Toyota expects a significant decline in profits for the current financial year, forecasting a 20% drop in operating income. The company cited the impact of President Donald Trumpâs tariffs and the ongoing weakness in the U.S. dollar as key factors that will weigh on its financial performance.
In its latest forecast, Toyota predicts operating income for the year ending March 2026 will total 3.8 trillion yen ($26 billion), down from 4.8 trillion yen in the previous year. The company highlighted the adverse effects of global trade disruptions, particularly tariffs, which have been eating into profits.
See also: Toyota bZ4X and Subaru Solterra Post Significant U.S. Sales Gains in Q1 2025
Toyota estimated that the levies directly cost it 180 billion yen in April and May. However, the company noted that currency fluctuations, particularly the weaker U.S. dollar, are expected to have the largest single impact, at 745 billion yen.
Toyotaâs Chief Executive, Koji Sato, expressed concerns over the uncertainty surrounding the tariffs. “Whether these tariffs are permanent or not, and what will happen is not something we can decide,” he said during a press conference. The automaker has warned that ongoing tariffs could increase vehicle prices in the U.S., potentially dampening consumer demand.
See also: Toyota Delays Japan EV Battery Plant Amid Slower Demand, Higher Costs
Analysts are also cautious about Toyotaâs ability to meet its profit forecast. Christopher Richter, an auto analyst at CLSA, pointed out that rising vehicle prices could challenge sales growth in the U.S. market. “Right now, things are very rosy in the U.S. just because customers are panicking and rushing to the market to buy cars,” Richter said. “But what happens if these tariffs continue? You need to raise prices. Can you grow sales like that? I donât know.”
Toyotaâs performance has also been affected by rising labor costs and the need for additional investment if it chooses to expand its production base in the U.S. The automaker has struggled with declining sales in China, where competition from local brands has intensified. However, Japan, Toyota’s most profitable market, provided a brighter spot with an 18% profit increase in the fourth quarter.
See also: Everything You Should Know About Toyota C-HR+ Electric SUV Specifications
In North America, Toyota’s largest market, operating losses widened to 100 billion yen from 28 billion yen a year earlier, primarily due to a temporary production halt at its Indiana plant.