Annual Report 2017 Table of Contents Message from the President Long-term Strategy At a Glance Initiatives for Financial Information Non-Automotive Business/Corporate History Sustainable Growth Information and Stock Information Table of Contents The Annual Report 2017 is intended to communicate to stakeholders the ways that Toyota is contributing to the sustain- Table of Contents able development of society and the earth based on its long-term strategies. More detailed ESG information is published in the Sustainably Data Book 2017. 1 Table of Contents (Published November 2017) 2 Message from the President Toyota’s Reports and Publications 5 Long-term Strategy 9 Eco-car Strategy: Electrifi cation Annual Report 2017 12 Connected Strategy: Information 15 Automated Driving and Utilizing AI: Intelligence Securities Reports/SEC Fillings 18 At a Glance Sustainability Data Book 2017 19 History Financial Results/Operating Results 20 Initiatives for Sustainable Growth Environmental Report 2017 —Toward Toyota Environmental Challenge 2050— 22 Corporate Philosophy 23 Making Ever-better Cars (TNGA) Corporate Governance Reports 26 Taking on the Future Mirai Creation Fund, Partner Robots * Toyota also publishes information on business and sustainability initiatives not included in the above reports and publications via its offi cial website. 28 Toyota Environmental Challenge 2050 Investors http://www.toyota-global.com/investors/ Sustainability http://www.toyota-global.com/sustainability/ 30 Aiming to Be the Best in Town Period Covered: Fiscal 2017 (April 2016 to March 2017) Some of the initiatives in fi scal 2018 are also included Toyota Mobility Foundation, Social Contribution Activities Scope of Report: Toyota Motor Corporation (TMC)’s own initiatives and examples of those of its domestic and overseas 32 Employees consolidated affi liates, and so on. 35 Corporate Governance About the PDF 38 Risk Management This fi le is an interactive PDF and can be navigated by clicking on the following elements. 39 Compliance 40 Financial Information Main menu Jump to the beginning off each of the report’s main sections 40 Financial Strategy Sub-menu Jump to specifi c parts wwithinithin each sectsectionion 42 Financial Results and Position The More details and WEB iconsicons foundfound inin eacheach sectionsection linklink to 49 Non-Automotive Businesses Icons related pages of the reportort and to relevant web papagesges and PDFs online, respectively.y. Financial Services, Housing Services * Requires an Internet connection.n. 50 Corporate Information and Stock Information 1 TOYOTA Annual Report 2017 Table of Contents Message from the President Long-term Strategy At a Glance Initiatives for Financial Information Non-Automotive Business/Corporate History Sustainable Growth Information and Stock Information Message from the President Sharing Ma king Ever-better Cars and Human Resource Development: The Forces That Power Sustainable Growth Our Passion to The net losses recorded after the global fi nancial crisis and the Europe. Beginning with 80 participants in Australia, a total of series of recall issues that began in the United States taught us an approximately 500 people (including the European leg this year) Create the Future important lesson. We at Toyota learned the hard way that even have now participated over the project’s four years. rapid growth, if not built on a solid foundation, can ultimately fail to serve the interests of stakeholders when it leads to rapid downturn. Below are a few remarks from participants. “On long-distance drives in real-world use environments, noise lev- To do right by our customers, investors, and other stakeholders, els on cars that had cleared internal standards on test courses I believe that we must build Toyota into a company that can sus- sometimes began to grate. It really brought home that some things tainably grow in any environment. We must manage it so that, like don’t come across through data alone.” a tree, the Company will grow larger and stronger over time, add- “In North America, we met people who live in places where having ing new growth rings year by year so that it can bear abundant a breakdown can be a life-or-death situation. For them, a car that fruit in the future. won’t break or fail is an absolute necessity. I want to always remember that for customers, cars function as partners that they At the fi nancial results press conference in May this year, I said that trust with their lives and livelihoods.” I want the current fi scal year to be one in which we take a critical “The experience made me painfully aware of the limits of my look at our true selves and do everything we can to improve our knowledge about cars. Working in an administrative division, competitiveness. By competitiveness, I do not refer only to quanti- I can’t engage with a car the way an engineer can, but the things I fi able things, like costs and productivity. It is crucial that we learned about what people think when driving were very valuable. improve the intangibles that make us competitive, by, for example, These two weeks changed my professional life.” developing human resources who are passionate about making ever-better cars and making the world a better place and who There are a few things I always tell participants after they come back. work to make constant improvements based on Genchi Genbutsu “You’ve driven the actual roads. You’ve had conversations. You’ve (onsite, hands-on experience). experienced the road, the cars, and the people who use them with your own senses. You’ve talked about these things and more with The Five Continents Drive Project is one initiative aimed at human your companions there using whatever knowledge of the local lan- resource development. Project participants drove across Australia guage you had. That’s the kind of situation where the true essence in 2014, then the Americas, divided into North America in 2015 of things emerges. Sometimes, the essence gets across best and Latin America in 2016. In 2017, they are driving across when you have limited words to express it. So, don’t rely solely on 2 TOYOTA Annual Report 2017 Table of Contents Message from the President Long-term Strategy At a Glance Initiatives for Financial Information Non-Automotive Business/Corporate History Sustainable Growth Information and Stock Information Message from the President data. I want you to take what you felt with your own senses, take Then, they are coming back to work, telling their junior colleagues the true essence of things, and use it to make ever-better cars. We about their experiences, and applying those experiences in their need you to help break down walls that Toyota itself has built.” own work. The road teaches the people, and the people make the cars. I hope that more and more of our colleagues will come to We’ve started a virtuous cycle. Participants are driving the same understand this process at a visceral level. roads as our customers, engaging with the cars and with the road. Taking on the Future In the near future, cars are expected to connect with people and What made me think that we ought to work with Dr. Pratt, made communities and take on new roles as part of the social infrastruc- me want to work with him, was not just that he is an amazing ture. New areas, such as AI, automated driving, robotics, and con- researcher and engineer, but because I believe that his goals and nected cars, are becoming especially important, and it is no longer motivations are the same as ours. enough to focus just on developing excellent cars and technolo- gies or to carry on sales and service in the same old ways. As we aim for the mobility society of the future, we are headed into unknown territory, seeking to ascend as-yet unconquered peaks. To take on a new breed of initiatives, we therefore felt it crucial to To climb these uncharted mountains, new technologies and the form a new team, rather than use previous frameworks. Accordingly, Sherpas who know the paths will be indispensable. Dr. Pratt in January 2016, we established Toyota Research Institute, Inc. agreed to be our Sherpa. This is what I told him: “Your compan- (TRI), welcoming Dr. Gill Pratt as its CEO. ions at Toyota are right behind you, sharing your goals and start- up mindset. And, I’m right there at the front of them. So don’t I fi rst met Dr. Pratt in August 2015. worry, and take the path you believe in.” I asked him, “Why do you want to work with Toyota?” His response was very simple. No one knows when we’ll reach the summit we’re seeking, or “I want to eliminate the everyday tragedy of traffi c accidents and even if we’re on the right path. What I do know is that only those contribute to making society better.” who reach the summit can see the opportunities that lie beyond. At the press conference announcing TRI’s establishment, he added to this, saying “I think Toyota will contribute to society by transforming In addition to TRI, we are actively collaborating and allying with from a successful hardware company to a new company by inte- other companies and partners in other industries, chiefl y in new grating software technologies; this is why I joined Toyota.” business areas. By humbly learning from these new partners and combining our strengths, we are endeavoring to make the mobility society of the future better, looking 10 and 20 years down the line. 3 TOYOTA Annual Report 2017 Table of Contents Message from the President Long-term Strategy At a Glance Initiatives for Financial Information Non-Automotive Business/Corporate History Sustainable Growth Information and Stock Information Message from the President Leading the Way Forward with Passion and a Start-up Mindset This year marks Toyota’s 80th anniversary.