Toyota cuts annual profit estimate, expects US$9.5bil tariff hit

The Star

3 days ago

A Toyota Tacoma is seen during the New York International Auto Show, in Manhattan, New York City, US, April 5, 2023. - Reuters
TOKYO: Toyota Motor cut its full-year operating profit forecast by 16% on Thursday, expecting a nearly $10 billion hit from U.S. tariffs on imported cars, higher material prices and a stronger yen.
The scale of the estimated tariff hit on the world's top-selling automaker highlights mounting margin pressure across the industry, as global car makers face rising costs from U.S. import levies on vehicles, parts, steel and aluminium.
"It's honestly very difficult for us to predict what will happen regarding the market environment," said Takanori Azuma, Toyota's head of finance, during a briefing.
The Japanese automaker would continue making cars for U.S. customers regardless of any impact from the tariffs, he said.
The company cut its operating profit forecast for the financial year to end-March 2026 to 3.2 trillion yen ($21.7 billion), down from a previous outlook of 3.8 trillion yen.
Toyota said it expects the U.S. levies to reduce its profit by 1.4 trillion yen ($9.50 billion) for the entire year. It had previously estimated a hit of 180 billion yen for April and May, but it had not issued a full-year projection until now.
For the April to June first quarter, Toyota reported an operating profit of 1.17 trillion yen, down from 1.31 trillion yen a year earlier, but above the 902 billion yen average of seven analyst estimates compiled by LSEG.
Toyota's North American business swung to an operating loss of 63.6 billion yen in the first quarter, from profit of 100.7 billion yen a year earlier, as it took a hit of 450 billion yen from the tariffs.
The first-quarter results highlight the pressure U.S. import tariffs are placing on Japanese automakers, even as a trade agreement between Tokyo and Washington offers potential relief.
Under the bilateral deal agreed last month, Japanese auto exports into the U.S. would face a 15% tariff, down from levies totalling 27.5% previously. But a timeframe for the change to go into effect has yet to be announced.
Last week, Toyota reported record global output and sales for the first half of the year, driven by strong demand in North America, Japan and China.
The company also announced on Thursday a plan to build a new vehicle factory in Japan, even as Japanese car sales have been falling due to a shrinking population and declining ownership.
Toyota said operations at the new plant are planned to start early next decade. Production models have yet to be decided.
Toyota shares fell 1.6% after the earnings were released. ($1 = 147.2300 yen) - Reuters