Picture: REUTERS
Picture: REUTERS

Tokyo — Toyota’s quarterly profit edged up as demand for its bread-and-butter car models from cost-conscious Chinese buyers helped offset bleak North American sales, although the firm’s shares slipped as it cut its annual net income outlook.

Japan’s biggest vehicle maker attributed the smaller forecast to unrealised losses from equity investments, but, in an indication that business was still strong, it kept its full-year operating profit view unchanged at ¥2.4-trillion ($22bn).

The car maker posted Asian sales of 464,000 units in the third quarter, up 15% from a year earlier, as strong demand in China for its cheap-and-cheerful Corolla and Levin sedans continued into the end of 2018.

Popularity of its luxury Lexus brand also helped it buck a broader slowdown in the world’s biggest auto market.

Toyota’s global sales rose 2.8% to 2.71-million units, with Asia making up for the slack in North America, where its sales slid 7.5% to 680,000 units.

“When one region is underperforming, other regions can compensate for that weakness. Likewise, when some vehicle models are underperforming, other models can compensate,” executive vice-president Shigeki Tomoyama told reporters at a briefing. “It’s a work in process, but as we diversify our markets and our models, little by little we’re starting to see this happen.”

Toyota shares dropped as much as 1.5% on Wednesday, but recovered slightly to end down 0.7% in a broader market that was mostly steady.

Toyota has been hit hard in the US by slowing sales of its marquee sedan models such as the Corolla and the Camry, as well as by its steep discounting to boost sales over the past two years as overall demand stagnates.

In contrast, the Corolla, Levin and Camry were Toyota’s top three selling models in China in 2018, outselling larger ones like the RAV4 SUV crossover, as buyers reined in expenses amid an economic slowdown exacerbated by a Sino-US trade war.

Toyota sold 1.47-million vehicles in China in 2018, up 14%, and aims to lift sales to 1.6-million this year, even as it and other carmakers brace for another tough year there.

Auto sales in China last year contracted for the first time since the 1990s, hurt by the phasing out of purchase tax cuts on smaller cars and the trade war. The world’s No.2 economy grew at its slowest in almost three decades in 2018, and the pace is expected to weaken further this year.

But Japanese vehicle makers such as Toyota, Honda and Nissan are expected to benefit from warming political ties between Tokyo and Beijing at a time when the Sino-US trade war is weighing on rivals such as Ford. However, niche players such as Japan’s Mazda Motor have not been able to escape the broader China weakness.

Mazda’s China sales sank 36% to 62,000 units in the third quarter, due partly to bleak sales of its Axela sedan that is priced slightly above than sold by many of its competitors.

Mazda’s global sales fell 7%, but the lower-volume automaker still raised its annual earnings view as its quarterly operating profit dropped less than expected.

Toyota cut its full-year net profit forecast by about 19% to ¥1.87-trillion ($17.03bn). It did not say which investments hit its net profit, but it is a major shareholder in Subaru, whose shares tumbled more than 30% in 2018, and Akebono Brake Industry, whose shares tanked 40%.

Toyota booked an operating profit of ¥676.1bn ($6.2bn) for the third quarter, slightly below the market’s average estimate of ¥680.8bn ($50.5bn), according to Refinitiv, but up 0.4% from a year earlier.