Toyota to build batteries for its hybrids in N. America

By Soyoung Kim

NEW YORK (Reuters) - Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) (TM.N: Quote, Profile, Research, Stock Buzz) will build batteries for its hybrids in North America eventually, as part of a plan to drive down the production costs of fuel-efficient models like its top-selling Prius.

As part of that strategy, Toyota expects that its next-generation Prius will have a profit margin close to that of a traditional sedan like the Corolla, a senior executive said on Friday.

Toyota, like other major automakers, does not typically detail vehicle-by-vehicle profitability. But the high cost of developing new hybrid systems and batteries has widely been seen as a constraint on the initial profitability of such models.

U.S. automaker General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) has said it expects to lose money initially by selling its all-electric Chevy Volt, due to the high cost of battery packs.

"We reduced costs of hybrid systems for the current Prius by 50 percent from the first generation," Vice Chairman Kazuo Okamoto said on Friday at a presentation to financial analysts and reporters in New York.

"For the next-generation Prius, we will be able to cut costs by another half, so I think we've been able to ensure profitability will be similar to regular vehicles, such as the Corolla," Okamoto said.

Toyota, the world's largest automaker by sales, will unveil its third-generation Prius and a new dedicated hybrid model for its luxury Lexus brand at the Detroit auto show in January.

Okamoto did not give the launch date for the new hybrids.

Despite the roughly $5,000 premium that the Prius carries over regular gasoline-powered vehicles, Toyota has struggled to meet surging demand for the gasoline-electric hybrid. Sales in the U.S. through August were down 4 percent because of a shortage of the hybrids on dealer lots.

"We will be producing batteries in North America, but we don't know when," Okamoto said. All hybrid batteries for Toyota are currently manufactured in Japan.

Toyota will start building the Prius in the United States in 2010, at its planned Mississippi plant which had been initially set to produce the Highlander SUV model.

"It is very difficult to make the main parts of batteries outside Japan, but we have to have battery production in North America," Okamoto said. "We just don't know when."

In addition to increasing production of the current hybrid, Toyota also is moving forward the launch of a plug-in version of the Prius.

The automaker aims to make it available to fleet operators, such as government agencies and universities, at the end of 2009. It had earlier set a roll-out date of 2010.

Unlike traditional hybrids which twin battery power and combustion engines, plug-ins will be powered entirely by an electric motor and have a battery that can be charged through an ordinary power socket.  Continued...