Toyota's Profits Fall for Second Straight Year; Cuts Full-Year Outlook Again

Toyota Motor Corporation reported its financial results for fiscal year 2025 (April 2024–March 2025), revealing record-breaking annual sales of ¥50.68 trillion (approximately RMB 2.2 trillion), up 5.5% year-over-year, making it the first Japanese company to surpass ¥50 trillion in revenue. However, operating profit for the same period fell 21.5% year-over-year to ¥3,766.2 billion, and net profit attributable to owners of parent declined 19.2% to ¥3,848 billion. The operating profit margin dropped from 11.9% in the previous fiscal year to 7.4%. While profits from its joint ventures in China increased, Toyota saw year-over-year profit declines across its core markets—including Japan, North America, and Europe—with North America reporting an operating loss of approximately ¥298.6 billion. Looking ahead to fiscal year 2026 (April 2025–March 2026), the company has adopted a more cautious outlook, forecasting sales of ¥51 trillion and operating profit of ¥3,000 billion—a ¥766.2 billion decrease from FY2025. The projected operating profit margin is 5.9%, marking the third consecutive year of declining profitability. Key factors weighing on performance include supply chain disruptions and export restrictions stemming from the U.S.-Iran conflict, as well as cost pressures from newly imposed U.S. tariffs. The former disrupted exports of high-margin vehicles destined for Middle Eastern markets, while the latter directly reduced operating profit by ¥1.38 trillion—accounting for 37% of the full-year operating profit. Despite profit pressures, Toyota plans to invest ¥1.6 trillion in research and development during FY2026, focusing on new energy vehicles, autonomous driving technologies, and talent development. Capital expenditures will remain elevated at ¥2.3 trillion. To address these challenges, Toyota is implementing internal adjustments such as increasing parts commonality, optimizing inventory structures, and enhancing production efficiency. Some Japanese plants have reduced their number of component types by as much as 80%.