Toyota Motor Corp (7203.JP, TM.US) remains the world's top-selling automaker by volume, but its financial performance is under mounting pressure. On August 4, the company issued a statement raising its net profit forecast for the current fiscal year (April 2026 to March 2027). However, even after the upward revision, the projection remains below the previous year's results, marking what is expected to be the third consecutive annual decline in net profit. Toyota now expects net profit for the fiscal year to be 3.25 trillion yen (approximately $1 to 157 yen), down 15.5% year-on-year. Operating profit is forecast at 3.4 trillion yen, a decrease of 9.7%.
Toyota recently released its production and sales figures for the first half of the 2026 fiscal year. The company produced 4.8637 million vehicles globally during the period, a 1.2% decline year-on-year. Total sales reached 5.0089 million vehicles, down 2.9% from the same period last year. This marks the first time in nearly two years that Toyota has experienced a simultaneous decline in both production and sales. In the Chinese market, Toyota sold 694,700 vehicles in the first half, a 17.1% drop year-on-year, representing a loss of 143,000 vehicles compared to the same period last year. Specifically, June sales in China totaled 115,300 units, a 26.9% decline year-on-year, marking the fifth consecutive month of declining sales for Toyota in the region.
Operating profit has declined for five consecutive quarters.
On August 4, Toyota released its financial results for the April-to-June quarter of the 2026 fiscal year. The company reported an operating profit of 1.06 trillion yen, down 8.8% year-on-year, marking the fifth consecutive quarter of decline. According to the financial report, Toyota's "other income" line item surged from 86 billion yen in the same period last year to approximately 900.3 billion yen, an increase of over 810 billion yen, with currency fluctuations being a significant contributing factor. Meanwhile, the company's automotive segment operating profit fell 21.0% year-on-year, with the operating margin declining from 9.5% to 7.9%. Toyota had previously warned that supply chain disruptions caused by the Middle East situation are expected to impact full-year profits by about 670 billion yen, and the company has initiated efforts to establish alternative logistics routes. Yoichi Miyazaki, Toyota's Executive Vice President and CFO, stated that the new fiscal year will mark the company's third consecutive year of profit decline. Against a backdrop of rapidly changing operating conditions, the company has primarily relied on short-term countermeasures, with insufficient progress on medium- to long-term structural business reforms. Some market analysts suggest that the strong growth in Toyota's book profit for the quarter was largely driven by currency factors and contributions from financial services, while the profitability of its core automotive business has not improved in tandem. Declining operating profit, slowing sales growth, pressure in the Chinese market, and geopolitical risks remain tangible challenges for Toyota.
Global H1 sales fell 2.9%.
Currently, Toyota's sales figures are not encouraging. Toyota explained in its announcement that sales in North America and Japan continued to grow, but the decline in the Chinese market offset the gains from these regions, dragging global sales below the same period last year. In the first half of the year, Toyota's sales in China totaled 694,700 vehicles, a 17.1% year-on-year drop, representing a loss of 143,000 units compared to the prior year. In June alone, monthly sales in China were 115,300 units, down 26.9% year-on-year, marking the fifth consecutive month of decline. Looking at key joint ventures, GAC Toyota sold 341,100 vehicles cumulatively in the first half, down 6.3% year-on-year, while FAW Toyota sold 273,700 units, a 27.4% drop. Meanwhile, Toyota's luxury brand Lexus sold approximately 71,900 vehicles in China during the first half, down 16% year-on-year. Although it retains its position as the top-selling imported luxury brand, its sales in China continue to slide. Toyota attributed the decline in the Chinese market to factors such as rising gasoline prices, describing the market environment as persistently severe. In the Middle East, Toyota sold 218,900 vehicles in the first half, a 21.6% year-on-year decrease. Regarding electrified vehicles, Toyota sold 2.7073 million units globally in the first half, up 6.8% year-on-year. Within this, pure electric vehicle sales reached 193,200 units, a significant 135.3% year-on-year increase, but they still account for less than 4% of total global sales. Hybrid electric vehicles remain the absolute主力, with 2.3309 million units sold in the first half, representing 86% of total electrified vehicle sales. Despite these challenges, Toyota's global sales of over 5 million vehicles in the first half still firmly place it at the top of the global automaker sales rankings. Alongside Toyota, other Japanese automakers are also struggling in China. Honda sold only 205,800 vehicles in the first half, a 34.7% year-on-year decline, while Nissan sold 237,000 units, down 15.0%. It is evident that Japanese brands are facing a broad-based challenge in the Chinese market.
Recently, reports indicated that due to the impact of the Middle East situation, Toyota will cut overseas production by approximately 100,000 vehicles by February 2027, a further expansion of previously planned reductions. Toyota stated that the cuts, driven by logistics disruptions in the Middle East and rising fuel prices suppressing consumer demand, will primarily target gasoline-powered models destined for the Middle East and Asian markets. Earlier, Toyota had planned to cut overseas production by about 38,000 vehicles between May and November, later expanding the reduction to approximately 83,000 vehicles for the period from June to November. The reports note that high energy prices have begun to impact car consumption, with some consumers delaying vehicle purchases as market demand weakens. Looking ahead, Toyota has announced plans to begin production of next-generation hybrid batteries starting in 2027. The company will adjust some of its domestic production capacity to supply new battery cells for 600,000 vehicles, stating that the new batteries will offer "higher performance and greater cost competitiveness."
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