Toyota Motor Corp (TM.US) has reported a fifth consecutive month of declining sales, impacted by geopolitical instability in the Middle East and sluggish performance in the Chinese market. The world's largest automaker stated in a Thursday announcement that global sales in June, including those of subsidiary Daihatsu Motor, fell 1.1% year-over-year to 926,688 units. Global production, however, rose 2.2% year-over-year to 984,408 units.

Sales of Toyota and Lexus brands declined year-over-year in June, with a 24% drop in the Middle East and a 27% decline in China. In its May earnings report, Toyota noted that it exports approximately 500,000 to 600,000 vehicles annually to the Middle East, and it expected that slightly less than half of those sales would be affected. As tensions between the U.S. and Iran escalate, global manufacturers face mounting pressure from soaring oil and raw material costs, combined with disrupted supply routes. Japanese automakers are particularly vulnerable due to their heavy reliance on the Middle Eastern market.

Meanwhile, intense competition from electric vehicle makers like BYD has further exacerbated Toyota's sales volatility in China. However, Toyota stated in its announcement that "robust demand in North America and Japan was offset by declining sales in China. In the North American market, demand for hybrid and other models remains strong."

Supply disruptions, coupled with fierce competition in China, are beginning to erode the record profits Toyota achieved in the previous fiscal year. Its earnings report showed that revenue for the fourth fiscal quarter ending March 31 was 12.60 trillion yen, a 1.9% increase year-over-year, meeting market expectations. However, operating profit plummeted 49% to 569.4 billion yen, falling far short of the market's expected 813.28 billion yen. Toyota has now posted a fourth consecutive quarter of year-over-year operating profit declines, reflecting slowing sales in China, heightened market competition, and persistent pressure from U.S. tariffs.

Toyota forecasts that its profit for the fiscal year ending March 2027 will decline, as it prepares for rising raw material costs driven by supply disruptions. The company expects operating profit to reach 3 trillion yen (approximately $18.4 billion), below analyst estimates and lower than the 3.8 trillion yen operating profit achieved in the previous 12-month period.