Iran conflict disrupts supply chain, Toyota Motor Corp. Sponsored ADR (TM.US) March sales dropped by 5.8%, while production increased against the trend by 3.9%.

Due to a decrease in demand for the core best-selling model RAV4 before the facelift, Toyota Motor Corp. Sponsored ADR (TM.US) saw a decline in sales in March; meanwhile, disruptions caused by the Iran conflict have affected the global supply chain, forcing the Japanese automotive industry to issue production reduction warnings. Toyota Motor Corp. Sponsored ADR announced on Monday that global sales in March (including subsidiaries Daihatsu and Hino) decreased by 5.8% year-on-year, to 983,126 units; however, global production increased by 3.9%, reaching 1.02 million units. These data indicate that despite the unrest in the Middle East causing an increase in aluminum and other raw material prices, leading to higher costs for automotive parts, the world's largest automaker is still able to maintain stable production. As about 70% of Japan's automotive industry's aluminum supply depends on the Middle East, its production may further decline. Despite an increase in production data last month, Toyota and Nissan have issued production reduction warnings. In March, the production of Toyota brand cars in Japan decreased by 3.3%. Suppliers have been preparing for long-term shortages, and even if the Strait of Hormuz is reopened and shipping returns to normal, this shortage situation may persist for several months. Refineries need time to resume production, and shipping companies also need to alleviate transport bottlenecks caused by hundreds of ships stranded in the Persian Gulf. Major Japanese automotive supplier, Denso Corporation, stated in March that the ongoing conflict had reduced Japan's monthly car production by about 20,000 units. Data also shows that Toyota has made progress in increasing sales of pure electric vehicles, with sales in March more than doubling to 35,524 units. Hybrid electric vehicles also continue to show good momentum, with sales increasing by 3.7% in March to 442,544 units. The automotive industry is facing multiple challenges including tariffs, increasing market competition, and uncertainties in global electrification transition. In this context, the resilience of Toyota Motor Corp. Sponsored ADR is remarkable. While competitors warn of cost increases in the billions and attempt to raise prices or shift production, Toyota, with its target of 11.3 million units by 2025, continues to maintain its position as the world's largest automaker and further expands its leading advantage over the Volkswagen Group.