Toyota Motor Corp will continue to grow in the U.S. market, but at a slower rate than it has in the past, and is considering targeting young consumers with a premium small car, the automaker's North American sales chief said on Thursday.

I don't think the double-digit growth of the past few years will continue because we are such a large part of the U.S. market now, Jim Lentz told Reuters in an interview.

On Wednesday, Lentz said Toyota is on track to post a U.S. sales increase of 5 to 6 percent in 2007. The automaker is now neck and neck with General Motors Corp in global sales, and is expected to become the world's largest automaker this year.

For next year, we will definitely grow, but we have to reevaluate the market in the fourth quarter to see how much we could grow, he said. Toyota sold 2.5 million vehicles in the U.S. market in 2006 and had more than 17 percent of the market in July.

Through July, Toyota has surpassed Ford Motor Co. -- excluding Ford's luxury brands, which it is looking to sell -- to become the second-largest automaker behind GM in the United States.

As the Japanese automaker has grown in the United States, it has entered every segment with a full line of cars, trucks and sport utility vehicles, including a luxury line with its Lexus brand and an experimental youth-oriented line with its Scion brand.

When asked about what Toyota might offer next for U.S. consumers, Lentz said the automaker is looking at the premium small car segment -- a category most automakers in the United States have stayed away from so far.

Lentz said Toyota has been studying a process called urbanization in which large numbers of people in their 20s and early 30s are moving into cities.

These people have money and they need cars, Lentz said. They don't have long commutes, and they don't have too much space to park. That's where we see the need for a premium small car.

BMW, the world's largest premium carmaker, is the only automaker to succeed with a small luxury car in the U.S. market -- with its Mini Cooper. The Mini shows that a small car does not have to be a cheap car, Lentz said.

The Mini subcompact has four models in the U.S. market, ranging in base price from $18,700 to $26,000.

In contrast, Honda Motor Co Ltd charges a base price of $13,850 for its Fit subcompact car, while Toyota charged $12780 for its Scion xA, which it stopped making last year. It charges $14,550 for its new Scion xD. GM's base price for its Aveo subcompact starts at $10,560.

I think it's time for more luxury-type small cars, Lentz said. He declined to provide any details on Toyota's plans, saying: We are looking at that, and that's all I can say.

RAPID GROWTH, SLOW ON DEALERS

Lentz said Toyota plans to maintain only two channels at dealers even as it grows rapidly in the United States. The automaker has been admired for its dealership efficiency at a time when rivals GM and Chrysler LLC, just purchased by private equity firm Cerberus Capital Management, have been criticized for having too many brands and dealerships.

With only two brands -- Toyota and Lexus -- in the U.S. market, the automaker launched its youth-oriented Scion brand in late 2003, pulling it into the Toyota channel and keeping only the Lexus brand under a separate dealership.

We are not considering a new brand, but if we were to have one, we would not increase our channels, Lentz said.

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