TOKYO -- Toyota Motor Corp., Japan's top automaker and world No. 3 in sales, said on Monday it could offer bigger sales incentives in the U.S. market this year if a price war continued to escalate in the sluggish car market.
"We expect overall car demand in the United States to exceed 16 million units this year but still fall well short of last year's level (of 16.8 million)," Toyota President Fujio Cho said in a news conference.
"That inevitably means fiercer competition, and if the Big 3 step up their incentives, as they are widely expected to do, we will probably be forced to do the same," he said.
Japan's top auto makers have up to now been largely immune to the price war thanks to their reputation for building more attractive and reliable cars.
A top executive at Toyota said last week the automaker had in fact spent $200 less per car on incentives last year, while the local powerhouses had raised theirs.
Bigger spending on incentives will put pressure on Toyota's profit margin, but the bigger damage would be to General Motors, Ford Motor Co. and DaimlerChrysler, which have been stepping up their discounts and other incentives to sell cars at the expense of profits.
Thanks to strong sales despite a shrinking U.S. market, Toyota last week reported record profits for a third straight year for the 12 months to March 31, turning in a 21 percent jump in operating profit to 1.36 trillion yen ($11.62 billion).
Toyota's annual net profit, at 944.67 billion yen, was bigger than those of the Big 3 combined for 2002.