Toyota, the world's largest carmaker, has reported a £3bn hit from the ongoing war in Iran, proving that even the mightiest of automotive empires can be brought to their knees by geopolitics and a spike in the cost of paint.
The Japanese manufacturer said profits for its financial year ending March took a beating as it was "likely unable to absorb newly added impact from the Middle East" - a polite way of saying "we can't just magic away a war." The biggest chunk of the damage was a 400bn yen (£1.9bn) increase in materials costs linked to the conflict, while lower sales cost another 270bn yen.
Toyota's operating profits dropped to 3.8tn yen for the year, with Donald Trump's tariffs adding a further 1.38tn yen to the pain. The US-Israeli attacks on Iran and the subsequent closure of the Strait of Hormuz have roiled global industry, leaving Asian manufacturers particularly exposed due to their heavy reliance on Gulf exports. Japan's automotive industry lobby group noted that 70% of the country's aluminium imports come from the Middle East, and oil prices have also driven up tyre costs.
Looking ahead, Toyota expects operating income for the coming year to be 3tn yen (£14bn), a drop of more than a quarter, marking the third consecutive year of profit decline. Takanori Azuma, Toyota's chief accounting officer, offered a bleak assessment: "We do not believe we can fully offset negative 670bn yen Middle East impact." The war's effects are being felt across the board, from "fuel costs, transportation expenses, and the cost of paint and other materials used at vehicle assembly plants," Azuma said.
Despite the turmoil, Toyota sold 9.6m cars during the year, half of them hybrids that combine a petrol engine with a small battery. Global sales rose 2%, buoyed by 9% growth in North America. Meanwhile, the company's bet on hybrids over fully electric vehicles - a strategy that's working well for now, even if it's not great for the planet - saw it sell only 600,000 battery cars during the year, though that was more than double the previous year.