July 2, 2008 / 12:18 AM / 11 years ago

Toyota struggles to meet hybrid, small car demand

DETROIT (Reuters) - The surge in popularity for small cars and fuel-efficient hybrids has left Toyota Motor Corp facing an unusual problem: deepening shortages of popular models such as the Prius hybrid.

A Prius with the new Hybrid engine is seen at the fair stand of Japanese car manufacturer Toyota at the international car show IAA in Frankfurt, September 11, 2007. REUTERS/Alex Grimm

A limited inventory of small cars hurt Toyota, which reported a 11.5 percent drop in U.S. sales in June.

In stark contrast, Japanese rival Honda Motor Co reported a 13.8 percent sales rise on record demand for its Fit subcompact car and Civic sedan.

Toyota executives said a dwindling inventory of vehicles, such as the Prius, Yaris and Corolla, had forced the automaker to scramble to try to keep up with demand in June, a month when industry-wide U.S. auto sales dropped almost 9 percent.

Sales of Toyota’s Prius, the top-selling hybrid in the U.S. market, fell 26 percent as dealers ran short of inventory and customers faced a six-month waiting list. Toyota said it would only partly be able to satisfy the backlog of demand from its dedicated Prius factory in Japan this year.

Hybrids command about a $5,000 price premium compared with equivalent vehicles without the expensive battery.

“It is very doubtful that there is going to be a lot of recovery this year to be able to satisfy consumer demand and that is very unfortunate,” said Jim Lentz, Toyota’s head of North American sales, referring to the Prius.

Toyota had a one-day supply of the Prius hybrid and a 2-1/2 day supply of its hybrid Camry sedan at the end of June.

Inventory of other popular Toyota cars also ran low in June. Dealer supply of Corolla sedans was down to a 15-day supply, while Yaris had a 7-day supply at the end of June, the automaker said.

Toyota said it expected inventories of Yaris and Corolla to increase in August and was working to add capacity at its hybrid battery manufacturing plant in Japan.

The current generation Prius uses nickel-metal hydride batteries made by Panasonic EV, a joint venture between the automaker and Matsushita Electric Industrial Co Ltd.

Toyota, which put the world’s first hybrid car on the road in 1997, has a goal of reaching global annual sales of 1 million hybrid vehicles soon after 2010 — more than double last year’s sales tally.

Toyota’s Lentz said the production constraint made it hard to forecast how large the market for the hybrid model could be in the United States, the Japanese automaker’s largest market.

“We don’t know what the top end on Prius is,” Lentz said.

In a J.D. Power survey, 72 percent of U.S. consumers said they were interested in buying a hybrid.

Overall, the U.S. sales performance of the three major Japanese automakers were mixed in June with Nissan Motor Co posting a 7.5 percent decline.

Honda bucked the downtrend in overall U.S. light car sales, outselling Chrysler LLC for the second consecutive month in June to grab the No. 3 spot in the U.S. market.

On a combined basis, the three major Japanese automakers increased their share of the U.S. market to 34.7 percent, up from 32.9 percent from a year ago.

The market share of the three Detroit automakers — General Motors Corp, Ford Motor Co and Chrysler — fell to 45.8 percent in June from 50.2 percent a year earlier.

Reporting by Poornima Gupta, editing by Richard Chang

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