Are Japanese automakers losing their appeal? Recently, Toyota, Honda, and Nissan, the three major Japanese automotive companies, have successively disclosed their Q1 financial reports for the current fiscal year (April 1 to June 30, 2025). Against the backdrop of the global automotive industry facing tariff pressures, the three Japanese automotive giants show significant divergence: Toyota leveraged its "scale advantage" to withstand profit decline pressure, becoming the only company to achieve sales growth; Honda's net profit was halved as it continues to seek balance between electrification investments and cost control; Nissan fell deep into a loss-making quagmire, with its profit-to-loss performance making its "recovery plan" urgently needed.

**Japanese Cars No Longer Profitable: Financial Reports of Three Giants Revealed**

As the "cornerstone" of Japanese automobiles, Toyota demonstrated strong market resilience this quarter. From April to June 2025, its global deliveries reached 2.411 million units, up 7.1% year-over-year, with delivery scale exceeding the combined total of Honda and Nissan. In comparison, Honda and Nissan's performance during the same period was dismal: Nissan's global sales were 707,000 units, down 10.1% year-over-year; Honda delivered 839,000 passenger cars, with a decline of up to 30% year-over-year, making it the company with the most severe sales decline among the three Japanese automotive giants.

From the overall first-half performance, Toyota's leading advantage further expanded. In the first half of this year, Toyota (including subsidiaries Daihatsu and Hino) achieved total sales exceeding 5.5 million units, up 7.4% year-over-year, surpassing second-place Volkswagen Group's 4.405 million units by more than one million, continuing to secure the top position in global automotive sales rankings.

The revenue performance of the three Japanese automotive giants during the reporting period was basically synchronized with their sales patterns, but the gap further widened. Toyota maintained its leading position among the three with operating revenue of 12.25 trillion yen, up 4% year-over-year; Honda's revenue was 5.34 trillion yen, down slightly by 1.2% year-over-year, with limited impact from sales decline; Nissan became the "weak link" with revenue of only 2.7 trillion yen, down significantly by 9.7% year-over-year, with scale less than a quarter of Toyota's, directly intensifying subsequent profit pressure.

The profit divergence was the most crucial highlight in this quarter's financial reports, with US tariff policy being the core impact factor.

Toyota fell into the predicament of "revenue growth without profit growth." Despite achieving both sales and revenue growth during the reporting period, Toyota's net profit decreased by 37% year-over-year to 841.3 billion yen (approximately 41 billion RMB); operating profit was 1.17 trillion yen, down 11% year-over-year, with profit margin contracting from 11.1% to 9.5%.

Honda's net profit was "halved." Financial report data shows that during the reporting period, Honda's net profit attributable to shareholders was 170.4 billion yen, down 50.2% year-over-year; operating profit was 244.17 billion yen, down 49.6% year-over-year, with profit margin plummeting from 9% to 4.6%. Even though motorcycle business operating profit hit a quarterly record high, it still couldn't offset the dual squeeze of electrification transformation investments and tariffs.

Nissan became the only loss-making enterprise among the three Japanese automotive giants. During the reporting period, its net loss was 115.76 billion yen (nearly 5.6 billion RMB), turning from profit to loss year-over-year; operating profit also fell into loss territory with a loss of 79.1 billion yen, causing profit margin to drop to -2.9%, with transformation period pressures fully erupting.

However, profit decline is not a predicament unique to Japanese automakers. German automakers faced similar pressure during the same period: BMW and Mercedes-Benz's Q2 net profits fell 31.9% and 68.7% year-over-year respectively, Audi's pre-tax profit in the first half dropped 39.2%, and profits of global automotive giants like Volkswagen, Hyundai, Kia, Stellantis, and Volvo were all affected to varying degrees. The global automotive industry is facing collective tariff "growing pains."

**Why Automotive Giants Cannot Withstand US Tariffs**

The North American market has always been a core profit source for Japanese automakers. From the reporting period data, the US market contributes about 40% of revenue for all three Japanese automotive giants: From April to June 2025, Nissan's net sales in the US market accounted for 40%, making the US its largest single global market; Toyota's sales in the North American market during the same period were 5.3 trillion yen, accounting for 40% of total sales, up 6.2% year-over-year; during the same period, Honda's sales in the North American market were 457,000 units, up 51% year-over-year, making it the only market globally where Honda achieved growth.

But it was precisely this core market that became the main target of US tariff policy impact. In early April 2025, the Trump administration announced the imposition of so-called "reciprocal tariffs" on goods exported to the US from multiple countries including Japan, with a tax rate of 25% for Japan. This rate was far higher than the 2.5% baseline tax rate previously enjoyed by Japanese automobiles, directly targeting Japan's core export products including automobiles.

Although the US and Japan reached a new agreement on July 22, reducing tariffs to 15%, this level is still significantly higher than historical averages, and the early high tariffs and policy uncertainty have already caused substantial damage to Japan's automotive industry, with this quarter's sharp profit decline being the most direct evidence.

Financial report data shows that US tariffs have become the "primary driver" of profit decline for the three Japanese automotive giants, with varying degrees of impact. According to Toyota's statistics, affected by US government automotive tariff policies, from April to June 2025, Toyota's operating profit decreased by 450 billion yen, with an estimated full fiscal year loss of 1.4 trillion yen (approximately 68 billion RMB). Under this impact, Toyota lowered its profit expectations for this fiscal year from the previously estimated 3.8 trillion yen to 3.2 trillion yen.

More alarmingly, Toyota turned from profit to loss in the North American market for the first time. Although sales in that market reached 794,000 units during the quarter, up 12.7% year-over-year, operating profit in that market turned from profit to a loss of 21.1 billion yen, decreasing by 106.2 billion yen year-over-year, highlighting the predicament of "sales growth without profit."

Nissan also pointed out that group restructuring expenses combined with the impact of US tariff policies will lead to serious losses. In the first fiscal quarter, US tariffs alone caused Nissan to lose 68.7 billion yen in profit, with full-year operating profit expected to shrink by up to 300 billion yen, prompting Nissan CEO Iván Espinosa to frankly state that the "Re:Nissan recovery plan is urgent."

Honda indicated that US tariff policies caused its first fiscal quarter operating profit to decrease by approximately 125 billion yen. However, compared to Toyota and Nissan, Honda is more optimistic about tariff adjustment expectations. After reassessing tariff impacts and strengthening cost optimization and pricing strategies, Honda raised its full-year operating profit target from 500 billion yen to 700 billion yen, while maintaining its full-year sales revenue target of 20.8 trillion yen and global group sales volume target of 3.62 million units.

**China Market Becomes Key Variable**

Under tariff impact, the performance of other global markets and progress in electrification transformation have become key to whether the three Japanese automotive giants can reverse their decline. Among these, China market's "warming signals" and electrification transformation's "differentiated paths" are particularly noteworthy.

As the world's largest automotive market, China market performance directly affects Japanese automakers' global performance. The three Japanese automotive giants also show clear differentiation in the China market.

Toyota is the best-performing Japanese automaker in China. In the first half of 2025, Toyota's sales in China reached 837,700 units, up 6.8% year-over-year. From April to June, sales increased 9.5% year-over-year to 450,000 units, with operating profit increasing 10.4% year-over-year to 55 billion yen. This performance benefited from coordinated growth of both north and south joint venture brands—FAW Toyota sold 377,800 new cars in the first half, up 16% year-over-year; GAC Toyota's sales reached 344,800 units, up 2.58% year-over-year. Both were the only two Japanese joint venture automakers to achieve sales growth in the first half of this year.

Toyota noted in its financial report that the increase in operating profit from China business was mainly due to marketing and cost reduction measures, including joint venture company profits and investment income calculated using the equity method.

"Competition in the China market remains fierce, with non-luxury joint venture brand market segments continuing to shrink and price wars further escalating," Iván Espinosa stated during the financial report meeting. This is precisely the common predicament faced by Nissan and Honda in China.

For Nissan, whose declining trend in China is difficult to reverse, electrification has become its "last hope." In the first half of this year, Nissan delivered 279,500 new cars in China, down 21.3% year-over-year. However, the N7, Dongfeng Nissan's first self-developed pure electric vehicle launched in April, showed potential, selling 6,189 units in June alone, with cumulative deliveries exceeding 10,000 units in one and a half months since launch. With N7's momentum, Nissan expects to launch plug-in hybrid model N6 (N7's plug-in hybrid version) in the China market, attempting to reverse its decline in China through electrified products.

Honda's sales in China continue to decline, and its transformation pace is relatively conservative. In the first half of this year, Honda's sales in China were 315,200 units, down more than 24% year-over-year. To respond to competition, Honda launched two mid-size pure electric SUVs this year—Dongfeng Honda S7 and GAC Honda P7—officially beginning its electrification transformation in China. However, from current sales performance, it has not yet formed a clear growth driver effect and still needs time to verify market acceptance.

In the wave of global automotive industry transformation toward electrification, the strategies and progress of the three Japanese automotive giants show significant differentiation.

Toyota is confident about its electrification transformation. Financial reports show that in the first half of 2025, driven by hybrid electric vehicle (HEV) sales in North America and Asia, Toyota's electrified vehicle sales proportion rose to 47.6%, reaching 1.259 million units. Among these, hybrid electric vehicle (HEV) sales were 1.165 million units, up 16.7% year-over-year; plug-in hybrid (PHEV) and battery electric vehicle (BEV) models increased 38.8% and 10.4% year-over-year respectively. Toyota expects that electrified vehicle sales proportion will reach 49.3% in fiscal year 2026, with annual sales expected to reach 5.123 million units.

On the same day as the financial report release, Toyota announced it would build a new vehicle manufacturing plant in Japan, scheduled to begin production in the early 2030s, further consolidating electrification production capacity foundation, demonstrating clear confidence.

Honda remains in the investment period of electrification transformation. Honda Chief Financial Officer Eiji Fujimura stated: "The profitability outlook for electric vehicles this fiscal year is also deteriorating, with expected losses of approximately 650 billion yen, an increase of 50 billion yen from previous estimates." Currently, electric vehicles are still in a loss-making state at the gross profit level. Under this impact, Honda reduced its electrification transformation investment from 10 trillion yen to 7 trillion yen in May this year. However, Honda still pins its hopes on next-generation products—the all-new pure electric product line "Honda 0 Series" planned for mass production in 2026, expecting next-generation electric vehicles after 2028 to be competitive. "We hope to reduce losses by launching these models," Fujimura said.

Honda's intention to "bet on the future" is obvious. Compared to Toyota's comprehensive layout and Honda's future planning, Nissan's electrification transformation relies more on the "single breakthrough" of pure electric vehicle N7, with an overall slower transformation pace. Currently, Nissan has not disclosed clear electrification sales targets. Although the "Re:Nissan recovery plan" emphasizes electrification, from current performance, it has not yet formed a core product matrix capable of driving overall sales and profit growth, and transformation speed urgently needs acceleration.