* To develop hybrid tech for small/midsize vehicles-Nikkei

* Eyes launch of car using technology in Japan in 2011-Nikkei

* Nissan shares close up 2.5 pct; auto sector flat

Nissan Motor Co (7201.T) aims to develop its own hybrid technology for small and midsize cars and end its procurement of hybrid components from Toyota Motor Corp (7203.T), the Nikkei business daily reported on Friday.

Using the technology, Nissan aims to roll out a hybrid version of the Serena minivan, its best-selling minivan in Japan, in its home market in 2011, the newspaper said.

Nissan, Japan's third-largest carmaker, has said that it plans to begin selling a luxury car using its own hybrid system in 2010 but an expansion of its hybrid line-up would suggest a shift in strategy for the company, which has focused its efforts on pure electric cars. [ID:nT97678]

Japanese carmakers are under growing pressure to offer hybrid models as demand in Japan has jumped for gasoline-electric vehicles, which receive tax breaks and subsidies under a government initiative to promote cleaner cars.

The plan underscores the increasingly difficult outlook for relying on electric cars as mainstay products so soon, said Yoshihiko Tabei, an analyst at Kazaka Securities. Nissan's long-term focus will probably remain on electric cars, but it needs hybrid cars as bridge products for the next decade or so.

Nissan spokeswoman Yuko Sasaki said that while the automaker is considering various options regarding the use of hybrid technology, it has not decided on anything beyond the launch of the luxury vehicle next year.

Nissan, in which France's Renault SA (RENA.PA) holds a 44 percent stake, has set a goal of becoming the leader in the zero-emissions vehicle market. It plans to begin selling electric cars in the United States and Japan in 2010, followed by a global roll-out in 2012.

It sold its first-ever hybrid, the Tino hybrid compact, in 2000 in Japan, but has mostly stayed out of the hybrid market since then. Its only hybrid model now is the Altima, for which it procures core components from Toyota and which is available only in the United States.

Nissan probably expects difficulty in improving profitability on electric vehicles with today's technology and with cost cuts mostly in the hands of motor and battery makers, while it probably has gained expertise on hybrid technology by using Toyota's hybrid components, Tabei said.

Shares of Nissan gained 2.5 percent to 569 yen on Friday, outperforming the broader auto sector, which finished flat.

FOR LONGER-TERM GAIN

UBS Securities analyst Tetsuo Yoshida said Nissan should be able to achieve profitability on hybrid cars faster than Toyota or Honda Motor Co (7267.T) did, because the technology is already available. But making a full-fledged entry into the market years after its two bigger rivals would put Nissan at a disadvantage in terms of sales competition, he said.

It probably would not even dare to think of competing with Toyota or Honda on sales. Its purpose is probably only to have mass-selling products that can meet tougher emissions regulations such as those in California, he said.

Hybrid cars have been in the spotlight in recent months in Japan thanks to strong sales of Toyota's fully remodelled Prius and Honda's new Insight, both with significantly lowered price tags, as well as government subsidies for low-emissions vehicles.

Honda's new Insight became the first hybrid to top the monthly ranking of best-selling cars in Japan in April, while Toyota's third-generation Prius, which debuted three months after the Insight, was No.1 in May. [ID:nT316781]

Analysts said Nissan's adopting its own hybrid technology instead of buying components from Toyota would not give it much cost advantage but would help it cultivate its technological development as well as secure a stable supply.

Developing on its own will help Nissan build its technology and data, which will be key to enhancing electric cars in the future. There is also some risk in keeping the supply of core components in the hands of a competitor, Kazaka's Tabei said. (Additional reporting by Nathan Layne; Editing by Chris Gallagher)

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