Toyota warns of tough times ahead as competition heats up

Toyota Motor Corp warned of tougher competition in China and raised its forecast for Japan sales as it reported quarterly profit that beat analyst estimates.

Net income in the April-to-June period rose to 646.4 billion yen ($5.2 billion), exceeding the 617.1 billion yen average of 12 analysts' estimates compiled by Bloomberg.

Operating profit trailed estimates and Toyota cut its full-year delivery forecast by 30,000 units to 10.12 million. The annual profit forecast was left unchanged.

Toyota has outpaced the industry in China this year, boosting deliveries by 12 percent in the world's largest auto market even as competitors like BMW AG consider revising their profitability goals amid slowing demand.

A weaker yen has helped soften the blow from declining deliveries in Japan and Southeast Asia, which helped lead to Volkswagen AG inching ahead as the world's largest automaker by sales.

"The sales expenses have gone up and also the sales prices have come down slightly," Tetsuya Otake, a Toyota managing officer, told reporters in Tokyo on Tuesday. "This is making our business in China quite difficult. The business environment is getting tougher."

BMW lowered production by 16,000 cars in China, its biggest market, Chief Financial Officer Friedrich Eichiner said on Tuesday.

After a stock market rout discouraged customers from making large purchases, those still buying are demanding bigger price cuts, he said.

Toyota said last week that it sold 5.02 million vehicles in the six months through June, trailing the 5.04 million that Volkswagen reported weeks earlier.

Deliveries declined 1.5 percent for Toyota and 0.5 percent for Volkswagen.

While Volkswagen may have surpassed Toyota by sales during the first half of the year, the Japanese carmaker still leads the industry in profits.

Analysts project the company may earn about $26 billion in operating profit for this financial year, almost double the $14.8 billion estimated for Volkswagen.