Seven major Toyota group firms to boost local procurement as protectionism rises

2026-08-01

Seven major Toyota group companies are wary of increasingly protectionist policies in the U.S. and Europe. Along with a weaker yen and higher raw material costs, the impact of the Kumamoto earthquake is also difficult to gauge, and the companies signaled at earnings briefings that they are moving quickly to strengthen local procurement and review production systems.

Preparing for policy shifts in the U.S. and Europe

The seven companies announced consolidated results for the April-June 2026 quarter under International Financial Reporting Standards on July 31, with three posting higher net profit and four reporting lower net profit. Seiji Maeda, chief financial officer at Denso, said the company would 'source locally up to the limits of our production capacity' to curb the impact of tariffs in North America, adding that it aims to raise its local procurement ratio there quickly.

Toyota's sales in North America remain firm, but negotiations to review the United States-Mexico-Canada Agreement are also under way. The European Commission has also called for stronger regional production and procurement, and the companies see expanding local sourcing as a source of competitiveness as they adapt to a new normal in supply chains.

Daisuke Kondo, vice president at Aisin, said similar steps will be needed in each region and explained that the company is specifically considering further local production and procurement in the U.S. JTEKT is also working to improve the profitability of its U.S. operations, while CFO Kazuyuki Kamiya said it will 'push ahead steadily with local procurement.' Hideyuki Iwamoto, vice president at Toyota Tsusho, said production is shifting back to the U.S., including for Toyota, while the company's strength lies in its ability to respond to changes in logistics and other areas.

Higher raw material costs and slower China business

Rising raw material prices are also weighing on the companies. Toyota Gosei has seen noticeable price increases in resin-related products linked to naphtha, and CFO Masayoshi Hachisuka said the impact began in the first quarter and will be especially pronounced in the U.S. market from the second quarter onward. Items that can be substituted will be handled by changing suppliers.

Aichi Steel revised its assumed exchange rate for the full year to a weaker yen at 160 yen to the dollar from 155 yen. The company's overseas sales ratio is relatively low, so a weaker yen becomes a drag on earnings through higher procurement costs. Added raw material price pressure, including for steel scrap, means the impact will amount to several billion yen more than initially assumed at the start of the fiscal year, Vice President Motoyuki Nakamura said. The company aims to offset that through efficient production and price revisions.

Business conditions in China are deteriorating. Hiroyuki Suzuki, CFO of Toyoda Gosei, said competition with local Chinese suppliers is intense and that obtaining orders from Toyota is also difficult unless the company can beat the competition. Operating profit from Toyoda Gosei's China business in the April-June quarter fell by half from a year earlier to 2 billion yen, and production volume for its core seat business was also down 20% from the initial assumption. The company cut its full-year outlook, saying the production decline is likely to continue. Aisin's operating profit from its China business also fell by almost half. JTEKT said it plans to continue reviewing its operations, including optimizing its sites.

Responding to the Kumamoto earthquake

The Kumamoto earthquake that struck on the 28th is also a concern. Denso said there is no impact on production at present, but it has about 30 suppliers in Kyushu, with one confirming an impact and 13 still being checked. Maeda said the company would provide full support, including assistance to people and production support.

Meanwhile, Toyota Industries, which was taken private in June, had been considering announcing earnings by July 31, but that has been postponed.

Enjoyed this article? Share it with your network!