French car giant Peugeot has unveiled new air-powered hybrid cars, which will knock 45 per cent off fuel bills for an average motorist. Driving the car - to be put on the road by 2016 - in towns and cities, costs could be slashed by as much as 80 per cent as the vehicle will be running on air for four-fifths of the time, company researchers say. The system works by using a normal internal combustion engine, special hydraulics and an adapted gearbox along with compressed air cylinders that store and release energy. Driving the car - to be put on the road by 2016 - in towns and cities, costs could be slashed by as much as 80 per cent as the vehicle will be running on air for four-fifths of the time. This enables it to run on petrol or air, or a combination of the two, the 'Daily Mail' reported. Air power would be used solely for city use, automatically activated below 70 kph and available for "60 to 80 per cent of the time in city driving". The company predicts, the cars could be achieving an average of 188 km a gallon by 2020. The air compression system can re-use all the energy normally lost when slowing down and braking. The motor and a pump are in the engine bay, fed by a compressed air tank underneath the car, running parallel to the exhaust. The revolutionary new "Hybrid Air" engine system the first to combine petrol with compressed air - is a breakthrough for hybrid cars because expensive batteries will no longer be needed. Cars fitted with Hybrid Air will be about 1,000 pounds cheaper to buy than current hybrid models. Hundred elite scientists and engineers have been working on the air-powered car for more than two years, in top-secret conditions at Peugeot's research and development centre at Velizy, just south of Paris. The revolutionary system can be installed on any normal family car without altering its external shape or size or reducing the boot size, provided the spare wheel is not stored there. "We are not talking about weird and wacky machines. These are going to be in everyday cars," a spokesman said. Peugeot, which unveiled its prototype, envisages introducing it in smaller models first, the report said. The car will be fitted with a sophisticated artificial brain that ensures it replenishes itself automatically so that motorists never run the risk of running out of compressed air late at night on a deserted country road because. The air compresses and decompresses of its own accord as the car speeds up and slows down.