TOKYO (AP) -- Toyota's Prius was the No. 1 selling vehicle in Japan for May, clinching the top spot in the domestic market for the first time and overtaking Honda's new hybrid, the Insight, which fell to third.
The revamped Prius debuted last month amid a hybrid price war with Honda.
Toyota Motor Corp. sold 10,915 Prius cars in May in Japan, more than a five-fold increase from the previous month, according to data released Thursday by the Japan Automobile Dealers Association.
That means for the second straight month, a hybrid car -- powered by gasoline and electricity -- topped the sales rankings in Japan, reflecting the popularity of green cars.
A government tax break for environment-friendly cars that began in April, part of an effort to stimulate the economy as well as promote green technology, has also helped sales.
"People who had been interested in hybrid cars but could not afford them are now beginning to buy them as they were encouraged by a new tax break program," said association official Toshiki Miyake.
Honda's Fit compact -- a regular gasoline-powered car that the company says produces less exhaust -- was in second with 8,859 units sold while the Insight sold 8,183 units after nabbing the top spot in April, the association said. The rankings exclude minicars with engines smaller than 660 cubic centimeters.
Competition in the hybrid segment has intensified after the Insight debuted in February in Japan at 1.89 million yen ($19,700).
Toyota responded by offering its new Prius at just over 2 million yen ($20,900), cutting nearly 300,000 yen ($3,100) from the price of the previous model. The upgrade also has a larger 1.8-liter engine and greater fuel efficiency than the older one.
Toyota dealers have already received 110,000 orders for the Prius in Japan.
"I am very relieved about the sales, and I am excited to find out more about the customers' response," said Akihiko Otsuka, chief engineer for the new Prius. He spoke to reporters at company headquarters in Toyota, Japan.
The strong hybrid sales are a bright spot for Japan's automakers, which have been battered by the global slowdown and credit crunch. Toyota, the world's biggest automaker that also makes the Camry sedan and Lexus luxury models, recorded its worst loss in its seven-decade history for the fiscal year ended March.
On Wednesday, Toyota said it will start leasing plug-in hybrid cars by the end of this year in the U.S., Japan and Europe. A plug-in recharges from a regular household socket. When the battery runs low, the cars start running as a regular hybrid so drivers don't have to worry about running out of juice on the road.