Toyota warns tariffs and rising costs could slash profits by billions

Toyota says escalating US tariffs and rising global costs could wipe billions from earnings, despite strong global vehicle sales. The Japanese manufacturer reported operating profit of 3.77 trillion yen (approximately A$39 billion) for the financial year ending March 2026, down 21.5 per cent compared to the previous year.

That decline came despite global vehicle sales increasing 2.5 per cent to almost 9.6 million units, while revenue climbed 5.5 per cent to a record 50.7 trillion yen (around A$524 billion).

Read more: Toyota Tundra price slashed in Australia with discounts worth almost $20,000

Toyota says US tariffs are hurting profits

Toyota says higher material costs, currency pressures and trade disruption hit margins, with North America a major weak point. The automaker’s operating results in North America swung from a 108.8 billion yen profit to a 192.5 billion yen loss over the past financial year, with Toyota blaming rising US tariffs as a major factor behind the deterioration.

Toyota estimates tariffs alone could reduce profits by another 670 billion yen (approximately A$6.9 billion) during the next financial year. The company now expects operating profit to fall further to around 3 trillion yen (approximately A$31 billion) in the year ending March 2027.

Global uncertainty and material costs add pressure

Toyota executives also pointed to broader geopolitical instability and supply chain disruption as additional pressures on the business. According to the company, material costs increased by around 400 billion yen (approximately A$4.1 billion), partly linked to instability in the Middle East and disruptions to shipping routes.

Toyota said the rapidly changing global trade environment has made long-term planning increasingly difficult, particularly in the United States, which remains one of the company’s most important markets. As a result, the automaker is considering expanding localised manufacturing and product development in America to reduce future exposure to import duties.

Hybrid vehicles remain a bright spot for Toyota

Despite the financial pressure, Toyota continues to benefit from strong global demand for hybrid vehicles, which now account for close to half of the company’s worldwide sales.

The brand has continued prioritising hybrid drivetrains rather than committing fully to battery-electric vehicles, a strategy that has helped maintain strong sales momentum in several key markets.

Read more: Global sales crown stays with Toyota in record fashion

Toyota Australia still expects strong sales in 2026

In Australia, Toyota is expected to remain in a strong position throughout 2026, helped by continued demand for the RAV4 and HiLux.

The Toyota RAV4 reclaimed its position as Australia’s best-selling vehicle in April 2026, according to VFACTS data, while Toyota Australia recently raised its local sales forecast beyond 210,000 vehicles for the year, a figure no automotive brand has previously achieved in Australia.