- Toyota reported a 36.9 percent drop in net profit to 841 billion yen ($5.7 billion) for the April to June quarter, largely due to new 25 percent U.S. auto tariffs and a stronger yen.
- The full-year impact of U.S. tariffs is expected to cut 450 billion yen from Toyota's operating profit, with additional hits from currency fluctuations (725 billion yen) and rising material costs (300 billion yen).
- Honda's net profit fell 50 percent to 196.6 billion yen, with operating profit down nearly 50 percent as tariffs significantly affected earnings.
- Honda is ramping up U.S. production by adding shifts and has shifted export strategies to minimize exposure; Mazda, facing a quarterly loss of 46 billion yen, is also redirecting shipments and adjusting U.S. sales targets.
- Japanese automakers, especially those reliant on exports like Mazda, are facing serious challenges, with falling sales and production adjustments as they navigate steep U.S. tariffs and market uncertainty.
Toyota Motor Corp. reported a sharp 36.9 percent drop in net profit for the April to June quarter, with earnings falling to ¥841 billion ($5.7 billion), as steep U.S. tariffs on imported cars dented the world's largest automaker's bottom line.
In April, U.S. President Donald Trump imposed an additional 25 percent tariff on all automobile imports, including those from Japan. The tariff came on top of the existing 2.5 percent levy, significantly raising costs for Toyota and other Japanese automakers with large export volumes to the United States.
As a result, Toyota's net profit for the April to June quarter fell 36.9 percent year-on-year to 841 billion yen ($5.6 billion), driven by both the tariff hike and a stronger yen. First-quarter operating profit also declined 10.9 percent to ¥1.1 trillion ($7.5 trillion), though net sales edged up 3.5 percent to ¥12 trillion yen ($81 trillion).
"The [U.S. tariff] has risen to 15 percent from the previous 2.5 percent, which obviously has a significant impact," said Takanori Azuma, Toyota's chief accounting officer. "And it is a thing we are not able to control. The major challenge is to ensure that our North America business generates solid profits. The result [of a trade deal] remains tough."
Initially, Toyota had only accounted for the tariff costs incurred in April and May, which were estimated at ¥180 billion ($1.2 billion). However, the full-year impact is now projected to be significantly higher, with tariffs alone slashing ¥450 billion ($3 billion) from operating profit. Currency fluctuations are expected to trim another ¥725 billion ($5 billion) and rising material costs are forecast to subtract an additional ¥300 billion ($2 billion). (Related: U.S. tariffs inflict huge blow on German automakers.)
Other Japanese automakers also feel the strain of new U.S. tariffs
Meanwhile, Honda reported a sharp 50 percent drop in net profit for its April to June fiscal first quarter, as higher U.S. tariffs on imported vehicles took a heavy toll on earnings. The Japanese automaker posted a net profit of ¥196.6 billion ($1.3 billion), down from the same period last year, with operating profit plunging nearly 50 percent to ¥244 billion ($1.7 billion).
In response to tariff challenges, Honda is adjusting its production strategy. Honda Chief Financial Officer Eiji Fujimura said 60 percent to 70 percent of Honda vehicles sold in the U.S. are already produced locally and the company plans to increase capacity by moving from two to three shifts per day at U.S. plants, without major new investments. Still, supply chain hurdles remain, particularly for hybrid vehicles, whose key components such as motors, batteries and power control units are primarily shipped from Japan.
Additionally, Masao Kawaguchi, head of Honda's accounting and finance supervisory unit, revealed that Honda shifted its export strategy to minimize tariff exposure. The U.S. plant now produces cars for domestic consumption, while its Canadian facility has taken over production for exports to Central America.
Mazda posted a deeper loss of ¥46 billion ($31 billion) on sales of ¥1.1 trillion ($7.5 trillion), down 8.8 percent year-on-year for the same period. The automaker sold 301,000 vehicles globally during the quarter, down three percent, including 100,000 units in the U.S., its largest market, down two percent.
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