Mazda plans to combine Toyota's Prius hybrid electrical drive with its next-generation SKY engine that is currently under development for its own hybrid car.
The collaboration has been prompted by management priority for environmental issues.
The vehicle will be available for sale in Japan by 2013.
Toyota began sales of the Prius, the world's first mass-production hybrid vehicle, in 1997.
Since then, over 2.3 million TMC-produced hybrid vehicles have been delivered to customers in over 70 countries and regions.
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