Toyota Motor is bracing for the ripple effect of US President Donald Trump’s tariff policy as it set a forecast for a massive 21% profit decline in the current financial year. According to Reuters, last fiscal year, Toyota recorded a profit of 4.8 trillion yen (approximately $33 billion). However, the Japanese automaker forecasts a reduced profit of 3.8 trillion yen ($26 billion) for the current year. The company stated that despite first-half supply constraints rising from certification issues and other factors, in the second half production recovered to 10 million vehicles per year.
Yoichi Miyazaki, Executive Vice President (Chief Financial Officer) said at the earnings call, “Even as we made comprehensive investments for the future and continued to strengthen our foundations, efforts such as price revisions and the expansion of value chain earnings enabled us to sustain a high level of profit.”
Toyota wary of U.S tariffs
Toyota is expecting a windfall from the U.S. tariffs that could affect sales as the company may be forced to hike the prices of its cars, which will have a negative impact on buyers. The tariffs are also likely to affect the Japanese company’s exports. “It is still extremely difficult to forecast the outlook, as the details of the tariffs remain fluid,” said Toyota President Koji Sato.
Toyota explained why the projection of lower profit for the new financial year. Starting from the new U.S. tariffs, the cost of raw materials and the strengthening of the Yen. The company also has an eye on the investment for future expansion plans in the U.S. and high labour costs, which every manufacturer is facing.
Toyota is trying to put a positive front as Miyazaki said the Japanese company has no immediate plans to pass heftier levies onto customers. “We believe that prices should be determined by customers…and we have raised prices of items in high demand,” he said, adding, “We will make an appropriate response at the right time.”