May 18 (Bloomberg) -- Toyota Motor Corp. said U.S. consumer demand for plug-in hybrids, a technology backed by President Barack Obama, may be limited by the vehicles’ price, recharge time and battery durability.

Toyota estimates sales of hybrids that can be recharged at household outlets may be 50,000 units a year at most and could be as few as 3,500, Bill Reinert, U.S. national manager for advanced technology, told a National Academy of Sciences panel today in Washington. Sales of Toyota’s Prius, the best-selling gasoline-electric vehicle, were almost 159,000 last year.

A market for the plug-in hybrid electric vehicles “will emerge, but their success depends on advantages over existing hybrids,” Reinert said. “There is a great deal of variation on how current PHEVs perform in real-world conditions.”

Interest in plug-ins surged after gasoline prices reached record highs last year and Obama campaigned on a goal of getting 1 million such vehicles on U.S. roads by 2015. The Energy Department said this month it plans to begin awarding a portion of $25 billion in low-cost federal loans to companies that build plug-ins and other fuel-efficient vehicles at U.S. factories.

General Motors Corp. has committed about $1 billion to develop the rechargeable Chevrolet Volt, which the Detroit automaker is banking on to leapfrog Toyota’s Prius. Standard hybrids such as the Prius boost fuel economy and cut emissions of carbon dioxide by supplementing a gasoline engine with an electric motor and battery pack that’s recharged from braking.

GM Plug-In Plans

GM aims to begin next year selling the Volt, which goes 40 miles on battery power before a gasoline engine engages to recharge its lithium-ion pack. The engine doesn’t fully re-power the battery, which must eventually be recharged at an electrical outlet.

Toyota hasn’t announced plans to sell plug-in hybrids to consumers. Honda Motor Co. said last month it’s studying plug- ins, and as yet has no plan for consumer sales.

The companies estimate lithium-ion batteries needed for plug-ins may add at least $5,000 to $10,000 to the vehicle price.

Tests of Priuses fitted with $10,000 lithium-ion packs from battery maker A123 Systems Inc. found fuel economy rose only to mid-to-low 50 miles per gallon from the standard Prius’s 46 mpg rating, Toyota said. The results of the tests by Google Inc.’s Google.Org, Consumer Reports and Portland General Electric include energy used to recharge the extra batteries.

The automaker also cited recent studies by Duke University and Carnegie Mellon University showing plug-ins may provide only limited reduction of greenhouse gases compared with current hybrids such as Prius that don’t need to be plugged in.

Test Fleets

Still, Toyota plans to build 500 plug-in Priuses with lithium-ion batteries to be delivered to global test fleets from this year, Shinichi Abe, head of the Toyota City, Japan-based company’s hybrid vehicle management system, told the National Academy. “This type of developing process is necessary before mass production,” he said.

GM, which is now struggling to avert bankruptcy, applied for Energy Department loans for projects related to Volt. Toyota isn’t seeking U.S. funds.

GM hasn’t changed its plan to begin selling the Volt in 2010, said Mark Verbrugge, director of the company’s materials and processes laboratory in Warren, Michigan.

Projected costs have come down, but not as far as the company would have liked, Verbrugge said. He declined to say anything about the vehicle’s projected sticker price.

Smaller and Cheaper

The market will determine how far GM pursues the Volt compared with its other hybrids, he said. A lot depends on further “technology enhancement,” he said.

“If you don’t see that down the road you’re going to make money, it’s not in anybody’s best interest,” Verbrugge said in an interview.

The kind of lithium-ion batteries that can be used in plug- in hybrids are smaller, cheaper and more powerful today than three years ago, said David Vieau, president and chief executive officer of A123 Systems. The Watertown, Massachusetts-based battery maker is projecting costs will drop by an additional 50 percent by 2015, Vieau said.

“This is real,” Vieau said. “This is not, gee, can you make them.”

Toyota’s wariness on demand in the U.S. for plug-in vehicles stems from its experience selling battery-powered RAV4 sport-utility vehicles in California in the early 2000s, Reinert said.

While the company spent 15 times as much per vehicle to advertise and promote the all-electric SUVs as it did for its first-generation Prius, it managed to sell only about 300 a year, he said.

Sales Remained Low

“These marketing efforts were successful in generating high awareness, as shown in our Web site traffic data, but sales remained low and did not increase over time,” Reinert said.

Testimony from Toyota, GM, A123 and other companies is being collected by the National Academy as part of a report it’s preparing for the Transportation Department to determine the market-readiness of advanced batteries and plug-in vehicles.

K.G. Duleep, managing director of Energy & Environmental Analysis Inc. in Arlington, Virginia, and a consultant on the report, said it may be published in July or August.

The Obama administration, pressing for more fuel-efficient vehicles, won’t block the Chevrolet Volt electric car even after the president’s auto task force called it too expensive, a person familiar with the matter said last month.

Questions about the plug-in car’s future arose after the administration ousted Chief Executive Officer Rick Wagoner on March 27 and criticized the car in a report that said government-supported GM’s recovery plan was insufficient.

To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Jeff Plungis in Washington at jplungis@bloomberg.net.

Last Updated: May 18, 2009 16:48 EDT