Toyota Doubles Down

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A couple years back, Fool contributor Matt Richey wrote a poignant warning against the perils of "doubling down" -- doubling your position in a stock already bought at one price after it had fallen to a lower price. (In Matt's case, he had doubled his position in Elan Pharmaceuticals (NYSE: ELN) as it fell from $13 to $10, but the topic of trying to catch "falling knives" has been written about often, with Nortel (NYSE: NT) being used as one prominent example.)

So doubling down on stocks, the prices of which are falling, can be risky. But what about doubling down on an investment thesis that has proven correct -- indeed, wildly successful? Car-making master of the universe Toyota Motors (NYSE: TM) did just that last week when it announced that it will "significantly boost," and in all likelihood double, its production of the super-popular gas-electric hybrid Prius for the U.S. market.

Toyota currently makes all of its "Prii" at a single factory in Japan. The company cranks out about 125,000 of the hybrid sedans per year and so far is earmarking well more than a third of the cars for sale in the U.S. Toyota's Prius sales are booming here, for reasons ranging from California's increasingly stringent auto emissions rules to the continuing high price of gasoline across the country to Virginia's decision to allow owners of hybrid vehicles to drive solo even in the state's HOV lanes.

Meanwhile, Toyota's competitors are gearing up to contend for a piece of the green automotive pie (yummy!). Honda (NYSE: HMC) has been in this fight from Round 1, first with its spaceship-resembling Insight, which was soon followed by its mass-market Civic hybrid. Nissan (Nasdaq: NSANY) is also expected to join the fray and has already begun licensing Toyota's hybrid technology with which to arm itself. And both Ford (NYSE: F), with its hybrid Escape, and General Motors (NYSE: GM), which has a hybrid Silverado pickup for sale, should be joining the fun any day now.

All the more reason for Toyota to lock in its market share as soon as possible by ensuring there are enough Prii available, that willing buyers are not forced to try out the competition for lack of an available Toyota. Smart move, Toyota.

Fool contributor Rich Smith owns no shares in any company mentioned in this article.