Tokyo. Toyota Motor and Honda Motor are set to report a sharp drop in first-quarter operating profit this week, hit by tighter tariffs on U.S. imports and a stronger yen, despite strong demand for hybrid vehicles.
According to analyst estimates, Toyota would report a 31% year-on-year decline, with profits of 902 billion yen ($6.14 billion), marking its weakest quarterly result in more than two years. Honda, for its part, would announce a 36% drop, to 311,700 million yen, chaining its second quarter down.
The pressure is mainly coming from the US, where new trade policies raised tariffs on Japanese vehicles to 15%, following a bilateral agreement that eliminated the previous total of 27.5%. Although it represents a reduction, the uncertainty generated is affecting market confidence and the final prices of vehicles.
Dependence on the US market
Honda's exposure to the U.S. market has grown significantly, accounting for nearly 40 percent of its sales in the first half of the year. Double-digit declines in markets such as China, Asia and Europe contributed to a 5% global drop in sales.
Toyota, in contrast, achieved overall growth of 6%, thanks to strong demand for its hybrid models such as Camry and Sienna, which offer better margins than traditional combustion models. It also showed an uptick in China, with a 7% year-on-year increase in sales.
Strategy Review and Hybrid Approach
Honda has already signaled a strategic shift: it announced in May a reduction in its investment in electric vehicles due to slowing global demand, and will redirect resources towards strengthening its hybrid portfolio.
Analysts and investors will closely follow the strategies of both companies in terms of prices, production and forecasts for the rest of the year, amid a global industry marked by regulatory changes and currency fluctuations.
Toyota shares have fallen 16% so far in 2025, while Honda's are unchanged.
