Toyota warns Iran war fallout could wipe out $4.3bn despite hybrid boom

Toyota has warned that the fallout from the Iran war could cost the company about $4.3 billion this financial year, making it one of the strongest signs yet of how the Middle East crisis is hurting global businesses.

The world’s biggest automaker said on Friday that rising energy prices, supply chain disruption, and higher operating costs are now outweighing the strong global demand for hybrid vehicles.

Toyota reported that quarterly operating profit fell nearly 50% to 569.4 billion yen ($3.6 billion) in the three months ending March 31. A year earlier, the company posted 1.1 trillion yen.

The company also forecast full-year operating profit of 3 trillion yen, far below the 4.59 trillion yen expected by analysts in an LSEG poll.

Toyota shares dropped around 2.2% after the announcement, reaching their lowest closing level since mid-October.

Hybrid Vehicle Investment Growth Fails to Offset Rising Costs

Toyota said it expects hybrid vehicle sales to exceed 5 million units for the first time this year. Higher fuel prices caused by the Iran conflict are pushing more consumers toward fuel-efficient vehicles.

But the increase in sales is not enough to fully offset rising production and shipping costs. The company said the Middle East crisis alone would create an impact of around 670 billion yen ($4.3 billion) by March 2027.

That figure is larger than estimates announced by many other global companies so far, including airlines and transport firms.

Toyota also revealed that vehicle sales in the Middle East dropped sharply in March after shipments to the region were disrupted.

Global Supply Chain Disruption Hits Automakers

The latest crisis adds more pressure to the global auto industry, which is already dealing with U.S. tariffs and growing competition from Chinese carmakers. Last week, Toyota said tariffs introduced under U.S. President Donald Trump reduced operating profit in the previous financial year by 1.4 trillion yen.

Germany’s Volkswagen also warned this week that tariffs could reduce its annual operating profit by 5 billion euros ($5.9 billion). Industry experts say global carmakers are now facing a difficult mix of higher logistics costs, energy price shocks, and weaker profit margins.

Toyota Stock Faces New Leadership Test

The financial outlook is the first issued under Toyota’s new CEO, Kenta Kon, who took office last month.

He now faces the challenge of steering the company through a period of geopolitical instability, trade pressure, and slowing profit margins.

Toyota’s margins have been falling steadily since reaching 11.9% in fiscal year 2024, even as vehicle sales continue to grow globally.

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