Toyota has dismissed reports it is planning to halve the price of its hybrid system for the new Prius, but confirmed the size and price of components will be cut "significantly" for the next generation of the popular hybrid car.

Kazuo Okamoto, head of Toyota's research and development division, told reporters in Tokyo last week that the next-generation Prius model would use an improved nickel-hydride battery instead of the lithium-ion battery that some observers had expected.

According to Reuters' reports he also claimed the size and price of the battery will be cut by around half, but a spokesperson for Toyota in Europe said that while the price of the hybrid system would be "significantly" reduced it would not be halved.

Toyota has not revealed a time frame for the third-generation of its flagship green car, but there is speculation it could appear late next year or in early 2009.

The company currently enjoys a 75 per cent share of the hybrid market and has revealed it aims to sell one million hybrid vehicles every year from 2010.

It also revealed plans last week that it is to extend the Prius family with new versions of the hybrid sedan. Speaking to the Wall Street Journal, Tokuichi Uranishi, head of Toyota's global sales operations, said the company was on target to sell in excess of 185,000 Prius cars in the US this year alone and hinted the company could offer a Prius-style mini van for the American market.