By Daniel Leussink
TOKYO, Nov 4 (Reuters) - Toyota is forecast to report its first increase in operating income in six quarters on Thursday, as a weaker yen and robust demand for its more profitable hybrid vehicles offset slumping sales in China and the Middle East.
The absence of US tariff-related costs that hit earnings a year earlier will also help.
Operating profit for the world's biggest automaker in the July-September quarter is predicted to surge 18% to 992 billion yen ($6.3 billion), according
to the median estimate of nine analysts surveyed by LSEG.
Revenue was predicted to rise 8% to 13.4 trillion yen.
Global sales of Toyota and Lexus vehicles fell 4% to just over 2.5 million units during the period, hit hard by a 22% decline in China and a one-third drop in the Middle East.
But the Japanese automaker saw higher-margin electrified vehicle sales in North America jump more than 30% to almost 430,000 vehicles, although overall sales volumes in the US rose less than 1%.
"With gasoline prices rising, there is demand for more fuel-efficient hybrids," said Yuya Takahashi, an analyst at Marusan Securities. "The key is how many of those more profitable hybrids are being sold."
Toyota's performance in China, the world's largest auto market, is likely to remain a key concern for investors as fierce competition from domestic brands amid a rapid shift to EVs is challenging its gasoline-powered and hybrid-heavy lineup.
The pain was visible at supplier earnings with Denso last week reporting a more than one-third drop in operating profit in Asia for the six months through September, hit by weaker vehicle sales in China and higher material costs.
Investors will also be looking at Toyota's growing investments in factory automation, vehicle software and autonomous driving.
Toyota has estimated it could cost 1 trillion yen annually from 2028 to modernise its factories as it steps up automation and robotics deployment.
($1 = 158.52 yen)
(Reporting by Daniel Leussink; Editing by Edwina Gibbs)
