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Toyota Prepares for 21% Fiscal 2025 Profit Decline Due to Tariff and Currency Pressures

Updated: May 08, 2025 10:47

Image Source: Reuters
Toyota Motor Corp. has predicted a 21% drop in full-year operating profit for fiscal 2025, expecting earnings of 3.8 trillion yen ($26 billion) for the fiscal year through March 2026, down from 4.8 trillion yen in the same period last year. The dramatic decline comes despite strong demand for Toyota's hybrid cars, as the automaker grapples with increasing pressures from new American tariffs and a strengthening yen.
 
Key Highlights:
  • Tariff Blow Looms Large: The fall is mainly due to the expected financial blow from the tariffs imposed by U.S. President Donald Trump on Japanese imports of cars. These tariffs, it is estimated, would lower the operating profit of Toyota by as much as 800 billion yen, specifically denting exports from Japan to the U.S.-one of the biggest markets for Toyota.
  • Currency Issues: The rising yen is also diminishing foreign profits when translated back into Japanese currency, adding to the tariff-related pressure.
  • Hybrid Demand Remains Robust: Even with these headwinds, Toyota's hybrid vehicles such as the Prius and Camry remain in robust demand worldwide, serving to cushion some of the profit fall.
  • Strategic Shifts: Toyota has indicated it will concentrate on minimizing fixed costs and normal operations, instead of turning to price increases. It is also exploring the transfer of some production, like the next-generation RAV4 SUV, to the United States to limit tariff exposure.
  • Investor Attention: Markets are monitoring Toyota's subsequent actions, including its proposed investment in Toyota Industries, and how it handles cross-shareholdings and regulatory demands
This projected profit downturn highlights the intricately tangled global challenges for even the globe's largest automaker, as economic and geopolitical forces redesign the industry terrain.
 
Sources: Reuters, MarketScreener, Barron's, Yahoo Finance

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