Toyota Motor Corporation has raised its operating profit forecast for the financial year ending in March, even as it braces for a ¥1.45 trillion (£7.6 billion) hit from tariffs on vehicles exported to the United States.
The world’s largest carmaker now expects operating profit of ¥3.4 trillion (£17.8 billion), up from an earlier projection of ¥3.2 trillion, supported by robust demand across Japan and North America.
Despite the pressure from higher import costs, Toyota said its product competitiveness and expanded value chain operations helped sustain sales momentum through the second quarter.
Mixed quarterly performance with profit drop and revenue growth
Toyota’s operating profit for the September quarter fell nearly 28% year on year, underscoring the impact of new trade duties introduced by the US earlier this year.
The company’s revenue, however, climbed over 8% to ¥12.38 trillion (about $81 billion), exceeding analyst estimates of ¥12.18 trillion compiled by LSEG. Operating profit came in at ¥834 billion, slightly below the market’s expectation of ¥863.1 billion.
The latest figures represent Toyota’s second consecutive quarterly decline in operating profit since Washington imposed reciprocal tariffs in April.
Although Tokyo and Washington reached an agreement in July to reduce tariffs to 15% from the initially proposed 25%, the duties that took effect in August continue to weigh heavily on Japanese exporters.
US tariffs and currency swings drag on margins
Toyota said tariffs remained the largest drag on its US earnings, as about one-fifth of its American sales still depend on imports from Japan.
The company has chosen to absorb most of the additional costs rather than pass them on to consumers. Exchange rate fluctuations and higher domestic expenses have further eroded margins in Japan.
Japanese exports of automobiles to the US dropped 24.2% in September, a slight improvement from the 28.4% fall recorded in August.
In North America, Toyota’s operating income for the first half of the year swung to a loss of ¥134 billion from a ¥128 billion profit a year earlier, reflecting the direct cost of tariffs and reduced profitability.
Experts expect Toyota’s profitability to stay under pressure in the current quarter, with gradual recovery anticipated in the
March quarter if trade costs stabilise and the yen weakens. However, rising competition in the electric vehicle market is likely to continue capping upside potential.
Vehicle sales rise as Toyota strengthens value chain
Despite margin challenges, global demand for Toyota vehicles remains strong. Including its luxury brand Lexus, Toyota reported vehicle sales of 5.3 million units in the nine months to September, a 4.7% increase from the same period last year.
The company plans to sell about 11.3 million vehicles globally by the end of the financial year.
Toyota said its focus would remain on increasing sales volumes, improving cost structures, and expanding value chain profits across markets.
The automaker aims to maintain competitiveness through disciplined production and steady investments in hybrid and electric vehicle technology, while navigating evolving trade dynamics and policy shifts in key export destinations.
Market outlook and investor focus
Toyota’s ability to raise its profit forecast despite significant tariff-related losses highlights both the resilience of its global operations and the importance of regional diversification.
While cost pressures are likely to persist in the near term, the company’s strong brand equity, extensive North American manufacturing base, and balanced model portfolio provide a buffer against external shocks.
Investors will be watching closely to see if the easing of tariffs, stabilising currency movements, and ongoing demand recovery can sustain Toyota’s profitability heading into the next fiscal year.
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