Japans Number One Automaker Chooses Hybrids to Keep Its Market Edge

Toyota Motor Corp., the worlds largest automaker by market value, plans to double the number of models that use hybrid engines to six by about 2006, including sport-utility vehicles, President Fujio Cho said.

Starting with the 1997 introduction of the Prius in Japan, Toyota has sold 140,000 cars with engines driven by a combination of gas and electricity. Toyota is also rolling out a larger, faster and cleaner version of the Prius hatchback later this year. But this is just the beginning. “We will release hybrid sport-utility vehicles in the next two to three years,” Cho told Bloomberg News in a television interview at Toyotas fifth environmental forum in Tokyo.

The hybrid vehicle market is worth approximately $2.5 billion, and expected to triple by 2006. In order to meet the demands of the consumer, diversifying the availability of hybrid electric vehicle models is necessary to stay at the head of the race.

“To make their green cars successful there are two main objectives, which are meeting emission regulations and offering lower prices,” said Masayuki Kubota, who helps manage the equivalent of $8.5 billion at Daiwa SB Investments Ltd. Once they are met, sales of hybrids will surge.

Toyota, which wants to raise its global share to 15 percent early next decade from a current 10 percent, partially by offering customers more hybrid models, was the first automaker to release cars with gasoline-electric powertrains for commercial sale, starting with the Prius in 1997.

Japanese drivers have three hybrid models to choose from and can expect to see double that in the next two to three years. American drivers will soon see the release of a hybrid sport utility, the very vehicle class thats drawn criticism from environmentalists for wasting energy, giving Toyota the promotional edge over its rivals.

Toyota probably needs to sell at least 300,000 units a year to make its hybrid project profitable, according to Koji Endo, an analyst at Credit Suisse First Boston Japan Inc.

 

Cho, who acknowledges the cost of making cars greener can be prohibitive, said the company “will be offering” the technology as long it makes business sense.