TOYOTA admits Australians haven’t embraced its trademark hybrid technology in the numbers it had hoped, but the pint-size Prius C city-car is designed to change that.

The original Prius may have become the world’s most popular hybrid by attracting more than 2.5 million buyers since going on sale in Japan almost 15 years ago, but the Corolla-size petrol-electric hatchback last year tempted little more than 800 buyers Down Under, despite a huge $5000 price cut in April.

Now, the smaller Yaris-based Prius C hatch lowers Toyota’s hybrid admission price by a further $10,000 to just $23,990 plus on-road costs, putting the Japanese giant’s Hybrid Synergy Drive technology within reach of more people than ever before.

In hybrid terms, that represents outstanding value, undercutting Honda’s larger $29,990 Insight hybrid by some $6000 to become Australia’s cheapest hybrid.

Beneath its futuristic skin, Toyota Australia’s third hybrid model – after the original Prius and the Melbourne-made Camry Hybrid, with the seven-seat Prius V people to come in May – comes loaded with more standard equipment than just about anything else at this price.

It might be nearly half a metre shorter at 3995mm long, but the smaller Prius C also offers better value for money than the regular Prius, matching Hyundai’s similarly sized and priced (but conceptually different) Veloster coupe for standard equipment.

The base model offers seven airbags, a reversing camera, keyless entry and start, Bluetooth, cruise control and foglights, while for a further $3000 ($26,990 plus ORCs) the flagship i-Tech variant adds satellite-navigation, LED headlights and ‘premium’ seat and interior trims. Both models come standard with a CVT automatic transmission, too.

Also helping to justify a pricetag that remains slightly higher than comparably sized diesel models, clever packaging makes the most of the compact Prius C body.

Apart from offering a full-size spare wheel and the flexibility of a 60/40-split folding rear seatback, thanks to an overall length that is 110mm longer than the Yaris hatch there is more rear legroom than a Corolla and 260 litres of luggage space (just 26 litres less than the latest Yaris hatch, but about half of the Yaris sedan’s boot space).

Despite being 55mm lower than the Yaris there is also adequate headroom front and rear. But despite Toyota’s claim there is plenty of room for five adults and their gear, the heavily humped centre rear position is suitable only for kids and there is little in the way of storage for rear-seat occupants.

The Prius C offers slightly more hiproom than the Yaris too, but remains cosy for two big blokes up front, where there are more door and dashboard storage options and the suitably futuristic dash impresses with its dash-top digital speedo read-out, and large 6.1-inch colour touch-screen and automatic air-con controls even at base level.

Yes, all touch surfaces are hard and plasticy, but no more so than anything else this size and at least there are alloy-look highlights in the upspec i-Tech to break up the expanse of black.

Surprisingly, for a light car, the front seats are big and supportive, and in the i-Tech do a convincing job of appearing to be leather-trimmed, although both variants we sampled came with a pronounced chemical odour.

The Prius C is also a better drive than its larger C-less namesake, thanks in part to a smaller – but still old-school nickel metal hydride, rather than lithium-ion – traction battery that is mounted in a Toyota-first under the rear seat rather than behind it.

As with Honda’s $34,990 CR-Z hybrid coupe, that not only makes its interior more flexible by allowing for a split/folding rear seatback, but results in a far lower centre of gravity, which Toyota says is similar to that of a BMW 1 Series.

On the road, that translates to less bodyroll and a chassis that feels noticeably more planted and responsive to driver inputs than the larger Prius hatch.

Although the C sets a new Toyota hybrid handling benchmark, that’s not saying much. Like the Yaris upon which it’s based, the Prius C offers decent ride quality but crashes through large road bumps and holes, and its dull electric steering is in a different league to more accomplished light-size hatchbacks.

Arguably, the smallest Prius is also more spirited to drive than its larger sibling, thanks to a more advanced ‘3.5-generation’ hybrid drive system that – like the original Prius – employs a battery-powered electric motor to boost the performance of its special Atkinson-cycle four-cylinder petrol engine.

In this case, a downsized 1.5-litre engine and 520-volt motor/generator combination (based on that of the previous-generation Prius) delivers a total output of 74kW, which is 26kW less than 100kW MkIII Prius offers with its 1.8-litre engine and beefier 650-volt motor/generator.

However, because it weighs some 265kg less than the regular Prius, the C not only feels more nimble but quicker in a straight line, offering a surprising turn of speed both from a standing start and during roll-on acceleration manoeuvres up steep inclines or from highway speeds.

The C also feels quicker than both the same-size Yaris, which is 11kW less powerful, and Honda’s larger Insight hybrid, which offers 2kW less peak power, but like the Insight and Prius progress is accompanied by the disconcerting whine of its CVT transmission, which is better than some similar gearboxes but still sounds and feels like a slipping clutch.

While Honda’s brilliant CR-Z combines a conventional manual transmission with hybrid power for the first time and the CVT-only Prius C is more like a conventional petrol car to drive than any Toyota hybrid before, it still requires buyers to make more compromises in the pursuit of fuel consumption.

In line with its positioning as a more mainstream hybrid, the Prius C comes with a conventional looking toothed transmission shift gate - unlike the regular Prius’ stubby dash-mounted shifter – but it still features a useful ‘B’ mode, in which engine braking is more pronounced and the brake energy regeneration system is more effective.

Being a full parallel hybrid drive system as in all Prius models – meaning the engine and motor can drive the front wheels independently of each other, unlike Honda’s Integrated Motor Assist hybrid system - the C has a token switchable electric-only mode in which it can travel without its engine running (in this case at speeds of up to just 40km/h) for one or two kilometres depending on battery charge.

It also means the Prius C normally sets off on battery power alone, before the petrol engine kicks in – a transition that feels smoother than in the Prius, but is still noticeable – and Toyota says the C can also revert to full EV in certain higher-speed situations.

However, despite its clever technology, lower kerb weight and downsized hybrid drive system, the smaller Prius C is no more efficient than the Prius – at least not in terms of its official combined fuel consumption figure of 3.9L/100km, which matches the larger Prius but still falls short of the bigger Golf BlueMotion’s 3.8L/100km benchmark.

Yes, Toyota rightly points out the C sets a new economy yardstick of 3.7L/100km in city driving, where it is likely to spend most of its time. Inexplicably, however, it fails to better the Prius’ combined figure, despite also achieving a lower 3.8L/100km highway number, and the Prius C actually emits slightly more CO2 (90g/km) than the Prius (89g/km).

Toyota blames the anomaly on the official ADR 81/02 laboratory test cycle - about 60 per cent of which is based on highway driving conditions, where hybrid technology is traditionally least effective and where the downsized Prius C drivetrain must worker harder than the Prius’ to achieve similar results.

It also points to the difficulty in making its much shorter body as aerodynamic as the longer Prius. The Prius C has a drag coefficient of 0.30Cd, making it far less slippery than the Prius (0.25Cd).

Still, despite plenty of hard acceleration, we managed to record a respectable 5.5L/100km during the mainly-urban 125km launch drive loop, which is about on par with light-sized turbo-diesel hatchbacks like the Ford Fiesta and VW Polo.

Toyota Australia should easily sell every one of the 1200 Prius C vehicles it expects to get its hands on this year from Japan, where sales are booming. The Prius C has also proved a smash hit in the US, where it was launched last week, and with all production coming from Japan global demand is likely to exceed supply.

Longer term, however, it remains to be seen whether Australians will flock in unprecedented numbers to the Prius C’s new low hybrid price in order to be seen to be green, or if they will continue to gravitate more heavily towards small diesel cars, which combine similar economy with better performance and superior dynamics for a similar price premium.