Toyota Will Combat Insight by Keeping Old Prius in Japan

I didn't think they would do it, so I've been ignoring the reports coming out of Japan saying Toyota will keep the old Prius around as a 'cheaper' option to the new Prius.  But Toyota has now confirmed they will be keeping the second generation Prius going alongside the third generation (MY 2010).

"They will have different engine sizes -- 1.5 liters and 1.8 liters -- and we figure there will be demand for the two to co-exist," President Katsuaki Watanabe told reporters at the unveiling of the new Crown Majesta sedan.

The new Prius is set to launch in Japan in May, but early sales of the Honda Insight have been very strong.  The new hybrid from Honda is selling at a significantly lower price than the Prius, so it makes sense that Toyota wants to compete against their biggest rival in the hybrid scene they've dominated so far.  But they don't really have a cheaper option than the Prius available, and they may not have one until 2011 when the Toytoa Yaris Hybrid is available.

Watanabe also noted Toyota has cut costs on hybrids to almost one fourth of the early costs.