Ford has its new Fusion, Honda has the Insight, and Toyota's new Prius is about to hit the streets. But already the next generation of the hybrid wars is drawing up its battle lines, and this time it's smaller. Toytoa is planing a Yaris-based hybrid to take on Honda's Fit hybrid, due around 2011-2012.

Toyota is actually positioning the Yaris to do battle with the Insight, however, continuing the company's angle of portraying the Honda hybrid as smaller and further down-segment than the Prius.

"We are developing a low-priced hybrid vehicle like Honda's Insight," Akihiko Otsuka, chief engineer of the new 2010 Prius, told the Nikkei. "We are going to compete by expanding our hybrid-vehicle lineup to smaller hybrids, in the class of the [Japanese-market] Vitz and Yaris."

But American's might more readily analogize the very similar-looking Insight to the Prius and therefore compare the Fit to the Yaris hybrid. Either way, it's the public that will benefit as a new generation of compact, inexpensive and highly efficient hybrids comes to market.

Pricing for the third-gen Prius is still unannounced, but the Yaris hybrid will certainly check in several thousand dollars below its bigger brother, and may even come in well below the $20,000 mark - a target Honda has just managed for its Insight. The Yaris will need to stay cheap to compete with the Fit, which is expected to start at about $2,000 more than the standard Fit's $14,750 starting price when it finally arrives around 2015.

The hybrid drivetrain would be adapted from the Prius application, using the same time-tested and inexpensive nickel-metal hydride batteries instead of more expensive and finicky lithium-ion units. Engines will also likely be co-opted from the existing Toyota lineup, possibly even offering an application for the second-gen Prius' 1.5L engine, now replaced with a 1.8L unit in the 2010 model.