UPDATE 1-Toyota to make Prius, not SUV, at new US plant-paper

(Adds details, analyst comment)

TOKYO, July 10 (Reuters) - Toyota Motor Corp (7203.T) will switch gears and produce the Prius hybrid instead of the less fuel-efficient Highlander sport utility vehicle at its planned Mississippi factory, the Nikkei business daily reported on Thursday.

The world's biggest automaker is also likely to suspend production at one of two assembly lines at its Indiana factory, where it builds the Tundra pickup and Sequoia SUV, by year-end for at least six months, the paper said. Citing company sources, it said the move was in response to falling demand for those models and would amount to a production cut of 50,000 vehicles a year.

During the stoppage, Toyota will modify the line to allow for more flexibility to build other models, the paper said in its evening edition.

The change in plans may mean the Mississippi factory, which will churn out the Prius as well as other cars, will not come onstream until 2011, the Nikkei said, at least a year behind original plans.

A Toyota spokesman said the company could not comment on the report.

Hit by an industry-wide slump in sales of large, gas-guzzling vehicles due to soaring fuel prices, Toyota's sales in the United States, its single-biggest market, have fallen 6 percent so far this year. Its sales of light trucks such as SUVs and pickups are down 12.5 percent, forcing it to run its Indiana and Texas light-truck factories at a reduced pace indefinitely.

In contrast, Toyota is struggling to keep up with runaway demand for the gasoline-electric Prius model, which saves fuel by capturing energy lost during braking to power an electric motor. [ID:nN01279173]

At the end of June, Toyota had a one-day supply of the Prius hybrid, imported from Japan, and a 2-½ day supply of its hybrid Camry sedan assembled at its Kentucky plant.