Toyota raises yearly profit forecast despite an expected $9 billion hit from U.S. tariffs

Toyota Motor on Wednesday raised the operating profit forecast for its financial year ending in March, while flagging a 1.45 trillion yen hit from U.S. tariffs.

The company, which revised its operating profit outlook to 3.4 trillion yen from 3.2 trillion yen forecast earlier, missed profit estimates for the quarter ended September. 

“Despite the impact of U.S. tariffs, strong demand supported by the competitiveness of our products has led to increased sales volumes mainly in Japan and North America and has expanded value chain profits,” Toyota said in its earnings report.

Here are Toyota’s September quarter results compared with mean estimates from LSEG:

• Revenue: 12.38 trillion yen (about $81 billion) vs. 12.18 trillion yen
• Operating profit: 834 billion yen vs. 863.1 billion yen

The world’s largest carmaker by sales volume reported a nearly 28% quarterly drop in profit, year on year, while revenue increased over 8%. Net income reached 972.9 billion yen, up

Toyota released 6-month results — from April to September — and the quarterly numbers have been calculated by GWN, based on company statement and LSEG data.

The decline in the September quarter’s operating profit represents the second straight drop since the U.S. introduced “reciprocal” tariffs in April. Tokyo in July clinched a trade deal with Washington, bringing down tariffs on its exports to the U.S. to 15% from the 25% initially proposed by President Donald Trump. The 15% duties took effect on Aug. 7.

The company flagged that tariffs remain the largest drag on Toyota’s profit in the U.S., while factors such exchange rate fluctuations and increased expenses hit earnings in Japan, .

A Toyota executive said in the earnings call that the company was “assessing challenges” and “making preparations” for a plan to ship made-in-U.S. vehicles to customers in Japan, as to align with a new investment framework between Tokyo and Washington.

They added that the plan may not be “economically rational,” but could make certain products more available to Japanese customers.

The impacts of U.S. tariffs have been sharply felt across Japan’s auto industry, with Japanese shipments of automobiles to the U.S. dropping 24.2% in September, though this was slightly less compared to the 28.4% drop in August.

While Toyota has extensive North American production, about one-fifth of its U.S. sales still depend on Japanese imports and tariff costs on those imports are being absorbed rather than passed through, according to Liz Lee, associate director at Counterpoint Research. 

“We’re expecting profitability to remain under pressure in [the current quarter] as tariff and currency headwinds persist, with gradual improvement likely from the [March quarter] onwards,” Lee told GWN in a statement.  

“Profitability should recover modestly next fiscal year if trade costs stabilize and the yen weakens, though rising EV competition will continue to cap upside potential,” she added. 

Toyota has increasingly been leaning into electrified vehicles, which accounted for 46.9% of Toyota and Lexus vehicle sales in the first half of its fiscal year. These sales were primarily driven by hybrid electric vehicles in regions such as North America and China.

However, Toyota’s limited lineup of fully electric battery-powered vehicles could leave it more exposed to competition from Chinese EV players in Europe and Southeast Asia, Lee said.

Despite decreasing profits, Toyota has continued to show strong global demand. The company recently reported that vehicle sales, including its luxury brand Lexus, reached 5.3 million in the nine months to September, a 4.7% increase from a year earlier. In it’s earnings report, the company said it would continue to focus on increasing sales volume and cutting costs.