Honda Hybrid System for Larger Cars in development

According to Tomohiko Kawanabe the Japanese company's head of automobile research and development, a finished product is only about three years away. "We've left the research stage and entered the field of development," he told Reuters in an interview.

Unlike the Toyota Prius, the Honda Insight and the CR-Z will both make use of a single electric motor, meaning it will be cheaper to manufacture but it will lack Toyota's full hybrid system when it comes to fuel efficiency.

The announcement comes amid a series of changes in recent years at Honda. The company has dropped work on the next generation NSX, it changed directions from using clean diesel technology in late 2008 and instead concentrated on bigger hybrid systems for larger cars such as the Honda Odyssey.

That's not to say that diesel has been dropped altogether, the Japanese company is currently studying development of a small diesel engine for Europe and India. "If you want to compete in markets like India, and also Europe, (a small diesel engine) is necessary," Kawanabe told Reuters.

The best known diesel engine in the Honda range is currently the 2.20-litre unit found in the Accord and some other models (only offered in Europe).