Toyota struggles to meet small car demand

By Poornima Gupta

DETROIT (Reuters) - The surge in popularity for small cars and fuel-efficient hybrids has left Toyota facing an unusual problem: deepening shortages of popular models such as the Prius hybrid.

A limited inventory of small cars hurt Toyota, which reported a 11.5 percent drop in U.S. sales in June.

In stark contrast, Japanese rival Honda Motor Co reported a 13.8 percent sales rise on record demand for its Fit subcompact car and Civic sedan.

Toyota executives said a dwindling inventory of vehicles, such as the Prius, Yaris and Corolla, had forced the automaker to scramble to try to keep up with demand in June, a month when industry-wide U.S. auto sales dropped almost 9 percent.

Sales of Toyota's Prius, the top-selling hybrid in the U.S. market, fell 26 percent as dealers ran short of inventory and customers faced a six-month waiting list. Toyota said it would only partly be able to satisfy the backlog of demand from its dedicated Prius factory in Japan this year.

Hybrids command about a $5,000 price premium compared with equivalent vehicles without the expensive battery.

"It is very doubtful that there is going to be a lot of recovery this year to be able to satisfy consumer demand and that is very unfortunate," said Jim Lentz, Toyota's head of North American sales, referring to the Prius.

Toyota had a one-day supply of the Prius hybrid and a 2-1/2 day supply of its hybrid Camry sedan at the end of June.