Shares of Toyota Motor (7203.T) slid 3.8% over the past week to ¥2,928, their weakest stretch in months, after the world's largest automaker scrapped its most important next-generation electric vehicle and slashed its profit outlook — raising hard questions about whether management can execute on electrification while juggling tariffs, recalls, and softening demand.
A Marquee EV Gets Shelved, and With It a Technology Timeline. Toyota halted development of a next-generation electric vehicle for its Lexus brand, citing weak demand and the elimination of U.S. subsidies.
The scrapped sedan had been the centerpiece of Toyota's next-gen EV strategy and had already slipped once — from a planned 2026 start to mid-2027 production. The vehicle was supposed to debut Toyota's advanced large-part casting manufacturing and longer-range batteries. Instead, the company will redirect resources toward SUVs, which are in stronger demand. For shareholders, this kills the clearest near-term proof point that Toyota could compete on EV technology with BYD and Tesla.
Profits Are Already Falling, and Tariffs Make It Worse. Full-year revenue rose 5.5% to ¥50.7 trillion, but operating income dropped to ¥3.77 trillion from ¥4.80 trillion and net income fell to ¥3.85 trillion from ¥4.77 trillion.
Toyota then lowered its operating income forecast by over 20% to ¥3 trillion for fiscal 2027 , citing rising costs and U.S. tariffs. U.S. March sales fell 8.5% year-over-year , with Lexus down 17% — the very brand the canceled EV was designed to revive.
A Wave of Recalls Chips Away at the Reliability Brand. So far in 2026, Toyota has issued nine U.S. recalls affecting over 1 million vehicles, the largest covering 550,000 Highlander SUVs.
Just days ago, another 82,000 vehicles were recalled for digital displays going blank — a recurring software flaw. At a 9.9x P/E, the stock looks cheap, but persistent quality issues erode the premium brand image that supports pricing power.
The Texas Gamble: Spending Big While Retrenching on EVs. Toyota filed plans for a $2 billion expansion of its San Antonio truck plant, expected to create 2,000 jobs , part of a broader $10 billion U.S. investment push. With 25% tariffs on Mexican-built vehicles, moving Tacoma production back to Texas makes strategic sense. But investors now face a company pouring billions into combustion-era truck capacity while retreating from the EV sedan that was supposed to showcase its technological future. The contradiction is the core of Toyota's credibility problem.