Toyota says hybrid cost premium to disappear

By Chang-Ran Kim, Asia auto correspondent

TOYOTA CITY, Japan (Reuters) - Toyota Motor Corp. (7203.T: Quote, Profile, Research, Stock Buzz) expects to cut costs for hybrid cars enough to be able to make as much money on them as it does on conventional gasoline cars by around 2010, a top executive said on Thursday.

Japan's top automaker has been keen to see the fuel-saving powertrain enter the mainstream since launching the Prius, the world's first hybrid car, in 1997, but sales have come at the expense of profitability given their high production costs.

But Masatami Takimoto, executive vice president in charge of powertrain development, said cost-cutting efforts on the system's motor, battery and inverter were bearing fruit, and the cost structure would improve drastically by the time Toyota reaches its sales goal of one million hybrids annually in 2010 or soon after.

"By then, we expect margins to be equal to gasoline cars," he told Reuters in an interview at Toyota's headquarters in Toyota City, central Japan.

If it succeeds, Toyota would be removing the main hurdle preventing rivals from pushing the expensive powertrain, which twins a conventional engine with an electric motor, and likely widen its sales lead as more consumers seek better mileage amid rising fuel costs.

Data this week showed U.S. gasoline prices at an all-time high above $3 a gallon, and Takimoto said he expected energy prices to continue rising.

Toyota likely achieved cumulative hybrid sales of one million units this month, having moved 998,900 by the end of April.

In 2006, it sold 313,000 units, accounting for the majority of the world's hybrid cars, and aims to lift that to 430,000 units this year with ramped-up production of the popular Prius.