Toyota keeps European sales target despite Russian market slump

By Agnieszka Flak and Laurence Frost

PARIS (Reuters) - Toyota Motor Corp expects to ride out the worst effects of the slump in Russia's car market, a senior executive said at the Paris auto show, and is sticking to its target of increasing sales to a million vehicles in Europe next year.

Though Russia's car sales this year could drop to their lowest level since the financial crisis as Western sanctions over Ukraine weaken the economy further, Toyota says its focus on higher-end vehicles will help to keep its Russian numbers steady this year. [ID:nL6N0RW528]

"There is a lot of uncertainty in Russia ... people are more reluctant to spend money; this is why the entry market is much more affected than the premium market," the Japanese company's head of European operations, Didier Leroy, told journalists at the Paris show.

The fragility of the European market, where sales remain 20 percent below their 2007 peak, means that the Paris show is packed with new fuel-efficient small cars and compact SUVs designed to close the gap.

Toyota's Leroy said that while Russia's car sales in the premium segment were down 8 percent, the drop was at 25-30 percent for entry-level cars, hurting many of Toyota's competitors.

Vehicles such as its Camry and Lexus have helped Toyota to boost its share of the declining Russian market by about 1 percent this year.

Toyota expects to lift European sales this year to slightly more than 865,000 vehicles from 847,530 in 2013, Leroy said, and the target to sell 1 million vehicles in the region in 2015 still stands.

However, rival carmakers that were too optimistic about the pace of this year's upturn have already been forced to cut back production, including Ford (F.N) and PSA Peugeot Citroen (PEUP.PA). NEW MODELS

Volkswagen (VOWG_p.DE), meanwhile, has loftier ambitions, with Chief Executive Martin Winterkorn saying on the eve of the show that the German carmaker is "well on the way" to achieving 10 million vehicle sales this year, four years earlier than originally planned. [ID:nL6N0RW585]

Among the new models in Paris is Renault's (RENA.PA) revamp of the elderly Espace people carrier as a crossover sport utility vehicle. It was launched on Thursday 30 years after the first model was unleashed on European consumers who hadn't yet realised they wanted one.[ID:nL6N0RN3ZO]

Once the European market leader, the Espace is now one of the laggards of its category, far behind the Ford (F.N) S-Max, which struck out in a sportier direction from its 2006 introduction and is unveiling another timely update in Paris.

"It's a global shift affecting even family vehicles, and it is here to stay," Societe Generale analyst Philippe Barrier said. "Designers are having to compromise as people look for something sportier."

Daimler (DAIGn.DE), meanwhile, said it will introduce 10 new hybrid vehicles by 2017, with Chief Executive Dieter Zetsche saying that electric cars have so far failed to gain widespread acceptance.

"They are an exciting concept but have a rather slow market adoption rate," he said on the eve of the Paris show. "A plug-in hybrid is the easy-entry version for those who are still a little uncomfortable with electric cars."

(Reporting by Agnieszka Flak, Laurence Frost, Andreas Cremer and Edward Taylor; Writing by David Goodman/editing by Keith Weir)