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

``In the future, the cars you see from Toyota will be 100 percent hybrid,'' Executive Vice President Kazuo Okamoto told reporters in Frankfurt yesterday, without giving a timeframe.

Japan's biggest carmaker is aiming to make as many as 400,000 gasoline-electric vehicles in 2006, including Prius cars, Camry sedans, Highlander sport-utility vehicles and Coaster buses, 60 percent more than 2005's target, President Katsuaki Watanabe said at an investor conference in New York yesterday.

Toyota has sold 425,000 gasoline-electric cars since 1997 and is trying to profit from its lead over General Motors Corp. and Ford Motor Co. in the technology. Watanabe said he aims to cut production costs and halve the $5,000 price premium on such vehicles, without giving details.

``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.''

Hybrid vehicles combine a gasoline engine with a battery pack that's recharged through braking. Electricity powers the vehicle at low speeds, enabling the Prius to go up to 55 miles on a gallon of gasoline, double the mileage of an automobile that runs on a conventional engine.

Shares of Toyota rose 1.3 percent to a five-year high of 4,720 yen in Tokyo.

Shares Advance

A Prius hybrid carries a sticker price of $20,875 in California. The cost of those components makes hybrids $3,000 to $5,000 more expensive than gasoline-engine autos, according to automakers and analysts.

Watanabe told investors he couldn't give a time frame for halving the price premium. The Nihon Keizai newspaper reported on its Web site today that he gave a target of 2010.

Fujio Cho, Watanabe's predecessor, previously targeted sales of 300,000 hybrids worldwide by the end of 2005, and last year he pushed back the date to 2006. Toyota's U.S. sales chief Jim Press said a shortage of batteries and other parts will probably contribute to the shortfall. The company is planning to sell 240,000 to 250,000 hybrids this year and 1 million a year by 2010.

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

Toyota, the world's biggest carmaker by market value, has seven vehicle models that run on hybrid systems, more than any other carmaker. Still, its competitors are beginning to catch up.

Honda Motor Co., Japan's second-largest carmaker by market value, has a hybrid version of its Accord sedan, a two-seat Insight model and is putting a hybrid Civic compact car on display at the Frankfurt International Motor Show this week.

Ford, which bought its hybrid technology from Toyota, last year released a gas-electric version of its Escape sport-utility vehicle, while Nissan Motor Co. will release the Altima hybrid in the U.S. next year.

``We believe that in 10 years the world will be filled with hybrids,'' Okamoto said.

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

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.

Made in Japan

Toyota, which makes vehicles in more than 60 factories in 27 countries, produces hybrid vehicles only at the Tsutsumi factory in central Japan, near its head office in Toyota City.

The carmaker may eventually make hybrids outside Japan, including a trial assembly of a small number of Prius gas- electric hybrid cars in northeastern China's Changchun city by the end of 2005, Toyota said.

Toyota will build hybrid Camry sedans in Georgetown, Kentucky in late 2006. The factory will spend $10 million on improvements and training to produce 48,000 hybrid Camrys a year, Toyota said on May 17.

The plant can now build 500,000 vehicles annually and makes gas-powered Camry, Solara and Avalon cars. The Camry is the best- selling car in the U.S.

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 03:00 EDT