Toyota suppliers feeling profit pressure from Iran war

FILE - A Toyota logo is seen at a dealership in El Monte, Calif., Thursday, March 27, 2025.

NAGOYA, Japan -- Japanese parts suppliers to automakers including Toyota face mounting cost and supply uncertainties due to the Iran war, warning that oil-related product price rises could dent profits.

Shortages of hard-to-substitute materials such as naphtha-derived products and aluminum could have an outsized impact on production, suppliers said, potentially rippling through manufacturing far beyond their cost base.

While vehicle output has so far been maintained, executives at Toyota Group suppliers said it was hard to fully grasp the impact of potential supply disruptions that could force them to absorb costs before passing them on to carmakers.

“At this point we are keeping operations running so our customers are not affected,” Aisin CEO Moritaka Yoshida told reporters at the Nagoya Stock Exchange, adding: “But how long we can sustain that is uncertain.”

Asia is the most vulnerable region to supply disruption, relying more heavily than others on crude, gas, fuel and other imports from the Gulf. Without these, some businesses are finding it increasingly difficult to operate.

Aisin said higher prices for aluminum, which it uses in die-cast components including transmission cases, were already weighing on its operating profit outlook. It estimated an impact of around 15 billion yen (US$94 million) in the financial year ending March 2027.

Denso, Toyota’s biggest parts supplier, cut its operating profit outlook for this financial year as it forecast a potential 45 billion yen hit under “uncertainty risks.”

CFO Yasushi Matsui cited possible cost inflation and the impact of supply disruptions of plastics, solvents such as thinners, and other materials linked to the Gulf situation.

Other suppliers warned the conflict, which began on February 28, could disrupt material supplies and manufacturing processes even if vehicle assembly itself remains intact for now.

Toyota Industries President Koichi Ito said some of its suppliers were asking for higher prices simply to secure materials, or shortening the period for which price levels could be guaranteed from months to weeks.

Price rises of naphtha-derived parts and others dependent on oil were spreading across a wider-than-expected range of products, he added, making it hard to pass costs on quickly as it was unclear how long the disruption might last.

One of the biggest risks for car and parts manufacturers is the supply of thinner used in painting, executives said.

“If automakers can’t paint, then naturally they can’t build cars, so the impact would be felt across the board,” Toyoda Gosei CEO Katsumi Saito said.

(Reporting by Daniel Leussink; Editing by Alexander Smith)