Toyota profits fall for a second consecutive quarter as U.S. tariffs hit exports
A sign with the Toyota logo in Surrey, England, in August 2023
Peter Dazeley | Getty Images News | Getty Images
Toyota Motor It cited a 1.45 trillion yen hit from U.S. tariffs as it raised its operating profit forecast on Wednesday for its fiscal year ending in March.
The company, which revised its operating profit outlook to 3.4 trillion yen from its previous forecast of 3.2 trillion yen, failed to meet its profit forecasts for the quarter ending in September.
“Despite the impact of U.S. tariffs, strong demand supported by the competitiveness of our products has led to increased sales volumes and increased value chain profits, primarily in Japan and North America,” Toyota said in its earnings report. report.
Here’s how Toyota’s September quarter results compare to average estimates from LSEG:
- Revenue: 12.38 trillion yen (about $81 billion) and 12.18 trillion yen
- Operating profit: 834 billion yen etc. 863.1 billion yen
The world’s largest automaker by sales volume reported a nearly 28% year-on-year decline in quarterly profit, while revenue rose more than 8%. Net income increased to 972.9 billion yen
Toyota announced 6-month results from April to September, with quarterly figures calculated by CNBC based on company filing and LSEG data.
The drop in operating profit for the September quarter represents the second straight decline since the US imposed “reciprocal” tariffs in April. In July, Tokyo signed a trade deal with Washington, reducing tariffs on its exports to the United States to 15% from the 25% originally proposed by President Donald Trump. 15% customs duty It came into force on August 7.
Tariffs remain the biggest drag on Toyota’s profits in the U.S., while factors such as exchange rate fluctuations and rising expenses are affecting earnings in Japan, the company said.
A Toyota executive said on the earnings call that the company was “assessing the challenges” and “preparing” for a plan to ship U.S.-made vehicles to customers in Japan. investment framework Between Tokyo and Washington.
They added that the plan may not be “economically rational” but could make some products more accessible to Japanese customers.
Tariffs are biting
Effects of US tariffs Japan’s auto shipments to the United States fell 24.2% in September; however, this was slightly less than the 28.4% decline in August.
Although Toyota has extensive production in North America, about a fifth of its U.S. sales still rely on Japanese imports, and customs costs on those imports are absorbed rather than transferred, according to Liz Lee, deputy director of Counterpoint Research.
“We expect profitability to remain under pressure” [the current quarter] Gradual recovery likely as tariff and currency fluctuations continue [March quarter] Lee said in a statement to CNBC:
“If trading costs stabilize and the yen weakens, profitability will recover modestly next fiscal year, but increased electric vehicle competition will continue to limit upside potential,” he added.
Toyota is increasingly moving towards electric vehicles, which accounted for 46.9% of Toyota and Lexus vehicle sales in the first half of the fiscal year. These sales were primarily driven by hybrid electric vehicles in regions such as North America and China.
But Lee said Toyota’s limited lineup of all-electric battery-powered vehicles could make it more open to competition from Chinese EV players in Europe and Southeast Asia.
Despite declining profits, Toyota continued to show strong global demand. The company recently reported Vehicle sales, including luxury brand Lexus, reached 5.3 million in the nine months to September, up 4.7% on the previous year. The company said in its earnings report that it will continue to focus on increasing sales volume and reducing costs.
