Toyota Motor Corporation, the world’s largest automaker, is expected to report stable annual earnings on Thursday, driven by robust demand for its hybrid vehicles. However, investors remain cautious, anticipating potential impacts from US tariffs that could affect future profits.
Industry experts are keenly observing whether Toyota will account for the effects of US tariffs, imposed by former President Donald Trump, which are expected to significantly impact automakers conducting business in the United States.
Toyota will also face scrutiny regarding its plans for Toyota Industries, following recent confirmation that the automaker is considering investing in a potential buyout of the key parts supplier.
Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Laboratory, noted that the primary focus will be on the company’s guidance for the fiscal year ending March 2026. However, he added that it remains uncertain whether the potential tariff impacts will be included.
Earnings Forecast and Market Performance
For the fourth quarter, analysts project Toyota’s operating profit to increase by 2% year-on-year, reaching 1.13 trillion yen (£6.3 billion), marking the first rise in three quarters. Toyota’s global sales in the January-March period grew by 5% compared to the previous year, driven by strong demand in the United States and Japan.
Despite steady hybrid vehicle sales, Toyota’s full-year operating profit for fiscal 2024 is expected to decrease from the previous year’s record. The company raised its profit forecast in February to 4.7 trillion yen (£26.7 billion), still marking a 12% decline from the prior year.
Toyota’s decision to focus on gasoline-electric hybrids, such as the Prius and Camry, has proven beneficial. However, challenges persist, as suppliers face difficulties in keeping pace with production demands.
Potential Tariff Impact
The company could face an 800 billion yen (£4.5 billion) reduction in its fiscal 2025 operating profit due to US tariffs on Japanese exports. This estimate does not account for broader repercussions, such as a potential economic downturn in the US or the effects on Toyota’s production in Canada and Mexico.
Toyota has maintained that it will continue regular operations and focus on reducing fixed costs rather than implementing drastic measures, such as increasing car prices. Insiders have revealed that the automaker is considering producing the next generation of its popular RAV4 SUV in the US to mitigate risks associated with tariffs and exchange rate fluctuations.
Investment in Toyota Industries
Investors are also awaiting updates on Toyota’s potential buyout of Toyota Industries. The impact on Toyota’s market value will depend on the deal structure, according to James Hong, head of mobility research at Macquarie. Additional investment could be seen negatively, while addressing cross-shareholding issues might positively influence the market.
Toyota Industries, a nearly century-old company, was originally spun off from Toyota Motor. As of last September, Toyota owned approximately 24% of Toyota Industries, while the latter held around 9% of Toyota Motor and over 5% of Denso, another Toyota affiliate.
Toyota’s share price has fallen by 13% this year, compared to an 8% decline for the Nikkei 225 index. Analysts will be closely watching the company’s strategy for unwinding cross-shareholdings amid pressure from regulators and investors.
–Reuters
