A signboard with the Toyota logo in Surrey, England, August 2023
Peter Daisley | Getty Images News | Getty Images
toyota motors The company on Wednesday raised its operating profit forecast for the fiscal year ending in March, citing concerns about a 1.45 trillion yen hit from U.S. tariffs.
The company, which revised its operating profit forecast to 3.4 trillion yen from the initial forecast of 3.2 trillion yen, fell short of its profit forecast for the quarter ending in September.
“Despite the impact of U.S. tariffs, strong demand supported by the competitiveness of our products led to increased sales volumes and expanded value chain profits, primarily in Japan and North America,” Toyota said in its earnings report.
Below is a comparison of Toyota’s September quarter results and LSEG’s average forecast.
Sales: 12.38 trillion yen (approximately $81 billion) vs. 12.18 trillion yen Operating profit: 834.0 billion yen vs. 863.1 billion yen
The world’s largest automaker by unit sales reported a nearly 28% drop in quarterly profit from a year earlier, while sales rose more than 8%.
Toyota reports its results for the six-month period from April to September, with quarterly numbers calculated by CNBC based on company statements and LSEG data.
The decline in operating profit in the September quarter is the second consecutive decline since the US introduced “reciprocal” tariffs in April. The Japanese government signed a trade deal with the United States in July, lowering export tariffs to the United States to 15% from the 25% originally proposed by President Donald Trump. The 15% tariff went into effect on August 7th.
The value of automobile shipments from Japan to the United States has decreased significantly, with exports decreasing by 24.2% in September, but slightly lower than the 28.4% decline in August.
Import duties remain the biggest driver of Toyota’s profits in the U.S., while factors such as exchange rate fluctuations and higher expenses hurt earnings in Japan, the company said in an earnings call.
Although Toyota has significant production in North America, it still relies on imports from Japan for about a fifth of its U.S. sales, and the tariffs on those imports are absorbed rather than passed on, said Liz Lee, associate director at Counterpoint Research.
“We expect profitability to continue to be under pressure (this quarter) as tariff and currency headwinds continue, but it is likely to gradually improve from (the March quarter) onwards,” he told CNBC in a statement.
He added, “If trade costs stabilize and the yen weakens, profitability will recover moderately next fiscal year, but intensifying EV competition will continue to limit upside room for prices.”
On a sales volume basis, Toyota continues to enjoy strong demand worldwide. The company recently reported that car sales, including its luxury brand Lexus, reached 5.3 million units in the nine months to September, an increase of 4.7% from a year earlier. The company said it will continue to focus on increasing sales volume, reducing costs and increasing profits.
