TLDR
- TM stock closed at $188.90, down 1.83%, ahead of May 8 earnings
- Tariffs will cost Toyota $1.3 billion in April and May alone
- Full-year operating profit forecast slashed by 21% to $26 billion
- U.S. sales face risks from rising prices and weaker dollar
- Japan remains a profit bright spot while North America losses deepen
Toyota Motor Corporation (NYSE: TM) shares are trading at $186.41 on May 8th early trading hours, down 1.32% as investors reacted to rising tariff costs and a gloomy profit forecast. The world’s largest automaker is bracing for a 21% drop in full-year operating income, citing currency headwinds and escalating trade tensions with the U.S.
Tariffs and Currency Hits Weigh on Outlook
Toyota expects operating income to fall to 3.8 trillion yen ($26 billion) for the fiscal year ending March 2026, down from 4.8 trillion yen in the prior year. The automaker faces $1.3 billion in tariffs over just two months, with Chief Executive Koji Sato warning of ongoing uncertainty as U.S.-Japan trade talks evolve.
Toyota says it will lose $1.3 billion in the months of April and May due to President Trump’s tariffs. Find out what's moving markets every morning before the Wall Street open, with the Reuters Market Rundown. More here: https://t.co/AmWF2mpYL1 pic.twitter.com/aR1KIrMh7a
— Reuters Business (@ReutersBiz) May 8, 2025
While tariffs directly hit costs, currency movements are proving even more damaging. Toyota estimates a weaker dollar will shave 745 billion yen from full-year profits, as U.S. earnings translate into fewer yen. Analysts warn that sustained tariffs could force Toyota to raise prices in the U.S., potentially dampening consumer demand.
Mixed Regional Performance
Toyota’s challenges are most acute in North America, its biggest market, where operating losses widened to 100 billion yen from 28 billion yen a year earlier. A production halt at its Indiana plant deepened the shortfall.
In contrast, Japan remained a bright spot, with fourth-quarter profit rising 18%, highlighting its resilience at home even as global pressures mount. In China, Toyota’s sales decline has been less severe than rivals, but competition from domestic brands remains fierce.
Hybrid Sales Offer Some Relief
Despite the headwinds, Toyota is seeing success with its hybrid vehicles. Full hybrids made up 43% of all Toyota and Lexus sales in the past year, up from 35% a year earlier, as more consumers embrace fuel-efficient options. This shift has provided some cushion against rising costs and volatile markets.
Profit Slips Despite Resilient Quarter
For the three months through March, operating profit was nearly flat, inching up 0.3% to 1.12 trillion yen. Still, with tariffs looming and currency pressures mounting, analysts question whether Toyota can hit its new, lower forecast.
Christopher Richter of CLSA cautioned that while U.S. demand remains firm for now, persistent tariffs could force price hikes that erode sales. “Can you grow sales like that? I don’t know,” he said.
Toyota’s stock, which is down 17.1% over the past year, extended losses following the forecast update. Shares slipped 1.3% on the day of the release and were down another 0.3% just before the announcement.
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