updated 7/28/2008 7:32:05 AM ET 2008-07-28T11:32:05

Toyota lowered its global vehicle sales plan for this year to 9.5 million vehicles — down from 9.85 million — as the sluggish North American market slows the Japanese automaker’s momentum.

Even with the lower number announced Monday, Toyota Motor Corp. plans to sell more vehicles than it did last year.

The pace of Toyota’s growth has been slowing. Under the new target it would inch up 1 percent this year, in contrast to a 6 percent climb in 2007, when it sold 9.37 million vehicles.

“The main reason for the change came from the faltering U.S. economy, and how rising oil prices and material costs are dampening the market there overall,” said Toyota spokeswoman Kayo Doi.

The Japanese and western European markets were also sluggish, but Toyota’s solid sales in China, the Middle East and other markets were enough to maintain its worldwide growth, she said.

Toyota now plans to sell 2.44 million vehicles in the U.S., far less upbeat than the earlier plan to sell 2.64 million vehicles.

It also slashed the sales plan for North America to 2.67 million vehicles from 2.84 million vehicles.

The new plan marks a nearly 7 percent drop from Toyota’s 2007 sales results of 2.62 million vehicles for the U.S., and a 5 percent slip from 2.82 million vehicles for North America. Prior to Monday’s revision, Toyota had expected sales to grow in North America, including the U.S.

The manufacturer of the Camry sedan, Corolla subcompact and Prius hybrid also lowered its global production plan for this year to 9.5 million vehicles — unchanged from the previous year.

Earlier, it had set the manufacturing target at 9.95 million vehicles, which would have represented 5 percent growth from 2007.

Tatsuo Yoshida, auto analyst with UBS Securities Japan in Tokyo, said woes over U.S. auto sales weren’t likely to ease until next year.

“I think Toyota is giving rather cautious targets,” he said. “GM is in a worse state in reliance on trucks, but Toyota also has the same problem.”

Toyota, the world’s second largest automaker in annual vehicles sales after General Motors Corp. of the United States, has averted the battering its American rivals have taken from soaring gas prices.

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Toyota has long boasted a reputation for models with good mileage. And its sales are still expected to be strong in emerging markets such as Russia, China and India, offsetting some of the losses in North America.

How the full-year tallies will add up is still uncertain as Detroit-based GM is also reporting growth in new markets.

GM, the world’s top automaker for 77 years straight, doesn’t release full-year sales forecasts.

Toyota outsold GM by 277,532 vehicles in the first six months of this year, selling 4.82 million vehicles worldwide.

The call was close in 2007. GM eked out a win at 9.37 million to Toyota’s 9.366 million vehicles.

Also hurting Toyota is the sluggish Japanese auto market, where Toyota is the top-seller. Toyota said it now expects to sell 2.23 million vehicles in its domestic market this year, rather than the initial 2.27 million. It sold 2.26 million vehicles in Japan in 2007.

With auto sales ailing in the key North American market, speculation had been growing that Toyota would lower its sales targets. Toyota reviews such plans every half-year or so.

Even Toyota is struggling to shift production from gas-guzzling sport utility vehicles and trucks to smaller models.

Earlier this month, Toyota announced sprawling manufacturing changes in the U.S., including starting production of the Prius for the first time, and shutting down truck and SUV production, to respond to changing consumer demand.

The worry about the switch to smaller vehicles isn’t just a numbers game. The change is almost certain to bite into automakers’ profit because the margins are heftier for bigger models.

Toyota reports earnings next week. General Motors has been losing billions over the last three years. Toyota has been chalking up booming profit, but its profit growth may also be dwindling.

Separately, Toyota said it was making Japanese affiliate Central Motor Co., which makes the Corolla, Yaris and other models, wholly owned under a share exchange plan approved at a board meeting Monday. Monetary terms weren’t disclosed.

The move won’t affect the vehicle sales and production numbers because they were already included in the tallies. But it will help strengthen production efficiency and allow Toyota to grow more cost competitive and improve quality controls, it said.

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