With 80,000 orders already on the books, Toyota has launched the third-generation Prius in Japan priced from JPY2.05m, almost JPY300,000 cheaper than the current lowest-priced model and close to the rival Honda Insight hybrid's JPY1.89m sticker price.

The automaker has set a monthly sales target of 10,000 units in Japan and hopes to sell about 300,000-400,000 units of the entire Prius range and a total of about 500,000-600,000 hybrid cars worldwide in 2009, Kyodo News said.

The new Prius will also be sold in North America and other parts of Asia from later this month and in Europe from June. The company plans eventually to sell the 3G models in more than 80 countries and regions, compared with over 40 countries and regions for the 2G line. The first generation was sold only in Japan from 1997 and exported to the US and other markets from 2000. Toyota has sold over 1.25m units so far. The 2G model is assembled in China but production otherwise has remained in Japan.

''Even before sales began, we have already received more than 80,000 orders [for the new Prius] so we have been able to make a start exceeding our expectations,'' Toyota executive vice president Akio Toyoda, a member of the founding family who will replace Katsuaki Watanabe as president in June, said at a press conference in Tokyo.

The company also announced it would introduce a new EX grade (trim level) of its second-generation Prius that will be available in Japan from June at the same retail price as the Insight.

Unlike previous Prius models, the new hybrid would also be sold through all of the nearly 5,000 Toyota dealer channels nationwide, a new policy Toyoda has emphasised.

''We have been able to bring the starting price closer to a price that customers would really feel they want to pay,'' Toyoda said. ''I'm very relieved we made it in time.''

Thanks to recent government tax breaks and promises of more subsidies to come for drivers buying fuel-efficient cars, hybrids in Japan have enjoyed solid sales, beating the severe downward trend in the overall car market.

The redesigned Prius, priced between JPY2.05 and 3.27m, will be about JPY160,000-220,000 lower per unit when the new tax breaks are applied.

The Insight became Japan's best selling vehicle in April and the first hybrid to make the top slot, according to the Japan Automobile Dealers Association. Company officials have also said that orders for the Insight have topped 30,000 units since its debut in February.

Research institute Fuji Keizai recently forecast global sales of hybrid motor vehicles would see a 7.6-fold jump to 3.75m units during the 12-year period to 2020, Kyodo News said.

In April, Honda executive vice president Koichi Kondo welcomed the price battle with Toyota, saying hybrids now needed to ensure a cost benefit to raise their car market presence.

Honda has a CR-Z hybrid sports car due next year and a hybrid Fit (Jazz) and second-generation Civic hybrid planed for after 2010.

Toyota's senior managing director Yoichiro Ichimaru  admitted to Kyodo News Toyota may no longer be at the forefront of deciding hybrid prices with the debut of the Insight, and said pricing was affected by competitors.

Analysts said Toyota's new Prius was likely to become another best seller, but warned the price tag topping JPY2m may turn out to be a disadvantage at a time of economic recession.

''The Prius certainly has much higher performance, but it is more expensive and most consumers tend to be quite price-sensitive these days,'' said SMBC Friend Research Centre auto analyst Shigeru Matsumura.

Kyodo News said questions remained over whether Toyota's production capability would keep up with the ''explosive'' demand for the Prius as Ichimaru said it would take about four months before the 80,000 orders were delivered.

Matsumura also said the popularity of the Prius may help to lift the entire languishing car market but warned the company's earnings may not necessarily improve if sales focus only on hybrids, which do not have high profit margins.

''There are so many more profitable car models so it would not be good if they are not sold and only the Prius is successful,'' he said.