The Hybrid Air system uses compressed air and removes the need for expensive batteries.

PSA Peugeot Citroën has announced a new kind of powertrain technology, called Hybrid Air, which could prove a game-changer in the world of hybrids.

It's the first hybrid system in the world to combine petrol power with compressed air technology, which means that expensive batteries are no longer needed. In fact it's estimated that this type of hybrid would be around R15 000 cheaper than a conventional petrol-electric hybrid.

But the real bonus is in the fuel consumption during city driving - where up to 80 percent of the car's power will come from compressed air. This translates into a claimed economy figure of just 2.9 litres per 100km and CO2 emissions of 69 g/km.

It's also a space-efficient system as Peugeot claims the components can fit into small and medium-sized cars without compromising storage space.

"This breakthrough technology represents a key step towards the two-litre-per-hundred kilometre car by 2020," chief executive Philippe Varin said at the press conference on Tuesday.

Hybrid Air cars are expected to hit the streets of Europe in about three years from now.