Toyota may cut its 2012 group-wide production plan by about 2% because of poor sales in China where the carmaker is suffering the fallout from the on-going territorial row, according to the Mid-Japan Economist newspaper.

The company denied that it has altered its calendar-year targets from 10.5m, including production of Daihatsu and Hino vehicles, which would make Toyota the first automaker to produce more than 10m vehicles in a year.

Sales of Japanese-brand cars across China have fallen since mid-September following protests and calls for boycotts in the dispute over a group of disputed islands in the East China Sea.

Toyota and its two local Chinese partners saw sales drop almost 50% in September from a year earlier to 44,100 vehicles. Sources told Reuters that Toyota’s production cutbacks in China are likely to extend to the end of November, a move that would almost certainly threaten the company’s goal of selling 1m cars in China this year.

Toyota’s sales in China accounted for about 12% of its global total in 2011 but it is less exposed to the world’s biggest car market than Nissan and Honda. According to the Nikkei newspaper, Nissan hopes to revive sales in China by providing full compensation for damage to its vehicles during the protests.

The programme will pay the repair costs for damaged vehicles made by local joint venture Dongfeng Nissan. If a vehicle has been destroyed, the owner will receive the equivalent of its previous value. Coverage will be offered to both past and future buyers.

The Nikkei reported that Dongfeng Nissan will also cover medical costs of owners attacked for driving Japanese vehicles. Using information from police and news reports, it will determine whether damage or injury resulted from demonstrations or riots, providing compensation even if the incidents are not related to Japan.