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Toyota has downgraded its full-year profit forecast after the world’s largest car producer predicted a ¥1.4tn ($9.5bn) hit this year from US tariffs.
The automaker revised down its annual operating profit forecast by 16 per cent to ¥3.2tn, despite Japan securing an agreement to reduce US tariffs on auto imports from 27.5 per cent to 15 per cent.
The tariff impact for Toyota is bigger than the estimated maximum of $5bn for General Motors and $3bn for Ford and is likely to narrow the gap in profitability between the companies.
But Japan’s leading auto producer has a greater capacity to absorb the extra costs given its leverage over suppliers and large profit base, with net income expected to plummet 44 per cent this year to ¥2.7tn.
Toyota’s results indicate that big Japanese automakers could emerge from US President Donald Trump’s tariffs regime in a strong position. The automakers have welcomed the reduction in tariff rate but have been pushing for greater certainty on when the lower rate will come into effect.
Honda raised its profit guidance on Wednesday. Japan’s second-largest automaker had assumed a full-year impact from tariffs of ¥650bn, which was revised down to ¥450bn.
“Despite the challenging external environment, we have continued to make comprehensive investments as well as improvements such as increasing sales volume, cost reductions, and expanding value chain profits, thereby minimising negative impacts,” Toyota said in its earnings presentation.
The downward revision caused Toyota shares to slip 1 per cent in Tokyo. The company’s shares have fallen 11 per cent since the start of the year.
US car lobby groups have said that under the current configuration of tariffs they could end up losing more than their Asian rivals and have criticised the US-Japan trade agreement.
Toyota had only disclosed a tariff impact of ¥180bn for April and May, making a downward revision for the full year probable in first-quarter earnings.
The forecast downgrade came even as Toyota chalked up record sales in the first half of the year, which increased 7.4 per cent to 5.5mn vehicles compared with the same period a year ago.
In the first quarter, Toyota wracked up ¥450bn of tariff costs, leading to a 37 per cent fall in net income to ¥841bn.
During the tariff negotiations, Toyota offered to export more vehicles from the US to sell in Japan and to help use its dealerships in its home market to help American rivals sell their vehicles to Japanese consumers.
Trump said this week that Japan would accept Ford’s F-150 trucks, although no details were provided.
Despite Trump’s calls for more US investment and Japan’s pledge to pour $550bn into the country as part of the trade deal, Toyota also said on Thursday it would build a new plant in the Japanese prefecture of Aichi that would start operations in the next 10 years.
