Toyota Motor reported a 21.5% decline in operating income for FY26 as US tariffs, higher costs and foreign exchange headwinds pressured profitability despite resilient vehicle sales and pricing.

The Japanese automaker posted operating income of Y3.76tn ($39.81bn) for the fiscal year ended March 2026, with a Y1.38tn tariff impact outweighing benefits from higher vehicle sales volumes, pricing revisions and growth in value chain revenues.

Full-year sales revenues increased 5.5% year-on-year to Y50.68tn, while net income attributable to Toyota fell 19.2% to Y3.84tn.

Total consolidated vehicle sales rose 2.5% to 9.595 million units during the year. Toyota and Lexus vehicle sales reached 10.477 million units, while total retail vehicle sales increased to 11.283 million units.

Electrified vehicle sales exceeded five million units for the first time.

Hybrid electric vehicle sales increased 4.4% to 4.62 million units, while plug-in hybrid sales rose 8.6% to 175,000 units and battery electric vehicle sales jumped 68.4% to 243,000 units.

Regionally, Japan remained Toyota’s largest profit contributor, although earnings were affected by currency movements and higher operating expenses.

North America recorded a sharp decline in profit due to tariff costs, while Europe and Asia remained profitable. Other markets recorded earnings growth supported by pricing revisions.

In China, operating income from consolidated subsidiaries rose to Y197.5bn, while equity-method profit from associates and joint ventures totalled Y108.2bn.

For FY2027, Toyota forecast operating income of Y3tn, representing a further decline of Y766.2bn from FY26 levels.

The company said it was unlikely to fully absorb newly added impacts, including Middle East-related factors, and identified a Y400bn Middle East impact within supplier support and material price pressures.

It also flagged a Y270bn Middle East impact within marketing and related activities.

Toyota projected sales revenues of Y51.0tn and net income of Y3tn for the year ahead.

Consolidated vehicle sales are expected to remain broadly unchanged at 9.60 million units. Toyota and Lexus vehicle sales are forecast at 10.5 million units, while total retail vehicle sales are projected at 11.18 million units.

Toyota expects total electrified vehicle sales to reach about six million units in FY2027.

On strategy, the company said it would focus on business structure reform through strengthening earning power in its core automotive operations and accelerating its transition into a mobility company.

Toyota also said it plans to maximise existing manufacturing capacity through its AREA35 initiative, expand hybrid production capacity, reorganise production models and increase procurement localisation.