Toyota warns of a difficult year for the auto industry

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Despite the challenges ahead, Toyota expects sales to increase in North America. The Japanese automaker may redirect some U.S.-bound vehicles to other markets.

US tariffs on imported cars and parts, along with currency fluctuations, will hurt Toyota this year.

The tariffs imposed by US President Donald Trump are taking a serious toll on Toyota. In the fiscal year ending March 2026, the Japanese auto giant expects its net income to fall by as much as 34.9% and its operating profit to fall by more than 20%. There is some good news, however: Prices won’t go up, at least not in the short term.

In its latest financial report released on May 8, Toyota revealed that operating profit will fall 20.8% to 3.8 trillion yen, or about $26 billion, in the next fiscal year ending in March 2026. By comparison, the company's operating profit in the last fiscal year was 4.8 billion yen. A nearly 30% drop in net profit to 3.1 trillion yen (about $21.5 billion) also spells trouble for the company.

Tariffs aren’t the only thing that’s making Toyota’s finances look dire. The company expects to see a 745 billion yen ($5.1 billion) hit from the yen’s appreciation against the dollar. Higher material costs will cost Toyota another 350 billion yen ($2.4 billion). Because President Trump has adjusted his tariffs so quickly, Toyota can’t say how much they’ll really matter, other than predicting a 180 billion yen ($1.2 billion) hit in April and May alone.

“As the government and agencies are currently working hard, the details of the U.S. tariffs are still subject to change,” Toyota President and CEO Koji Sato said. “It is difficult to predict what will happen next. On the other hand, we have included the impact of the implemented parts in our forecast for this fiscal year.”

Still, Toyota's U.S. sales remain strong. Chief Financial Officer Yoichi Miyazaki noted that the brand expects to sell 2.94 million vehicles in North America in the current fiscal year, up 8.8 percent from the previous year. "Toyota will not take any short-term measures, such as raising prices due to tariffs," he added.

Speaking to Nikkei Asia, Sato added that some U.S.-bound vehicles could be shipped to other markets as Toyota continues to adjust: "It would be desirable to distribute products to the U.S., where many of our customers are," he said. "But in the short term, we should also consider adjusting."

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