Key facts
- Toyota Motor may compensate suppliers for losses due to a canceled flagship EV development plan.
- The automaker has postponed the launch of its first U.S.-built electric SUV to early 2026.
- Plans to produce new Lexus electric SUVs in North America have been abandoned in favor of imports from Japan.
- Toyota's Q2 2025 operating profit dropped 20% year-over-year.
- U.S. tariffs are expected to cost Toyota $9.5 billion in 2025.
- A planned EV battery factory in Fukuoka, Japan, has been delayed for a second time.
- Toyota reduced its global EV sales forecast by 10% for the fiscal year ending March 2026.
Toyota Motor is reportedly preparing to cover a portion of the losses incurred by its suppliers due to the cancellation of a flagship electric vehicle development plan. This decision reflects a broader strategic reassessment by the automaker amid slowing global demand for EVs and a shift in priorities towards profitability under its new president.
Previously, Toyota had postponed the launch of its first U.S.-built electric three-row SUV from late 2025 to early 2026, citing decreased U.S. EV demand and increased popularity of hybrid vehicles. The company has also abandoned plans to produce new Lexus-branded electric SUVs in North America, opting instead to import these models from Japan, a move complicated by a 15% tariff on Japanese imports.
Despite these setbacks, Toyota is continuing to invest in its electrification strategy. Its $14 billion battery plant in North Carolina, operational since April 2025, is designed to produce 30 gigawatt-hours of battery capacity annually. Additionally, the company is upgrading its Indiana plant to produce a second all-electric SUV by late 2026. Toyota also plans to open a new factory in Shanghai, China, around 2027 to produce EVs for Lexus.
These strategic adjustments come as Toyota faces financial headwinds. The company reported a 20% year-over-year drop in operating profit for its second quarter of 2025, attributed to weaker sales and production issues. U.S. tariffs are projected to cost the company $9.5 billion in 2025, leading to a 1% reduction in annual production targets. Furthermore, Toyota has delayed its plan to build a new factory dedicated to EV batteries in Japan's Fukuoka Prefecture for the second time and has cut its global EV sales outlook by 10% for the fiscal year ending March 2026.
Toyota paid approximately 6 billion yen ($39 million) for the Fukuoka site, with an agreement to begin construction within three years. The automaker has stated that the plant will still proceed in due course, though an updated timeline has not been provided. The company maintains its long-term target of 1.5 million global EV sales in 2026, though this figure may evolve.