The race to produce the first mass-market plug-in electric car accelerated yesterday when Toyota said that it would market a test fleet of rechargeable hybrid vehicles by the end of 2010.

The move is being seen as a direct challenge to General Motors, which plans to start production of its electric Volt car in the same year. However, Rick Wagoner, the chief executive of GM, admitted last week that the complexity of the Volt’s development meant that a production timetable could not be guaranteed.

Speaking at the Detroit motor show, Katsuaki Watanabe, the president of Toyota, said: “We welcome competition because that is how new technology is developed for consumers. But we don’t want to lose.”

The Japanese carmaker plans to market the test fleet of several hundred rechargeable hybrids to companies or government agencies.

Toyota, which soon could be crowned the world’s biggest motor manufacturer, is preparing to build a factory to produce the next generation of lithium-ion batteries for plug-ins and all electric cars. The carmaker has a 60 per cent stake in Panasonic EV Energy, a joint venture with Matsushita Electric Industrial, to build batteries for its Prius hybrid. Mr Watanabe said that Toyota would increase production of the nickel-metal hydride batteries used in existing hybrids through that joint venture from 500,000 a year to 600,000.

Sales in America of Toyota’s hybrid Prius rose by 69 per cent last year as consumers reacted to the surging cost of oil with increased interest in greener cars.

The motor show has been dominated by the carmakers’ drive to prove their environmental credentials. The big three US marques – GM, Ford and Chrysler - each highlighted a range of green concept cars. GM has also thrown its weight behind alternative fuel sources, striking a partnership with Coskata, a renewable energy company, to produce plant-based ethanol fuel for vehicles. Ford has established an ecologically friendly brand called Ecoboost that it intends to expand in 2010.

Mark Fields, the head of Ford’s North American division, speaking at the motor show, called for tax cuts to help to stimulate sales as the economy weakens. Mr Fields said: “The first half of the year is going to be cautious. We all know what’s going on in the economy and we can’t close our eyes to that . . . I hope they [the Bush Administration] really take a strong look at that [tax rates]. Combined with interest rate cuts, that could be a really potent package.”

The carmaker, which recorded record losses in 2006 at $12.7 billion, is expecting a challenging first half of the year across the industry, with a drop in retail sales.

Mitt Romney, the Republican presidential candidate, called yesterday for more government concessions to help the car industry in the United States. He said that companies needed assistance as they coped with escalating costs and tough new requirements for fuel efficiency. In a speech in Detroit, Mr Romney said: “From legacy costs, to healthcare costs, to [fuel efficiency] costs, to embedded taxes, Detroit can only thrive if Washington is an engaged partner, not a disinterested observer.”

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts