PORTLAND, OR – Toyota Motor Sales U.S.A. Inc. is cutting the price of replacement batteries for its first- and second-generation Toyota Prius hybrid sedan.

Nickel-metal-hydride units for ’00-’03 models are reduced to $2,299, while batteries for second-generation Prius cars now cost $2,588. Replacement batteries for both generations previously cost $2,985.

“We’ve stated from the beginning that battery-replacement costs would continue to decline due to technology and volume-related advancements, and we believe this will continue,” says Gary Smith, Toyota’s corporate manager-product quality and service support.

The batteries are subject to warranties of 10 years and 150,000 miles (240,000 km), or eight years and 100,000 miles (160,000 km), depending on the state where the vehicles were purchased.

How many have needed replacing? “Enough to fill the navel of a gnat with room left over for two caraway seeds,” boasts Bill Reinert, Toyota’s colorful national manager-advanced product technology.

Toyota spokesman John Hanson is more precise: About 300, he says. The NiMH batteries, therefore, have demonstrated 99.95% reliability, considering the auto maker has sold a total of 635,632 Prius models in the U.S., according to Ward’s data.

Batteries for Toyota Motor Corp.’s hybrids, including Lexus-brand models, are sourced from Japan’s Panasonic EV Energy Co. Ltd., of which Toyota owns a controlling interest.

Meanwhile, the auto maker says it is studying the business case for remanufacturing Prius batteries in the U.S. to further lower replacement costs.

Toyota, which is hosting a sustainable mobility seminar here, has its eye on an annual output of 1 million NiMH batteries by 2010, along with a similar target for lithium-ion battery production.

The auto maker has said its first plug-in hybrid electric vehicle, set for testing in commercial fleets late next year, will feature Li-on technology.