Toyota's Operating Profit Plummets, Hit by Trump Tariffs and Chinese EVs
Toyota Motor of Japan reported a 49% decline in operating profit for the fourth quarter, missing analyst estimates. The drop in profit was triggered by US tariffs and increasingly fierce competition from Chinese car manufacturers, which also pressured revenue. The Japanese automaker’s revenue reached 12.6 trillion yen for the fourth quarter ending in March 2026. Meanwhile, its profit only amounted to 569.4 billion yen, far below analysts’ projections of 813.28 billion yen for the fourth quarter.
The world’s largest car producer by sales volume recorded a 1.89% year-on-year revenue increase for the fourth quarter ending in March, in line with expectations. Operating profit declined for the fourth consecutive year-on-year period, reflecting ongoing pressure from US tariffs. Net profit attributable to the company rose to 817.2 billion yen from 664.6 billion yen the previous year.
Toyota’s consolidated vehicle sales for the fourth quarter of its fiscal year fell to 2.29 million units from 2.36 million units the year before. Toyota lowered its operating revenue forecast by more than 20% to 3 trillion yen for the fiscal year ending March 2027, while raising its sales revenue forecast by 0.6%.
“We have recently seen a significant increase in our break-even volume due to a combination of increased investment in human resources and future-oriented investments, as well as the impact of US tariffs,” the company stated in an official statement, quoted from CNBC International on Saturday (9/5/2026).
The automaker stated during a press conference on Friday that it adopted a six-month average for its foreign exchange rate assumptions, rather than the usual monthly average, due to current volatility. Toyota set its average exchange rate assumption for the fiscal year at 150 yen to the US dollar.
The weakening yen has boosted the competitiveness of exporters like Toyota by making its products cheaper for foreign buyers and increasing the value of overseas profits when converted back to the currency.
Toyota said its research and development spending reached a record high, partly due to certification issues and capacity constraints, although the company expects capital expenditure to remain stable going forward.
The company stated that it continues to cut costs and reduce wasteful production, but anticipates higher spending due to the Middle East conflict and inflation.
Toyota Motor’s asset productivity declined over the full 2016-2025 period, with a slight decrease in asset turnover, according to a 5 May report by Price Target Research.
Toyota faces challenges, burdened by slowing sales in the Chinese automotive market, vehicle recalls, intensifying competition in the electric vehicle sector from rivals, and Trump-related tariffs.
The company recorded weaker quarterly sales in the US in the first quarter amid concerns about affordability and fuel price pressures from the Middle East conflict.
Toyota has also been trying to navigate production plans amid tariffs and other regulatory changes. The company said in March that it would spend a total of US$1 billion on two US factories as part of plans to invest up to US$10 billion there over the next five years.
Toyota expects to see growth in the battery electric vehicle sector in China, Europe, and North America, and plans to expand its business in those regions. Toyota’s shares last traded 2.18% lower in Tokyo on Friday.