Toyota Motor Corp <7203.T> might face limited production through July due to Japan's March 11 earthquake and its aftermath, its U.S. sales chief, Bob Carter, said in a note to dealers.

Today we have good levels of inventory, but inventory will be getting tighter, Carter said in the note obtained by Reuters.

Toyota will be producing new vehicles at significantly reduced levels, Carter's note said. What we don't know are vehicle production levels for May through July. The potential exists that supply of new vehicles could be significantly impacted this summer.

The slowdown of production will crimp Toyota's ability to capture market share on its fuel-efficient lineup this summer when U.S. average gasoline prices are expected to top $4 per gallon. In 2008, Toyota's sales for its Prius hybrid and small-car lineup, including Corolla, spiked when gas prices surpassed $4 per gallon.

Toyota's Japanese plants will resume operations on April 18 and run at about half the normal scheduled production, and then will shut for two weeks through May 10 as Japan's national Golden Week gets underway, Toyota's note said. Golden Week is a string of Japanese national holidays in the first week of May.

The world's top-selling automaker had lost 260,000 units of production in Japan through last week. In North America, it is expected to lose about 35,000 units of production through April 25, the company said.

The company said last week that North American Toyota production will be reduced beginning April 15 due to parts availability and will have an extended Easter break starting on April 21.

A decision on how long Toyota's North American plants will run on three-day work schedules rather than five-day schedules will be made later, Carter said.

To keep the production lines running, Toyota will match the colors of its cars and trucks to available paints, which are limited by supplier shutdowns in Japan.

Toyota's U.S. dealers have clearly benefited from rising gas prices, Carter said. And he added Toyota's U.S. inventory of 300,000 units is now four times higher than after the 2009 Cash for Clunkers government incentive program.

However, the government program to boost U.S. auto sales during the recession ended in the fall, while the auto industry was in a tailspin, and not in the spring during a gradual recovery, as is the case now.

Carter's memo was sent to U.S. dealers on Sunday and reported earlier on Monday by the Wall Street Journal.

HIGHER VEHICLE PRICES

The gradual economic recovery that increased consumer demand, coupled with the expected shrinking of the new vehicle supply, is likely to mean higher sales prices in relation to the suggested retail price, analysts and automakers have said.

CNW Research said on Monday that early April U.S. auto sales are showing the highest average transaction prices in relation to the manufacturers' suggested retail price (MSRP) since 1996. Many factors, including an easing of auto consumer credit and a smaller supply of used cars and trucks due to production cutbacks after the 2008-2009 sales downturn.

The average transaction price is the actual price to consumers of a new vehicle after manufacturer and dealer discounts and incentives.

The CNW figures do not yet account for the expected shrinkage of new-vehicle availability because of production shutdowns and slowdowns, not only at Toyota and other Japanese automakers, but at U.S. automakers as well due to the lack of auto parts.

General Motors Co Chief Financial Officer Tim Ammann told analysts last week the impact of the Japan crisis might push vehicle prices higher and allow GM to cut back incentives.

Carter noted to dealers that 800,000 auto parts industry-wide are affected by the Japan crisis and many of those parts rely on five tiers of suppliers.

(Reporting by Bernie Woodall; editing by Maureen Bavdek and Andre Grenon)

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