Toyota anticipates profit dip amid yen strength and tariff concerns

2025-05-08 general

Tokyo, Thursday, 8 May 2025.
Toyota projects a 35% profit decrease, forecasting 3.1 trillion yen in consolidated net profit for the fiscal year ending March 2026. Despite robust automobile production, a stronger yen and potential tariffs on imported vehicles are expected to impact earnings negatively. The automaker estimates US tariffs could slash profits by 180 billion yen in just two months. This somber outlook underscores the swift challenges many companies face due to recent trade policies.

Financial projections

Toyota anticipates a 1% increase in sales, projecting revenues of 48.5 trillion yen [1]. However, operating profit is expected to decline by 21% to 3.8 trillion yen for the fiscal year ending March 2026 [1]. These projections fall short of analyst expectations, which had operating income pegged at 4.7 trillion yen [8]. The company’s financial reports, released on May 6, 2025, already indicated a 15% decrease in net profit compared to the same period last year [1].

Tariff impact assessment

Toyota estimates that tariffs imposed by the Trump administration will negatively impact profits by 180 billion yen between April and May [1]. The New York Times reports that the automaker anticipates a $1.3 billion hit from these tariffs during the same period [2]. These tariffs, which include a 25% levy on vehicle imports implemented in early April 2025 and extended to auto parts on May 1, 2025, are creating significant financial headwinds for the company [2].

Executive insights and market analysis

Toyota’s President Koji Sato acknowledged the increasingly volatile business environment, particularly concerning trade relations [1][2]. CLSA auto analyst Christopher Richter suggests that panic buying due to tariffs might temporarily boost sales, but long-term sales growth is uncertain if prices increase [4]. Toyota’s challenges extend beyond tariffs, as the company also grapples with a stronger yen and higher material costs, further pressuring profits [3][7].

Global sales and production

Despite the financial headwinds, Toyota forecasts record world production of 10 million units for the fiscal year ending March 2026 [1]. Global sales are projected to reach 10.4 million units, exceeding the 10.3 million units sold in the previous year [1]. However, Toyota faces challenges in China, where sales have declined amid strong competition from domestic brands [3]. Sales in North America, a key market, also decreased by 8% in the first quarter of 2025 [1].

Investor implications

The projected profit decline and tariff impacts raise concerns for investors [8]. Toyota’s cautious outlook reflects broader uncertainties within the automotive industry due to trade policies and currency fluctuations [5]. While the company is striving to mitigate these challenges through increased production and sales, the external economic pressures pose significant risks to profitability and shareholder value. The situation remains fluid, with the long-term effects of the tariffs still uncertain [4][6].

Bronnen

trump tariffs toyota profit