Toyota will continue to sell the current Prius when the revamped version goes on sale in May in an unusual move likely to help the top-selling hybrid ride out a threat from rival Honda.

Toyota Motor Corp. President Katsuaki Watanabe said Thursday there is demand in the Japanese market for both the third-generation Prius and the smaller model that’s already on sale.

He declined to give details, including overseas plans. But his comment is the first from Toyota confirming recent Japanese media reports that the current Prius gas-electric hybrid will continue to be on sale, partly to match the cheap price of Honda Motor Co.’s new Insight hybrid.

Prius faces an unprecedented challenge from the Insight, which starts at 1.89 million yen ($19,000) in Japan, and $19,800 in the U.S. The Prius now sells for $22,000 in the U.S. and 2.3 million yen ($23,000) in Japan.

Watanabe said Toyota has been slashing costs on hybrids to almost a fourth of the early costs. He declined to give details on pricing, adding Toyota will give an explanation when the new model is unveiled, expected in May.

“Honda has made an excellent car that addresses ecological problems,” Watanabe said of the Insight at a Tokyo showroom. “It will stimulate the development of hybrid technology, including cost-cutting. And that is also our goal.”

The Insight has been a hit since going on sale in February in Japan. It is expected in overseas showrooms in coming weeks. The Prius is the global best-seller in hybrids at a cumulative 1.2 million sold around the world since its 1997 debut.

Watanabe also expressed hopes General Motors Corp. will avert bankruptcy, as that would hurt the overall auto industry as well as parts-makers, which Toyota shares with the Detroit automaker.

GM received a $13.4 billion bailout loan from the U.S. government, but is asking for more money to avoid collapse. The Obama administration is expected to give a restructuring plan for GM and Chrysler LLC by the end of this month.

“I think it will be best if General Motors is able to continue its operations,” Watanabe said in a response to a reporter’s question.

He also said Toyota’s California joint venture plant with GM, New United Motor Manufacturing Inc., or NUMMI, remains important for Toyota.

“There is no problem to continue with that,” he said.

But he was pessimistic about prospects for any quick recovery in global auto sales.

Toyota global vehicle production plunged 49.6 percent in February from the same month a year ago. Toyota’s U.S. sales tumbled 39.8 percent in February.

“There surely has to be light at the end of the tunnel,” he said after showing a luxury model for the Japanese market, the Crown Majesta. “I want the decline to stop, and I’m watching closely for it every month, but it’s not coming.”



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