The Japanese auto giant said it aimed to churn out 9,000 Camry Hybrids a year in Thailand, a key hub for Asian operations, and another 10,000 in Australia, which is seeking to revive its ailing auto industry.

Toyota announced the start of hybrid production in Melbourne as Australian Prime Minister Kevin Rudd visited the automaker's headquarters in central Japan.

Toyota, which will use an existing factory for the production starting in 2010, will benefit from subsidies of 35 million Australian dollars (37 million US dollars) from Canberra to be used in research and development.

Rudd said increased popularity of the hybrid would help Australia cut back on emissions blamed for global warming.

"This hybrid will use one-third less petrol than a standard car, one-third less emissions and therefore for an average family ... savings of up to 1,000 dollars a year," Rudd told reporters.

"Australia must do whatever we can to assist Australian motorists who are faced with the challenge of rising fuel prices and also... in our overall efforts to bring down greenhouse gas emissions," he said.

Rudd has called for a transformation of Australia's auto industry, which has shed more than 11,000 jobs since 1996, by launching a 500-million-Australian-dollar fund to assist the development of green cars.

Toyota, poised to overtake General Motors this year as the world's top automaker, was a pioneer of hybrids, which deliver power by switching between a regular engine and an electric motor.

It primarily produces the hybrid in Japan but also in the United States and China.

The Altona plant in Melbourne employs 4,500 workers, which will go up slightly with production of the hybrids, Toyota chief executive Katsuaki Watanabe said.

"Due to Australia's high interest in global warming and environmental issues, we are confident that the Camry Hybrid will be welcomed there," Watanabe said next to Rudd.

"Toyota's hybrid system, which controls emissions and contributes to cutting down on petrol consumption, is our core technology," he said.

The company later announced that it would also produce Camry Hybrids at the Gateway plant some 110 kilometres (70 miles) from Bangkok.

Toyota's hybrid output jumped 25 percent to 430,000 units in 2007. The company aims for annual production to jump to one million units in the early 2010s.

Australians buy one million cars a year and only 5,000 are hybrids, Rudd said.

Australian Industry Minister Kim Carr, who was travelling with Rudd, hoped that the benefits of Toyota's investment would spill over to other sectors.

"We want to see a rapid transformation of the Australian automotive industry because... it affects so many other industries -- steel, plastics, electronics and even aerospace," Carr said.

Rudd is paying his first visit to Japan since taking office last year.

He later headed to Tokyo where he visited a large supermarket and offered free samples of Australian beef on toothpicks to customers.

Aussie beef has gained sales in Japan due to concerns over US beef following a mad-cow disease scare.

Rudd's trip is aimed in part at easing concerns in Japan that the Mandarin-speaking former diplomat favours Beijing. He visited China as part of his first major international visit but not longstanding ally Japan.

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