Toyota braces for ¥1.4 trillion dent in operating income under U.S. tariffs

Japan Times

10 hours ago

Toyota Motor has lowered its annual guidance as it warned of a ¥1.4 trillion ($9.5 billion) hit to operating income from U.S. tariffs that have rattled the global automotive industry.
The world's biggest carmaker now sees ¥3.2 trillion in operating income for the fiscal year ending in March 2026, it said Thursday. That's down from its initial forecast of ¥3.8 trillion, and also missed analyst expectations.
Toyota's shares fell as much as 2.4% in Tokyo, before paring losses to 1.9%.
The carmaker reported operating income of ¥1.17 trillion in the first quarter, down 11% from a year earlier, though beating analysts' predictions for ¥890 billion. While price hikes in some regions helped that metric, the tariff impact was ¥450 billion for the period.
The outlook, which coincides with the start of U.S. President Donald Trump's sweeping new tariffs, marks the carmaker's most comprehensive account of their likely impact beyond a previous estimate of a ¥180 billion hit in April and May alone.
Toyota's estimate dwarfs recent forecasts from global heavyweights as the auto industry contends with fast-changing policies that are seeing costs balloon.
Ford Motor said last week that it sees a net tariff impact of $2 billion — about $500 million more than the company expected previously — and General Motors said its exposure is $4 billion to $5 billion.
Toyota's Japanese peers are also facing less of a hit. Subaru pegs the tariff impact at ¥210 billion, Nissan Motor forecasts ¥300 billion and Honda Motor anticipates ¥450 billion.
Honda raised its annual profit forecast Wednesday. It now sees ¥700 billion in operating profit for the fiscal year ending March 2026, compared to the prior guidance for ¥500 billion and analysts' average estimate of ¥896 billion.
Japanese carmakers now face a 15% tariff on vehicles they send to the U.S. after the two countries reached a trade pact last month that also includes plans for Japan to create a $550 billion American investment plan.
While the rate is lower than the additional 25% anticipated by the industry, uncertainties linger over the finer details of its implementation — auto tariff discounts for the EU, Japan and South Korea have yet to be codified. Until they are, cars will face the higher charge.
In July, in response to news of the deal, Toyota said that it hopes for improved ties between the U.S. and Japan and called for further tariff reductions.
Despite the turmoil, Toyota logged record global sales during the first half of 2025 thanks to strong demand for its gas-electric hybrids in core markets. It sold 5.5 million units between January and June, a 7.4% bump from the previous year, mostly due to robust sales in the U.S., Japan and China.
The carmaker expects group sales of 11.2 million this year.
Toyota also plans to build a new vehicle manufacturing plant in Aichi Prefecture, with operations slated to start in the early 2030s though production models have yet to be decided, it said.
The announcement of a new domestic factory comes even as Japanese car sales have been falling due to a shrinking population and declining ownership. The last assembly plant Toyota built in Japan was in 2012.
It also comes as Trump has complained of a flood of Japanese cars flowing into the U.S. and contributing to a massive trade deficit for his country. Among Japanese automakers, Toyota is the top exporter to the U.S., although most of the vehicles it sells there are built locally.
Toyota has had a long-standing policy of maintaining annual production capacity of 3 million vehicles in Japan, with roughly half bound for overseas markets.