Toyota Profit Falls as US Tariffs and Middle East Tensions Weigh on Outlook
7203 reported weaker annual earnings for fiscal 2026 on Friday, as higher U.S. trade tariffs pressured margins despite continued growth in vehicle sales.
The Japanese automaker also issued a softer-than-expected operating profit forecast for fiscal 2027, warning that ongoing geopolitical tensions in the Middle East could negatively impact sales and earnings.
Toyota shares fell 2.18% during trading in Tokyo, underperforming the broader NIKKEI, which slipped just 0.19%. U.S.-listed Toyota shares also moved lower in premarket trading.
Fiscal 2027 Outlook Misses Expectations
Toyota said operating income for the fiscal year ending March 31 declined to 3.78 trillion yen from 4.79 trillion yen a year earlier.
Looking ahead, the company projected fiscal 2027 operating income of 3.0 trillion yen, significantly below Bloomberg analyst expectations of 4.61 trillion yen.
The automaker stated that it may struggle to absorb additional economic pressure stemming from the ongoing Middle East conflict. Toyota had previously warned that the U.S.-Israel conflict involving Iran could disrupt vehicle sales and operations across the region.
Operating income during the January-to-March quarter also dropped sharply, nearly halving to 569.4 billion yen.
Vehicle Sales Remain Strong
Despite weaker profitability, Toyota continued to post strong vehicle sales numbers.
The company forecast fiscal 2027 vehicle sales of 11.2 million units, slightly below the 11.3 million units sold during fiscal 2026. Revenue for fiscal 2027 is expected to reach 51.0 trillion yen.
For fiscal 2026, Toyota’s sales revenue increased to 50.68 trillion yen from 48.04 trillion yen in the previous year.
Hybrid electric vehicles remained one of Toyota’s strongest-performing segments, continuing the company’s long-standing leadership position in hybrid technology.
North America Leads Growth
North America remained Toyota’s largest sales market during the year, followed by Japan and Europe.
However, the company experienced weaker sales performance across Asia, mainly due to increasing competition in China’s automotive market.
Toyota’s net income attributable to shareholders declined to 3.85 trillion yen from 4.77 trillion yen a year earlier.
The company also announced a full-year dividend of 95 yen per share.
