Honda has revealed that it is poised to step up its price war with Toyota as it seeks to wrest away its rival's dominance of the global market for hybrid cars.

The company announced yesterday that it is to unveil its new hybrid car, named the Insight, at the Paris Motor Show in October and while precise pricing details were not disclosed, executives hinted that the car would be significantly more affordable than both its own Honda Civic hybrid and Toyota's Prius.

Honda president Takeo Fukui has said he wants to keep the price premium for the new five-door Insight compared with an equivalent gas engine model to under $19,000 (£11,000). The car is set to launch in Japan, the US and Europe early next year.

The announcement comes just weeks after Honda said the next version of its Civic hybrid would also be priced to undercut the Prius. Toyota, meanwhile, is expected to respond soon with the launch of a new version of its flagship Prius, which has already sold a million units worldwide and has become synonymous with the hybrid car market.

In related news, Indian engineering giant Tata has become the latest car manufacturer to attempt to break into the growing market for electric vehicles, unveiling a plug-in version of its Indica hatchback.

The company said it plans to launch the car, which will have a Lithium-ion battery with a 110-mile range when fully charged, in Norway in 2009 and in India a year later.