It promises to answer many of the criticisms of the first model as well as trying to 'normalise' the ownership and driving experience of hybrids in the same way that Honda has done with the Civic IMA.
Toyota's commitment to the environment also includes the launch of the 'cleanest' diesel available anywhere, with the new Avensis D-CAT.
Anyone who drove the first Prius, meaning – of course – 'ahead of its time' in Latin, would have found it a strange experience. Its lower-medium saloon design, partly a necessity of transporting a large battery around in the rear, was never going to go down that well in western Europe, where hatchbacks are favoured.
Not much attention had been paid to the overall driving experience, either, with steering and handling characteristics distant from European tastes.
And there was the price. Granted, specification was high, with electric windows, CD player, ABS, climate control and automatic transmission, but for £16,495 on-the-road, people expected a bit more, even while they were helping to save the planet.
There was a £1,000 PowerShift grant available, bringing the price down to £15,495. But taking into account the depreciation, fleets could choose a modern diesel lower-medium saloon – perhaps the Ford Focus TDCi Ghia or Volkswagen Bora TDI – and run it for the same cost.
This was mainly down to the low residual value prediction as the motor trade is often highly suspicious of new technology, because the used car buyer sees it as something that could potentially cost them dear if it was to go wrong.
With the new model, Toyota has had to allay fears about the technology and ensure that it has a clear running costs advantage over conventional fuels, as well as offering an appealing and spacious shape.
Perhaps the most significant step is that Toyota will guarantee the hybrid components of the new Prius for eight years or 100,000 miles, on top of the standard three-year/60,000-mile warranty for the rest of the car's powertrain.
The Prius has grown into an upper-medium car – at least in wheelbase, if not in overall length – with a hatchback body, a more powerful but more compact battery and vastly improved fuel consumption and carbon dioxide emissions.
Although Toyota just missed its target of 100g/km for carbon dioxide, at 104g/km and 65.7mpg on the combined cycle, it makes the new Prius the most fuel-efficient family car on sale.
With discounts for its hybrid status, it would fall into a benefit-in-kind tax band of 11% for the remainder of this financial year and for 2004/05. That would put the Prius at about £35 a month for a 22% taxpayer – about the same level as a supermini.
It also receives the full discount on the London congestion charge, with a potential total saving of £1,250 a year. And early residual value indications look promising.
Toyota claims Glass's Information Services put the new Prius at 34% over three years/60,000 miles.
Despite its improved fuel consumption over the previous model, performance is more in line with what's expected of diesel upper-medium cars with a 0-62mph time of 10.9 seconds.
The UK will have three trim levels – T3, T4 and T Spirit. All include eight airbags, ABS with electronic brake force distribution and braking assistance, electronic traction control (E-TRC) and vehicle stability control plus (VSC+).
There are electric windows all round and a CD player, while the climate control includes an electric air conditioning system that doesn't sap performance or fuel efficiency and can operate while the engine is not running.
Toyota thinks UK sales will reach 1,600 in 2004, with fleet buyers taking up to 500, while in 2005 the Prius annual sales are expected to reach 2,500. These are ambitious compared with the current model, which has sold about 1,200 units in the UK over three years.
Behind the wheel
I like the styling of the new Prius. I would never have said that of the old model but the new car combines the practicality of a five-door hatchback with the swooping lines of a coupe.
The shape is largely for the benefit of aerodynamics, although inside it's a slightly different story. There is plenty of legroom in the rear for adults, but headroom is awful, particularly in the middle seat.
Boot space, while adequate for most needs, (remembering that the rear seats also fold) is the factor that betrays its upper-medium sector aspirations, being too shallow for useful transport of bulky items.
Another aspect of the interior which I didn't like was the hard, matt texture plastic on the dashboard and doors. When Toyota is producing interiors as upmarket as that in the Avensis (designed and built in Europe and recently exported to Japan), the brittle-feeling panels in the Prius are a let-down.
Although it feels cheap, it probably isn't and someone at Toyota obviously thought it was a good idea. But it is out of step with what's expected of an upper-medium car in Europe.
The LED display is quite modern-looking – in the same way as the Renault Espace – and is only visible in full by the driver. The steering wheel adjusts up and down, but not in and out, although the digital readouts are just below the base of the windscreen and are not obscured by the wheel.
The gear selector takes the form of a small joystick alongside the steering wheel and the whole process of starting up and setting off is relatively easy to remember once you have been through it yourself for the first time.
The new Prius has a setting where you can select running on electric with a range of about two kilometres, but the engine will still cut in when the battery runs low or the speed increases above typical town rates of progress.
While the electric power steering is devoid of real feel, it offers more resistance than in the original Prius and doesn't take long to get used to. For the most part the Prius handles well too and keeps its composure around twistier roads.
Despite the addition of 16-inch wheels, the Prius still offers a comfortable ride with limited road noise being transmitted through the cabin. It also has punchy performance, the CVT gearbox keeps revs at the optimum level when acceleration is needed and when the electric motor kicks in, the Prius also has a surprising turn of speed.
THE Prius has far more appeal than the original and comes with better performance and fuel economy. Compared with upper-medium diesels, while it still might lack the space to compete with the best, performance is good and this time the running costs might just work in its favour.
Engine (cc): 1,497 plus 500v electric motor
Engine max power (bhp/rpm): 76/5,000
Engine max torque (lb-ft/rpm): 85/4,000
Motor max power (bhp/rpm): 67/1,200
Motor max torque (lb-ft/rpm): 295/0-1,200
Combined max power (bhp/mph): 112 at more than 52mph
Comb max torque (lb-ft/mph): 353 at less than 22mph
Max speed (mph): 106
0-62mph (sec): 10.9
CO2 emissions (g/km): 104
Fuel consumption (mpg): 65.7
Fuel tank capacity (l/gal): 45/9.9
Transmission: Continuously variable transmission
Service interval (miles): 10,000
On sale: January 2
Price (OTR): £16,495-£19,995