HINOY Hino Motors Ltd (PK)

TOKYO (Dow Jones)--Toyota Motor Corp. (7203.TO) said Thursday it expects auto sales to surge by a fifth to a record level next year as production returns to normal, with new models and emerging markets helping drive growth after a year scarred by disasters in Japan and Thailand.

But highlighting the scale of the problems it has faced this year, Toyota was effectively knocked off its perch as the world's biggest auto company by sales in 2011, as it said it expects its group global sales to fall 6% in calendar 2011 to 7.90 million vehicles.

The slacker sales will likely leave the auto maker trailing General Motors Co. (GM) and Volkswagen AG (VOW.EX) this year, putting an end to its three-year reign at the top of global auto sales.

While Japan's biggest car maker forecasts global sales excluding those of its subsidiaries to grow 20% to 8.48 million in 2012, doubts remain whether Toyota can regain the top spot next year. Toyota will likely have to overtake GM and VW, which are both looking to sustain their own momentum, amid a stubbornly strong yen that is continuing to blunt its overseas competitive edge, as noted by Moody's Investors Service in their downgrade of the car maker's rating the same day.

GM already sold 6.79 million vehicles in the first nine months of this year, up 9.2% from the same period a year earlier, and could sell over 9 million for the full year if it maintains a similar growth pace. Volkswagen boosted sales 14% to 7.51 million for the first 11 months of the year and has said it expects to sell more than 8 million vehicles this year.

The likely loss of its leading sales crown comes as Japan's biggest car maker by volume endures another tough year, with the March 11 earthquake and tsunami in Japan followed by massive flooding in Thailand earlier in the year. The previous year, Toyota was hit by its global recall crisis.

The challenging environment looks set to continue, too, as the soaring yen cuts into the profit margins of vehicles built in Japan.

"The significant headwinds caused by the strong yen compound the challenges that Toyota faces in rebuilding its market position and restoring adequate profitability," said Moody's, citing the local currency as a reason for downgrading its rating outlook to negative from stable.

The strong yen dents margins on vehicles exported from Japan, and adversely affects Toyota's price competitiveness, the rating agency said in a release.

But Toyota's ambitious sales target for 2012 would outstrip the company's sales record of 8.43 million posted in 2007. Toyota plans to significantly rev up production to make up for lost output after the disaster-triggered manufacturing disruption. It also expects the Prius c new compact hybrid to help lift sales. Banking on burgeoning demand, Toyota forecasts sales in China and other emerging markets to account for 45% of its worldwide sales next year, compared to 33% five years before.

The company plans to build 8.65 million vehicles globally, also an all-time high level, in 2012. That will represent a 24% rise from 2011.

Toyota is even more upbeat further down the road, as it envisions ambitious plans for global sales of 8.95 million vehicles and production of 8.98 million vehicles in 2013. If these levels are meet, that could set the company's next target at a 10 million threshold that has been never hit by any car maker, although Volkswagen has said it wants to reach that mark by 2018.

The numbers for 2011 include sales at its small-car making Daihatsu Motor Co. (7262.TO) and truck-manufacturing Hino Motors Ltd. (7205.TO) subsidiaries.

But the targets for the next two years reflect plans at Toyota only, excluding those for the two subsidiaries.

Toyota, and other Japanese car makers also released Thursday their production data for November. The figures show that some of their factories took a severe hit from the bottleneck of parts supplies from Thailand due to the floods.

Toyota said its overseas output declined 9.1% to 357,613 vehicles in November, as production slowed due to the parts supply disruption. Its domestic production was also affected to a lesser extent, but still managed to rise 5.1% to 276,851 vehicles.

Nissan Motor Co. (7201.TO) said that its combined output in Southeast Asia, South Africa and Brazil fell 17.6% to 34,395 vehicles in November while Honda Motor Co. (7267.TO) said that the scarcity of parts from Thailand dented its domestic production by 37.8% to 54,403 vehicles and cut overseas output by 27.1% to 167,573.

-By Yoshio Takahashi, Dow Jones Newswires; 813-6269-2791; yoshio.takahashi@dowjones.com

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