Carter said it is still 'under study' whether Toyota would offer multiple body styles of the Prius.

David Healy, an auto analyst at Burnham Investment Securities, said the key question is how much has Toyota been able to shrink the cost of the Prius.

'They have been trying to reduce the $3,000 to $5,000 premium for a hybrid,' Healy said. Despite new hybrid offerings from Ford, General Motors Corp. and Chrysler LLC in the works, 'Toyota clearly owns the hybrid market.'

Honda Motor Co. said Wednesday here it would launch a new five-passenger hybrid next April that would be priced below the Prius and its Honda Civic Hybrid, with plans to eventually sell at least 100,000 in the United States. Honda stopped selling its Honda Accord hybrid because of weak sales. Analysts said the higher price for the hybrid Accord was the main reason.

The auto industry is 'going to be in a rough patch for quite some time,' Carter predicted, 'with gradual improvements throughout 2009 and then steady progress as we get into 2010 as our economic fundamentals start to regain their sold footing.'

He said the recovery would look more like a Nike 'Swoosh' than a sharp incline.

Automakers must react quickly as consumers shift quickly to smaller more efficient cars, Carter said. 'There's no more time outs. The game's on the line here. We have to radically revamp our lineups.... Our backs are against the walls.'

Carter also said that automakers aren't ready for higher fuel economy requirements and future regulations like caps on emissions, requirements for zero emission vehicles or new proposals on global warming.

'They're just around the corner and frankly our industry is not ready for it,' Carter said.

Through July, U.S. auto sales are on pace to average just over 14 million -- nearly a two-decade low. For the month of July, sales fell to annualized sales level of 12.5 million vehicles.

Carter said in 'the not too distant future' annual U.S. auto sales would top 17 million vehicles, a generally accepted sign of a healthy U.S. auto market. He said that full recovery wouldn't happen until sometime after 2010, in part because of U.S. demographic trends that will bring millions of new buyers into the market.

'Turbulence is always going to be a part of this business, as this business reacts to the highs and lows of social, political and economics trends,' Carter said. 'Sometimes it feels like it's a double-barreled perfect storm.'

Consumers are demanding more hybrids, more four-cylinder engines 'and they want vehicles that exceed 30 miles per gallon,' Carter said. In May, 50 percent of all vehicle sales were four-cylinder engines, the first time that's happened in U.S. history. Bigger engines have historically been more profitable for automakers to sell.

'That sort of shift rattles every automaker,' Carter said.

Toyota doesn't see gas prices falling below $3.50 a gallon, Carter said.

But he predicted the truck market will recover, as will the U.S. auto market.