Toyota to make cheaper hybrids

Japanese carmaker will use smaller, less pricey system starting in 2008

Toyota Motor Corp. will begin using a cheaper and smaller hybrid system from 2008, more than doubling production of the high-efficiency vehicles to 600,000 units a year by then, the Asahi daily reported on Wednesday.

Japan's top auto maker would like to to spread the hybrid powertrain as the main fuel-efficient alternative to internal combustion engines in order to make up for initial spending on research and development and to lower high per-unit production costs.

Toyota is aiming to sell 1 million hybrid vehicles annually some time in the decade beginning in 2010.

Since rolling out the world's first gasoline-electric hybrid car in 1997, Toyota has improved the powertrain with a second-generation system it calls THS II, which powers the remodeled Prius and Lexus RX400h SUV, among others.

But the hybrid system, which allows vehicles to run on an electric motor under certain driving conditions to save fuel, still costs manufacturers -- and consumers -- thousands of dollars over the cost of a regular, gasoline-only, vehicle.

By making the system smaller, Toyota aims to slash the premium by half and expand its use to most of its mid-sized or larger cars, the Asahi said, without citing sources.

Toyota executives have said they aimed to eventually make the powertrain available across its entire product line-up.

Toyota has been pouring R&D resources into addressing the cost issue, but a spokeswoman said a target date for a third generation hybrid system had not been set.

"2008 is certainly a possibility, but we don't know that yet," she said.

Toyota expects to build and sell about 250,000 hybrid vehicles this year through its eight model offerings.

Next year, that will rise to between 350,000 and 400,000 units, boosted by the addition of the Camry hybrid to be built in Kentucky from the latter half of 2006, and the China-built Prius, production of which has been targeted to begin by this year.

The Asahi said Toyota would begin making key components for the hybrid systems in the United States -- the first time this manufacturing would be done outside Japan -- in line with the auto maker's stated aim to eventually procure such parts locally.

Led by Toyota's aggressive push, sales of hybrid vehicles have risen sharply over the past few years, particularly in the United States and Europe, but auto makers have yet to agree on a de facto powertrain for saving fuel.