Toyota to Build Gas-Conserving Hybrid Vehicles in U.S. Plus Other News

DETROIT January 11, 2005; John Porretto writing for the AP reported that Toyota Motor Corp., Japan's No. 1 automaker, will build gas-conserving hybrid vehicles in the United States, though plans haven't been finalized, President Fujio Cho said Tuesday.

For now, Toyota builds all of its hybrids in Japan. Cho, in an interview Tuesday with automotive and financial journalists at the North American International Auto Show, said the company will determine by midyear which model would be the most logical to build in the United States.

Demand for the Toyota Prius has far exceeded initial expectations, creating a wait of up to six months for the gas-electric car in some areas. Toyota is set to begin selling a hybrid version of the luxury Lexus RX sport utility vehicle in mid-April and a hybrid version of the Toyota Highlander SUV in June.

"Without a doubt, we will eventually produce a hybrid model in the United States," Cho told reporters through an interpreter.

Toyota's planned production for North America this year is 100,000 Priuses, which it hopes will eliminate the backlog of orders. Toyota has sold more than 100,000 Priuses in the United States since 2000, including 53,991 in 2004.

The 100,000 North American forecast is part of a companywide goal to sell 300,000 hybrid vehicles worldwide by the end of 2005.

Moreover, Cho said the company remains bullish on prospects for hybrids even as it and other automakers invest billions on technology for hydrogen fuel cell cars and trucks. Experts say road-ready hydrogen-powered vehicles, which would emit nothing more harmful than water vapor, are at least 10 to 15 years away.

Companies such as General Motors Corp. and Ford Motor Co. have said they consider hybrids to be a bridge to fuel-cell vehicles, but Cho said hybrid technology will remain viable even as fuel-cell vehicles become marketable.

Regardless of what type of propulsion system is used in future vehicles, Toyota executives said, hybrid technology can be used to increase fuel efficiency.

"We believe hybrids will continue to be the core technology in the future," Cho said.

Hybrids aside, Toyota is expanding its vehicle business rapidly worldwide, gaining ground on GM, the world's largest automaker.

Toyota expects sales growth in all key regions this year, including the United States, where sales will likely total 2.15 million, up from 2 million in 2004.

Last year marked the first time Toyota sold 2 million-plus vehicles in the United States since it began business here 47 years ago. Its sales rose 10 percent last year and are expected to grow again in 2005, though analysts say at a slower pace.

Toyota, along with its Lexus and Scion brands, accounted for 12.2 percent of the U.S. market in 2004, up from 11.2 percent in 2003 and 10.4 percent the year before that. The forecasting firm CSM Worldwide said last month Toyota is likely to overtake DaimlerChrysler AG, the smallest of Detroit's Big Three carmakers, as the third-leading U.S. seller of cars and trucks by the end of the decade.

Cho said the company has a policy not to discuss sales and market-share targets, and he declined to say if it was a goal to pass GM in global sales. He said the priority was to listen to the "voice of the customer" in distinct markets such as India, China and the United States and make sure the company is producing vehicles that meet consumers' needs.

Michael Bruynesteyn, an automotive analyst with Prudential Equity Group, said continued expansion into new vehicle categories was the best way for Toyota, as well as Honda Motor Co., to keep stealing market share from the Big Three.

Honda and Toyota each hold a large share of the U.S. market for smaller cars, but both have a lot of room for growth in lucrative segments such as large cars, SUVs and full-size pickups, Bruynesteyn said in a presentation Tuesday to the Society of Automotive Analysts.

Honda, for example, introduced its first pickup, the Ridgeline, during this week's Detroit auto show media preview. Toyota will increase production capacity for its full-size pickup, the Tundra, when it opens a new plant in San Antonio in late 2006.

Meanwhile, flexible manufacturing -- allowing a plant to shift from one model to another more easily and to build several vehicles on the same production line -- has made it easier for Toyota and Honda to break in to new segments, Bruynesteyn said. GM and Ford are spending billions of dollars to make their plants more flexible.

"The barriers to entry are coming down," he said. "It's easier for automakers to get into new segments. They're doing so at lower investment, lower risk, without having to build a dedicated plant."

Toyota also has been able to sell vehicles in the United States with much less spending on consumer incentives than the Big Three -- an average of $852 per vehicle in 2004, versus a combined average of $3,911 for GM, Ford and Chrysler, according to Autodata Corp.

Jim Press, chief operating officer of Toyota Motor Sales USA Inc., said the automaker may have to increase that spending somewhat in 2005 because of "the aging cycle of some of our products."