Daihatsu is Japan's second-biggest maker of minivehicles, which receive preferential tax treatment in the country.
It has developed the hybrid car, based on its Atray minivehicle, powered by a 660cc gasoline engine and an electric motor.
"We have to reduce manufacturing cost further before introducing the hybrid minivehicle and we need to understand how large a market exists for hybrid minivehicles," Daihatsu chairman Iichi Shingu told Reuters at a press preview of new minivehicles.
Toyota Motor owns 51.1 percent in Daihatsu.
Shares in Daihatsu shares were up 3.33 percent at 558 yen on a report that it had developed the hybrid minivehicle. It was outperforming the benchmark Nikkei average, which was down 0.71 percent.
The Nihon Keizai Shimbun daily reported that Daihatsu was expected to start selling the hybrid minivehicles as early as 2003.
Toyota Motor Corp. and Honda Motor Co. already sell hybrid cars in Japan, the United States, Europe and some other countries.
The development of environmentally friendly cars is a key concern for automakers in view of increasingly strict environmental rules.
Daihatsu said on Wednesday it had launched a new Max minivehicle with a gasoline engine, for marketing from November 1 with a monthly sales target of 6,000 units.