Honda Motor says it will start selling vehicles equipped with a new hybrid system in 2026. It aims to double global sales of hybrid models from the current level to 1.3 million units by 2030.

The move follows a slump in demand for electric vehicles in Europe and the US.

Honda says the upgraded system has fewer parts and reduces production costs by 30 percent. It also improves fuel efficiency by as much as 10 percent in mid-size models.

Honda says all new car sales will be electric or fuel cell vehicles in 2040. But it will promote hybrids in the meantime to generate profits to fund EV development.

Honda's automotive operations chief, Hayashi Katsuto says the firm's carbon neutrality target still stands. But he adds that the company needs to be flexible in working toward that goal.

He said: "We didn't think we would be able to remain competitive on only battery electric vehicles. So, it's natural for us to continue developing hybrids."

Subaru this month also released models in Japan with a new hybrid system. It says the vehicles improve fuel efficiency by 20 percent. They will be available in the US next year.