Toyota sees its sales growth in China slowing next year, but believes a new strategy of launching more models with smaller engines will help it outperform rivals after its results trailed the overall market this year, an executive has said.

Shoju Nozaki, a senior Toyota sales executive in China, told the Wall Street Journal Toyota expects its China sales to grow 14% to 800,000 vehicles in 2010 after forecasting sales of about 700,000 this year, up 20% from the 585,000 it sold there in 2008.

One fifth growth is slow compared to that of automakers in China including General Motors, Nissan Motor and Hyundai Motor. Overall vehicle sales in China in the first 10 months of 2009 rose nearly 38% from last year.

JD Power has forecast a 4.6% rise in sales of passenger vehicles in China and a 3.3% decline for light commercial vehicles.

Yale Zhang, a Shanghai-based analyst with U.S. consulting firm CSM Worldwide, thinks Toyota's goal to increase sales by 14% next year is achievable.

"They were stuck in neutral for a good part of the year this year and have had plenty of time to make adjustments to focus more on cars with smaller engines, so most of the structural problems they faced earlier this year are gone," Zhang told the WSJ.

Toyota's sales in China actually contracted in the first four months of this year, before starting to turn around in May as the company responded, belatedly, to surging demand for cars with smaller engines.

After averaging 14% growth to the end of September Nozaki expects Lexus sales in China to total about 33,000 vehicles this year, compared with 32,150 in 2008.

Lexus sales were hit by a government tax on vehicles with engines larger than three litres and Nozaki said the brand should have moved more quickly to offer models with smaller engines.

"The sales tax change hit us substantially," he said.  Lexus would introduce more China-specific cars, such as the ES240, launched in September, which has a smaller engine that qualifies for lower taxes.

He said Toyota expects Lexus sales to rebound in 2010, rising about 30% to 43,000 vehicles.

"The most important take-away from late last year and the start of this year when sales struggled is...we need to respond more quickly to policy change," Nozaki said. "We lacked cars with smaller engines just when we needed them the most." Having more China-focused cars with smaller engines "is what we are going to focus on going forward," he said. "That is the main pillar of our new strategy in China."

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