Toyota has decided to collaborate with Microsoft in order to develop an in-car electronics system for its vehicles and it is believed that this system would help the Toyota's battery-powered vehicles to work in a more efficient manner.

A Toyota subsidiary, that provides data services to drivers, would be separately working on this project and both the firms are supposed to make an investment of 1 billion yen ($11.7 million) in the subsidiary to get the project initiated.

With the aim of using this unique system in its 2012 fleet of electric and plug-in hybrid vehicles, Toyota President Akio Toyoda believed that this new service could help in improving the range and fuel economy of hybrids and electric cars by using heating and cooling functions more efficiently.

In addition, he said, “Toyota and Microsoft have worked together for nearly a decade developing in-car entertainment and mapping services delivered through Bing. The new partnership expands on that to enter what Ballmer called a new frontier for the ultimate mobility device”.

Toyota is all geared up to launch a plug-in version of its Prius hybrid, a tiny two-passenger electric car in 2012 and in order to cope up with the increasing competition in this segment, the car maker is trying to generate some differentiation by turning their focus to the bells and whistles of in-car connectivity.