Denso Corporation said on Tuesday that despite expansion in the fast-growing Asian market, profit margins will struggle to grow from about 6% due to vehicle makers' drive to cut costs, Reuters reported.

"Due to heavy price reduction, even if we have a 10% sales increase, if the price falls by 10%, profit (margins) stay flat," Chishu 'Charlie' Murodono, the head of Denso's Asian operation, told Reuters on the sidelines of a two-day motor industry conference in Bangkok.

The news agency noted that Denso has still fared well compared with rivals, with profits rising 14% in the six months to the end of September on the back of brisk overseas sales by top customer Toyota.

By comparison, Reuters said, Delphi Corporation, the world's largest automotive parts supplier, posted a loss of $US353 million in the third quarter due to charges for restructuring, including 8,500 job cuts worldwide.

Reuters said Denso's operating profit margin in the first six months of this year was 7.2%, up from 6.9% in the full year that ended March 31, and 5.5% last year.

Murodono, who is managing director of Denso International Asia Pte, in Singapore, told the news agency the only way to sustain the profit margin, and possibly boost it, was to raise total sales through technologically advanced products.

But that also required huge spending on research and development, meaning global parts makers constantly needed to cut costs elsewhere, such as through the use of less raw material, to stay ahead or be profitable, the report added.

"Customers are constantly seeking new innovations, and technology is changing so quickly," Murodono said in an interview with Reuters, noting that R&D makes up 12% of Denso's total costs, and adding: "And as traditional supplier-car manufacturer relationships break down, competition gets even fiercer."

Reuters said Denso has been expanding rapidly overseas - notably in Asia - having said this year that it will invest about $US250 million in Thailand, Vietnam and Indonesia over the next two years to expand parts production - and Murodono reportedly said he expected Asia to account for about 10% of Denso's total sales in the next three to four years, compared with 7-8% now.

Denso is aiming to boost its share of the global parts market to 30% by 2005 from about 25% now, the Reuters report added.