CITROEN plans to unveil a diesel-electric hybrid C4 concept later this month and hopes to have a production hybrid on sale by 2010.
The move comes in response to a call by the French president, Jacques Chirac, for car-makers to have such cars on sale at affordable prices within 10 years.
Citroen claims a diesel-electric hybrid is more effective at reducing fuel consumption and emissions than petrol-electric hybrids.
It also says diesel hybrids offer better fuel consumption and lower emissions without the performance and cost penalties.
Citroen has been a long-time proponent of diesel engines, having pioneered launches of common-rail direct injection diesels. It was one of the first car-makers to offer a diesel engine with a particulate filter.
Citroen will launch its C4 HDi turbo-diesel locally next month.