Toyota, the world's biggest carmaker and a figurehead for Japanese industrial might, has made its first annual net loss in 71 years, triggering investors' fears that it had botched its strategy in China and may fall victim to a price war on hybrid cars.

The 2008 loss of 436.9 billion yen (£2.9 billion) was worse than the company's recent forecasts had suggested and contrasted sharply with the Y1,720 billion record profits in 2007. Sales in the United States and Europe plunged and Japan's biggest company, once seemingly bulletproof, had its bottom line ransacked by currency turmoil arising from the collapse of Lehman Brothers.

Toyota's loss was echoed in the electronics industry when Toshiba reported its biggest group loss of Y343 billion after the global market for semiconductors collapsed.

The car group's results were attributed by Katsuaki Watanabe, the company president, to a “significant deterioration” in vehicle sales in the US and Europe and the rising cost of raw materials.

The company issued even darker predictions for the year to next March and announced plans to cut Y460 billion in fixed costs. Investors were expecting the company to remain loss-making for at least another year, but Toyota's forecast of an Y850 billion flood of red ink in 2009 was more than twice as bad as consensus analyst estimates.

Naoki Fujiwara, a fund manager at Shinkin Asset Management, said: “Toyota's outlook was worse than I'd expected. The company expects a really tough time for the first six months. I expect the bottom for the auto industry is the April-June period, followed by a slow recovery.”

Analysts believe that Toyota has misjudged the Chinese market - and, in particular, its ability to grow strongly there while consumers in the US and Europe rein in spending.

Ed Merner, president of Atlantis Investment, said: “China is a very important market but not for Toyota - they missed the boat. This is the one market that is doing well and Toyota has a low exposure to it.”

Analysts said that there were also creeping doubts over how well the Japanese group was placed to benefit from the agonies of its big American rivals in Detroit. Some believe that Toyota, with its robust balance sheet and leadership in hybrid vehicles, could emerge triumphant from a “last man standing” scenario. Others suspect that the company may fare badly as consumers opt for cheaper, smaller cars and Honda and others compete more fiercely on hybrids. Factories across its international network - already mothballed or operating on vastly reduced shifts - may remain in that state for some time. Capital spending will be reduced by more than a third and company insiders said that Toyota would almost certainly continue to shed temporary jobs.

Standard & Poor's, the ratings agency, cut Toyota's long-term credit score by a single notch to AA, saying that it could be some time before the carmaker's technological and structural advantages over rivals were translated into profits.

Toyota’s shares closed 1.5 per cent down in Tokyo at Y3,980 before the announcement and ended the day 1.3 per cent down in New York at $79.17.

The gloom in Tokyo was intensified by Toshiba's announcement. The technology company is to raise funds from shareholders and lenders after reporting heavy losses for last year. Sales fell 13 per cent to Y6,600 billion as consumer demand for electronic goods slumped worldwide. It has been particularly badly hit by a drop in demand for computer chips, created by a supply glut.

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