Toyota qtrly profit dips, 2026 outlook sours amid trade tariff woes

Toyota (NYSE:TM) clocked a weaker profit for the quarter to March 31, as higher operating costs and production disruptions offset robust vehicle sales, while the Japanese automaker also presented a softer-than-expected outlook for its 2026 earnings.

Toyota’s operating income was flat at 1.12  trillion yen ($7.7 billion) for the three months  to March 31, even as its sales revenue for the quarter grew to 12.36  trillion yen from 11.07 trillion yen.

This saw Toyota’s net income fall to 664.6 billion yen from 997.6 billion yen for the quarter.

The world’s biggest automaker by volume forecast fiscal 2026 sales revenue of 48.50 trillion yen, up marginally from 2025, while operating income is expected to fall to 3.80 trillion yen from 4.79 trillion yen. The operating income forecast was much lower than Bloomberg estimates of 4.69 trillion yen.

Toyota sold about 11 million vehicles in fiscal 2025, and forecast sales of 11.2 million vehicles in the current year. The automaker benefited from sustained demand for its hybrid electric vehicles in North America- a trend it expects to persist in the current year.

But the company forecast a potential 180 billion yen impact on its profit in April-May from new U.S. trade tariffs. Its softer-than-expected operating profit forecast also highlights more potential damage to its margins from increased U.S. trade tariffs.

U.S. President Donald Trump imposed a 25% duty on all foreign automobiles in the U.S., which stands to greatly impact Toyota. Trump also plans to impose separate tariffs on Japan, Mexico, and Canada- all major production hubs for the automaker.

While anticipation of the tariffs did spur some front-loading in sales through the March quarter, this boost is expected to wear off in the coming months.

Beyond tariff headwinds in the U.S., Toyota is also grappling with increased competition in major market China, especially given that it has few fully electric offerings to compete with majors such as BYD (SZ:002594) and Tesla (NASDAQ:TSLA).

Toyota still provided annual guidance, which is in contrast to several U.S. and European automakers, who withdrew their guidance due to increased uncertainty over Trump’s tariffs.