Business Overview

Revenues and Automotive Operations Operating Income (¥ Billion) (¥ Billion) 25,000 2,500 Revenues ...... ¥21,928.0 billion (+13.4%)

20,000 2,000 Operating income ...... ¥2,038.8 billion (+20.4%)

15,000 1,500 In fiscal 2007, consolidated revenues increased 13.4%, to ¥21,928.0 billion, with strong vehicle sales in North America and Europe offsetting sales

10,000 1,000 declines in Japan and Asia. Operating income was up 20.4%, to ¥2,038.8 billion. The increase in operating income was mainly due to increases in 5,000 500 both production volume and vehicle units sold, the effect of changes in exchange rates, and cost reduction efforts, partially offset by an increase in 0 0 expenses related to business expansion. FY ’03’04 ’05 ’06 ’07

Revenues Operating income (Right scale)

Revenues and Financial Services Operations Operating Income (¥ Billion) (¥ Billion) 1,500 250 Revenues ...... ¥1,300.5 billion (+30.5%)

1,200 200 Operating income ...... ¥158.5 billion (+1.7%)

900 150 In fiscal 2007, consolidated revenues grew 30.5%, to ¥1,300.5 billion, due to higher auto sales financing that accompanied brisk vehicle sales. 600 100 Meanwhile, operating income rose 1.7%, to ¥158.5 billion, as a steady increase in financing volume offset the valuation losses on interest rate 300 50 swaps stated at fair value of sales finance subsidiaries in North America.

0 0 FY ’03’04 ’05 ’06 ’07

Revenues Operating income (Right scale)

Revenues and Other Business Operations Operating Income (¥ Billion) (¥ Billion) 1,500 50 Revenues ...... ¥1,323.7 billion (+11.2%)

1,200 40 Operating income ...... ¥39.6 billion (–0.2%)

900 30 In fiscal 2007, consolidated revenues were up 11.2%, to ¥1,323.7 billion, while operating income was ¥39.6 billion, remaining at the same level as 600 20 in fiscal 2006. Included in other business operations, the housing business achieved favorable production and sales. 300 10

0 0 FY ’03’04 ’05 ’06 ’07

Revenues Operating income (Right scale) Note: Fiscal years ended March 31

32 ANNUAL REPORT 2007 Business Overview

Automotive Operations Financial Services Operations Other Business Operations Market Summary

Consolidated Vehicle Sales and Production +8.9% (FY 2007) 5,100 Consolidated Vehicle Sales (Thousands of units) +15.1% Consolidated Production (Thousands of units) 2,942 +19.6% 1,224 +13.9% 709 +0.3% –3.9% –10.3% 1,205 –9.7% 2,273 789 755 Europe

+6.8% Asia North America 433

Middle East Japan +20.0% +21.8% +11.1% +20.6% 304 284 147 147 +6.7% +3.9% 268 Africa 117 Central and South America Oceania

Principal Market Data Automotive Market (Sales)

U.S. Europe Asia China Japan (Thousands of units) (Thousands of units) (Thousands of units) (Thousands of units) (Thousands of units) 20,000 20,000 20,000 20,000 20,000

15,000 15,000 15,000 15,000 15,000

10,000 10,000 10,000 10,000 10,000

5,000 5,000 5,000 5,000 5,000

0 0 0 0 0 CY ’02’03 ’04 ’05 ’06 CY ’02’03 ’04 ’05 ’06 CY ’02’03 ’04 ’05 ’06 CY ’02’03 ’04 ’05 ’06 CY ’02’03 ’04 ’05 ’06

Source: Toyota Motor Corporation Note: market definitions—Europe: Germany, France, the United Kingdom, Italy, Spain, the Netherlands, Belgium, Portugal, Denmark, Greece, Ireland, Sweden, Austria, Finland, Switzerland, Norway, Poland, Hungary, and the Czech Republic; Asia: Indonesia, Thailand, the Philippines, Malaysia, Singapore, Vietnam, Taiwan, and South Korea; Japan: minivehicles included.

ANNUAL REPORT 2007 33 Business Overview

Automotive Operations Financial Services Operations Other Business Operations LEXUS

LS600hL IS220d

GS450h SC430 GS430

Toyota is developing Lexus into a powerful global premium brand.

Market Strategy Lexus Vehicle Sales Cultivate the Lexus Brand (Thousands of units) 500 in Markets Worldwide In fiscal 2007, Lexus sales were up

400 a sharp 20%, to approximately 490,000 vehicles. Viewing Lexus as

300 a global premium brand, Toyota is building brand power and expand-

200 ing sales. While more than 60% of worldwide sales are in North

100 America, to grow sales of Lexus- brand vehicles we will significantly

0 increase sales in such regions as

FY ’03’04 ’05 ’06 ’07 Japan, Europe, and China. In 2007,

North America Europe Japan we expect to sell more than Others Note: Lexus vehicle sales are calculated on a retail basis and are different from consolidated vehicle sales (shipments). Fiscal years ended March 31

34 ANNUAL REPORT 2007 LEXUS

500,000 Lexus-brand vehicles commitment to true luxury, the LS600h, in May 2007 in Japan. The around the world. Lexus LS460 earned high acclaim launch of this latest hybrid is In North America, fiscal 2007 from the outset, and strong sales another step toward realizing our Lexus sales remained strong, rising of the model continue. We believe goal of creating new-era prestige 6%, to 340,000 vehicles. Lexus that the Lexus LS460’s superior dri- sedans under the Lexus marque. market share in the U.S. luxury ving performance, advanced safety brand segment rose to 16% in technology, excellent environmen- 2006, and Lexus earned the rank of tal performance, and meticulously best-selling luxury brand for the crafted features set the standard seventh straight year. for new-era prestige sedans. Craftsmanship Lives on in Lexus In Japan, where the Lexus brand Around the world, the Lexus Under the Lexus brand, we take a entered its second fiscal year on LS460 has earned praise from cus- meticulous approach to manufacturing the market, we expanded the net- tomers and many other quarters. in the pursuit of true luxury. At the Tahara plant in Japan, which manufac- work of Lexus dealers from the first Domestically, it was chosen as the tures Lexus models, we ensure quality fiscal year’s 151 to 163 and sold 2006–2007 Japan Car of the Year in befitting of a global premium brand by dovetailing leading-edge production more than 36,000 vehicles. We will November 2006. Overseas, the equipment and production engineering further consolidate recognition of model has received numerous with the craftsmanship of highly skilled workers. To pass on that craftsmanship Lexus as a premium brand and accolades. In April 2007, automo- to the next generation, all Lexus-model steadily build a customer base. bile journalists chose the Lexus production employees undergo spe- In Europe, fiscal 2007 Lexus sales LS460 as the 2007 World Car of the cialized training. We seek ultimate quality that can jumped 48%, to more than 50,000 Year—the first time a Japanese car only be achieved through the high-level vehicles, thanks to the expansion has received this award. Other marrying of the Lexus brand’s famous manufacturing quality and employees’ of the dedicated Lexus dealer net- Lexus vehicles are also widely senses—in other words, that can only be work and the stepped-up introduc- admired. For example, this year achieved through expert craftsmanship. tion of diesel and hybrid models. the Lexus IS won the “Das Goldene In Asia, including China, Lexus sales Lenkrad” (Golden Steering) in Europe. rose 48% in fiscal 2007, to approxi- Our product strategy for Lexus is mately 67,000 vehicles. In China, to expand the lineup of models in we are concentrating on strength- stages while continuing to improve ening sales. Focusing on large cities, driving and environmental perfor- we expanded the network of dedi- mance to strengthen their appeal. cated Lexus dealers to 23. In an effort to expand the Lexus Crankshaft polishing by master craftsman Note: Lexus vehicle sales are calculated on a brand into new vehicle segments, retail basis and are different from we unveiled a sports car, the latest consolidated vehicle sales (shipments). Lexus LF–A concept vehicle, at the Product Strategy North American International Auto Create True Luxury through Show in January 2007. Additionally, Craftsmanship and Leading- we are strategically developing Edge Technologies hybrid offerings. Having already From fall 2006, we began introduc- marketed hybrid versions of the ing a new model of the flagship Lexus Lexus RX SUV in April 2005 and the LS in stages worldwide. Merging Lexus GS sedan in March 2006, we the latest technologies with crafts- rolled out a hybrid version of the manship and an uncompromising flagship Lexus LS model, the Lexus

ANNUAL REPORT 2007 35 Business Overview

Automotive Operations Financial Services Operations Other Business Operations Japan

Corolla AXIO Auris

Corolla Fielder Estima Hybrid BLADE In a weak domestic market, Toyota aims to establish a solid earnings base and further increase its large market share by developing products that stimulate market demand.

Market Conditions Consolidated Vehicle Sales and Domestic Market Share Including Production in Japan Minivehicles (Toyota, Daihatsu, Hino) Weak Demand Delays Market (Thousands of units) (%) 6,000 60 Recovery +8.9% In fiscal 2007, total domestic new- 5,100 vehicle sales including minivehi- 41.5% cles declined 4.1%, to 5.62 million 4,000 40 vehicles, while sales excluding minivehicles decreased 8.3%, to –3.9% 2,273 3.58 million vehicles. In recent years, 2,000 20 consumer spending in Japan has been flat, and customers have tended to delay vehicle replace-

0 0 ment. At the same time, demand

FY ’03 ’04 ’05 ’06 ’07 FY ’03’04 ’05 ’06 ’07 has shifted toward minivehicles

Consolidated vehicle sales and used vehicles. The market Consolidated production Note: Fiscal years ended March 31

36 ANNUAL REPORT 2007 Japan excluding minivehicles has trended Market Strategy 10th-Generation Corolla Trigger Demand by Developing below 4 million vehicles in the past In October 2006, we unveiled the first several years. In fiscal 2008, the Market-Creating Products fully remodeled Corolla in six years and market will likely remain un- Faced with continuing tough con- renamed the sedan the Corolla AXIO. In addition to being the top-selling car changed year on year. ditions in Japan’s automotive in Japan, the Corolla accounts for market, Toyota will develop new about 1.4 million vehicle sales annually in more than 140 countries and regions. Performance Overview and appealing market-creating With more than 30 million vehicles sold to Market Share Reaches New products to achieve medium-to- date, it has become Toyota’s best-sell- Record long-term growth. In new model ing car and a symbol of the Company. Combining reliable basic perfor- Given difficult market conditions, development, Toyota will further mance with an upmarket feel, the latest consolidated domestic sales in emphasize car manufacturing that Corolla throws out given ideas about compact cars. It features state-of-the- fiscal 2007—including those of draws on the Company’s collective art equipment not normally offered in Daihatsu Motor Co., Ltd., and Hino strengths. In particular, we will compact cars, such as a rearview monitor, which gives a video image of the area Motors, Ltd.—declined slightly, to focus on improving fuel efficiency behind the vehicle when reversing, an approximately 2.27 million vehi- and environmental performance optional Pre-crash Safety System for cles, despite product marketing while including more leading-edge active and passive safety that uses mil- limeter-wave radar, and an Intelligent efforts. Consolidated domestic safety technologies and equip- Parking Assist system. Additionally, a production increased 8.9%, to 5.10 ment. From the second half of newly developed 1.8-liter engine and Super CVT-I (Continuously Variable million vehicles, due to higher 2007, we will pursue a sales strat- Transmission-Intelligent) transmission overseas demand. egy that is based on the launch of give the Corolla outstanding driving and environmental performance. Meanwhile, market share includ- a series of new models. ing minivehicles rose to a record In sales of Toyota-brand vehicles, 41.5%, up from 40.9% in fiscal we will maintain Japan’s four-sales- 2006. Sales of such new models as channel system, comprising Toyota, the mainstay Corolla, which was Toyopet, Corolla, and Netz deal- fully remodeled in October 2006, ers, which we established through were brisk. As a result, in 2006 the the reorganization of our sales Corolla ranked first in domestic channels in 2004. We will make full automobile sales ranking (exclud- use of the advantages of the four- Pre-crash Safety System ing minivehicles) for the fourth sales-channel system to accurately consecutive year. Moreover, seven respond to structural changes in of the 10 best-selling cars were the market. And, we will carefully cater Toyota models, testifying to to the diverse needs of customers Toyota’s strong presence in the through sales and after-sales ser- domestic market. vices that reflect the philosophy of putting the customer first. Intelligent Parking Assist system

Domestic Lineup Highlights (Toyota brand) 2006 June Full remodeling of the Estima Hybrid October Full remodeling of the Corolla and the Corolla Fielder Launch of the Auris December Launch of the BLADE (high-end hatchback)

ANNUAL REPORT 2007 37 Business Overview

Automotive Operations Financial Services Operations Other Business Operations North America

Tundra RAV4

FJ Cruiser Camry Hybrid Yaris Toyota aims to continue to localize operations in North America, which has an automotive market that promises to expand, and work in harmony with local communities.

Market Conditions Consolidated Vehicle Sales and Market Share in North America Production in North America Demand Expected to Grow (Thousands of units) (%) 3,000 30 Steadily +15.1% In fiscal 2007, total sales in the U.S. 2,942 2,500 automotive market were down 3.1% year on year, to 16.5 million 2,000 20 vehicles. Meanwhile, in the Canadian

1,500 15.4% market sales increased year on +0.3% year for the second straight year, 1,205 1,000 10 to 1.62 million vehicles. In the North American market, as in the 500 previous fiscal year, gasoline price

0 0 increases curbed sales of large

FY ’03 ’04 ’05 ’06 ’07 CY ’02’03 ’04 ’05 ’06 vehicles and spurred demand for

Consolidated vehicle sales Note: Different from fiscal year figures small and medium-sized vehicles Consolidated production* * Excluding vehicles produced by NUMMI (unconsolidated company) Note: Fiscal years ended March 31

38 ANNUAL REPORT 2007 North America with good fuel efficiency. Additionally, Market Strategy Construction of a New Plant given recent growing interest in large, Achieve Sustainable Growth in Mississippi fuel-efficient vehicles, demand for by Further Increasing Aiming to expand North American operations and continue localization, fuel-efficient vehicles across all seg- Localization and Making Toyota has chosen Mississippi as the ments is increasing. In the medium- Products More Appealing site of a new plant that is scheduled to to-long term, vehicle demand in To cater to growing demand in the start production around 2010. The new plant will be our eighth vehicle produc- the U.S. market will likely continue North American market, Toyota is tion plant in North America. The follow- to grow, fueled by sustained eco- raising local production capacity in ing is an overview of the plant. nomic strength and population stages. Our sixth vehicle production Company name: Toyota Motor Manufacturing, growth. base in North America, a new plant Mississippi, Inc. (TMMMS) in Texas, started production of the Location: Blue Springs, Union County, Performance Overview new Tundra in November 2006. Mississippi 11th Consecutive U.S. Sales Record And, in April 2007 our capital tie- Product: Highlander In North America in fiscal 2007, up partner Fuji Heavy Industries Production capacity: Toyota sold a record 2.94 million began consignment production of 150,000 vehicles annually Investment: vehicles and built 1.20 million vehi- the Camry for the North American Approximately $1.3 billion cles on a consolidated basis. market at its plant in Indiana. In Number of employees: Approximately 2,000 Including Toyota-brand vehicles 2008, we plan to begin RAV4 pro- built by unconsolidated New United duction at a second Canadian Motor Manufacturing, Inc., North plant. Further, in February 2007 American production amounted to Toyota announced plans to build a approximately 1.57 million vehicles. new plant, in Mississippi, which will In the United States, Toyota achieved begin manufacturing the Highlander a new vehicle retail sales record for SUV around 2010. the 11th year in a row, amounting to In addition to our existing product Mississippi plant’s groundbreaking ceremony 2.60 million vehicles. strategies of expanding our lineup The Camry, fully remodeled in of hybrid vehicles and bringing new fiscal 2006, sold well and in 2006 models to market under the Scion retained its title as the best-selling brand that target younger customers, passenger car in the United States we will use the launch of the new for the fifth year running. In fiscal Tundra as a trigger to strengthen 2007, our Kentucky plant added to our pickup truck business. the Camry’s popularity by starting Increase North American Annual Production Capacity to 2.17 Million Vehicles by up production of the Camry Hybrid. around 2010 (planned) Strong sales continued across other 1. Canada (TMMC) 270,000 vehicles models, such as the RAV4, Yaris, 2. California (NUMMI)* 400,000 vehicles Prius, and FJ Cruiser, which is only 3. Kentucky (TMMK) 500,000 vehicles sold in the U.S. market. Focusing on 4. Indiana (TMMI) 350,000 vehicles 5. Texas (TMMTX) 200,000 vehicles (began production in November 2006) younger, Generation-Y customers, 6. Fuji Heavy Industries’ 100,000 vehicles (started up in April 2007) the Scion models saw a steady in- U.S. plant crease in sales. Also, sales of the 7. Mexico (TMMBC) 50,000 vehicles (increase from 30,000 to 50,000 vehicles in 2007) remodeled Tundra, a full-size pickup 8. Canada, second plant 150,000 vehicles (scheduled for start-up in 2008) truck, have been strong since its 9. Mississippi (TMMMS) 150,000 vehicles (scheduled for start-up around 2010) * The California plant is a Toyota-General Motors joint venture company that is accounted for using the equity launch in February 2007. method. Production capacity figures include vehicles for General Motors. Note: Please see the Overseas Manufacturing Companies section on page 66 for full plant names.

ANNUAL REPORT 2007 39 Business Overview

Automotive Operations Financial Services Operations Other Business Operations Europe

Aygo Corolla

Auris Yaris Avensis

In the European market, which is characterized by fierce competition among many car manufacturers, Toyota will offer products with differentiated appeal and quality to heighten its brand presence.

Market Conditions Consolidated Vehicle Sales and Diesel Vehicle Sales and Production in Europe Diesel Sales Ratio Demand Stable at 17 Million (Thousands of units) (Thousands of units) （%） 1,500 500 50 Vehicles In fiscal 2007, total sales across the +19.6% 42.1% 1,200 1,224 400 40 European automotive industry (19 +14.5% countries) amounted to 17.18 mil- 395 900 300 30 lion vehicles, roughly the same +13.9% level as in the previous fiscal year. 709 600 200 20 Competition in the automotive market in Europe is challenging. In

300 100 10 addition to the large number of car manufacturers competing in the

0 00region, customer needs and priori-

FY ’03 ’04 ’05 ’06 ’07 CY ’02’03 ’04 ’05 ’06 ties with respect to cars differ in

Consolidated vehicle sales Diesel sales ratio (Right scale) each country. Consolidated production Diesel vehicle sales Note: Fiscal years ended March 31 Note: Different from fiscal year figures

40 ANNUAL REPORT 2007 Europe

Although there have been some Aiming to take advantage of French Plant Builds One regional variations, the size of the demand for diesel vehicles, which Millionth Yaris European market as a whole has represent more than half of the Responsible for the production of the remained around 17 million vehi- European market, we worked to Yaris (Vitz in Japan) in Europe, our plant in France (TMMF) built its one millionth cles over the past several years. step up diesel vehicle sales. As a Yaris in December 2006. Since the start Amid intense competition among result, diesel vehicles accounted for of production with an annual output of 150,000 vehicles in January 2001, the local and global automakers to 42% of Toyota’s European vehicle plant has increased its capacity in grow sales and revenues, demand sales in 2006. stages. Today, it has an annual produc- in the market is expected to tion capacity of 270,000 vehicles and employs 3,950 people. A perennial remain stable. Market Strategy favorite in the region, the Yaris was Strengthen Brand Power chosen as the European Car of the Year in 2000 and had vehicle sales of 1.6 mil- Performance Overview by Cultivating Core Models lion by the end of 2006. Ninth Straight Sales Record and Emphasizing Quality Heightens Toyota’s Presence In Europe, we will advance the In Europe in fiscal 2007, Toyota Toyota brand’s market penetration extended its streak of sales records by fostering core models in each to nine years, selling 1.22 million vehicle segment and improving vehicles on a consolidated basis. In quality. Also, aiming to reflect the a European market of 19 countries, characteristics of the European Toyota ranked eighth in Europe’s market, we will increase the per- One millionth Yaris passenger car market, and market centage of diesel vehicle sales and share reached 5.8%. Supported by introduce more hybrid models. In robust sales, consolidated produc- production, we will continue to European Annual Production Capacity in 2008 (planned) tion exceeded 700,000 vehicles. increase local production and pro- 1. United Kingdom (TMUK) 285,000 vehicles Among Toyota-brand vehicles, curement. In 2007, our plants in the 2. France (TMMF) 270,000 vehicles sales of our flagship mass produc- United Kingdom and Turkey began 3. Turkey (TMMT) 150,000 vehicles tion model, the Yaris, remained production of the new Auris. 4. Portugal (TCAP) 10,000 vehicles strong. In December 2006, the one Beginning in 2006, Toyota’s plant 5. Czech Republic (TPCA) 100,000 vehicles* millionth Yaris rolled off the line at in France, which builds the Yaris, 6. Russia (TMMR) 20,000 vehicles our plant in France, which began increased annual production (to increase to 50,000 vehicles) operations in 2001. In addition, the capacity from 240,000 to 270,000 Total 835,000 vehicles

Aygo, a small passenger car that vehicles. In addition, our Polish * Toyota-brand vehicles only Note: Please see the Overseas Manufacturing has been built by our joint venture plant that manufactures manual Companies section on page 66 for full plant names. company with PSA Peugeot Citroën transmissions is moving forward in the Czech Republic since 2005, with plans to increase production reached our initial sales target of capacity from the current level of 100,000 vehicles per year. As the 600,000 units a year to 720,000 start of a campaign that will cover units by mid-2009. And, Toyota’s countries throughout the region, Russian plant, presently under con- Toyota began marketing the Auris— struction in St. Petersburg, will a strategic model for Europe and begin production of the Camry in Japan—in the United Kingdom in December 2007, with an initial February 2007. annual output of 20,000 vehicles.

ANNUAL REPORT 2007 41 Business Overview

Automotive Operations Financial Services Operations Other Business Operations Asia and Other Regions

Camry Corolla

Hilux VIGO Innova Ban Pho plant, Thailand Toyota is accelerating efforts to lay a foundation for growth by increasing operational development in Asia, Central and South America, and other emerging markets where vehicle demand is burgeoning.

Market Conditions Consolidated Vehicle Sales and Consolidated Vehicle Sales and Production in Asia Production in Other Regions Asian Market Shrinks but (Thousands of units) (Thousands of units) 1,000 1,500 Markets Grow in Other Regions +12.6% In fiscal 2007, mainstay Asian mar- –10.3% 1,296 800 789 1,200 kets, including Indonesia and

–9.7% Taiwan, slumped due to the effect 755 600 900 of crude oil price increases. The Chinese market maintained robust

400 600 growth and continued to develop +12.0% into one of the world’s major auto- 411 200 300 motive markets. Meanwhile, auto- motive markets in Central and South 0 0 America and Africa expanded

FY ’03 ’04 ’05 ’06 ’07 FY ’03 ’04 ’05 ’06 ’07 steadily.

Consolidated vehicle sales Consolidated vehicle sales Markets are expected to con- Consolidated production Consolidated production tinue growing mainly in Central Note: Fiscal years ended March 31 and South America, Africa, and the Middle East. 42 ANNUAL REPORT 2007 Asia and Other Regions

Performance Overview China Strategy Tianjin FAW Toyota Motor’s Third Plant Contrasting Sales in Asia Target Large Increase in Vehicle Begins Production of New Corolla and Other Regions Sales by Improving Brand Value A joint venture company established by In Asia in fiscal 2007, sales downturns In the Chinese market, which contin- China FAW Group Corporation and Toyota, Tianjin FAW Toyota Motor com- in Indonesia and Taiwan resulted in a ues to grow rapidly, we will continue pleted its third plant in Tianjin and began roughly 10% decrease in Toyota’s to carefully monitor future supply the production of the new Corolla in May sales, to 789,000 vehicles, and a and demand trends while increas- 2007. Adding 200,000 vehicles to our annual production capacity, this latest roughly 9% year-on-year decline in ing local production capacity and plant will enable Tianjin FAW Toyota production, to 755,000 vehicles, on a steadily pursuing a product strategy Motor to build 470,000 vehicles a year. We will sell the new Corolla built at this consolidated basis. aimed at improving brand value. plant through a network of approximately In Other Regions, such as Central In May 2006, Guangzhou Toyota 260 dealers across China developed by FAW Toyota Motor Sales Co., Ltd. and South America, Oceania, and Motor Co., Ltd., began full-fledged Africa, consolidated sales reached production of the new Camry. In 1.29 million vehicles, thanks to China, sales of the Camry are very strong demand for the IMV* series strong, with 95,000 vehicles sold in and the Camry. Consolidated pro- fiscal 2007. In fiscal 2007, sales in duction reached 411,000 vehicles. China amounted to approximately * IMV is an abbreviation of Innovative International 300,000 vehicles*. In addition, Multipurpose Vehicle. Toyota has established Tianjin FAW Toyota Motor Co., Ltd., an optimal production system, which includes purchasing, with key hubs in Asia, South began producing the new Corolla Tianjin FAW Toyota Motor’s new Corolla Africa, and Argentina. This system supplies in May 2007. And, production of the multipurpose vehicles to more than 140 coun- Vehicle Sales and Production tries and regions. As of June 2007, the IMV Yaris will begin at Guangzhou in China series consisted of pickup trucks, minivans, Toyota Motor in mid-2008. Toyota (Thousands of units) and SUVs produced in 9 countries. 400 plans to steadily increase vehicle IMV Project sales by establishing a mass pro- New Plant in Thailand Boosts duction system for core models while 300 308 Supply Capability adding to its lineup and develop- 285 Under the IMV project, we com- ing sales and after-sales networks. 200 pleted our third plant in Thailand, in * Vehicle sales in China refers to sales of vehicles Ban Pho, which began production produced in China and imported from Japan. of pickup trucks in January 2007. China: Outline 100 With an annual production capacity Changchun 2003 October– Land Cruiser of 100,000 vehicles, the new plant 2005 December– Prius 0 will supply pickup trucks domesti- Tianjin CY ’02 ’03 ’04 ’05 ’06 2002 October– VIOS cally and to markets in more than 90 Vehicle sales Production 2004 February– Corolla Note: Different from fiscal year figures countries and regions. 2005 March– Crown Mainstay IMV production bases October– REIZ 2007 May– Corolla Guangzhou in Indonesia, South Africa, and Sichuan 2006 May– Camry 2008 Mid-2008– Yaris Argentina are steadily increasing 2000 December– Coaster production and exporting vehicles 2003 September– Land Cruiser Prado to markets worldwide. In fiscal China: Operational Highlights 2007, IMV series sales were up 2006 May Guangzhou Toyota Motor Co., Ltd., began production of the Camry June Sichuan FAW Toyota Motor Co., Ltd., increased production capacity for the Land 7.3%, to 570,000 vehicles. Cruiser Prado December Guangzhou Toyota Motor Co., Ltd., decided to begin production of the Yaris from mid-2008 2007 April Tianjin FAW Toyota Engine Co., Ltd., began production at second plant May Tianjin FAW Toyota Motor Co., Ltd., began production of the new Corolla at third plant

ANNUAL REPORT 2007 43 Business Overview

Automotive Operations Financial Services Operations Other Business Operations

In line with its global strategies for automotive operations, Toyota is extending the geographic reach of its financial services operations while developing auto sales financing services that stimulate demand and reflect regional characteristics.

Performance Overview Regional Strategy Total Assets of Financial Services Operations Favorable Vehicle Sales and Strengthen Auto Sales Financing (¥ Billion) Attractive Financial Services Services in 31 Countries and 15,000 Products Result in Record Regions Number of New Contracts Toyota’s financial services opera- In fiscal 2007, financial services tions are centered on Toyota 10,000 operations concluded a record Financial Services Corporation 2.54 million new contracts and real- (TFS), which has overall control of ized solid growth in revenues, to financial services subsidiaries in

5,000 ¥1,300.5 billion, and operating Japan and overseas, and cover 31 income, to ¥158.5 billion. These fa- countries and regions, including vorable results stemmed from Japan. TFS provides financial ser- stronger sales of Toyota- and Lexus- vices for vehicle purchases and 0 brand vehicles and the develop- leases to approximately 6.8 million FY ’03’04 ’05 ’06 ’07 ment of products and services customers. In particular, the TFS Note: Fiscal years ended March 31 catering to different countries’ dis- group is expanding operations in tinct needs through intense collabo- emerging markets that are show- ration among regional management ing dramatic growth. In China, the companies, distributors, and dealers. TFS group is rapidly establishing a

44 ANNUAL REPORT 2007 Financial Services Operations system that will encompass more in fiscal 2007 thanks to a drive to loans that include insurance and than 60% of the market for Toyota- recruit members that focused on maintenance. Among other products brand vehicles. In fiscal 2007, the Toyota dealers and to the expan- catering to the needs of customers TFS group extended its sales area sion of tie-up card services. In addi- and specific regions, we introduced from Beijing to include Guangzhou, tion, we started QUICPay* service a lease for the Tundra in the United Tianjin, Shenzhen, and Shanghai. in the small settlements market in States and the Auris key for key Plans call for further expansion to April 2006. The number of QUICPay product in Europe. Similarly, in Japan Jiangsu, Zhejiang, and other areas members exceeded one million in we are marketing such demand- of Guangdong by the end of 12 months due to a drive to recruit generating products as the “Lexus March 2008. And, in its first year of QUICPay dealers and members. Owners’ Lease*” and “Rakuchin operation in Indonesia, the TFS * QUICPay is a type of electronic money based Corolla Credit**.” In addition, the group increased its sales bases on a postpay service that does not require TFS group is bolstering financing prior cash deposits. from 7 to 14. We plan to enter other products for fleets and used vehi- regions with careful consideration Business Strategy cles to expand its customer base of management resource utiliza- Expand Customer Base and Target and support Toyota’s vehicle sales tion and regional characteristics. Long-Term Earnings Growth from a long-term perspective. Meanwhile, in such mainstay Under the slogan “Growth, Efficiency, * Lexus Owners’ Lease is a lease plan that markets as Europe, North America, Change,” the TFS group steadily lessens the burden of monthly payments by fixing vehicles’ future trade-in prices. Australia, and Japan, the auto sales continued to implement initiatives ** Rakuchin Corolla Credit is a payment plan financing environment is changing from the previous fiscal year focus- that lessens the burden of monthly pay- ments by fixing vehicles’ trade-in prices significantly. Excess liquidity is ing on the themes of always three or five years in advance. causing fierce competition among putting the customer first, building banks. At the same time, cus- business in developing countries, tomers can easily access financial launching fresh initiatives to target information through the Internet. earnings growth, and shifting to a Overview of Toyota’s Financial Services We will respond to such changes low-cost business model. Operations FY 2007 by fostering closer relationships In mainstay auto sales financing Total assets of financial services with customers. To that end, we business, we are strengthening operations ...... ¥13,735.4 billion are advancing our Customer for coordination among management Revenues from financial services operations ...... ¥1,300.5 billion Life initiative to ensure long-term companies, distributors, and deal- Operating income...... ¥158.5 billion growth. As part of that initiative, ers in regions worldwide. At the Credit ratings ...... AAA /Aaa we are issuing credit cards in same time, we are offering cus- Operating areas ...... 31 countries and Japan and the United States. tomers easy payment plans regions worldwide Total cardholders of the TS through long-term loans for younger Market coverage ...... approx. 90% CUBIC CARD, issued by Toyota customers and fixed residual value No. of customers ...... approx. 13 million Finance Corporation, passed 6 million products. Also, we provide package No. of employees ...... approx. 8,000 Note: Fiscal year ended March 31

Financial Services Operations Organization

Toyota Motor 33.42% Corporation 100% Aioi Insurance Toyota Financial Co., Ltd. Services Corporation

100% 100% 50% 50% 100% Overseas Sales Toyota Finance Toyota Financial Services Toyota Asset Toyota Accounting Finance Companies Corporation Securities Corporation Management Co., Ltd. Service Co.

ANNUAL REPORT 2007 45 Business Overview

Automotive Operations Financial Services Operations Other Business Operations

Toyota uses technologies and expertise cultivated in automotive operations to develop businesses in related peripheral areas, such as intelligent transport systems, information technology and telecommunications, housing, motorboat manufacturing, and environ- mental products.

Intelligent Transport Systems Business Housing Business Aiming to realize a society based on sustainable Toyota is expanding its housing business by develop- mobility, Toyota develops products and systems ing and supplying high-quality products that reflect designed to enable the practical application of intelli- current needs. In fiscal 2007, sales of homes were up gent transport systems in the areas of safety, the envi- 5.1%, to 5,807 units, due to the marketing of products ronment, and comfort. with outstanding security, earthquake resistance, com- (additional details available at: fort, and durability. http://www.toyota.co.jp/en/tech/its/index.html) (additional details available at: http://www.toyota.co.jp/en/more_than_cars/housing/index.html) Information Technology and Telecommunications Business We believe that further integration of vehicles and communication is essential to enhancing the conve- nience and comfort of cars. Focusing on cell phones, Toyota is collaborating on the planning and commer- cialization of telecommunications-related products and services in partnership with general telecommuni- Sincé Aventino cations service provider KDDI Corporation, which offers products ranging from cell phone services to Marine Business fixed-line telephone domestic and international telecom- By making full use of the engine and other advanced munications services and Internet-related services. At technologies it has developed in automotive manufac- the same time, we are developing a sales agency busi- turing, Toyota produces and markets motorboats and ness that primarily handles KDDI cell phones. marine engines. In fiscal 2007, we continued to work to increase sales of our pleasure boat models. e-Toyota Business (additional details available at: Toyota launched the GAZOO Internet-based informa- http://www.toyota.co.jp/jp/more_than_cars/marine/index.html) tion service in 1998. Today, the service provides infor- mation on new cars, used cars, and related services Biotechnology and Afforestation Businesses and a wide range of other information to 7.5 million To contribute to the realization of a recycling society, members. In addition, Toyota expanded operations by Toyota is developing businesses in the fields of biotech- entering the telematics field with the development of nology and afforestation. Those operations include the G-BOOK information service for onboard terminals. afforestation businesses in Australia and China, sweet We have steadily upgraded that service, developing potato cultivation and processing in Indonesia, and G-BOOK ALPHA and G-link for Lexus-brand models, floriculture and rooftop greening in Japan. Additionally, and we launched G-BOOKmX in May 2007. Overseas, in the field of bioplastics, we constructed a pilot fac- we are introducing e-CRB—a cutting-edge customer tory within our Hirose plant and began operations in relationship management network system—in Thailand, May 2005. Also, Toyota jointly developed an agent Australia, and China as part of efforts to build long- that promotes the production of fertilizer, “resQ45,” lasting, trusting relationships with customers. with Menicon Co., Ltd. In July 2006, we launched the (additional details available at: agent, which is efficient, reduces offensive odors, and http://www.toyota.co.jp/en/more_than_cars/gazoo/index.html) lowers environmental burden. (additional details available at: http://www.toyota.co.jp/jp/more_than_cars/bio/index.html) 46 ANNUAL REPORT 2007