Middle East unrest and sluggish sales in China cause Toyota Motor (TM.US) sales to decline for the fifth consecutive month

According to Golden Ten Data, due to the dual impact of turmoil in the Middle East and sluggish sales in China, Toyota Motor (TM.US) has seen its sales decline for the fifth consecutive month. The world’s largest car manufacturer stated in a press release on Thursday that, including its subsidiary Daihatsu, global car sales in June declined by 1.1% year-on-year to 926,688 units; global car production in June increased by 2.2% year-on-year to 984,408 units.

Toyota and Lexus brands posted a year-on-year sales decrease in June, with the Middle East dropping by 24% and the Chinese market by 27%. When releasing its May earnings report, the automaker stated that it exports about 500,000 to 600,000 cars to the Middle East annually and expected that just under half of these sales would be affected.

As tensions between the US and Iran have escalated over several months, soaring oil prices, increased raw material costs, and blocked supply routes have put growing pressure on global manufacturers. Japanese automakers have been particularly affected due to their heavy reliance on the Middle Eastern market. Meanwhile, fierce competition from electric vehicle manufacturers like BYD has further exacerbated Toyota’s sales volatility in China.

However, in the statement, Toyota said: “Strong demand in North American and Japanese markets has been offset by declining sales in China. In the North American market, demand for hybrid and other models remains robust.”

Supply disruptions combined with fierce competition in the Chinese market have started to erode the record profits Toyota achieved in the previous fiscal year. Financial statements show that revenue for the fourth quarter ending March reached 12.6 trillion yen, up 1.9% year-on-year and in line with market expectations; however, operating profit plunged 49% to 569.4 billion yen, well below the market’s expectation of 813.28 billion yen. Toyota’s operating profit has seen year-on-year declines for four consecutive quarters, reflecting slower sales in China, intensified market competition, and persistent pressures from US tariffs.

Toyota expects that profit for the fiscal year ending March 2027 will decline, as the company prepares for rising raw material costs resulting from supply disruptions. Toyota forecasts operating profit will reach 3 trillion yen (approximately $18.4 billion), which is lower than analysts’ expectations and also below the 3.8 trillion yen operating profit achieved in the previous 12-month period.