Toyota sees cost savings over $2.7 billion annually

"We would expect to exceed what we've done under the previous plan," Katsuaki Watanabe told Reuters in an interview at the company's headquarters in Toyota City.

That amount should grow every year along with rising sales, he said, as cost reductions would be made on a per-vehicle basis.

Since 2005, Toyota has been working on a new cost-saving strategy dubbed "VI" for Value Innovation, which seeks to lump some of the tens of thousands of components in a car into modules and systems. The first car to incorporate the new scheme, a remodeled Crown sedan, is due out early next year.

"I believe the strategy is basically proceeding as planned," Watanabe said.

Toyota has given scant details on the program's target, saying only that it expected the impact to be faster and bigger than a previous plan to cut the price of individual parts.

That plan, called CCC21 (Construction of Cost Competitiveness in the 21st Century) and led by Watanabe as purchasing chief, shaved $9 billion off costs over five years, and executives have said it had the capacity to eliminate 300 billion yen in costs every year. That is equivalent to around 13 percent of Toyota's operating profit of 2.24 trillion yen last year.

The ability to reduce costs has been Toyota's forte, allowing it to pour money back into developing new models and attract drivers around the world. Toyota began selling the Prius, the world's first gasoline-electric hybrid car, 10 years ago and is still one of just a handful of carmakers to mass-produce the gas-sipping vehicles.

"The fact that they're planning to build on the CCC21 plan is remarkable, and attests to Toyota's unique strength as a high-volume carmaker and its group companies' solidarity," UBS Securities auto analyst Tatsuo Yoshida said.

"It'll give them a free hand to use their resources flexibly, including securing even more customers by building more attractive features into their cars," he said.