Toyota will reportedly start selling a new hybrid car in 2011 that is more fuel efficient than its Prius hybrid.

The new hybrid, based on Toyota’s Vitz (Yaris in Europe) compact car, will have a fuel economy of more than 40 kilometres per litre, against 38 kilometres for the third-generation Prius, the Yomiuri newspaper reported.

The small hybrid will reportedly be cheaper than Toyota’s existing hybrids, and is expected to be sold in Japan, Europe and the United States, the report said.

The Prius has been Japan’s top-selling car in recent months as government subsidies spur strong demand for fuel-efficient vehicles.