Japan's Automakers Post Strong Results on Record Yen Weakness... but Sales Slip

Japan's major automakers posted strong results for the April-September period this year, with net profits rising or turning positive. However, most saw their global vehicle sales decline, despite benefiting from the record weakness of the yen.

According to the Nihon Keizai Shimbun (Nikkei) and other sources on November 12, an analysis of the consolidated results for the first half of fiscal 2026 (April-September) at seven major Japanese automakers found that Nissan Motor and Mitsubishi Motors narrowed their losses. The other five companies also increased their net profits or returned to profitability.

A sign at a Toyota dealership in Chicago, Illinois, on the 10th (local time). Chicago, U.S. = AFP-Yonhap News.

Nissan recorded a net loss of 533.1 billion yen, equivalent to about 5 trillion won, in fiscal 2025 (April 2025-March 2026). It is now forecast to post an annual net profit of 20 billion yen (167.3 billion won) in fiscal 2026 (April 2026-March 2027). The company did not turn a profit in its interim results, as rising interest rates increased its interest expenses. However, it expects to return to profitability through the impact of new model launches and efforts to improve earnings by streamlining its operations.

Honda also recorded a first-half increase in net profit for the first time in three years. Despite recognizing a loss of 435.1 billion yen (3.6409 trillion won) from the cancellation of its electric vehicle (EV) development plans, Honda's net profit rose 65.7% from the same period a year earlier, thanks to strong hybrid vehicle sales in the U.S. market.

The weak yen played a major role in the improved results. The average yen-dollar exchange rate from April to September this year was 159 yen per dollar (1,330 won), up 13 yen (109 won) from the same period last year. This generated foreign exchange gains for Japanese automakers when they converted their overseas dollar earnings into yen.

Toyota Motor's operating profit for the first half rose 9.2% from the same period a year earlier to 2.1911 trillion yen (18.3351 trillion won). The Nikkei reported that the improvement attributable to exchange rate fluctuations alone amounted to 785 billion yen (5.732 trillion won).

By contrast, actual vehicle sales were weak. Global sales fell from a year earlier at five of the seven companies, with Suzuki and Mazda the only exceptions.

The decline in Japanese brands' sales was particularly pronounced in China, where demand weakened amid an economic slowdown and local EV makers expanded their market share. Nissan sought to make inroads into the market by launching the N7 EV, co-developed with its Chinese joint venture, but its sales in China in the first half plunged 45.5% from a year earlier to 182,854 vehicles. Honda, whose sales in China halved over the same period, said at a press conference on its results that "conditions in the gasoline-powered vehicle market, our core market, are extremely difficult."

Uncertainty over future profitability is also growing. A prolonged period of instability in the Middle East could drive up prices for raw materials such as plastics and paint. The Nikkei also warned that high oil prices could spur demand for EVs, further weakening the competitiveness of Japanese automakers as they lose ground to Chinese companies.

The Nikkei analyzed that the outlook for Japan's auto industry is clouded by the possibility that a prolonged period of instability in the Middle East could trigger a sharp rise in the prices of automotive materials such as plastics and paint, as well as by the prospect that high oil prices could accelerate the shift to EVs, a market where Chinese cars are strong.

This content was produced with the assistance of AI translation services.