Toyota Takes a Major Hit: Profit Forecast Down by a Third Amid US Tariffs
Toyota Reduces Profit Expectations by One-Third, According to U.S. Customs Statement - Reduced Profit Projections by Toyota due to US Tariffs: Toyota's anticipated earnings drop by a substantial one-third as a consequence of implementation of US tariffs.
The US has implemented a 25% tariff on auto imports starting early April, followed by a similar boost to auto parts imports in May. In a recent announcement, Toyota disclosed that these tariffs would cost the company a staggering 1.1 billion euros.
CEO Koji Sato acknowledges the struggle to calculate the exact impact, as the tariffs are part of the ongoing negotiations between Japan and the US over a potential trade agreement. Given that 28% of Japanese exports are directed towards the US, and the automotive sector accounts for approximately one in eight jobs, favorable terms are crucial for Tokyo.
Almost half of Toyota's car sales in 2021 were shipped from Japan and Mexico to the US. In response, CEO Sato shared that Toyota will make adjustments to its shipments to the US in the short term and aim to "develop production locally to meet customer needs" in the long run.
Toyota produces vehicles in ten US plants and has a strong presence in Mexico, as well. An eleventh plant, a battery factory for electric and hybrid cars in North Carolina, is set to open soon, according to the company.
Adjusting production will take time and investments, according to auto expert Takaki Nakanishi from the Nakanishi Research Institute.
The fiscal year that ended in March saw a minimal dip in Toyota's vehicle sales, down 0.3%, but a 6.5% rise in revenue to around 295 billion euros. Despite the meager profit growth of 3.6% in the same period, the current forecast points to a 35% drop in net profit to approximately JPY 3.1 trillion ($21.6 billion) for the upcoming fiscal year[1][4].
Toyota is also grappling with weak sales in China, where local competitors are fiercely competitive in the electric vehicle market. In response, Toyota announced plans to open an electric vehicle plant in China[3].
- Toyota Motor
- Profit Forecast
- Auto Imports
- US
- Fiscal Year
- Japan
- Auto
- Yen
- Mexico
- Tokyo
Bonus Insights:
- Slight discrepancies in projected net profit have surfaced, with one report stating a 34.9% drop in net profit for the current business year[4].
- Toyota expects to uphold its global vehicle sales by 4.7% to 9.8 million units, with substantial growth in North America and Japan[1].
- The Commission, recognizing the impact of tariffs on the auto industry, has also made recommendations on the use of the euro in the context of the single market, as office-related expenses like financing for companies such as Toyota can be calculated and managed more efficiently in euros, potentially softening the financial burden imposed by tariffs.
- Despite Toyota having a strong presence in Mexico and producing vehicles in ten US plants, with an eleventh battery factory set to open in North Carolina, adjustments to shipments to the US and local production will be necessary to meet customer needs and potentially reduce costs associated with tariffs, as calculated by auto experts like Takaki Nakanishi.
- As Toyota is forecasted to experience a 35% drop in net profit, the fiscal year ending in March saw a minimal dip in vehicle sales but a significant 6.5% rise in revenue to approximately 295 billion euros, underscoring the importance of favorable trade agreements between Japan and the US to maintain profitability, given that 28% of Japanese exports are directed towards the US and the automotive sector accounts for approximately one in eight jobs in Tokyo.
