Toyota's crystal ball must be running on all cylinders. (Or maybe it's a hybrid.) With rising gas prices and a still-lukewarm economy, the Prius C seems tailor-made for these times: Prius fuel economy without the Prius price tag.

This car marks new territory for the ever-growing Prius family. While the Prius V is essentially a station wagon version of the high-selling regular Prius, the C is a wholly different vehicle. Only slightly longer than a Toyota Yaris, the Prius C is nearly 20 inches shorter and three inches narrower than a Prius. It's also nearly 600 pounds lighter, weighing in at just 2,545 pounds.

Compared against the larger Prius, it makes sense that this smaller, lighter hatchback has a smaller, less-powerful engine. The 1.5-liter, four-cylinder engine and hybrid drivetrain combine for a total of 99 horsepower. Toyota says that at 53 mpg, the Prius C has the best EPA city fuel economy of any car without a plug. Overall EPA fuel economy is 50 mpg, same as the regular Prius. (The C gets better city numbers than the regular Prius but lower highway figures.)

This smaller Prius aims to cost less to purchase and to save money at the pump. Base price starts under $20,000, including destination. Most buyers will probably want modern necessities, such as a USB input and Bluetooth. They come in the next step up the model ladder, the Prius C Two--the trim level that we bought. There are some surprises in equipment here; Automatic climate control is an unexpected plus, but the lack of satellite radio and adjustable shoulder belt anchors are negatives.

The car has been selling briskly since it went on sale, and in our experience, dealers aren't budging much at all from sticker. Our dealer wanted to charge a $1,500 markup over sticker for our "Habanero" (a very distinctive shade of orange) car. Our shopper--successfully--told him to go pound sand. The sticker price came to $20,850.

Putting that price into perspective is tricky. Indeed, it is about $4,000 less than the larger, more refined regular Prius. But it's also about $3,000-$4,000 more than most of the subcompact competition, like the Honda Fit, Hyundai Accent or Chevrolet Sonic. (Check out our comparison test of the latest subcompacts in the magazine and online.) In a price-sensitive market, will the Prius C's hybrid premium be worth it given that the regular subcompact competition is already rather sparing with fuel?

Also, consider that Honda already sells a less expensive hybrid, the larger Insight. Despite the same economic conditions, which would seem to be tailor-made for its success, sales never quite took off. (Despite excellent reliability, the Insight scores too low in Consumer Reports tests to be recommended.) Finally, Toyota's own lackluster and low-scoring Yaris subcompact makes us wonder if the more expensive Prius C is a more competitive design.

We'll find out how the C stacks up as we thoroughly test it here at our track. For a closer look, check out our First Drive video.