Toyota lifts profit outlook to $30.3 billion even with $9 billion U.S. tariff blow

Toyota raised its operating profit forecast for the financial year ending in March to 3.4 trillion yen (around $30.3 billion) on Wednesday, which is higher than the previous 3.2 trillion yen outlook.

Toyota made that forecast even as it warned that new U.S. import tariffs will cost the company 1.45 trillion yen, saying it expects stronger results over the full year despite pressure on quarterly performance.

For the quarter that ended in September, Toyota reported operating profit of 834 billion yen, below expectations of 863.1 billion yen. At the same time, revenue increased to 12.38 trillion yen (about $81 billion), compared with analyst estimates of 12.18 trillion yen.

Toyota’s net income for the quarter came in at 972.9 billion yen, and the company said that firm demand in Japan and North America helped maintain sales strength even under new trade costs.

“Despite the impact of U.S. tariffs, strong demand supported by the competitiveness of our products has led to increased sales volumes mainly in Japan and North America and has expanded value chain profits,” said Toyota on Wednesday.

Tariffs weigh on Toyota’s operating profit and U.S. market

The 3rd quarter was the second straight decline in operating profit for Toyota since the United States introduced “reciprocal” tariffs in April.

A trade agreement between Tokyo and Washington in July lowered the originally proposed 25% tariff to 15%, with the new rate taking effect on August 7. Even so, automobile shipments from Japan to the U.S. have continued to slide. Exports decreased 24.2% in September, following a 28.4% drop in August.

Toyota said that import tariffs remain the biggest drag on U.S.-related profits. In Japan, currency movements and higher costs also pressured earnings. While Toyota manufactures extensively in North America, about one-fifth of U.S. sales still depend on imported vehicles. The company is absorbing tariff costs on those imports rather than passing them on to customers.

Liz Lee, associate director at Counterpoint Research, said, “We’re expecting profitability to remain under pressure in [the current quarter] as tariff and currency headwinds persist, with gradual improvement likely from the [March quarter] onwards.” Lee added that next fiscal year could bring some relief if trade expenses stabilize and the yen weakens, but noted that competition from electric vehicle makers will remain a challenge. “Profitability should recover modestly next fiscal year if trade costs stabilize and the yen weakens, though rising EV competition will continue to cap upside potential,” she said.

Hybrid sales drive growth while battery EV lineup remains limited

Toyota has been increasing its focus on electrified vehicles, and 46.9% of all Toyota and Lexus sales in the first half of the fiscal year came from that category.

Most of these sales were hybrid electric vehicles, especially in North America and China, where demand for hybrid systems remains strong.

However, Toyota currently has a limited lineup of fully battery-powered EVs. Lee noted that this may leave the company more exposed to competition from Chinese EV manufacturers expanding in Europe and Southeast Asia.

Despite tight margins, global demand for Toyota’s vehicles has remained steady. The company reported 5.3 million vehicle sales in the nine months to September, a 4.7% increase from the same period last year. This total includes Toyota’s Lexus luxury brand.

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