Toyota sees profit falling more than 20% as Iran war and US tariffs bite

Toyota Motor said on Friday it expects net profit in the current financial year, ending in March 2027, to fall by 22%, as the company absorbs the impact of US tariffs and the Middle East conflict. The Japanese carmaker said the Iran war alone is expected to add about US$4.3 billion in costs this year, one of the clearest warnings yet from a major global manufacturer about the economic fallout from the crisis.

The world’s biggest carmaker also reported that net profit for the financial year just ended, 2025/26, fell 19.2% to 3.848 trillion yen, while revenue rose 5.5% to 50.7 trillion yen. Toyota said it expects revenue to edge up to about 51 trillion yen this year, although that still falls short of analyst expectations cited in market reports.

Toyota said the cost impact from the Iran war would total around 670 billion yen, with most of that coming from higher material costs, while the rest would stem from delivery delays and lower sales volumes. The company said the conflict was pushing up everything from fuel and transport costs to the price of paint and other materials used in vehicle production.

In the fourth quarter, ending in March 2026, Toyota’s operating profit slumped by almost 50% to 569.4 billion yen, down from 1.1 trillion yen a year earlier and marking its weakest quarterly result in more than three years. Reuters said the figure came in well below market expectations, underlining the pressure from tariffs, rising costs and tougher competition.

Toyota’s full-year operating profit forecast for the current financial year stands at 3 trillion yen, also below analyst forecasts. The company said it continues to benefit from strong demand for hybrid vehicles, with sales expected to exceed 5 million units for the first time this year, but that this is not enough to offset rising costs.

Toyota also said research and development spending had reached a record high, partly because of certification-related issues and production constraints. Even so, it expects capital spending to begin stabilising in the period ahead. The company added that it is continuing to cut costs and reduce inefficiencies, but still expects inflation and the Middle East conflict to push expenses higher.

On exchange rates, Toyota said it was using a six-month average rather than the usual monthly average because of current currency volatility, with an assumed average of 150 yen to the US dollar for the present financial year. A weaker yen has historically helped exporters such as Toyota by making products cheaper for overseas buyers and boosting the value of overseas earnings when converted back into yen.