The launch Tuesday of two sport utility vehicles featuring hybrid engines highlights Toyota Motor Corp.’s keenness to spread the hybrid system as a core environmental technology.

Toyota became the world’s first automaker to commercially mass produce hybrid vehicles when it launched the Prius in 1997.

In 2004, the nation’s largest carmaker sold some 135,000 hybrid cars worldwide, including 126,000 Prius models. Toyota hopes to boost that figure to 1 million.

“The hybrid system can be applied to any form of energy source to improve fuel efficiency,” whether it be gasoline, diesel or hydrogen, Toyota Executive Vice President Akihiko Saito said Tuesday. “That’s why we are trying to expand use of the hybrid system to all our vehicles.”

A hybrid system combines a conventional gasoline-powered engine with an electric motor, increasing fuel efficiency and lowering carbon dioxide emissions, one of the major causes of global warming.

Hybrid vehicles are becoming widely popular in the United States, where aspiring buyers of the latest Prius had had to wait six months for delivery.

Such demand has prompted other automakers, such as General Motors Corp. and DaimlerChrysler AG, to start developing their own hybrid automobiles.

But with the Prius costing about 400,000yen to 500,000yen more than conventional cars in the same class, many analysts say hybrid vehicle manufacturers will have to further slash prices to get them into the mainstream.

Toyota’s strategy is to reduce the cost of hybrid-vehicle components by aggressively expanding models to boost sales and by providing other automakers with its hybrid technologies upon request.

It is also trying to move production closer to demand. Toyota’s hybrids are only made in Japan, where production capacity for the Prius in 2005 has been boosted 40 percent to 180,000 units over last year. But now Toyota plans to start manufacturing the car in China by yearend and launch hybrid vehicle production in the U.S. as well.

“The hybrid system was originally seen as a stopgap technology until vehicles using fuel cells became more widely available,” said Yasuhiro Matsumoto, an analyst at BNP Paribas Securities (Japan) Ltd. “But it is clearly taking precedence” due to such factors as the delay in the development of rival technologies, he said.

Due to the delay, “Toyota is outclassing the others by enjoying the merits of scale of mass production” and by selling its hybrid-vehicle components to other automakers, who are incapable of developing their own hybrid systems given development costs that can reach into the hundreds of billions of yen, Matsumoto said.

In September 2002, Toyota agreed to supply its hybrid system components to Nissan Motor Co. along with technical assistance. It also reached hybrid licensing agreements with Ford Motor Co. in March 2004.

Toyota is now reportedly negotiating with Porsche AG and Fuji Heavy Industries Ltd. on supply of hybrid-system components.

But whether sales of hybrid vehicles will gather steam as Toyota hopes remains to be seen.

Industry officials say demand for hybrid vehicles is highest in the U.S. But even there, market share is expected to remain low.

According to global market research firm J.D. Power & Associates, sales of vehicles with hybrid engines in the U.S. are expected to reach 535,000 in 2011, more than six times the number sold in 2004.

Despite that increase, the firm expects the share of hybrid vehicles in the U.S. market to peak at around 3 percent in 2010 and remain flat from there on, largely for two reasons: high prices and improved fuel efficiency for conventional gasoline and diesel engines.

Koji Endo, director of equity research at Credit Suisse First Boston Securities (Japan) Ltd., believes hybrid technologies are likely to hold the key to environmental concerns as other Asian countries, such as China and India, rapidly motorize.

But taking into consideration the high popularity of diesel engines in Europe, as well as the high prices of hybrids, global sales in 2010 will probably reach 1 million at best, he said.

“Currently, hybrid models are in general 20 percent more expensive than the conventional model,” Endo said. “Automakers must bring the level of this premium down to at least 10 percent.”

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