Sept. 13 (Bloomberg) -- Toyota Motor Corp., the world's second-largest automaker, said all of its vehicles may eventually be run by hybrid gasoline-electric motors, as record fuel prices curb demand for conventional automobiles.

Toyota, the world's first and largest maker of so-called hybrid cars, said it's aiming to increase hybrid production by 60 percent in 2006 and will cut costs and prices to make them more affordable.

``In the future, the cars you see from Toyota will be 100 percent hybrid,'' Toyota Executive Vice President Kazuo Okamoto said in Frankfurt, declining to give a time for achieving the target. ``We believe that in 10 years the world will be filled with hybrids.''

Toyota has sold 425,000 hybrid cars since 1997 and is trying to profit from its edge over General Motors Corp. and Ford Motor Co. in the technology. President Katsuaki Watanabe said he aims to halve the premium in price of hybrids over conventional vehicles ``at the earliest possible stage.''

Hybrid vehicles combine a gasoline engine with battery packs that's recharged through braking. Electricity powers the vehicle at low speeds, enabling the Prius hybrid to go up to 55 miles on a gallon of gasoline, double the mileage of a conventional automobile. The cost of those components makes hybrids $3,000 to $5,000 more expensive than conventional gasoline engine autos, according to automakers and analysts.

Shares of Toyota rose as much as 1.1 percent to 4,710 yen, changing hands at 4,700 yen at 1:55 p.m. in Tokyo.

Prius Premium

Toyota is aiming to make as many as 400,000 hybrid vehicles in 2006, including Prius cars, Camry sedans and Highlander sport- utility vehicles and Coaster buses, almost two-thirds more than its original production target, according to president Watanabe, speaking in New York yesterday. The carmaker is aiming to sell 1 million hybrid vehicles a year by 2010.

``Toyota has been the leader of the pack in environmental technology and they will probably continue to be,'' said Norihito Kanai, an analyst at Meiji Dresdner Asset Management Co. in Tokyo. ``Many of its rivals were at first not so aggressive in hybrids, but now we see everyone joining.''

Global sales of vehicles may drop this year, as the price of gasoline surged to more than $3 a gallon on Sept. 2, according to AAA, the largest U.S. motoring organization.

Making Cars Cheaper

Watanabe yesterday also said the automaker needs to halve the price difference between hybrids and conventional gasoline vehicles by 2010, the Nihon Keizai newspaper reported on its Web Site today.

Toyota's competitors are beginning to make gasoline-electric hybrids as well. Honda Motor Co. produces the Insight two-seat car, the Accord hybrid and will show off a new version of its Civic compact hybrid in Frankfurt. Ford, which bought its hybrid technology from Toyota, last year released a hybrid version of its Escape sport-utility vehicle, while Nissan Motor Co. will release Altima hybrid in the U.S. next year.

Bayerische Motoren Werke AG on Sept. 7 said it will join General Motors, the world's biggest carmaker, and DaimlerChrysler AG to develop fuel-saving gasoline-electric power systems for release in models as soon as 2007 as they try to catch up with Toyota.

Volkswagen AG and Porsche AG said yesterday that they plan to jointly develop gas-electric versions of Volkswagen's Toureg, Audi Q7, and Porsche Cayenne sport utility vehicles, which are all built at Volkswagen's factory in Bratislava, Slovakia. Audi is a unit of Volkswagen.

To contact the reporter on this story: Alan Katz in Frankfurt at akatz5@Bloomberg.net; Kae Inoue in Tokyo at kinoue@bloomberg.net

Last Updated: September 13, 2005 01:03 EDT