Auto Sector Investment Strategy (June 2026): Comparing Toyota, Honda, SUBARU, and Nissan Through Tariffs and EV Losses

Scheduled publication date: 2026-06-11

#AutoStocks #Toyota #Honda #SUBARU #NissanMotor #Tariffs #HEV #EV #ROIC #JapaneseStocks #InvestmentStrategy

[Summary]

In 2026, auto stock selection has shifted away from choosing companies based on "EV growth expectations" and toward choosing companies with an earnings structure capable of absorbing tariff pressure.

From that perspective, the current priority order is as follows.

Toyota > Honda ~= SUBARU > Nissan

The key point is not sales volume alone. Investors need to ask whether a company can maintain its operating margin after tariff impact, continue generating operating cash flow, and keep ROIC above its cost of capital.

From 2026 to 2027, the auto sector has become harder to read through simple labels such as "EV winners," "yen depreciation beneficiaries," or "low-PBR value stocks." The factors now driving the sector are U.S. tariffs, EV-related losses, North American profitability, competition in China and Asia, sales finance, and a practical return to HEVs.

This article looks at Toyota Motor (7203), Honda Motor (7267), SUBARU (7270), and Nissan Motor (7201) in the following order.

1. Operating profit and operating margin
2. Impact of tariffs, EV losses, and restructuring costs
3. Cash generation capacity and credibility of next-year recovery plans

This is not a recommendation to buy or sell individual stocks. Auto stocks can move significantly due to foreign exchange, interest rates, tariffs, sales volume, inventory, sales incentives, raw material prices, EV/HEV investment, and geopolitical risk.

Conclusion and Comparison Table

For investment judgment, the first step should not be asking "which stock should I buy?" but organizing "what would need to be confirmed before raising the assessment?"

This table is not a buy/sell recommendation. Rather, it is a table for organizing what should be verified before adding these stocks to a portfolio.

First, Separate Facts From Estimates

The pasted memo included ROIC, WACC, three-year EPS CAGR, forecast PER, and other items in the investment matrix. The direction is interesting, but if unverified figures are placed at the center of the article, the numbers can look more precise than they really are.

This article first uses figures that can be checked in official earnings materials as the main axis.

The important point is that Toyota is clearly ahead if judged only by operating margin, while SUBARU and Nissan are very thin. Honda is loss-making on a headline basis, but the company says adjusted operating profit excluding EV-related losses exceeded JPY 1tn, so judging it only by the loss itself would be misleading.

Four Issues to Watch in the Current Auto Sector

1. U.S. Tariffs Directly Cut Margins

Toyota disclosed that U.S. tariff policy pushed down FY2026/3 operating profit by JPY 1.380tn. This is not temporary noise. For Japanese automakers that earn money in North America, it is a variable that changes how investors should read margins.

SUBARU also has a high exposure to the U.S. market. Its China risk is smaller, but it is heavily affected by changes in U.S. tariffs, North American inventory, and sales incentives. In other words, the type of geopolitical risk is different.

2. EVs Have Become an Earnings Management Issue, Not Just a Growth Theme

Honda booked large EV-related losses in FY2026/3 and fell into an operating loss. At the same time, company materials indicate that adjusted operating profit excluding EV-related losses exceeded JPY 1tn.

This point can be read in two ways.

• A bullish reading is that a significant portion of the bad news was recognized upfront through loss booking.
• A cautious reading is that the decline in four-wheel competitiveness and the cost of shifting the EV strategy are not fully over yet.

EVs are no longer only a "dream growth theme." The sector has entered a phase where investors need to see who can process losses quickly and reallocate capital toward HEVs, ICE, and SDV investment.

3. HEV Reversion Is Positive, but It Does Not Rescue Every Company

Strong HEV demand is a clear tailwind for Toyota. Honda also has room to improve e:HEV.

However, it is risky to raise the entire company assessment based only on HEV reversion. North American tariffs, sales incentives, competition in China and Asia, R&D, EV losses, and the interest-rate environment for sales finance are all moving at the same time. The market is not only looking at whether HEVs are strong. It is looking at how much HEV profit can absorb tariffs and restructuring costs.

4. Watch Sales Finance: Automakers' Profit Is Not Determined Only by Vehicles

When looking at auto stocks, investors should check not only operating profit from the vehicle business, but also sales finance.

Toyota and Honda supplement vehicle sales with profit from financial services. Interest income, residual-value settings, leases, and credit costs in sales finance change how consolidated earnings look when margins in the completed-vehicle business fluctuate.

That said, sales finance is not always positive. If interest rates, delinquency rates, residual-value risk, or funding costs deteriorate, financial services profit can also come under pressure. Therefore, when comparing automakers, the following sequence is closer to economic reality.

Operating profit from the vehicle business
  ->
Financial services profit
  ->
Credit costs and residual-value risk
  ->
Consolidated operating CF

Stock-by-Stock Notes

1. Toyota Motor (7203)

Facts

For FY2026/3, Toyota reported operating revenue of JPY 50.685tn and operating profit of JPY 3.766tn. Operating profit declined by roughly 20% year on year, but the scale is still in a different league from peers. Operating CF was also in the JPY 5tn range, giving the company substantial financial capacity.

On the other hand, the impact of U.S. tariffs was JPY 1.380tn. North America posted an operating loss, and even though sales volume increased, Toyota could not fully protect margins.

Points for Investment Judgment

Toyota is resilient under tariff pressure. However, it is not a company that can fully offset tariffs. That distinction matters.

The next points to watch are whether North American profitability returns from the red, how much cost increases can be restrained, and whether profit from financial services can be viewed as non-temporary.

Provisional Assessment

A (promising candidate)

Toyota is a core candidate within the sector. However, the basis for a bullish assessment should not be "because PER is low." It should be the depth of sales scale, operating CF, HEV supply network, and financial resilience.

2. Honda Motor (7267)

Facts

For FY2026/3, Honda reported an operating loss of JPY 414.3bn and a loss attributable to owners of parent of JPY 423.9bn. The main factor was EV-related losses. Company materials show FY2026/3 EV-related losses of JPY 1.4536tn and adjusted operating profit of JPY 1.0393tn.

For FY2027/3, Honda expects operating profit of JPY 500.0bn. However, this plan also incorporates JPY 500.0bn of EV-related losses.

Points for Investment Judgment

It is too rough to dismiss Honda simply by saying it is weak because it is loss-making. The motorcycle business is strong, and the company expects FY2027/3 motorcycle sales of 22.80 million units. A cash-generating pillar remains.

The issue is the four-wheel business. Investors need to ask how much motorcycle earnings power will be consumed by competitiveness in China and Asia, North American tariffs, and additional costs from the EV strategy shift. It is also risky to say "motorcycles make it fine" without checking this.

Provisional Assessment

B (conditional)

The motorcycle business and adjusted profit are positives. However, investment judgment depends on confirmation of four-wheel recovery and the winding down of EV-related losses.

3. SUBARU (7270)

Facts

For FY2026/3, SUBARU reported revenue of JPY 4.785tn and operating profit of JPY 40.1bn. Operating profit declined by roughly 90% year on year. The company cited factors including the impact of additional U.S. tariffs as reasons for the profit decline.

For FY2027/3, SUBARU expects revenue of JPY 5.200tn and operating profit of JPY 150.0bn.

Points for Investment Judgment

SUBARU's relatively low China risk is attractive. However, that also means dependence on North America is high. When U.S. sales are strong, earnings can expand easily. But if tariffs, inventory, sales incentives, or foreign exchange move in the wrong direction, margins can be cut quickly.

Being less exposed to China is a defensive factor, but being too close to the U.S. is a different risk.

Provisional Assessment

B (conditional)

There is room for a reassessment if U.S. market recovery and a stabilization of tariff impact can be confirmed. At this point, however, the North America concentration risk warrants a more cautious view than Toyota.

4. Nissan Motor (7201)

Facts

For FY2026/3, Nissan reported revenue of JPY 12.008tn, operating profit of JPY 58.0bn, an operating margin of 0.5%, and a net loss attributable to owners of parent of JPY 533.1bn.

For FY2027/3, the company expects operating profit of JPY 200.0bn, but the dividend forecast is zero.

Points for Investment Judgment

Nissan secured an operating profit, but an operating margin of 0.5% is still thin. Given profitability in Europe and Asia, sales incentives in North America, restructuring costs, and delayed product launches, a low PBR alone is not enough to justify buying.

The point to watch here is not the absolute amount of operating profit, but whether there is a credible path for the operating margin to return to 1%, 2%, and 3%.

Provisional Assessment

C (cautious)

Until the results of restructuring become visible, it is safer to treat Nissan not as a value stock, but as a potential value trap that needs verification.

If Using ROIC Spread, Make It a Verification Item for Next Time

ROIC spread is an effective way to think about auto stocks. In a capital-intensive industry, shareholder value is unlikely to increase if operating profit does not exceed the cost of capital.

However, there is not enough verification yet to put ROIC, WACC, and three-year EPS CAGR into a definitive table in this report. From next time onward, the checks should proceed in the following order.

1. Standardize the definition of invested capital by company
2. Separate the automotive business from the finance business
3. Decide whether to use adjusted operating profit excluding one-off losses
4. Clearly state WACC assumptions
5. Look at ROIC spread on a three-period average

Only after this is complete can a ROIC spread table be used for investment judgment.

What Is the Stock Price Pricing In?

What the market will price in going forward is not FY2026/3 results, but the speed of recovery in FY2027/3.

The four points to watch in particular are:

• Toyota: signs of tariff impact narrowing
• Honda: pace of decline in EV-related losses
• SUBARU: recovery in North American margins
• Nissan: return to an operating margin above 1%

Stock prices are likely to react not only to the absolute amount of profit, but also ahead of the direction of margins.

Therefore, what investors should check after earnings announcements is not only whether sales increased or decreased. They need to confirm the direction of improvement in operating margin after excluding tariff impact, adjusted operating profit, operating CF, FCF, and ROIC spread.

Overall Judgment

The June 11 strategy for the auto sector naturally places Toyota as the core candidate, Honda and SUBARU as conditional, and Nissan as cautious.

Toyota still has depth in operating profit and operating CF even after tariff impact. Honda retains strength in motorcycles and adjusted profit beneath the headline loss, but EV losses and four-wheel recovery need confirmation. For SUBARU, the key is now North America concentration risk rather than low China risk. Nissan should be treated cautiously until the effectiveness of restructuring becomes visible, given its 0.5% operating margin and remaining net loss.

The next KPI to watch is not PER.

Tariff impact
  ->
Operating margin
  ->
Adjusted operating profit
  ->
Operating CF and FCF
  ->
ROIC spread

This sequence allows auto stocks to be compared by the quality of profit and capital efficiency rather than by themes.

Sources and Caution

This article is an investment analysis memo based on each company's FY2026/3 earnings materials, official IR information, and public reporting. Market data, PER, PBR, dividend yields, and share prices change depending on the point of acquisition. The assessments in the article are not buy or sell recommendations, but provisional classifications intended to show the verification sequence.

• Toyota Motor, "FY2026/3 Financial Results [IFRS] (Consolidated)" and earnings presentation materials, disclosure date: 2026-05-08
• Honda Motor, "Fiscal Year Ended March 31, 2026 Financial Results" and earnings presentation materials, disclosure date: 2026-05-14
• SUBARU, "Latest Results and Forecast," disclosure date: 2026-05-15
• Nissan Motor, "Consolidated Financial Results for FY2025," disclosure date: 2026-05-13
• Confirmation date: 2026-06-09