Toyota projects third annual profit decline amid Middle East strain
The Japanese carmaker forecasts lower earnings for fiscal 2026 as fuel and material costs, weaker regional sales and US tariffs squeeze profits.
- Toyota forecasts its net profit will fall for a third consecutive year, projecting a 22% drop for the current fiscal year which began in April.
- The company directly attributes the expected decline to the worsening situation in the Middle East, which is creating a tougher operating climate.
- The Middle East turmoil is expected to cut profit by 670 billion yen, caused by rising fuel and material costs and weaker vehicle sales in the region.
Toyota Motor Corp said on Friday (May 8) it expects net profit to decline for a third straight year in the current business year, citing a tougher operating climate linked to the worsening situation in the Middle East.
For fiscal 2026, which began in April, Japan’s leading carmaker forecast consolidated net profit of 3 trillion yen, a 22 per cent drop from the previous year. Operating profit is also projected at 3 trillion yen, down 20.3 per cent, while sales are expected to edge up 0.6 per cent to 51 trillion yen.
The company said the Middle East situation, together with higher material costs and related pressures, is likely to cut profit by 670 billion yen this year. It also expects higher US tariffs introduced by President Donald Trump’s administration to continue weighing on earnings.
Toyota President Kenta Kon, who assumed the post last month, told an online press briefing that the company has been pursuing cost reductions and productivity improvements. He also signalled that Toyota would maintain investment aimed at growth despite the difficult conditions.
The unrest in the Middle East is expected to push up crude oil and oil-related product prices, while also obstructing vehicle exports to the region. Toyota expects profit to fall by 400 billion yen because of rising costs tied to higher fuel and material prices, and by another 270 billion yen due to weaker vehicle sales in the Middle East and other markets.
Toyota put the expected hit from higher US tariffs at 1.38 trillion yen, unchanged from the level seen in fiscal 2025, which ended in March.
The company based its forecasts on exchange rates of 150 yen to the dollar and 180 yen to the euro. The stronger assumed euro rate compared with the previous year could lift profit by 235 billion yen.
Global vehicle sales by the Toyota group, including Daihatsu Motor Co, are forecast to fall 0.9 per cent to 11.18 million units. The decline reflects the removal of Hino Motors Ltd from the group’s consolidated accounting.
Toyota expects vehicle sales to rise in the United States and Europe, supported by strong demand for hybrid vehicles, but to slip slightly in Japan. Sales of electric vehicles are projected to grow sharply both in Japan and overseas.
In fiscal 2025, Toyota’s sales rose 5.5 per cent to a record 50,684.9 billion yen, making it the first Japanese company to surpass the 50-trillion-yen threshold. The increase was helped partly by solid hybrid vehicle sales in North America.
However, net profit fell 19.2 per cent to 3,848 billion yen, marking a second consecutive annual decline. Operating profit also dropped 21.5 per cent to 3,766.2 billion yen, pressured by higher US tariffs.
“Our continued efforts resulted in these profits amid major environmental changes,” Kon said.
[Copyright The Jiji Press, Ltd.]
