Toyota And Honda See Sharp Declines In Profit Amidst Iran War Pressures, Spiking EV Costs

Toyota expects a sharp decline in profit as rising material and shipping costs tied to the Iran conflict pressure its business, according to Bloomberg. 

The automaker projected operating income of ¥3 trillion for the fiscal year ending March 2027, well below both analyst expectations of ¥4.6 trillion and last year’s ¥3.8 trillion.

The company said supply chain disruptions are driving up costs for aluminum, resins, and other materials, while logistics issues remain unpredictable. Toyota estimates the regional conflict could reduce earnings by about ¥670 billion.

After the forecast was released, shares dropped as much as 3.5%. Analysts noted Toyota may be giving conservative guidance, but future performance will depend heavily on how long the conflict continues.

Julie Boote, an analyst at London-based research firm Pelham Smithers Associates Ltd told Bloomberg: “Toyota did not only miss consensus estimates, but also its own forecast, as auto unit sales came in much weaker than predicted by the automaker. It is still likely that Toyota is once again lowballing its guidance, with earnings upgrades possible during the fiscal year; much depends also on the development of the Iran war.”

Toyota expects vehicle sales to dip slightly this year, though hybrid sales are projected to surpass 5 million units for the first time. The company is also focusing more on after-sales services, which it sees as a major future profit driver.

Despite record annual revenue of ¥50.7 trillion, quarterly operating profit fell 49% due to tariffs and higher shipping expenses.

Meanwhile, Honda just posted an operating loss of 400 billion yen — its first in the company’s history, according to Nikkei. The loss was primarily driven by problems tied to its electric vehicle business and marks the company’s first operating loss since going public in 1957.

This is a major decline from the 1.2 trillion yen operating profit it reported the previous fiscal year. It would also be the second-largest operating loss ever reported by a Japanese automaker, behind Toyota Motor Corporation’s 461 billion yen loss during the 2009 global financial crisis, although accounting differences make direct comparisons imperfect, Nikkei writes.

In March, Honda said it expected an operating loss between 270 billion and 570 billion yen and announced it was canceling three planned EV launches in North America.

The company also projected up to 2.5 trillion yen in EV-related costs over fiscal years 2025–2027, including asset impairment charges and supplier compensation.

Despite these losses, Honda plans to return to operating profitability in the current fiscal year, supported by strong motorcycle sales in Asia, a weaker yen, and a broader turnaround strategy for its North American and Chinese businesses.

Nissan had also trimmed production due to the Iran war earlier in the year.