While GM, Lexus and other manufacturers focus on improving mileage figures for their SUVs and large cars by installing hybrid engines, Honda is focusing its energies on bringing hybrids into small cars, believing that is where the technology is best employed. The company has even said it won't be building any large hybrids for the foreseeable future.

In fact, Honda's largest hybrid vehicle currently on sale is the small Honda Civic, and according to Masaaki Kato, president of Honda R&D, we are unlikely to see any large hybrids from the Japanese manufacturer. Instead, Honda plans on launching a raft of small hybrid cars in the coming years, beginning with a hybrid smaller than the Civic next year, a small, sports hybrid called the CR-Z following soon after that - and by 2012 even the diminutive Honda Fit will have a hybrid engine under the hood, which should make it ultra-efficient.

The reason for the focus on small cars is due to their suitability for city driving, which often involves stop-start traffic. According to Kato, these are the best conditions for hybrids as the batteries can power the car much of the time without having to call on the gasoline engine. By creating ultra-efficient city cars, Honda is hoping to capture new car buyers and city dwellers who may find larger hybrids such as the Toyota Prius too big for their purposes, or still not frugal enough for their wallet.

The next Honda hybrid, a dedicated model designed specifically for the task, like Toyota's Prius, will make its debut this October at the Paris Motor Show. Honda's cost-cutting measures in the next-gen hybrid drivetrain and optimized materials and design are intended to make the new hybrid a very affordable vehicle, which the company hopes will help it achieve substantial market penetration and win sales back from long-time leader Toyota.