Toyota Motor Corporation has reported a 19% decline in its annual profit for the fiscal year ending in March, as tariffs imposed by former US President Donald Trump significantly impacted the Japanese automaker's earnings. Despite this, global sales experienced growth.
Financial Performance Overview
The manufacturer of the Camry sedan, Prius hybrid, and Lexus luxury vehicles posted a profit of 3.85 trillion yen ($25 billion), a substantial decrease from the nearly 4.8 trillion yen recorded in the previous fiscal year. The company attributed the drop largely to Trump's tariff policies, which erased approximately 1.4 trillion yen ($9 billion) from its annual operating income.
Impact of Tariffs and Exchange Rates
Unfavourable trends in exchange rates further squeezed profit margins, according to Toyota, which is headquartered in Toyota City, central Japan. Nevertheless, the company noted that it performed relatively well, selling nearly 9.6 million vehicles worldwide, up from about 9.4 million the year before. The value of these sales rose by 5.5% to 50.7 trillion yen ($323 billion), compared to 48 trillion yen in the prior year.
Quarterly Results
On a quarterly basis, Toyota's profit surged by 23% to 817 billion yen ($5.2 billion) from 664 billion yen. Sales for the January-March period increased by nearly 2% to 12.6 trillion yen ($80 billion).
Outlook for the Current Fiscal Year
Looking ahead, Toyota expects to sell 9.6 million vehicles in the current fiscal year through March 2027. However, the company has issued a relatively cautious profit forecast of 3 trillion yen ($19 billion), citing potential disruptions from developments in the Middle East.
Supply Chain Concerns
Toyota warned of possible supply-chain disruptions due to the closure of the Strait of Hormuz, which is effectively blocked as a result of the Iran war. Vehicle sales in the Middle East have also declined. Japan imports nearly all of its oil, much of it from the Middle East, and the conflict has driven up prices for oil and other materials. Companies are facing increased costs from using longer shipping routes to bypass the strait.
Strategic Vision
Toyota reiterated its ambition to transform into "a mobility company," indicating plans to expand into boats and planes. The company also pledged to continue innovating beyond the automotive industry, exploring areas such as robotic arms for restocking store shelves and devices for transporting medical equipment.
Cost Reduction Measures
The company stated it would become leaner by reorganising its model lineup and increasing local procurement while cutting costs. Following the earnings announcement, Toyota's shares fell by 2.2%.
