Japan’s two biggest automakers – Toyota and Honda – are expected to report significantly weaker Q1 earnings this week, hit by:
- Steeper U.S. import tariffs (rising to 15% from 2.5%)
- A strengthening yen hurting overseas profits
- Sluggish global EV demand
- And for Honda – a major slump in key markets like China, Asia, and Europe
Forecasts:
- Toyota: Q1 operating profit expected to fall 31% YoY to ¥902B (~$6.14B) – its weakest quarter in over 2 years
- Honda: Q1 operating profit expected to drop 36% to ¥311.7B – its second straight quarterly decline
- Already guiding for a 59% full-year profit drop
- Already guiding for a 59% full-year profit drop
Key Pressures:
- Tariffs: Japanese auto imports to the U.S. now face 27.5% total levies
- Currency: A stronger yen erodes overseas earnings
- Sales mix: Honda is more exposed to the U.S. market, which makes up ~40% of its sales
- Global sales:
- Toyota up 6% globally, buoyed by strong hybrid sales (Camry, Sienna)
- Honda down 5% globally, with sharp declines in China, Asia & Europe
- Toyota up 6% globally, buoyed by strong hybrid sales (Camry, Sienna)
Strategic Shifts:
- Honda is scaling back EV investments, doubling down on hybrids
- Toyota continues to leverage its hybrid strength while managing costs with transfer pricing to mitigate tariff impact
- Both are using Canada and Mexico to produce U.S.-bound vehicles and offset direct import costs
Market Reaction:
- Toyota shares: Down 16% YTD
Honda shares: Flat