PREVIEW-UPDATE 1-Japan, Korea auto Q1 seen strong; outlook shaky

* April-June earnings powered by strong U.S., China sales

* Japan makers seen giving cautious outlook despite brisk Q1

* Forex, higher input costs, demand uncertainty to weigh (Updates Starmine comparative table)

By Chang-Ran Kim and Cheon Jong-woo

TOKYO/SEOUL, July 27 (Reuters) - Top Japanese and Korean automakers are set to report a sharp improvement in April-June earnings as car demand in major markets soared, but the coming quarters look tough due to rising commodity prices and a slowdown in sales.

Japan's Toyota Motor Corp (7203.T), Honda Motor Co (7267.T) and Nissan Motor Co (7201.T) must also contend with a weaker dollar, now trading around 87 yen JPY=, against their assumption of 90 yen and an average 92 yen in the latest quarter.

The euro, too, has drifted to a far less favourable 113 yen EURJPY=, but analysts said the smaller exposure to Europe would limit any damage. Toyota has assumed a euro rate of 125 yen for the year, while Honda and Nissan set the rate at 120 yen.

"If forex assumptions are tweaked just for the weaker euro, there would actually be potential for an upward revision, since the first (April-June) quarter was stronger than expected," UBS auto analyst Tatsuo Yoshida said.

"But the main question is: what's in store for the rest of the year? There are uncertainties in exchange rates, materials prices and sales volumes," he added.

Six analysts surveyed by Reuters put Toyota's first-quarter operating profit at an average 146 billion yen ($1.67 billion) -- more than the company's forecast for a 100 billion yen for the six months to Sept. 30. In the year-earlier quarter, Toyota made an operating loss of 195 billion yen.

Honda and Nissan are expected to report a surge from the slim operating profits they made in the first quarter last year.

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For a Starmine comparative table: r.reuters.com/tap69m

For a table of consensus estimates: [ID:nTOE60O03N]

For more Asia earnings previews: [ID:nSGE66J00X] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Still, with a U.S. sales recovery looking weaker than anticipated and European consumption shaky from the region's debt crisis, many analysts said they expect automakers to paint a cautious picture for the rest of the year. Japanese scrappage incentives are also set to expire at the end of September -- a negative especially for top beneficiary Toyota.

"We do not expect firms to raise full-year guidance as the North American market recovery is slower than expected, Europe is weaker than expected, and the yen is appreciating," Morgan Stanley analyst Noriaki Hirakata said in a report.

That was true also for South Korea's top brand, Hyundai Motor Co (005380.KS), according to analysts.

"The industry's momentum will definitely get weaker in the third and fourth quarter due to an economic slowdown and tougher competition," said Ahn Sang-joon, an analyst at Tong Yang Securities in Seoul.

MOMENTUM SLOWS IN U.S., CHINA

New vehicle sales in the United States -- traditionally a cash cow for Japan's top three brands -- grew by double-digits in April and May but slipped in June, raising doubts about the strength of the recovery predicted at the start of the year.

Sales in China, the world's biggest auto market, also disappointed in June, with growth slipping below 20 percent for the first time in 14 months as the impact of government stimulus faded and labour disputes at auto factories dented production.

Intermittent production stoppages in China over the past few months, mainly at Honda-related plants, are expected to be reflected in July-September because profits made in China are booked one quarter behind.

In the United States, Japanese automakers have faced stiff competition from Hyundai as it grabbed more market share in the world's second-biggest auto market despite spending less on profit-eroding sales incentives.

Hyundai, the world's fifth-biggest automaker along with its affiliate Kia Motors Corp (000270.KS), is expected to report a 32 percent rise in its second-quarter net profit, according to a poll of 26 analysts by Thomson Reuters I/B/E/S, driven by stronger demand for its cars in China and the United States.

Estimates have Kia's net profit rising 27 percent.

Hyundai and Kia's earnings have been boosted since last year by new and competitively priced models such as Hyundai's Sonata sedan, the high-end Genesis and Kia's Forte compact car.

With more products in the pipeline including the remodelled Elantra -- its best-selling car -- next month, and the Azera mid-sized sedan later this year, analysts said Hyundai would likely cope relatively well with a slowdown in demand.

"New models will be able to ease demand concerns," said Yim Eun-young, an analyst at Dongbu Securities in Seoul. ($1=87.44 Yen) (Editing by Lincoln Feast)