Key Takeaways
Toyota Motor Corp. is forecasting a third consecutive year of profit decline, projecting a 22 percent drop in the fiscal year through March 2027 as the automaker grapples with US trade tariffs and the escalating conflict in the Middle East.
"We have not been able to fully offset the impact of major changes in the business environment, such as US tariffs and the situation in the Middle East," Toyota President Kenta Kon said in a statement accompanying the release.
The world’s largest automaker by sales reported a 19.2 percent fall in net profit to 3.85 trillion yen ($25 billion) for the fiscal year ended March 2026, even as revenue grew 5.5 percent to a record 50.7 trillion yen. Operating profit for the year fell 21.5 percent to 3.77 trillion yen. For the current fiscal year, Toyota expects operating profit to fall a further 20 percent to 3 trillion yen.
The downbeat forecast highlights the systemic risks facing global manufacturers from geopolitical fragmentation. The company attributed the profit decline to two main external factors: a 1.38 trillion yen operating profit impact from US tariffs imposed by the Trump administration and severe disruptions to both sales and supply chains from the conflict in Iran. Toyota’s sales in the Middle East, a key export market, fell by a third in March.
The conflict has created a two-front battle for Toyota, hitting both sales and its famously lean supply chain. The company, which exported over 320,000 vehicles to the region last year, has already been forced to cut production for the Middle East.
More critically, disruptions to shipping through the Strait of Hormuz have delayed raw material imports and sent costs soaring. According to Japan’s automotive industry lobby group, 70 percent of the country's aluminum imports come from the Middle East, creating a severe bottleneck for key components. Chief Financial Officer Yoichi Miyazaki admitted that Toyota's business in America is also "very challenging," with the North American division posting an operating loss for the first time since the 2008 financial crisis.
To counter the rising costs, Kon said the company will review its complex model lineup and work with suppliers to improve efficiency. Despite the headwinds, Toyota’s global retail sales rose 2 percent to a record 10.47 million vehicles in fiscal 2025, driven by a 9 percent growth in North America and strong demand for its hybrid models, which saw sales top 5 million units for the first time.
The profit warning signals that even with record sales, external pressures are overwhelming the company's internal cost-saving efforts. Investors will watch for Toyota’s ability to manage its supply chain and adapt its global production footprint in its next quarterly report.
This article is for informational purposes only and does not constitute investment advice.
