DETROIT – While many auto makers have begun offering three rows of seating in their midsize and large cross/utility vehicles, Toyota Motor Sales U.S.A. Inc. was one of the first to squeeze a third row into a smaller model.

When it debuted in 2006, the current-generation Toyota RAV4 CUV was the first vehicle of its size in the U.S. with the optional feature.

But now, with the realization the extra row eats up precious cargo space, Toyota is evaluating whether to keep it, a top official tells Ward’s.

“One of the criteria (compact CUV buyers are) looking for is interior cargo space,” Bob Carter, group vice president and general manager-Toyota Div. tells Ward’s in an interview during the North American International Auto Show here. “What’s questionable is the importance of (having) three rows.”

Carter says Toyota hasn’t fully made a decision on nixing the RAV4’s third row but admits its inclusion is “challenging from a design standpoint” because the rear headroom space needed changes the exterior shape of the vehicle.

“It does affect some of the design element,” he says.

Ward’s data shows the RAV4 was the third best-selling model in its segment in 2008 with 137,020 deliveries. It trailed Ford Motor Co.’s Escape, with 156,544 sales, and market-leader Honda Motor Co. Ltd.’s CR-V, with 197,279.

Carter says increasing RAV4 sales is “really behind the decision on localization of production,” referring to Toyota’s new Woodstock, ON, Canada, plant that opened last fall. Previously, Toyota imported all RAV4s from Japan to the U.S.

“We were fully dependent on (imported units). We were running short,” he says, noting last year Toyota’s East Coast dealers were chronically out of the type of RAV4s buyers wanted.

For ’09, Toyota did a mid-cycle upgrade on the RAV4, removing the rear-mounted spare tire and adding a new 2.5L 4-cyl. engine.

The RAV4 is unique in its segment because it offers a V-6 mill, which Carter says has had a consistent take rate of 25%-30%, even during last summer’s spike in gasoline prices.

Toyota is not considering doing away with the engine, he says, noting one good reason for keeping it is that the V-6 RAV4 model has a high level of conquest buyers new to the brand.