* Says China sales drop 6 pct in Oct to 61,600 vehicles
* Marks first year-on-year decline since April 2009
* Toyota losing popularity due to Sino-Japan dispute -Nikkei
* Honda exec says small incentives kept Oct sales weak (Adds Honda executive comment)
TOKYO, Nov 2 (Reuters) - Toyota Motor Corp said on Tuesday its sales in China fell 6 percent in October to 61,600 vehicles, marking the first year-on-year decline in 18 months.
The decreasing popularity of Toyota cars and deteriorating Sino-Japanese relations have hit the company's sales in China, the Nikkei business daily reported.
Robust demand in China, the world's biggest car market, has been one of the few bright spots for global automakers, and prolonged weak sales there could further hamper Toyota's profit recovery.
According to the Nikkei report, sales of Toyota's Corolla model fell 16.4 percent to 33,700 vehicles despite a price cut, while sales of its Camry dropped 3 percent to 20,300 vehicles.
The news comes a day after rival Nissan Motor Co's China venture raised its 2012 sales target by 50 percent to 1.5 million vehicles as it keeps ramping up capacity to satisfy demand for its popular Tiida and Teana models.
South Korea's Hyundai Motor Co, meanwhile, is building a third plant in China, boosting its total production capacity in the country by two-thirds to 1 million units.
Still, robust sales in China are coming at the expense of profit margins as many automakers slap on heavy sales incentives to outsell each other.
Honda Motor Co Executive Vice President Koichi Kondo said on Tuesday that Honda's Chinese sales were also "not that great" in October because it did not use incentives to the same extent as rivals. He did not elaborate.
"But (sales) will come back strong in November, because we raised our incentives -- though not as much as the rest," Kondo told reporters at a test-drive event in Japan.
He added that while profitability was still high for Honda in China compared to global levels, margins were falling every year as price wars intensify.
Toyota's shares ended up 1.1 percent, outperforming a flat Nikkei average. (Reporting by Chang-Ran Kim and Mariko Katsumura; Editing by Michael Watson)