Peugeot has announced its first Hybrid Air car which it plans to have on public sale by 2016.

The Hybrid Air is driven by a conventional petrol internal combustion engine coupled with a hydraulic motor that is powered by compressed air.

The car has a pressurised steel "scuba tank" running down the middle of its undercarriage. The tank is filled with about 20 litres of nitrogen and some oil. Like a Toyota Prius, the Hybrid Air recovers energy when the driver brakes or decelerates but, instead of using this energy to charge a battery, the Hybrid Air compresses the nitrogen in the tank. The compressed nitrogen forces the oil through a hydraulic motor when the car is accelerated.

The system does not store a great deal of energy but Peugeot claims the technology is capable of giving a 45% improvement in urban fuel consumption.

However, the big advantage of air hybrid technology is that this is achieved without the need for expensive and heavy batteries or an electric motor. Peugeot expects that the Hybrid Air could be around $7,500 cheaper than a comparable electric hybrid.