Okamoto said he could not comment on the planned timetable for the launch of the redesigned Prius.

Auto analysts have expected a redesigned version of the market-leading hybrid to go on sale in the United States during the 2010 or 2011 model years.

Okamoto, who was speaking on the sidelines of a briefing for financial analysts in New York, also said it would be difficult for Toyota to match GM's planned time-table for launching a plug-in hybrid by 2010.

"We could have vehicles on the road in a test phase but production by that point would be difficult," he said.

Okamoto said Toyota will use its existing hybrid system as it looks to build a commercial version of plug-in vehicles it has begun to test in the United States and Japan.

The decision to use a modified Prius-system for the new car will mean a smaller battery that gives the vehicle a relatively shorter range in electric-only mode.

"The plug-in will be an extension of the system we're using with the Prius," he said. "We see some advantages. For instance, we can add trunk space and have a lighter vehicle."

GM, which is on the brink of being overtaken by Toyota as the global sales leader, this year announced plans to build the Chevrolet Volt, a car designed to run on electricity alone for up to 40 miles.

Environmental advocates have been pressing automakers to roll out such plug-in vehicles that would be capable of recharging at standard electric outlets and carry an on-board combustion engine to provide power for longer-haul driving.

TOYOTA: BEST, IF NOT FIRST

The current generation of hybrid vehicles, including the Prius, uses nickel-metal hydride batteries for power at low speeds and in stop-and-go traffic, delivering higher fuel economy.

GM showed off a concept version of the Chevrolet Volt in January and has set 2010 as a target for production.

Toyota's North American sales chief Jim Lentz said Toyota was willing to be beaten to the market for a plug-in vehicle if that meant building a better vehicle.

"It's important for Toyota to be first," he told Reuters. "While we'd love to be first, we're determined to be best."

Toyota will turn to lithium-ion batteries for its still-developing plug-in vehicle, Okamoto said.

But he said that kind of battery, now widely used in electronics and cell phones, still needs development before it meets Toyota's standards for use in vehicles.

GM has not said where it will build the Volt. Toyota's Prius is assembled in Japan, near its headquarters in Aichi prefecture.

Toyota expects to sell 1 million hybrid vehicles per year by early next decade and is relying on the technology to boost fuel efficiency across its vehicle line-up.

Lentz said Toyota expected to sell about 250,000 hybrids in the United States this year, giving it about 80 percent share in that segment.

"The demand still far outstrips our ability to build," Lentz said, noting that Toyota had less than 10 days supply of the existing Prius in August.

That compared to an average industry-wide inventory level closer to 60 days supply of sales.

Separately, Okamoto said Toyota would bring back a sports car to its US vehicle line-up, but declined to provide further detail.