- Toyota says the Iran conflict has triggered a financial hit of around £3bn.
- Raw material costs alone rose by nearly £1.9bn during the year.
- The company expects profits to fall again as supply chain disruption spreads across the auto sector.
Toyota Motor Corporation has warned that the conflict in Iran is driving up costs across its global operations, dealing a financial blow of roughly £3bn to the world’s largest carmaker.
The Japanese automotive giant said rising prices for materials, fuel and logistics, combined with weaker sales in the Middle East, had significantly damaged earnings. The warning is among the clearest signs yet of how the conflict in West Asia is rippling through global manufacturing and trade networks.
Toyota said operating profit for the financial year ending March fell to 3.8 trillion yen (£19.5bn), while it expects profits to decline again in the coming year as the disruption continues.
The company estimated the direct impact linked to the Middle East conflict at around 670bn yen (£3.4bn or $4.3bn), including a 400bn yen (£1.9bn) rise in material costs and another 270bn yen (£1.3bn) from lower sales volumes and operational disruption.
From aluminium to tyres, costs are climbing
The biggest pressure appears to be coming from supply chains.
Asian manufacturers have been hit particularly hard because many rely heavily on imports and shipping routes linked to the Gulf region. The closure of the Strait of Hormuz following the conflict has disrupted cargo flows and pushed up prices for key industrial materials.
Japan’s automotive lobby group has reportedly said around 70 per cent of the country’s aluminium imports come from the Middle East, leaving manufacturers exposed to supply shocks and price spikes.
Toyota also pointed to rising transportation expenses, higher fuel prices and increasing costs for industrial materials used in vehicle production, including paint and tyres.
“We do not believe we can fully offset negative 670bn yen Middle East impact,” Takanori Azuma said, as quoted in a news report.
According to Reuters, Azuma also said the impact of the war was being felt across “fuel costs, transportation expenses, and the cost of paint and other materials used at vehicle assembly plants”.
At the same time, the company is still dealing with the fallout from tariffs introduced under US president Donald Trump, which reportedly cut Toyota’s operating profit by 1.38 trillion yen (£7.1bn) during the last financial year.
Hybrids helping, but not enough
Toyota sold 9.6 million vehicles globally during the year, with hybrid cars making up roughly half of total sales. Global sales rose 2 per cent overall, supported largely by strong demand in North America.
The company expects hybrid sales to cross 5 million units for the first time during the current financial year, as higher fuel prices push more consumers towards fuel-efficient vehicles.
Still, Toyota suggested that stronger hybrid demand alone would not be enough to offset mounting operational costs and slowing conditions in key regions.
Sales in the Middle East reportedly dropped sharply in March after shipments into the region were disrupted by the conflict.
The outlook also marks one of the first major earnings forecasts issued under new chief executive Kenta Kon, who is now tasked with steering the company through a difficult period for the global automotive sector.
Alongside supply chain disruption and higher energy costs, Toyota is also facing increasing pressure from fast-growing Chinese electric vehicle makers and a slower-than-expected global shift towards fully battery-powered cars.
Toyota has largely focused its electrification strategy on hybrid vehicles rather than fully electric models. During the year, it sold around 600,000 battery electric vehicles — more than double the previous year, but still a relatively small share of its overall sales.
Kon reportedly said the company’s approach was not about “stepping on the brakes completely” but about gradually changing structures and cutting waste piece by piece.
