A Toyota car decorated as a dog at the company’s headquarters in Tokyo, Japan. Picture: REUTERS/KIM KYUNG-HOON
A Toyota car decorated as a dog at the company’s headquarters in Tokyo, Japan. Picture: REUTERS/KIM KYUNG-HOON

Tokyo — On Tuesday, Toyota said that it sees room to expand in China as growing sales of its luxury brand Lexus help it buck an emerging trend of slowing demand, which has hit profit at some of its global rivals.

Japan’s biggest vehicle maker also raised its full-year operating profit forecast by 4.3%, saying improved marketing pushed up sales in China, Europe and elsewhere, while a weaker yen will have a bigger positive impact.

Growing demand for Toyota’s Lexus luxury brand has boosted China sales in the past year. Import tariff cuts from July have also supported Lexus models, which are shipped from Japan —  though Toyota is considering producing them locally, Reuters reported last month.

This demand helped the vehicle maker weather the market’s steepest sales drop in nearly seven years in September amid a broader slowdown in economic growth.

“Even if there is uncertainty in China, potentially, the market will grow in the longer term,” Didier Leroy, Toyota’s chief competitive officer, said at briefing. “Lexus is growing in China, but if you compare it with other brands we still have a small brand ... That means we have a lot of room to improve and Lexus has strong potential in China.”

Toyota sold about 1.3-million vehicles in China in 2017 and has a market share of 5%, much smaller than General Motors and Volkswagen (VW). Leroy said region-specific marketing and a diverse product offering has helped Toyota sales, which jumped 20% between July and September.

Brighter forecast

Toyota now expects full-year profit of ¥2.4-trillion — flat compared to the year prior — based on the yen averaging about ¥110 to the dollar up to the end of March, rather than ¥106 in its previous forecast.

The upgrade comes after a 1.9% rise in global sales in July-September helped operating profit rise 11% to mark Toyota’s strongest second-quarter performance since 2015.

Higher sales in China helped lift Asia sales by 9.2%, while sales rose 4.8% in Europe. Sales in North America eased slightly, but less discounting lifted regional operating profit by 12.6%.

Toyota and domestic rivals face the possible need to increase investment in North America, as Japan’s automotive industry considers ways to raise localised production following an updated trade pact between the US, Canada and Mexico.

The industry is also bracing for higher US tariffs on Japanese imports, likely pushing up prices at Toyota, which imports nearly one third of all of the vehicles it sells in its biggest market from Japan.