Toyota faces third consecutive quarterly profit decline due to rising costs and tariffs

• Toyota's global sales reached a record 10.5 million vehicles in 2025, up nearly 4%, with hybrids accounting for 42% of sales while EVs represented less than 2%
• U.S. market performance was particularly strong with 8% sales growth as consumers shifted toward high-margin hybrid vehicles
• The yen's weakness against Toyota's forecast rate (146 per dollar vs. current 156.88) may provide upside to financial results and help offset cost pressures

Summary

Toyota Motor is expected to report its third consecutive quarterly operating profit decline on Friday, with Q4 (October-December) operating profit forecast at 1.09 trillion yen ($6.95 billion), down 10% year-over-year, according to seven analysts surveyed by LSEG.

Key Performance Metrics:

Despite the profit decline, Toyota achieved record global sales of 10.5 million vehicles in 2025, up nearly 4%. The company demonstrated particular strength in its largest market, the United States, where sales rose 8%. Sales in China remained flat, while India surged 17% to over 350,000 vehicles. Hybrids accounted for 42% of Toyota and Lexus sales, while battery electric vehicles represented less than 2%.

Primary Challenges:

The profit pressure stems from rising labor costs, increased raw material prices, and U.S. import tariffs, with Japanese vehicles facing a 15% levy. However, analysts emphasize Toyota's resilience through strong hybrid product offerings and effective inventory management, positioning it favorably in a stagnant global auto market.

Financial Outlook:

Toyota maintains its full-year operating profit forecast of 3.4 trillion yen for the fiscal year ending March, raised in November due to higher sales volumes, a weaker yen, and cost-cutting initiatives. The yen's recent weakness beyond Toyota's assumptions (146 yen/dollar, 169 yen/euro) could provide upside surprises to results.

Additional Context:

The results come amid heightened governance scrutiny following activist investor pushback over Toyota's bid to privatize affiliate Toyota Industries. Analysts note the company's competitive advantage through hybrid technology in a market requiring manufacturers to capture market share from rivals rather than rely on overall demand growth.