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TOKYO: Toyota Motor and Honda Motor are expected to report weaker first-quarter earnings this week, as United States import tariffs and a stronger yen weigh on profits despite solid demand for hybrids in their biggest overseas markets.
Japanese automakers face growing uncertainty in the US, where tariffs on imports are pushing up vehicle prices and testing the resilience of consumer demand. Investors will be watching for clues on how Japan’s two largest automakers are offsetting such burdens.
Toyota, the world’s top-selling automaker, is forecast to post a 31 per cent year-on-year drop in operating profit to 902 billion yen tomorrow, according to the average estimate of seven analysts polled by LSEG.
That would mark its weakest quarterly result in more than two years.
Honda is expected to report a 36 per cent decline in operating profit to 311.7 billion yen today, its second straight quarterly drop.
The automaker has forecast a 59 per cent fall in full-year profit.
Both companies face the prospect of 15 per cent tariffs on Japanese auto imports into the US from levies totalling 27.5 per cent previously, following a bilateral trade deal last month.
Other Japanese automakers and suppliers have also flagged weaker earnings, citing the same pressures from tariffs and the stronger currency compared with the same period a year ago.
Honda’s reliance on the US has deepened in recent years as sales in other regions falter. Outside of the US, both companies produce key models for the US market in Canada and Mexico.
For Honda, the US accounted for around two-fifths of total sales in the first half of the year. Its global sales fell five per cent over the period, dragged down by double-digit declines in China, Asia and Europe.
Toyota’s global sales rose six per cent over the period, supported by strong demand for petrol-electric hybrids which typically carry higher margins than conventional petrol cars. Its Camry and Sienna hybrids remain strong sellers in the US.
The company has also performed better in China in recent months, posting a seven per cent increase in vehicle sales over the first half of the year.
Honda said in May that it was scaling back its investment in electric vehicles given slowing demand, and would be focusing on hybrids with various revamped models.
It had earlier delayed plans to build an EV production base in Canada due to slowing demand for electric cars. Reuters
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