Tariffs are beginning to eat into the auto industry’s bottom line
During a May 8 briefing announcing its financial results for the fiscal year, Japanese automaker Toyota said that it is expecting the impact of newfound U.S. import tariffs to cost it 180 billion yen (~$1.3 billion) in April and May alone, which would turbocharge a 21% operating profit loss during this fiscal year.
Unlike other automakers like Ford, General Motors, and Stellantis, who start their fiscal years in January, Toyota’s fiscal year starts in April. In its full-year 2025 financial results document, Toyota said that the impact for April and May has been tentatively factored into its predictions for the 2025-2026 fiscal year, as the situation remains uncertain. Toyota CEO Koji Sato echoed the same sentiment in front of the cameras and the press.
“When it comes to tariffs, the details are still incredibly fluid, so it’s difficult to take steps or measure the impact,” Sato said.
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Toyota CFO: “Appropriate action” may be taken to ease tariff impact
In a broader view, the current presidential administration’s heavy tariff plan is set to bring a heavy blow to Toyota’s bottom line moving forward. Raw numbers show its operating profit declining by 21% to 3.8 trillion yen (~$25.4 billion) in the 2025-2026 fiscal year, which ends on March 31, 2026. Its operating profit margin is also expected to be shaved from a solid 10% in the fiscal year that ended on March 31, 2025, to 7.8% by the end of March next year.
Despite this, Toyota CFO Yoichi Miyazaki predicts that sales will jump by at least 4.7%, led by moving cars in key markets like North America, Europe, and Japan, where high demand and plentiful inventory provide at least some buffer against the tariffs. However, with the average Toyota dealer working with a 10-day supply of cars and hybrids turning over at an average of six days, Miyazaki sees a window to adjust prices where appropriate.
“Real demand is very strong,” Miyazaki said during the same briefing in Tokyo on May 8. “In the past, we have raised prices when demand was high. So, we will look at the situation and take the appropriate action at the appropriate timing.”
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Toyota has other massive challenges apart from tariffs
Toyota is the latest in a line of automakers, including Ford and General Motors, which recently warned of billion-dollar-plus blows to their bottom lines. Earlier this week, Ford withdrew its full-year guidance after announcing it expected to lose about $1.5 billion due to tariffs, and at the same time, General Motors said it expects to be exposed to up to $5 billion in auto tariffs.
However, tariffs are just one part of the layer cake of financial setbacks for Toyota. It expects to lose 745 billion yen (~$5 billion) on fluctuating exchange rates, 350 billion yen (~$2.3 billion) due to higher prices for key materials, and net income is expected to drop by a whopping 35%. In addition, the previous quarter that ended on March 31 marked the second in a row where operating profit took a hit. The automaker took a 10% hit from January to March, after a 28% hit from October to December 31.
Final thoughts
It seems very mysterious that Toyota CFO Yoichi Miyazaki is weighing “appropriate actions” in light of tariffs on products that are doing well in sales; however, I am not surprised that such actions are being weighed in light of the current climate.
Toyota has a significant manufacturing presence in the United States among Japanese automakers, as many of its parts and completed products within the Toyota and Lexus brands are produced domestically. Despite this, it goes to show that even the most “American” companies are being affected.