By Kosaku Narioka

Toyota Motor reported weaker quarterly earnings and projected a drop in profit for the new fiscal year, expecting President Trump's tariffs and higher material costs to cut into its bottom line.

Japan's largest automaker estimated a U.S. tariff impact of 180.0 billion yen, equivalent to $1.25 billion, for April and May. Chief Executive Koji Sato said Thursday that tariff developments are fluid and it is difficult to project further.

The U.S. started imposing a 25% levy on finished foreign-made cars early last month.

Chief Financial Officer Yoichi Miyazaki said the company's earnings power means it can monitor developments in trade talks between the U.S. and Japan and not make sudden changes in production. He said Toyota won't raise vehicle selling prices in the U.S. just because of tariffs.

Sato said the company will continue taking steps in the medium-to-long term to develop and make cars based on where customers are located. At the same time, it is important to maintain domestic production and supply chain, export products and earn foreign currencies, he said.

"It's critical to protect domestic production," Sato said at a briefing.

Toyota Motor remained the world's biggest carmaker in 2024, selling 10.8 million vehicles globally as it benefited from a shift among consumers in the U.S. and some other markets to hybrid cars from fully electric vehicles.

For the fiscal year ended March, it made 3.2 million vehicles in Japan and exported about 542,000 to the U.S.

To sell cars in the U.S., Japanese automakers like Toyota not only produce them at U.S. plants but also make them in countries such as Japan and Mexico and import to the U.S.

The yen's sharp weakening in recent years has helped boost earnings for Japanese exporters, including Toyota, as it makes exports more competitive abroad and increases the value of profits earned overseas in yen terms.

The stock is down 15% year to date, weighed by concerns about U.S. tariffs and the yen's modest gains in recent weeks.

Toyota said Thursday that net profit for the three months ended March fell 33% from a year earlier to Y664.6 billion despite higher vehicle sales. Lower margin and non-operating losses weighed on the bottom line. Still, the fourth-quarter result was better than the Y587.4 billion estimate in a poll of analysts by data provider Visible Alpha.

For the year that began in April, it forecast group vehicle sales to rise 1.7% to 11.20 million units thanks to projected gains in various regions, including North America.

The carmaker projected annual net profit to drop 35% to Y3.100 trillion and revenue to increase 1.0% to Y48.500 trillion.

It expects changes in foreign-exchange rates to weigh on its operating profit by Y745.0 billion as it projects a stronger yen. Higher costs of materials are also expected to drag its earnings by Y350.00 billion.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

May 08, 2025 08:59 ET (12:59 GMT)

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