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Toyota Motor Corp. began selling its smallest hybrid car in Japan Monday to compete with Honda Motor Co. for younger consumers seeking entry-level fuel-efficient vehicles.

Prices for the Aqua compact hybrid, to be marketed as the Prius C in the United States, will start at ¥1.69 million, the automaker said Monday in a statement. The company aims to sell 12,000 Aquas a month in its home market.

Toyota is counting on gasoline-electric models, led by an expanded Prius lineup, to meet a goal of increasing global vehicle sales 20 percent next year. Honda’s Fit compact, sold in hybrid and conventional gasoline-engine versions, outsold the larger Prius in the first six months of this year in Japan, underscoring consumer demand for smaller fuel-efficient cars.

“The Aqua shows Toyota is increasing efforts to boost sales in the domestic market,” said Mamoru Kato, an auto analyst at Tokai Tokyo Research Center in Nagoya. “Toyota raised the price of the Prius to a more profitable level, so the Aqua serves to meet demand for smaller, cheaper hybrids.”

The Aqua measures 3.9 meters in length, compared with the 4.48-meter Prius, and has as much legroom as a Corolla compact, according to chief engineer Satoshi Ogiso. It costs 22 percent less than the Prius, which starts from ¥2.17 million, according to Toyota’s website.

The new model delivers a locally rated 35 kpl. That compares with 30 kpl for the hybrid version of the Fit, which starts from ¥1.59 million, Honda’s website says.

Domestic sales of the Prius plummeted 51 percent in the first six months of this year to 83,319 vehicles as Japan’s March 11 earthquake and tsunami disrupted production. Honda’s Fit topped the market segment with sales of 88,282, a 2 percent decrease from a year earlier.

U.S. deliveries of the Prius, the world’s best-selling hybrid car, rose 49 percent last month from a year earlier, according to Autodata Corp.

“While hybrids are generally projected to sell in developed markets like the U.S., it’s difficult to say if such a small car as the Prius C will sell,” said Tokai Tokyo’s Kato.

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