Toyota and Honda, Japan’s automotive giants, are bracing for weaker quarterly earnings, dragged down by a double blow: rising import tariffs in the United States and a strengthening yen that’s hurting overseas profits. This comes despite strong demand for hybrid vehicles, particularly in international markets.
Uncertainty is growing around trade relations with the US, where newly imposed 15% tariffs on Japanese car imports, lower than the previous 27.5% due to a recent bilateral agreement, are already impacting prices and testing consumer demand. Investors are closely watching how these top automakers will respond to the added pressure.
According to a forecast by LSEG based on seven analysts, Toyota, the world’s top carmaker by volume, is expected to report a 31% drop in operating profit year over year, down to 902 billion yen (about $6.14 billion). This would mark Toyota’s weakest quarterly performance in over two years. Honda is expected to fare even worse, with a 36% drop in operating profit, falling to 311.7 billion yen. The company has already forecast a 59% plunge in full-year earnings. Adding to the strain is the stronger yen, which cuts into the value of international sales.
Honda is particularly vulnerable due to its heavy reliance on the North American market, which accounted for about 40% of its global sales in the first half of the year. Toyota, meanwhile, saw a 6% increase in global sales, thanks in large part to the popularity of high-margin hybrid models like the Camry and Sienna in the US.
Toyota also posted strong numbers in China, with a 7% year-on-year growth in vehicle sales for the first half of 2025. In contrast, Honda suffered a 5% drop in global sales, hurt by double-digit declines across Asia, Europe, and China.
In May, Honda announced plans to scale back investments in electric vehicles, citing slower-than-expected demand. The company is now shifting its focus toward updated hybrid models and has postponed construction of its Canadian EV production facility for the time being.
Investors now await updates from both automakers on pricing strategies and revisions to full-year forecasts. According to CLSA auto analyst Christopher Richter, Japanese carmakers are already implementing transfer pricing strategies to help mitigate the impact of US tariffs.
