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Despite forecasting increased car sales, Toyota is expecting global profits to continue declining as tariffs and the Middle East conflict take a toll.
Toyota is expecting its continually declining global profits will receive a further AUD $5.8 billion hit due to conflict in the Middle East — despite selling more cars.
While still expected to generate profits of 3.0 trillion yen (AUD$26.2 billion), this marks the third consecutive year of forecast declining profits for what is the world's largest automaker, and Australia’s best selling brand.
Takanori Azuma, the Accounting Group Chief Officer at Toyota Motor Corporation, said conflict in the Middle East was a key contributor to the forecast profit decline.
“Taking into account the Middle East impacts, etc., we are forecasting operating income for the fiscal year ending March 2027 of 3.0 trillion yen (AUD$26.2 billion), representing a year-on-year decrease of 800 billion yen (AUD$7 billion),” Azuma said.
Toyota is expecting that it will be able to offset some financial impacts, but the associated impacts of the Middle East conflict is not one of them.
“In the current fiscal year ending March 2027, we will work to absorb increases in labor cost and other expenses through marketing such as price revisions and the expansion of value chain profits,” Azuma said.
“However, we do not believe we can fully offset [the] negative 670 billion yen (AUD $5.8 billion) Middle East impact.”
“Therefore, we are forecasting operating income [in the 2027 financial year] of 3.0 trillion yen, representing a year-on-year decrease of 766.2 billion yen (AUD $6.7 billion) compared with the previous fiscal year.”
The impact of the Middle East conflict is still less than the 1.4 trillion yen (AUD $12.2 billion) impact from US tariffs in the 2026 financial year, with a similar impact forecast again for the 2027 financial year.
Toyota has topped Australian sales charts for 24 consecutive years and represents almost one-in-four new cars sold – but sales down under are a drop in the ocean for the Japanese marque and did not rate a prominent mention in Toyota's global financial presentations.
Toyota sold 239,863 cars in Australia in 2025 and Lexus (Toyota’s luxury sub-brand) sold 14,562. But these Australian sales represent just 2.4 per cent of the 10.477 million Toyota and Lexus vehicles sold during the 2026 Japanese Financial Year.
Toyota Motor Corporation’s 2026 financial year figures span from 1 April 2025 to 31 March 2026 as it is a Japanese company.
While Australia's financial year is from 1 July to 30 June the following year, Japan and thus Toyota follow a different calendar. In Toyota's home country the financial year is from 1 April to 31 March.
Toyota sold 10.477 million Toyota and Lexus vehicles during the 2026 Japanese financial year. Lexus is Toyota's luxury sub-brand.
Toyota’s Chief Financial Officer Yoichi Miyazaki referenced the need to restructure the iconic Japanese brand as profit forecasts declined for the third consecutive year.
“I am acutely aware that this is our third consecutive year of declining profit forecasts. The key reason for this decline is that, in a rapidly shifting business environment, the scope and manner of our response has been limited to the short term," Miyazaki said.
"We have been slow to sow the seeds for the future and restructure the business from a longer-term perspective."
Toyota's President Kenta Kon also said change was needed at Toyota, highlighting the need to reduce bureaucracy.
“I feel there is still significant room for improvement in our management and administrative operations. Those of us in such positions, by further examining where our abilities truly lie, can move beyond simply “managing” the front lines and instead get directly involved to support operations," Kon said.
"Instead of just 'managing' numbers on paper, we actually need to reduce costs at our worksites. From management work to work that creates value… I feel we need to return to the starting point of Toyota work—the Toyota Production System.”
Toyota’s President also looked back to the era following the global financial crisis, noting this wasn’t the first time during his tenure at Toyota where the company was hit by a global event outside its control.
“Looking back, when Chairman Toyoda became president in 2009, our company had just fallen into the red due to the global financial crisis. We were facing a critical juncture that threatened our very existence. At the time, I was working as one of Mr. Toyoda’s secretaries,” Kon said.
However, Kon’s speech overall focused more on “reform” and “growth” rather than any direct reference to potential cutbacks at Toyota.
“With so many new technologies and players emerging these days, we are in an era without clear-cut answers. That’s precisely why my role is to encourage colleagues to take on challenges without fear of failure” Kon said.
Max is the News Publishing Coordinator for Drive. He enjoys creating engaging digital content, including videos, podcasts, interactive maps, and graphs. Prior to Drive, he studied at Monash University and gained experience working for various publications. He grew up playing Burnout 3: Takedown on the PS2 and was disappointed when real life car races didn’t have the same physics.
