Attaining global growth and improved efficiency
Toyota Motor Corporation September 12, 2003
1 Cautionary Statement with Respect to Forward-Looking Statements
This presentation contains forward-looking statements that reflect Toyota’s plans and expectations. These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause Toyota’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. These factors include: (i) changes in economic conditions affecting, and the competitive environment in, the automotive markets in Japan, North America, Europe and other markets in which Toyota operates; (ii) fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar, the euro and the British pound; (iii) Toyota’s ability to realize production efficiencies and to implement capital expenditures at the levels and times planned by management; (iv) changes in the laws, regulations and government policies affecting Toyota’s automotive operations, particularly laws, regulations and policies relating to environmental protection, vehicle emissions, vehicle fuel economy and vehicle safety, as well as changes in laws, regulations and government policies affecting Toyota’s other operations, including the outcome of future litigation and other legal proceedings; (v) political instability in the markets in which Toyota operates; (vi) Toyota’s ability to timely develop and achieve market acceptance of new products; and (vii) fuel shortages or interruptions in transportation systems, labor strikes, work stoppages or other interruptions to, or difficulties in, the employment of labor in the major markets where Toyota purchases materials, components and supplies for the production of its products or where its products are produced, distributed or sold. A discussion of these and other factors which may affect Toyota’s actual results, performance, achievements or financial position is contained in the “Operating and Financial Review and Prospects” and “Information on the Company” sections and elsewhere in Toyota’s annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission.
2 Ryuji Araki
Executive Vice President Toyota Motor Corporation
3 Agenda
Part Ⅰ TOYOTA NOW Global Manufacturing and Marketing in 2002
Part Ⅱ TOYOTA NEXT a. Sales Strategy – Regional Strategies: North America, Europe, Asia, China, and Japan b. Building Global Development and Optimum Production Systems c. Future Growth through Market Creation Part Ⅲ Financial Strategy
Part Ⅳ Technology Strategy
4 PartPartⅠⅠ TOYOTATOYOTA NOWNOW
5 Global Manufacturing and Marketing in 2002 Production and Sales
Number of vehicles 6,550 (thousands(thousands ofof units)units) 6,730 6,314 6,167 6,000
4,500 764 2,412 1,467 2,930 1,779 3,480 2,175 3,949 2,570 4,240
3,000 ～～～～～～1,500 ～ ～ CY92 CY98 CY00 CY02 Projections for Overseas production Overseas sales CY03 Domestic production Domestic sales
* Total units including Toyota/Lexus, Daihatsu, and Hino brands
6 Global Manufacturing and Marketing in 2002 Overseas Production and Operating Income
2,175 (Thousands of units) Exchange rate (yen/dollar) 2,000 1,271 Overseas production volume (calendar year) *1
(Billions of yen) 1,000 131 yen/$
122 yen/$
500 ～～～～～～0 650 FY92 FY94 FY96 FY98 FY99 FY00 FY0 1 FY02 FY03 Operating income(US GAAP*2) *1. Output including Toyota, Daihatsu, and Hino brands *2. FY92-96 : Japan GAAP
7 PartPart ⅡⅡ TOYOTATOYOTA NEXTNEXT Attaining global growth and improved efficiency
8 a. Sales Strategy: North America Steadily expanding sales towards the 2 million target
Number of vehicles (thousands(thousands ofof units)units)
2,000 2,000
1,500
tion duct 1,000 pro ocal ng lo andi Expa 500
8.7 8.7 9.3 10.1 10.4* 0 Target for Projection 1998 1999 2000 2001 2002 2003–2004 for 2005 Units manufactured in North America Units imported from Japan * Market share in the US (%)
9 a. Sales Strategy: North America Creating markets through new product launches
The U.S. market :
Number of vehicles (millions(millions ofof units)units)
15
Tundra Double Cab Lexus RX330 (scheduled launch: (from March 2003) fall 2003) 10 Commercial vehicle (light truck) market Scion (from June 2003) Passenger vehicle market
5 No. 1 inin 20022002 xA passenger Next-generation Prius vehicle sales (scheduled launch: October 2003) Corolla Camry xB 0 1990 2002
10 a. Sales Strategy: Europe Achieving 800 thousand sales target ahead of time Renewal of strategic core models completed
European core models
Corolla Yaris
Number of vehicles (thousands(thousands ofof units)units) Avensis Market share 800 (%) 800 4.5% 5.0 600 3.9% 4.0 3.4% 400 2.9% 2.9% 3.0 200 ～～～～～～0 2.0 1998 1999 2000 2001 2002 Target for 2005 Toyota sales units Market share
11 a. Sales Strategy: Europe Improve products (diesel-powered vehicles)
- Expanding lineup for diesel-powered vehicles - Expanding local production of diesel engines - DPNR launch
Number of vehicles (thousands(thousands ofof units)units)
Diesel Engines 200 Rapid expansion of local production From Jan.03: TMUK 50,000 units TMMF 30,000 units 31% From 2005: Poland 150,000 units
100 22% 16% ～～～～～～0
1998 2001 2002 DPNR/launch in 2003 DPNR：Diesel Particulate Diesel sales ratio - NOx Reduction system
12 a. Sales Strategy: Asia Establish a solid position as a top-brand in major markets → Expand faster than the market
Number of vehicles (thousands(thousands ofof units)units) Year-on-year growth (%)
30 400 +26%
300 20
200 +14% 10 100 Market Passenger share: vehicles 22% ratio: 47% ～～～～～～0 0 Projection 1998 1999 2000 2001 2002 for 2005
Toyota sales units Year-on-year growth: market Year-on-year growth: Toyota
* excluding China
13 a. Sales Strategy: China Manufacturing and marketing to be strengthened in response to market growth
Luxury SUV Large & luxury Crown Land Cruiser/Prado Establish full product lineup Compact VIOS lineup Product Daihatsu Establish (compact) Corolla Toyota brand Aggressive introduction of models
50,000 units/Year Several hundred thousand 30,000 units/Year units/Year
capacity 25,000 units/Year →115,000 units/Year Production 50, 000 units/Year
2002 2003 2004 2005 2006 2007 2008 2009 2010
14 a. Sales Strategy: Japan Domestic market and Toyota sales
Number of vehicles (thousands of units) and (thousands of units) re:: maiinttaiiniing a Toyotta’’s share Market share % (%) gh--llevell over 40% expandiing hiigh 4,000
40
2,000 ～～～～～～0 20 1998 1999 2000 2001 2002 Projection for 2005
Total market excluding minivehicles Toyota’s share (%)
15 a. Sales Strategy: Japan Toyota Sales by Category (excluding minivehicles)
Toyota’s share (overall) :
2002: January to July, 2003: 42.4 % 42.8 %
76.5 3 Box Large & Luxury 77.9 CelsiorCelsior ～ Alphard 45.8 Minivan, Cab Wagon 59.6 Wish ～ Vitz 41.8 2 BOX 37.4 Market share (%)
30 40 50 60 70 80 Toyota’s share: for the year 2002 Toyota’s share: January to July, 2003
16 a. Sales Strategy: Japan Reorganization of sales channel and Lexus introduction - Lexus brand: New introduction - Toyota brand: 5 → 4 channels
Price range Future positioning
From August 2005, 180 dealers / 4 models
Tradition Toyota dealers: Luxury vehicles Toyopet dealers: Medium-sized vehicles New Netz: Corolla dealers: Compact vehicles Develop new market segment (from spring of 2004) Advanced / originality
Areas to be changed
17 b. Building Global Development and Optimum Production Systems Pursue optimum product lineups by region
Core models
Camry Corolla Yaris/Vitz
Tacoma Previa/Estima
Avensis Hilux
Region-specific models
18 b. Building Global Development and Optimum Production Systems Research and development system:
Global network through linkage between Japan (core technology) Toyota Technical Center/ Design Headquarters and regional bases (local needs) (Head Office) Japan Core technology TMEM R&D Group development ED2 (Design Center in France) Development
Collaboration
Toyota Technical Center in the US
★
Collaboration Higashifuji Technical Center Development Collaboration
★★New R&D Centers ★ inin AsiaAsia andand AustraliaAustralia (Thailand(Thailand andand Australia)Australia)
Development CALTY (Design Center in the US)
19 b. Building Global Development and Optimum Production Systems Domestic/overseas outputs
Tianjin plant, Number of vehicles Chengdu China Number of vehicles plant, Polish (thousands(thousands ofof units)units) China plant West Virginia 6,730 plant, USA French plant Indiana 6,314 plant, 6,000 USA n Canadian plant uctiio Kentucky plant expansion prod expansion, USA eas p verse UK plant g O ndiin 1,779 2,175 2,570 Expa 4,500 764 1,051 1,346 1,467
Maintaining Domestic production 3,000 ～～～～～～1,500 ～～～～～～1992 1994 1996 1998 2000 2002 Projection For 2003 Domestic production Overseas production
** TotalTotal outputoutput includingincluding Toyota/Lexus,Toyota/Lexus, DaihatsuDaihatsu andand HinoHino brandsbrands
20 b. Building Global Development and Optimum Production Systems Strengthen production in major regions
Present Plan (tens of thousands of units)
< North America > < Europe > < China >
148 166 50 71 5 25
Production in cooperation with - Capacity expansion through the China FAW Group first 3 work-shifts in the UK and New factory in Texas (from the fall of 2003) French factories (from 2006) - JV with PSA Peugeot (from 2005) ＋ ＋
Local production expansion of engines - Start of production of TMMAL engines Diesel-powered engine (from April 2003) and capacity production at the new factory in expansion (from 2005) Poland (from early 2005) - TABC engine assembly (from 2005) etc.
21 b. Building Global Development and Optimum Production Systems IMV Project (from 2004) A network base for manufacturing and export of pickup trucks and multipurpose vehicles. Consolidating production output on a global scale and creating a mutual supply network
Thailand: global production base Other Asian countries: Engines and main components production bases To over 80 countries and regions Japan
South Africa / Argentina : To Europe / Africa India Thailand Interregional production bases
To South America Other countries The Philippines
Indonesia South Africa
Argentina : Pickup truck / multipurpose vehicles : Engines and main components
22 b. Building Global Development and Optimum Production Systems UMR activity (Unit and Material Manufacturing Reform)
Attain “cost reductions,” “quality improvement” & global deployment through standardization and simplification
① Development ~ production preparation Goals : process - Lead time and costs: 50% reduction ② Product structure, production facilities Innovation ③ Next-generation production method - Quality: the world’s best
Example: Process innovation in engine development – the use of digital engineering –
Preparing production Start of commercial Product design Preparing production manufacturing
1. Synchronize product and process 2. Verification on prototype model 3. Distribute 3D solid data globally designs line and creation of data base
Reduce number of Shorten lead time for Reduce the man-hour of initial design changes production preparation overseas support processes
Existing Process: 32 months ⇒After innovation: 16 months
23 c. Future Growth through Market Creation Global-scale motorization
AdvancesAdvances in in thethe Eastern Eastern & & TheThe U.S. U.S. market market Central European and Central European and Strong growth expansionexpansion Russian markets Strong growth Russian markets of Asian markets GrowingGrowing population population of Asian markets
The automobile industry still holds great growth potential
24 c. Future Growth through Market Creation
TECHNOLOGY DEVELOPMENT MARKETING
Nanotechnology Materials technology
Assessing customer needs Biotechnology Energy technology technologies technologies Leading-edge Leading-edge
Propose visions Engine Body Electronics
Transmission Chassis Existing Existing technologies Environment IT technologies technologies technologies Safety Next-generation Next-generation Next-generation Next-generation
Products focused on market creation Comfort Kindness Excitement
25 c. Future Growth through Market Creation Next-generation technology development : Environment
Next-generation Prius and Next-generation hybrid system
Fuel cell hybrid vehicle Toyota FCHV (limited marketing launched since December 2002) Achieve both superior environmental and driving performance
26 c. Future Growth through Market Creation Next-generation technology development : Safety
Improvement of real safety performance
Passive Safety Active Safety
- Field of vision assistance - Earning Euro NCAP 5★★（（New Avensis） - Intelligent AFS*, etc. - Addressing various types of crash situations - Use of peripheral monitoring technology The world's firstfirst Radar /PreCrash safety system (commercialized in Japan in February 2003)
The world's firstfirst Image sensor without with Brake AFS AFS - Autonomy driving support PSB VSC, Navigation/Telematic etc.
Radar sensor - Network driving support
* AFS： Adaptive Front-lighting System
27 c. Future Growth through Market Creation
Growth potential of auto industry in the diversified society
Improve customer satisfaction and realize growth
1. Management: growth strategy Speed and diversification
Adapting to the markets Market creation
2. Competition: pursue efficiency 3. Value: technological innovation - Investments in a wide range of R&D Optimum production and development systems - Establish global standard Continuous cost reductions - Achieve both superior environmental and driving performance
Value chain Passion ITS / Finance, etc. Enthusiasm and conviction
Sustainability Social responsibility / building trust
28 PartPart ⅢⅢ FinancialFinancial StrategyStrategy Towards a long-term, stable growth
29 Profit Earnings and Efficiency Growth and targets in operating income ratio & ROE
9% (%) 8.2% 8.3%(1Q) 9 7.7%
6% 5.6% 6.1% 6 ～ (Billions of yen)
Operating income ratio income Operating 10.4% (%) 10% 1,000 10
IF: Forex rates in FY04 9.6% 7.8% = Forex rates in FY03 500
ROE 7.1% 1Q （ROE：12.3%） 6.8% 1Q 7 ＊1Q＝1st Quarter 0 FY99 FY00 FY01 FY02 FY03 FY04 (forecast) Target
Operating income Operating income ratio ROE (US GAAP)
30 Cost Reduction Enhanced cost reduction effects
Billions of yen 300
200
100
0 FY99 FY00 FY01 FY02 FY03 FY04(forecast) Unconsolidated Subsidiaries * FY99 – FY02: Japan GAAP (US GAAP)
31 Long-term, Stable Growth Accumulated net income and growth in EPS
Trillions of yen (yen/share)
200
4 140
2 80
0 20 FY94 FY96 FY98 FY00 FY02
Accumulated net income EPS (net income per share) (US GAAP) * FY94 – FY97: Japan GAAP
32 Dividend Payments & Share Buybacks Free cash flow allocated to dividend payments and share buybacks
(Billions of yen) 1,000
Capital expenditures R&D
500
0 FY99 FY00 FY01 FY02 FY03 Free cash flow Dividends & share buybacks *1. Free cash flow = Current net income + Depreciation costs - Capital expenditures (US GAAP) See Annex Ⅰfor a reconciliation of free cash flow to net cash provided by operating activity *2. R&D Expenses for FY99 – FY02: JAPAN GAAP
33 Change in Share Ownership
IncreaseIncrease inin foreignforeign shareholdersshareholders (listed(listed onon NYNY andand LondonLondon StockStock ExchangesExchanges inin Shareholdings September 1999) Shareholdings VS by banks IncreaseIncrease inin individualindividual shareholdersshareholders (reduction(reduction inin stockstock unitunit inin AugustAugust 2000)2000)
[Sept. 30, 1999] [March 31, 2003 ]
Banks Dram 34% atic drop 15%
34 Speedy Decision Making and Strengthened Corporate Governance Faster operations/strengthened monitoring by various stakeholders
GeneralGeneral shareholders’shareholders’ meeting
InternationalInternational AdvisoryAdvisory Accounting audits Accounting audits BoardBoard ofof directorsdirectors BoardBoard basedbased onon USUS && JapanJapan auditingauditing MonitoringMonitoring Monitoring standardsstandards Monitoring Labor-ManagementLabor-Management Council & Forum President Council & Forum BoardBoard ofof statutorystatutory auditorsauditors SocialSocial ContributionContribution Monitoring Monitoring Monitoring ProgramProgram CommitteeCommittee MoreMore thanthan halfhalf areare Managing Officers Monitoring externalexternal auditorsauditors Monitoring
MonitoringMonitoring CorporateCorporate EthicsEthics CommitteeCommittee
35 IR Activities and Brand Value Enhancement
InvestorsInvestors && shareholdersshareholders IR Financial information
BrandBrand valuevalue enhancementenhancement PR CR Corporate Technical information information MediaMedia MotorMotor ShowShow
36 PartPart ⅣⅣ TechnologyTechnology StrategyStrategy
37 Akihiko Saito
Executive Vice President Toyota Motor Corporation
38 39 40 Diversified Energy Scenario
3000 Innovative Photovoltaic Technologies Wind Power Biomass 2000 Hydraulic/ Geothermal
Nuclear 1000 Natural gas power Crude oil Crude oil equivalent tons (millions) Crude oil equivalent Primary energy / Production energy volume Primary Coal 0 2000 2020 2040 2060 2080 2100 Source: NEDO
41 Future Image of Powertrain Development
(in billions) 2
1 Internal combustion engine vehicles（ICE） Internal combustion engine hybrid（ICE-HV) Total world vehicle ownership Fuel cell vehicle 0 2000 20X0 Year
42 “Right vehicle” for the “Right place” at the “Right time”
Gasoline hybrid engine vehicle Clean diesel engine vehicle Fuel cell hybrid vehicle
NOx and PM regulatory Right vehicle figures for Europe
year
NOx Right time Right place
PM
regulatory figures for Japan 100 Hc hydrogen gas station
NOx
CO
year
43 Approach to Environmental Problems
Usage
Environmental problems
Production Disposal Recycle Approach through life cycle of vehicle
44 Example of LCA: CO2 Replacement
1 Disposal stage Usage stage Product stage
0.5
0 Gasoline engine vehicle
45 Example of LCA: CO2 Replacement
1 Disposal stage Disposal Usage stage Product stage
Usage Stage
0.5
Product Stage
0 Gasoline engine vehicle
46 Example of LCA: CO2 Replacement
1 Disposal stage Usage stage Product stage
0.5
0 Gasoline engine Diesel engine Gasoline hybrid vehicle vehicle vehicle
47 Example of LCA: CO2 Replacement
1 Disposal stage Usage stage Product stage
0.5
0 Gasoline engine Diesel engine Gasoline hybrid Fuel cell hybrid vehicle vehicle vehicle vehicle
48 Toyota’s Technology Developments
2003 AVENSIS with DPNR Diesel Vehicle
1997 2003 PRIUS Next generation Gasoline Hybrid Vehicle PRIUS
2003 2003 TOYOTA FCHV TOYOTA FCHV Fuel Cell Hybrid Vehicle BUS (FCHV)
49 Comparison of the CO2 Emissions for Diesel and Gasoline Vehicles
(g/km) 200
150
CO2 replace
100 ～ 0 2.0L Gasoline 2.0L Diesel engine engine
CO2 replace in Avensis
50 Comparison of NOx and PM* Regulatory Figures in Euro4
*particulate matter
(g/km) Diesel regulatory 0.025
PM
Gasoline regulatory
0 0.08 0.25 NOx (g/km)
51 Diesel Engine with DPNR
Common Rail System EGR Valve
Exhaust Port Injector EGR Cooler
Turbo Charger
Exhaust Gas Oxidation Catalytic DPNR Converter Catalytic Converter
52 Emissions of Common Rail Engine with DPNR
(EC mode)
Euro3 (Current)
Current average Diesel without DPNR PM Euro4 ('05)
New Avensis
with DPNR
NOx
53 Toyota’s Technology Developments
2003 AVENSIS with DPNR Diesel Vehicle
1997 2003 PRIUS Next generation Gasoline Hybrid Vehicle PRIUS
2003 2003 TOYOTA FCHV TOYOTA FCHV Fuel Cell Hybrid Vehicle BUS (FCHV)
54 PRIUS: The World’s First Mass-Produced Hybrid Vehicle
55 Development Goals of First-Generation Prius
◆◆ Innovative advances in Double fuel economy, surpassing Fuel conventional gasoline-fuel Economy engine
Reduce ◆ ◆ Drastically cleaner Emissions emissions by 90 %
56 HV Technology Matrix
Strong THSII NG Prius *EV SU-HV Drive THS Prius
THS-C:ESTIMA
Japanese Mild Vehicle A non Japanese EV Vehicle B Drive
THS-M:CROWN Motor Power Ratio / Vehicle Power
Series/Parallel HV Series HV Parallel HV ( HV of Hybrids)
＊:propelled by electric motor only
57 Next Generation PRIUS with New Hybrid System – THS II –
THS II
Fuel Economy Hybrid Synergy Drive
Existing hybrid system
Improvement of conventional engines Fun to Drive Current conventional engines
59 Acceleration Performance and Fuel Efficiency in New PRIUS
Good
Next generation PRIUS
Japanese HV A
Fuel current PRIUS efficiency Trade-off between Fuel Efficiency and Acceleration performance
COROLLA(L4 1.3L） ALLION (L4 1.8L） COROLLA (L4 1.5L）
Bad CAMRY (L4 2.4L） MARKⅡ(L6 2.5L）
Bad Take-off acceleration performance Good
60 Toyota’s Technology Developments
2003 AVENSIS with DPNR Diesel Vehicle
1997 2003 PRIUS Next generation Gasoline Hybrid Vehicle PRIUS
2003 2003 TOYOTA FCHV TOYOTA FCHV Fuel Cell Hybrid Vehicle BUS (FCHV)
61 Development of TOYOTA FCHV
◇The FCHV-3 with hydrogen-absorbing alloy tank ◇The FCHV-4 with high-pressure hydrogen tanks ◇The FCHV-5 with CHF reformer ◇FCHV-BUS1 The world’s first FCHV The FCHV with methanol reformer with hydrogen-absorbing alloy tank at the EVS-13 (Osaka) 2002 ◇Limited marketing with the delivery of TOYOTA FCHV
2001 ◇FCHV-BUS2 1997 1996
62 Insistence on In-house Development
Next generation PRIUS (2003)
TOYOTA FCHV (2002)
63 In-house Development of Toyota Hybrid System
Engine Generator Secondary battery Power control unit Hybrid Motor ECU
In-house developed components
Engine & Motor & Generator Power control unit
64 In-house Development of FCHV System Independent In-house Development of Total System Including Fuel Cell Stacks
Secondary Air battery compressor
Power control unit Motor High-pressure Air compressor Power control hydrogen unit storage tank TOYOTA HV EUC FC Stack
Motor In-house developed components TOYOTA FC Stack
65 Advantage of In-house Development
Ⅰ. World leading-technology Ⅱ. Fastest commercialization in the world Ⅲ. Truly effective cost reduction
66 Conclusion
1. Toyota’s technology strategy for environmental problems
(1) The mind set of “right vehicle” for the“right place” at the“right time” (2) LCA as method for evaluating vehicle environmental impact
2. Insistence on in-house development source of Toyota’s competitive power
67 Attaining global growth and improved efficiency
Toyota Motor Corporation September 12, 2003
68