Toyota Sales Plummet for Third Consecutive Month Amid Ongoing Middle East Crisis

Toyota's Global Sales Decline for Third Straight Month Amid Middle East Conflict

Toyota Motor Corp.'s global sales have posted their third consecutive month of year-on-year declines, affected by disruptions stemming from the Middle East conflict. The company's exports to the region plummeted by over 90% in April, a significant blow to its business.

In April, Toyota's global sales, including those of subsidiary Daihatsu Motor Co., decreased by 3.7% from the same period last year to 902,015 units. However, production rose 3.4% to 933,685 units. This disparity highlights the challenges Toyota faces in balancing production with dwindling sales.

The conflict's impact on Toyota's supply chain is a pressing concern. The company has managed to keep factories operating despite disrupted routes through the Strait of Hormuz, but a prolonged squeeze on fuel supplies would test its resilience. This scenario would expose the dependence of global automakers on Gulf-linked supplies for parts, materials, and energy.

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While demand remains strong, with customers waiting months for certain models in major markets, Toyota's sales have also declined compared to last year. This drop can be attributed, in part, to the buying rush ahead of tariffs and the rollout of the new RAV4 sport utility vehicle model. In China, market conditions remain challenging for Japanese carmakers, resulting in a 25% decline in sales.

In comparison, Honda Motor Co. and Nissan Motor Co. also experienced significant declines in April. Honda's global sales fell 7.9% to 265,215 units, while output remained mostly flat globally. Nissan's sales shrunk 7.6% to 208,663 units.

Toyota's exports to the Middle East plummeted 92% year on year to 2,418 vehicles. At its earnings announcement earlier this month, accounting chief Takanori Azuma stated that the manufacturer exports approximately 500,000 to 600,000 vehicles annually to the Middle East, and that it was assuming slightly less than half of that volume would be affected.

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As a result of the conflict, Toyota forecast a surprise drop in profit for the fiscal year through March 2027, bracing for higher raw material costs. The outlook for ¥3 trillion ($18.8 billion) in operating income fell short of analyst estimates, as well as the ¥3.8 trillion posted in the prior 12-month period. Toyota's suppliers had warned of impending shortages due to the Iran conflict, and the company expects a ¥670 billion hit to its bottom line from the regional turmoil.

In response to logistical problems caused by regional tensions, Toyota plans to increase production cuts overseas to around 83,000 units.