Toyota struggles to keep up with battery production, meet consumer demand

Higher fuel prices have spurred the nation's demand for hybrid vehicles, with suprising results — Toyota, maker of the popular Prius hybrid, is struggling to produce enough of the nickel-metal hydride batteries that power these "green" cars.

The crunch is likely to remain the rest of the year, as battery production can't be boosted until next year, says Toyota Motor Corp. Executive Vice President Takeshi Uchiyamada, who oversees production for Japan's top automaker.

"Hybrids are selling so well we are doing all we can to increase production," he said in a previous statement to the press. "We need new lines."

Craig Van Batenburg, owner of the Automotive Career Development Center (ACDC), in Worcester, Mass., explains the increasing demand for hybrid vehicles this way: "For the first time, people are seeing the error of their ways for being so 'fuel-ish.' Maybe it's the spike in fuel prices, maybe it's the sluggish economy — but whatever it is, the change is so dramatic that nobody saw it coming. The average American is slow to change, and this change was unprecedented," he added, in an exclusive interview with Aftermarket Business magazine.

Graham Payne, managing director of the Capstone Financial group, agrees that nobody was able to predict the sharp increase in demand for hybrid vehicles. Of course, the belief that skyrocketing fuel prices will remain high for the foreseeable future is fueling demand for these vehicles.

"In the past six to 12 months, consumers have come to the realization that high gas prices are here to stay," Payne added, during an e-mail interview. "As such, they need a vehicle that will mitigate higher gas prices. The fundamental shift in public opinion makes the hybrids much more attractive not only for the green crowd, but also for everyday Americans who are making their decisions based both on the price of the car and the price of gas."

Battery production is critical in determining how many hybrid vehicles Toyota can produce, Uchiyamada said from the company's Tokyo office.

Hybrids, including Toyota's top-selling Prius, offer better mileage than comparable gas-only cars by switching to an electric motor whenever possible.

Toyota leads the world's automakers in hybrids sold at about 1.5 million vehicles since the first mass-produced hybrid Prius came out about a decade ago. The company now offers other models in a hybrid version.

Prius and other hybrids are soaring in popularity around the world amid surging gasoline prices, and other automakers are also rushing to produce hybrids. Hybrids also boast a green image in reducing emissions linked to global warming.

But Uchiyamada, who is leading Toyota's effort to make auto production greener, acknowledged such efforts hadn't yet extended to battery production because of the problems keeping up with demand.

"That has to settle down first," adds Uchiyamada, an engineer who helped develop the Prius.

Toyota said last week its hybrid-battery joint venture with Matsushita Electric Industrial Co., which makes Panasonic products, will begin producing next-generation lithium-ion batteries in 2009, and move into full-scale production in 2010.

Toyota also said it's setting up a battery research department later this month to develop an innovative battery that can outperform even that lithium-ion battery.

Toyota has also announced its third plant in Japan for producing current hybrid batteries, called nickel-metal hydride, that run the Prius and other hybrid models on sale now.

"But you can't just build a new plant to produce these batteries overnight," says Van Batenburg. "It's a very expensive proposition. But the demand for these batteries came overnight. So, Toyota has vowed to ramp up production from its current 600,000 batteries to 1 million batteries in production by 2010 to better serve its customers. That's a lot of batteries."

Other automakers are also revving up hybrid production.

Honda, Japan's second-biggest automaker, said it will boost hybrid sales to 500,000 a year after 2010. Honda said it will introduce a new hybrid-only model next year for a total lineup of four hybrids.

Nissan Motor Co., which still hasn't developed a hybrid for commercial sale, said that it will by 2010. Nissan says its joint venture with electronics maker NEC Corp. will start mass-producing lithium-ion batteries in 2009 in Japan.

Still, when it comes down to it, "green" is nice, but saving some "green" is even nicer, Payne says.

"Now that gas prices have hit the $4 a gallon mark, it will take less time for consumers to recover the increased cost of a hybrid vehicle. From an economic standpoint, three years is now the break-even point where the excess cost of the vehicle is offset by the fuel savings. Obviously, you can't quantify the positive impact on the environment versus the use of traditional gas, but this is a very strong argument for some in favor of purchasing a hybrid vehicle," he adds.