TOKYO (Reuters) -- Toyota Motor Corp. said on Tuesday its quarterly operating profit slipped 13 percent on the weaker dollar and rising costs in the U.S. market, but the world's third-largest car maker raised its half-year forecasts.
"This quarter, we had the impact from foreign exchange...But these are one-off factors and sales are strong in all regions," Takeshi Suzuki, Toyota's managing officer in charge of finance, told a news conference.
With General Motors, Ford Motor Co. and Chrysler driving a fierce price war, Toyota's spending on incentives such as cash rebates and other perks swelled to $1,132 per car in July, according to research firm Autodata, although that was still far below the 'Big Three' average of $4,000.
Quarterly profit also fell because Toyota produced more cars than usual in the year-ago period to replenish its depleted North American inventory.
Analysts said its fundamentals remained solid, forecasting a pick-up in coming quarters on the back of a steady stream of new models.
"I suspect the first quarter may end up being a bottom for Toyota this year," said Shotaro Noguchi, senior analyst at Mitsubishi Securities.
"But if they fail to bring incentives down from the current $1,000 range, that may inflict some damage on their profits."
Toyota's Suzuki said he was confident.
"We will have new models out later in the year, so we believe that there will be room to lower (sales incentives)," he said.
Attesting to its robust sales so far, Toyota raised its global sales target for the business year to 6.41 million vehicles from the 6.26 million it forecast three months ago.
"The signs for operating performance are good, given that the company is talking about higher production output globally for this year. That's a strong sign of confidence in its main markets, particularly the U.S.," said Marc Desmidt, a director at Merrill Lynch Investment Managers.
Toyota is by far the healthiest auto maker in the world now, having boosted its share of the crucial U.S. market at the expense of local manufacturers while gaining sales at home. Last year, it was the most profitable company in Japan and made more money than Detroit's 'Big Three' auto behemoths combined.
In the quarter, Toyota earned 8.3 cents in operating profit on each dollar in sales, compared with Honda Motor Co.'s 7.5 cents. Last year, Nissan earned 10.8 cents for every dollar in sales, while GM made 1.1 cents and Ford less than a cent.
For the first quarter to June 30, Toyota, reporting quarterly figures under U.S. accounting rules for the first time, had a group operating profit of 340.77 billion yen ($2.83 billion), down from 392.57 billion yen a year earlier.
Net profit fell 9.7 percent to 246.37 billion yen, while revenue grew 5.6 percent to 4.093 trillion yen.
The auto maker does not give group-based projections, but it raised its parent net profit forecasts for the half year to September by a third to 280 billion yen, and operating profit also by a third to 400 billion yen, on revenues of 4.2 trillion yen, or 2.4 percent better than forecast three months ago.
Although a better model mix and the launch of new models are helping Toyota's sales volume grow, analysts have warned that profits could be hit by an intensifying price war in the U.S.
Unlike rival Nissan Motor Co., which has vowed not to sacrifice profits for the sake of market share, Toyota is keen to expand its slice of the global car market, internally setting a goal of a 15 percent share within the next decade.
In June, it launched the new Scion brand, which targets the growing number of "Generation Y" drivers -- aged up to their mid-twenties -- looking for stylish but cheap vehicles. Sales so far have exceeded expectations.