Battery shortage limiting Toyota Prius production

The all-new third-generation Prius hybrid has proven to be a lone bright spot for Toyota amid slumping sales, but a battery supply issue will likely drag down Prius sales this year. The all-new Prius is in such hot demand - both here in the United States and in Toyot's domestic market of Japan - that many customers are experiencing wait lists of several months.

Toyota currently has the capacity to produce about 500,000 Prius hybrids per year, but Toyot's battery supplier - Panasonic EV Energy - isn't currently equipped to handle that level of production. As a result, Toyota has been forced to slow production as it waits for batteries to become available.

"The new Prius model has been excessively popular, inconveniencing some of our customers, and the factories are working overtime at full capacity," Takahiko Ijichi, Toyota senior managing director, told Automotive News.

"Unfortunately, the batteries are not catching up with demand. Production of the batteries needs to be increased in order for our production to go up."

However, it will likely be several months before Panasonic EV will be able to match output with demand. The battery maker is currently ramping up its production efforts and hopes to have a 1 million unit capacity by mid-2010.

The lack of battery capacity has also delayed Toyot's decision to move some Prius production to its Tupelo, Mississippi plant. Toyota had planned to begin Prius production in Mississippi in late 2010, but has since delayed that plan due to insufficient battery supply.

Although the battery shortage has stifled Prius sales, Toyota is still making healthy profits on the popular hybrid. Thanks to advancements in its hybrid technology, the third-generation Prius is 30 percent more profitable than the outgoing model, putting it in Toyot's "midlevel of profit".