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The Honda Insight is likely to be powered by the 1.4-litre petrol engine and electric motor seen in the Civic Hybrid which will develop around 115bhp.

When operating at low speeds, the Insight will work entirely on battery power ensuring zero emissions and exemption from the London Congestion Charge.

At higher speeds a combination of brake energy and acceleration will help re-charge the Insight’s hybrid battery.

As a result the Insight should average around 70mpg and cost no more than £35 a year to tax.

The Insight name first appeared in 1999 when Honda launched the first mass produced hybrid to be sold in Europe. They sold just 400 in Europe, but globally 17,000 left Honda showrooms.

The UK hybrid market is currently dominated by the Toyota Prius followed by the Honda Civic IMA which both cost from £17,000.

With the introduction of the Insight next year, this balance could change thanks to the price difference and more radical design of the new Honda hybrid.

The Honda Insight is the latest stage in the Japanese car maker’s eco-friendly drive with future cars including a sporty hybrid based on the CR-Z, a Jazz Hybrid and a new Civic Hybrid.

With these new models, Honda anticipates selling 500,000 hybrids globally by 2009 with the Insight accounting for 40 per cent of these numbers.