ITEM
4. INFORMATION ON THE COMPANY
4.A HISTORY AND DEVELOPMENT OF THE COMPANY
Toyota Motor Corporation is a limited liability, joint-stock company incorporated under the Commercial Code of Japan and continues to
exist under the Companies Act. Toyota commenced operations in 1933 as the automobile division of Toyota Industries Corporation (formerly, Toyoda Automatic Loom Works, Ltd.). Toyota became a separate company on August 28, 1937. In 1982, the
Toyota Motor Company and Toyota Motor Sales merged into one company, the Toyota Motor Corporation of today. As of March 31, 2017, Toyota operated through 597 consolidated subsidiaries (including variable interest entities) and 200 affiliated
companies, of which 54 companies were accounted for through the equity method.
8
See Business Overview Capital Expenditures and
Divestitures
for a description of Toyotas
principal capital expenditures and divestitures between April 1, 2014 and March 31, 2017 and information concerning Toyotas principal capital expenditures and divestitures currently in progress.
Toyotas principal executive offices are located at 1
Toyota-cho,
Toyota City, Aichi
Prefecture
471-8571,
Japan. Toyotas telephone number in Japan is
+81-565-28-2121.
4.B BUSINESS OVERVIEW
Toyota primarily conducts business in the automotive industry. Toyota also conducts business in finance and other industries. Toyota sold 8,971 thousand vehicles in fiscal 2017 on a consolidated
basis. Toyota had net revenues of ¥27,597.1 billion and net income attributable to Toyota Motor Corporation of ¥1,831.1 billion in fiscal 2017.
Toyotas business segments are automotive operations, financial services operations and all other operations. The following table sets forth Toyotas sales to external customers in each of its
business segments for each of the past three fiscal years.
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Yen in millions
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Year Ended March 31,
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2015
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2016
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2017
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Automotive
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25,006,224
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25,923,813
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25,032,229
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Financial Services
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1,621,685
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1,854,007
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1,783,697
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All Other
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606,612
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625,298
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781,267
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Toyotas automotive operations include the design, manufacture, assembly and sale of passenger
vehicles, minivans and commercial vehicles such as trucks and related parts and accessories. Toyotas financial services business consists primarily of providing financing to dealers and their customers for the purchase or lease of Toyota
vehicles. Toyotas financial services business also provides retail installment credit and leasing through the purchase of installment and lease contracts originated by Toyota dealers. Related to Toyotas automotive operations, Toyota
engages in intelligent transport systems (ITS). Toyotas all other operations business segment includes the design and manufacture of prefabricated housing and information technology related businesses including a web portal for
automobile information called GAZOO.com, etc.
Toyota sells its vehicles in approximately 190 countries and regions.
Toyotas primary markets for its automobiles are Japan, North America, Europe and Asia. The following table sets forth Toyotas sales to external customers in each of its geographical markets for each of the past three fiscal years.
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Yen in millions
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Year Ended March 31,
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2015
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2016
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2017
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Japan
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8,338,881
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8,588,437
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8,798,903
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North America
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9,430,450
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10,822,772
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10,033,419
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Europe
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2,690,803
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2,507,292
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2,517,601
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Asia
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4,531,178
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4,475,623
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4,279,617
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Other*
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2,243,209
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2,008,994
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1,967,653
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*
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Other consists of Central and South America, Oceania, Africa and the Middle East.
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During fiscal 2017, 25.4% of Toyotas automobile unit sales on a consolidated basis were in Japan, 31.6% were in North America,
10.3% were in Europe and 17.7% were in Asia. The remaining 15.0% of consolidated unit sales were in other markets.
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The Worldwide Automotive Market
Toyota estimates that annual worldwide vehicle sales totaled approximately 94 million units in 2016.
Automobile sales are affected by a number of factors including:
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social, political and economic conditions;
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introduction of new vehicles and technologies; and
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costs incurred by customers to purchase and operate automobiles.
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These factors can cause consumer demand to vary substantially from year to year in different geographic markets and in individual
categories of automobiles.
In fiscal 2017, the U.S. economy experienced steady growth, with Europe sustaining gradual
recovery under monetary easing measures, while in Japan the favorable employment environment supported consumption. In emerging markets, even though the Chinese market recovered due to economic stimulus measures, consumption stagnated in
resource-rich countries as consumption sentiment plummeted reflecting deterioration in fiscal conditions.
The automotive industry was also impacted by this trend. In 2016, with respect to developed countries, markets in
Europe and the United States expanded. In addition, in Japan, the market contracted even though the introduction of new models supported demand. In emerging markets, the expansion of the Chinese market continued, but markets in other emerging
countries contracted.
However, in the medium- to long-term, Toyota expects the automotive market to grow driven principally by the growth in China and emerging
markets. Global competition is expected to be severe, as competition in compact and
low-price
vehicles intensifies, and technological development and development of new products become more frequent with a
heightened global awareness of the environment and more stringent fuel economy standards.
In 2016, China, North America,
Europe and Asia were the worlds largest automotive markets. The share of each market across the globe, which Toyota estimates based on the available automobile sales data in each country and region information, was 30% for China, 23% for North
America (22% excluding Mexico and Puerto Rico), 21% for Europe and 10% for Asia. In China, new vehicle sales increased to approximately 28.3 million units. In North America, new vehicle sales increased to approximately 21.2 million units.
In Europe, new vehicle sales increased to approximately 20.0 million units. In Asia (including India but excluding Japan and China), new vehicle unit sales increased from the previous year to approximately 9.5 million units.
The worldwide automotive industry is affected significantly by government regulations aimed at reducing harmful effects on the
environment, enhancing vehicle safety and improving fuel economy. These regulations have added to the cost of manufacturing vehicles. Many governments also mandate local procurement of parts and components and impose tariffs and other trade barriers
and price or exchange controls as a means of creating jobs, protecting domestic producers or influencing their balance of payments. Changes in regulatory requirements and other government-imposed restrictions can limit an automakers
operations. These regulations can also make it difficult to repatriate profits to an automakers home country.
The
development of the worldwide automotive market includes the continuing globalization of automotive operations. Manufacturers seek to achieve globalization by localizing the design and manufacture of automobiles and their parts and components in the
markets in which they are sold. By expanding production capabilities beyond their home markets, automotive manufacturers are able to reduce their exposure to fluctuations in foreign exchange rates as well as to trade restrictions and tariffs.
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Recently, there have been many global business alliances and investments entered into
between manufacturers in the global automotive industry. There are various reasons behind these transactions including the need to respond to the excessive global capacity in the production of automobiles, the need to reduce costs and improve
efficiency by increasing the number of automobiles produced using common vehicle platforms and by sharing research and development expenses for environmental and other technology, the desire to expand a companys global presence through
increased size and the desire to expand into particular segments or geographic markets.
Toyota believes that its research and
development initiatives, particularly the development of environmentally friendly new vehicle technologies, vehicle safety and information technology, provide it with a strategic advantage.
Toyotas ability to compete in the global automotive industry will depend in part on Toyotas successful implementation of its
business strategy. This is subject to a number of factors, some of which are not in Toyotas control. These factors are discussed in Operating and Financial Review and Prospects and elsewhere in this annual report.
Toyota Global Vision
In
March 2011, Toyota unveiled its Toyota Global Vision corporate outline for the future, which serves not only to give direction to Toyota employees around the world, but also to convey such direction to customers and to the public at
large. Toyota will work to achieve sustained growth through the realization of the following ideals which are parts of the Vision:
The safest and most responsible ways of moving people
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Safety is Toyotas highest priority, and Toyota will continue to provide world-class safety.
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Toyota will also continue to contribute to environmental quality and to human happiness by using leading environmental technology and by deploying that
technology in a growing line of vehicle models. At the same time, Toyota will work through the provision of products, sales and services that exceed customer expectation to offer a rewarding experience for customers.
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Enriching lives around the world
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Toyota has been consistently true to its founding spirit of serving society through conscientious manufacturing, and it will continue working in that
spirit to contribute to enhance the quality of life wherever it has operations.
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Toyota will strive to continue contributing to economic vitality wherever it has operations by generating stable employment and by participating in
mutually beneficial business relationships with dealers and suppliers. It will also strive to continue to actively engage in initiatives for human resources development and the promotion of cultural activities of its host communities.
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Lead the way to the future of mobility
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Toyota will lead the industry in technological development that will spawn next-generation mobility. For example, it will explore possibilities in
personal mobility and in the convergence of information technology for automobiles and smart grids for optimizing energy generation and consumption. Toyota will strive to offer products and services that match the needs in each market.
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Toyota will strive to advance environmental technology and develop
low-carbon
technologies and technologies for
maximizing safety through interaction with the transport infrastructure to lay a foundation for sustainable and amenable future mobility.
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Our commitment to quality, constant innovation
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Toyota is committed to providing quality vehicles that are highly reliable and driven with a sense of safety and reliability.
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Toyota will constantly reinvent itself and continue to engage in cutting-edge technology development. Toyota will work towards offering vehicles around
the world that address the needs of today and of tomorrow at affordable prices.
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Continued
awareness for the Earth and environment
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Toyota will continue to work towards minimizing environmental impact in its manufacturing and other operations, and products.
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With an emphasis on environmental awareness, Toyota will in its operations work towards energy conservation, reduction in carbon dioxide emission,
efficient use of resources such as recycling, and human resource development and production methods that allow for coexistence with nature.
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Exceed expectations and be rewarded with a smile
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Everyone at Toyota will continuously maintain a sense of gratitude to customers and will strive to earn smiles with products and services that are
stimulating and inspiring and exceed customer expectations.
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There is always a better way
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All Toyota employees will share the recognition that there is always a better way and share a commitment to continuous improvement, which are
fundamental to The Toyota Way.
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Meet challenging goals by engaging the talent and passion of
people
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Toyota will nurture a corporate culture where teamwork and individual creativity thrive and where people will approach their work with pride and
passion.
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Toyota will honor the spirit of diversity in recruiting, training and promoting capable individuals around the world. Human resources development at
Toyota will continue to promote the transfer of the companys
monozukuri
spirit of conscientious manufacturing and related skills and
know-how
from one generation to the next.
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As for our future business environment, developed countries are expected to continue growing steadily,
while the growth rate of emerging countries are expected to increase gradually on the back of the steady growth in developed countries and the effects of policy measures taken by emerging countries. The Japanese economy is expected to improve mainly
in the area of private demand supported by continuing extension of the positive cycle of the economy with improvements in employment and income conditions, although attention needs to be paid to uncertainty related to policy trends mainly in the
U.S. and U.K.
The automotive market is expected to progress steadily in developed countries and to pick up gradually in
emerging countries. Meanwhile, complicated interactions and developments such as changing market and regulations, developments in technology and entry from other businesses are changing the automotive business itself.
In this severe business environment, the Toyota group intends to steadily progress toward the realization of the Toyota Global Vision
through sustainable growth based on the following policies:
First, Toyota intends to boldly take on new challenges to create
the future. It aims to construct a future mobility society through the strategic approach to Electrification/Information/Intelligence and new value creation. Toyota will strive to reduce the environmental impact of automobiles as close to zero as
possible, and will roll out new initiatives toward a sustainable society looking to make a positive impact on earth and society.
12
Second, Toyota will change how we work in order to grow as steadily as a tree
adding annual growth rings. Through strong vision and sense of mission and leaning humbly, Toyota aims to make a break with the past, and thereby accelerate making ever-better cars. Toyota will also work to obtain
and sustain its competitiveness for its own survival by increasing sensitivity to the drastically changing society and reacting to crises properly.
Third, Toyota will work to solidify its foundations in order to continuously support itself. Thoroughly following the principle of Customer First, every member will implement the basics of work.
Based on these initiatives, the Toyota group will contribute to enriching lives of communities by providing
ever-better cars. This is expected to encourage more customers to purchase Toyota cars and thereby lead to the establishment of a stable business base. By perpetuating this cycle, Toyota will aim to realize sustainable growth and enhance
corporate value. In addition, through full observance of corporate ethics such as compliance with applicable laws and regulations, the Toyota group will fulfill its social responsibilities.
Toyota Environmental Challenge 2050
Positioning responding to
environmental issues as one of the most prioritized challenges for management, Toyota has tackled
head-on
activities such as the development and promotion of next-generation vehicles including hybrid vehicles
and fuel cell vehicles, efficient production that puts less of a burden on the environment, the recycling of end-of-life vehicles and hybrid vehicle batteries, planting trees for the coexistence of humans and nature in harmony, and conservation of
ecosystems.
However, in recent years, the seriousness of environmental issues is increasing over a wide area, as evidenced by
global warming, water shortages, resource depletion, and degradation of biodiversity. In response to the situation, Toyota believes it is necessary to take on new challenges that consider the world 20 or 30 years in the future, in order to remain
closely aligned with the global environment. Accordingly, Toyota announced Toyota Environmental Challenge 2050 in October 2015.
With the aims of reducing the environmental impact of vehicles as much as possible as well as moving toward a net positive impact, by
2050 in order to contribute to the realization of a sustainable society, the Toyota Environmental Challenge 2050 has set forth the following six challenges for Toyota to address.
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1.
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New Vehicles Zero CO2 Emissions Challenge
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2.
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Life Cycle Zero CO2 Emissions Challenge
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3.
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Plant Zero CO2 Emissions Challenge
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4.
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Challenge of Minimizing and Optimizing Water Usage
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5.
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Challenge of Establishing a Recycling-Based Society and Systems
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6.
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Challenge of Establishing a Future Society in Harmony with Nature
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Further strengthening collaboration with the Toyota group and all other stakeholders, Toyota will consolidate new ideas, dynamism and technology to tackle together the realization of a truly sustainable
society from a long-term perspective.
Automotive Operations
Toyotas revenues from its automotive operations were ¥25,081.8 billion in fiscal 2017, ¥25,977.4 billion in fiscal 2016 and ¥25,062.1 billion in fiscal 2015.
Toyota produces and sells passenger vehicles, minivans and commercial vehicles such as trucks. Toyota Motor Corporations
subsidiary, Daihatsu Motor Co., Ltd. (Daihatsu), produces and sells mini-vehicles and
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compact cars. Hino Motors, Ltd. (Hino), also a subsidiary of Toyota Motor Corporation, produces and sells commercial vehicles such as trucks and buses. Toyota also manufactures
automotive parts, components and accessories for its own use and for sale to others.
With an aim to strengthen
competitiveness in the small car segment, on January 29, 2016, Toyota and Daihatsu entered into a share exchange agreement to make Daihatsu a wholly-owned subsidiary of Toyota as of August 1, 2016. From January 2017, Toyota and Daihatsu
established the Emerging-market Compact Car Company to promote development of competitive products in emerging markets. Through planning and implementation of optimal strategies including combining their technical expertise and bases of
operations, joint development of next-generation technology, bold cost reduction and expansion of product lineups with a global brand strategy, Daihatsu will play a key role in developing globally competitive small cars of both brands based on the
technology Daihatsu has developed through manufacturing of mini-vehicles.
Vehicle Models
Toyotas vehicles (produced by Toyota, Daihatsu and Hino) can be classified into three categories: hybrid vehicles, conventional
engine vehicles, and fuel cell vehicles. Toyotas product
line-up
includes subcompact and compact cars, mini-vehicles,
mid-size,
luxury, sports and specialty cars,
recreational and sport-utility vehicles, pickup trucks, minivans, trucks and buses.
Hybrid Vehicles
The worlds first mass-produced hybrid car was Toyotas Prius. It runs on an efficient combination of a gasoline engine and
motor. This system allows the Prius to travel more efficiently than conventional engine vehicles of comparable size and performance. The hybrid design of the Prius also results in the output of 75% less emission than the maximum amount allowed
by Japanese environmental regulations. Toyota views the Prius as the cornerstone of its emphasis on designing and producing
eco-friendly
automobiles.
In the last three years, Toyota has strengthened its hybrid lineup by introducing the fully remodeled Voxy HV/Noah HV in
January 2014, the NX300h in July 2014, the RC300h and the Esquire HV in September 2014, the fully remodeled Alphard HV and Vellfire HV in January 2015, the Sienta HV in June 2015, the fully remodeled
RX-HV
in September 2015 and the fully remodeled Prius in November 2015, as well as adding Auris HV in April 2016, Prius PHV and the new model
C-HR
HV in October 2016 and the
new model LC HV in May 2017. In the hybrid vehicles area, where strong growth is anticipated, Toyota aims to continue its efforts to offer a diverse
line-up
of hybrid vehicles, enhance engine power while
improving fuel economy and otherwise work towards increasing the sales of hybrid vehicles.
Fuel Cell Vehicles
Toyota began limited sales of a fuel cell vehicle in Japan and the United States in December 2002. In June 2005, Toyotas
new fuel cell passenger vehicle became the first in Japan to acquire vehicle type certification under the Road Vehicles Act, as amended, on March 31, 2005, by Japans Ministry of Land, Infrastructure, Transport and Tourism. Leases for fuel
cell vehicles began in July 2005. By 2007, Toyota was able to make improvements to
start-up
and cruising distance at temperatures below freezing, which were technological challenges. Toyota has made
advances by solving technological issues such as the above and worked towards the practical use of such solutions, culminating in the general sale of the worlds first mass produced fuel cell vehicle MIRAI in Japan beginning in
December 2014, in the United States beginning in June 2015 and in Europe beginning in September 2015.
Conventional Engine Vehicles
Subcompact and Compact
Toyotas subcompact and compact cars include the four-door Corolla sedan, which is one of Toyotas bestselling models. The Yaris, marketed as the Vitz in Japan, is a subcompact car designed to
perform better and
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offer greater comfort than other compact cars available in the market with low emissions that are particularly attractive to European consumers. In Europe, Toyota introduced the fully remodeled
Aygo in June 2014. In Japan, Toyota introduced the remodeled Corolla Axio/Fielder in May 2012, the remodeled Porte and its variant, the Spade, in July 2012 and the remodeled Auris in August 2012. In India, Asia, China and other
markets, Toyota introduced the Etios and Vios. In addition, Toyota introduced the AGYA, which is designed and manufactured by Daihatsu. Moreover, Yaris iA, which is designed and manufactured by Mazda Motor Corporation, was newly introduced in July
2015.
Mini-Vehicles
Mini-vehicles are manufactured and sold by Daihatsu. Daihatsu manufactures mini-vehicles, passenger vehicles, commercial vehicles and auto parts. Mini-vehicles are passenger vehicles, vans or trucks with
engine displacements of 660 cubic centimeters or less. Daihatsu sold approximately 545 thousand mini-vehicles and 209 thousand automobiles on a consolidated basis during fiscal 2017. Daihatsus largest market is Japan, which accounted
for approximately 70% of Daihatsus unit sales during fiscal 2017. From 2011, Toyota began to sell some mini-vehicles manufactured by Daihatsu under the Toyota brand.
Mid-Size
Toyotas
mid-size
models include the Camry, which has been the bestselling passenger car in the United States for nineteen of the past twenty calendar years (from 1997 to present) and also for the last fifteen
consecutive years. The Camry was fully remodeled in August 2011. Camry sales in the United States for 2016 were approximately 387 thousand units (including Camry hybrids). In addition, Toyotas other
mid-size
models include the REIZ for the Chinese market, the Avensis, which was remodeled in November 2008 for the European market, and the Mark X, which was remodeled in October 2009 for the Japanese
market.
Luxury & Large
In North America, Europe, Japan and other regions, Toyotas luxury lineup consists primarily of vehicles sold under the Lexus brand name. Lexus passenger car models include the LS, the GS, the ES,
the IS, the HS, the CT and the RC. Lexus models also include the LX, the GX, the RX and the NX sold as luxury sport-utility vehicles. Toyota commenced sales of its luxury automobiles in Japan under the Lexus brand in August 2005. As of
March 31, 2017, the Lexus brand lineup in Japan includes the LS, the GS, the HS, the IS, the CT, the LX, the RX, the NX, LC and the RC. The Toyota brands
full-size
luxury car, the Avalon, was
remodeled in October 2012, and the Crown was remodeled in December 2012. Toyota also sells the Century limousine in Japan.
Sports and Specialty
In April 2012, Toyota introduced the 86 (called
Scion
FR-S
in the U.S.), a compact sports car with a front-mounted engine and rear-wheel drive. In October 2014, Toyota introduced the RC coupe that leads the image of Lexus, which engages drivers on a
sentimental level. In May 2017, Toyota introduced LC, the new model flagship coupe for Lexus.
Recreational and
Sport-Utility Vehicles and Pickup Trucks
Toyota sells a variety of sport-utility vehicles and pickup trucks. Toyotas
sport-utility vehicles available in North America include the Sequoia, the 4Runner, the RAV4, the Highlander, the FJ Cruiser and the Land Cruiser, and pickup trucks available are the Tacoma and Tundra. The Tacoma, the Tundra, the Highlander and the
Sequoia are manufactured in the United States. Toyota also offers four types of sport-utility vehicles under the Lexus brand, including the LX, the GX, the RX, and the NX. Toyota also manufactures the RX and RAV4 models in Canada. Toyotas
pickup truck, the Hilux, has been the bestselling model of all Toyota cars sold in
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Thailand. In July 2014, Toyota introduced the new NX model under the Lexus brand. In May 2015, Toyota introduced the fully remodeled Hilux and in September 2015, it introduced the fully
remodeled RX of the Lexus brand. In December 2016, Toyota introduced
C-HR,
a model with a focus on both design and drive.
Minivans and Cabwagons
Toyota offers several basic models for the global
minivan market. Its largest minivans in Japan, the Alphard and the Vellfire, were remodeled in January 2015. In addition, the Wish was remodeled in April 2009, the Noah/Voxy was remodeled in January 2014 and the new model Esquire was
introduced in October 2014 in Japan. The new model Calya, an original equipment manufacturing (OEM) vehicle by Daihatsu, was introduced in July 2016 in Indonesia. Toyotas other minivan models include, in Japan, the
Estima, the Sienta and the Isis, and, in North America, the Sienna.
Trucks and Buses
Toyotas product lineup includes trucks (including vans) up to a gross vehicle weight of five tons and micro-buses that are sold in
Japan and in overseas markets. Trucks and buses are also manufactured and sold by Hino, a subsidiary of Toyota. Hinos product lineup includes large trucks with a gross vehicle weight of over eleven tons, medium trucks with a gross vehicle
weight of between five and eleven tons and small trucks with a gross vehicle weight of up to five tons. Hinos bus lineup includes medium to large buses used primarily as tour buses and public buses, small buses and micro-buses.
Product Development
New cars introduced in Japan during fiscal 2017 and thereafter include the Auris HV and the
C-HR.
Remodeled cars in Japan during fiscal 2017 and thereafter include
the Tank, the Roomy, the Prius PHV and the Coaster. New vehicles introduced outside of Japan during fiscal 2017 and thereafter include the
C-HR
and the LC. Remodeled cars outside of Japan during fiscal 2017
and thereafter include the Sienta and the Calya.
In addition, the IMV product lineup based on the IMV project to optimize
global manufacturing and supply systems is a lineup of strategic multipurpose vehicles produced from a single platform to meet market demand. The IMV product lineup includes, as of March 31, 2017, the Hilux, Fortuner, and Innova, one or all of
which are available in all regions except for Japan.
Markets, Sales and Competition
Toyotas primary markets are Japan, North America, Europe and Asia. The following table sets forth Toyotas consolidated vehicle
unit sales by geographic market for the periods shown. The vehicle unit sales below reflect vehicle sales made by Toyota to unconsolidated entities (recognized as sales under Toyotas revenue recognition policy), including sales to
unconsolidated distributors and dealers. Vehicles sold by Daihatsu and Hino are included in the vehicle unit sales figures set forth below.
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Year Ended March 31,
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2013
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2014
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2015
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2016
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2017
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Units
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%
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Units
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%
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Units
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%
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Units
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%
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Units
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%
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Market
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Japan
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2,278,796
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25.7
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%
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2,365,410
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26.0
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%
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2,153,694
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24.0
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%
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2,059,093
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23.7
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%
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2,273,962
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25.4
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%
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North America
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2,468,804
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27.8
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2,529,398
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27.7
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2,715,173
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30.3
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2,839,229
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32.7
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2,837,334
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31.6
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Europe
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799,085
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9.0
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844,003
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9.3
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859,038
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9.6
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844,412
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9.7
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924,560
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10.3
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Asia
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1,683,578
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19.0
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1,608,355
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17.6
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1,488,922
|
|
|
|
16.6
|
|
|
|
1,344,836
|
|
|
|
15.5
|
|
|
|
1,587,822
|
|
|
|
17.7
|
|
Other*
|
|
|
1,640,401
|
|
|
|
18.5
|
|
|
|
1,768,867
|
|
|
|
19.4
|
|
|
|
1,755,037
|
|
|
|
19.5
|
|
|
|
1,593,758
|
|
|
|
18.4
|
|
|
|
1,347,182
|
|
|
|
15.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,870,664
|
|
|
|
100.0
|
%
|
|
|
9,116,033
|
|
|
|
100.0
|
%
|
|
|
8,971,864
|
|
|
|
100.0
|
%
|
|
|
8,681,328
|
|
|
|
100.0
|
%
|
|
|
8,970,860
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Other consists of Central and South America, Oceania, Africa and the Middle East, etc.
|
16
The following table sets forth Toyotas vehicle unit sales and market share in Japan,
North America, Europe and Asia on a retail basis for the periods shown. Each markets total sales and Toyotas sales represent new vehicle registrations in the relevant year (except for the Asia market where vehicle registration does not
necessarily apply). All information on Japan excludes mini-vehicles. The sales information contained below excludes unit sales by Daihatsu and Hino, each a consolidated subsidiary of Toyota. Vehicle unit sales in Asia do not include sales in China.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands of Units)
|
|
|
|
Fiscal Year Ended March 31,
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
Japan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market sales (excluding mini-vehicles)
|
|
|
3,242
|
|
|
|
3,433
|
|
|
|
3,126
|
|
|
|
3,126
|
|
|
|
3,360
|
|
Toyota sales (retail basis, excluding mini-vehicles)
|
|
|
1,570
|
|
|
|
1,605
|
|
|
|
1,439
|
|
|
|
1,462
|
|
|
|
1,607
|
|
Toyota market share
|
|
|
48.4
|
%
|
|
|
46.7
|
%
|
|
|
46.0
|
%
|
|
|
46.8
|
%
|
|
|
47.8
|
%
|
|
|
|
|
(Thousands of Units)
|
|
|
|
Calendar Year Ended December 31,
|
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
North America:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market sales
|
|
|
17,153
|
|
|
|
18,514
|
|
|
|
19,597
|
|
|
|
20,804
|
|
|
|
21,191
|
|
Toyota sales (retail basis)
|
|
|
2,360
|
|
|
|
2,520
|
|
|
|
2,670
|
|
|
|
2,817
|
|
|
|
2,798
|
|
Toyota market share
|
|
|
13.8
|
%
|
|
|
13.6
|
%
|
|
|
13.6
|
%
|
|
|
13.5
|
%
|
|
|
13.2
|
%
|
|
|
|
|
|
|
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market sales
|
|
|
18,171
|
|
|
|
18,009
|
|
|
|
18,397
|
|
|
|
18,971
|
|
|
|
19,968
|
|
Toyota sales (retail basis)
|
|
|
838
|
|
|
|
848
|
|
|
|
888
|
|
|
|
874
|
|
|
|
928
|
|
Toyota market share
|
|
|
4.6
|
%
|
|
|
4.7
|
%
|
|
|
4.8
|
%
|
|
|
4.6
|
%
|
|
|
4.6
|
%
|
|
|
|
|
|
|
Asia (excluding China):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market sales
|
|
|
8,986
|
|
|
|
8,899
|
|
|
|
8,785
|
|
|
|
9,287
|
|
|
|
9,541
|
|
Toyota sales (retail basis)
|
|
|
1,487
|
|
|
|
1,427
|
|
|
|
1,324
|
|
|
|
1,249
|
|
|
|
1,305
|
|
Toyota market share
|
|
|
16.5
|
%
|
|
|
16.0
|
%
|
|
|
15.1
|
%
|
|
|
13.4
|
%
|
|
|
13.7
|
%
|
Japan
Japan is one of the leading countries with respect to technological advancements and improvements and will continue to demonstrate such strength. Toyota strives to earn customer satisfaction by
introducing products distinctive of Japans manufacturing ability such as value-added products including Lexus models, hybrid vehicles, vehicles with
3-seat
rows and mini-vehicles. Toyotas
consolidated vehicle sales in Japan in fiscal 2017 was 2,274 thousand units, an increase of 215 thousand units in comparison with the previous year. Toyota endeavors to secure and maintain its large share of and position atop the
Japanese market. Toyota held a domestic market share (excluding mini-vehicles) on a retail basis of 46.0% in fiscal 2015, 46.8% in fiscal 2016 and 47.8% in fiscal 2017.
Although Toyotas principle is to conduct production in regions where it enjoys true competitiveness, it considers Japan to be the source of its good manufacturing practices. Toyota supports its
operations worldwide through measures such as the development of new technologies and products,
low-volume
vehicles to complement local production, production of global vehicle models which straddle multiple
regions and supporting overseas factories. Toyota will continue the implementation of the new platform and the new unit for the Toyota New Global Architecture (TNGA) globally, with Japan at the core. In Japan, Toyota is implementing
flexible production based on market needs, in order to support its large share of domestic sales.
Since Toyota formed an
alliance with SUBARU CORPORATION. (SUBARU) in 2005, Toyota and SUBARU have utilized each others resources in development and production. In April 2008, in order to create
17
synergy and to further strengthen competitiveness, Toyota, Daihatsu and SUBARU agreed on joint development of a compact rear-wheel-drive sports car and OEM supply with compact cars and
mini-vehicles. In order to promote a smooth cooperation, SUBARU transferred 61 million SUBARU shares owned by SUBARU to Toyota in July 2008. As a result of this transfer, Toyota owns 16.5% of SUBARU issued shares. While Toyota vehicles have
been manufactured at SUBARUs North American production center, Subaru of Indiana Automotive, Inc. (SIA), since 2007, Toyota and SUBARU ceased such production in May 2016, and the collaboration between Toyota and SUBARU will shift
going forward to collaboration focusing on products and technology.
Toyota and Mazda have been engaged in collaboration such
as the licensing of Toyotas hybrid technologies to Mazda and the production of compact cars for Toyota at Mazdas plant in Mexico. In May 2015, Toyota and Mazda entered into an agreement to build a mutually beneficial long-term
partnership that leverages the resources of both companies to complement and enhance each others products and technologies and that will result in more appealing cars that meet the diverse needs and tastes of customers around the world. A
joint committee is currently evaluating how best to utilize each companys respective strengths. The committee will encourage broad and meaningful collaboration across a range of fields, including environmental and advanced safety technologies.
In 2011, Toyota and BMW Group agreed to conduct collaborative research in the field of next-generation
lithium-ion
battery technologies and for BMW to supply diesel engines to Toyota Motor Europe, Toyotas European subsidiary. In 2013, as part of their strategic long-term cooperation in the field of sustainable
mobility, Toyota and BMW Group entered into agreements for the joint development of a fuel cell system, joint development of architecture and components for sports vehicles and joint research and development of lightweight technologies. The two
companies completed collaborative research on
lithium-air
batteries, a post-lithium-battery solution as planned by conducting the second phase of collaborative research into next-generation
lithium-ion
battery cells.
In 2017, Toyota and Suzuki Motor Corporation (Suzuki), aiming to
contribute jointly to resolution of social issues and achievement of the sound and sustainable development of an automobile-based society, entered into a memorandum of understanding on beginning concrete examination of a business partnership. The
companies agreed to begin concrete examination toward the realization of business partnerships in areas including environmental technologies, safety technologies, information technologies and mutual supply of products and components. The companies
aim to realize the points agreed upon.
In Japan, there are five major domestic manufacturers, five specialized domestic
manufacturers and a growing volume of imports from major United States and European manufacturers. The prolonged economic slump in the Japanese economy and the recent increases in environmental awareness have also shifted consumer preference towards
more affordable automobiles such as compact and subcompact vehicles and towards utility vehicles such as mini-vans. For more than 40 years, Toyota has maintained its position as the largest automobile manufacturer in Japan. Every year since
fiscal 1999, Toyota, excluding Daihatsu and Hino, has achieved a market share (excluding mini-vehicles) of over 40%, reflecting in part the success of the introduction of new models for subcompact and compact cars, mini-vans and sedans. In
August 2005, Toyota launched the Lexus brand in Japan and achieved a record top market share of 25.6% in the luxury market in 2011. Toyota aims to further distinguish the Lexus brand by continuing to attract new and affluent customers including
customers that typically had purchased imported vehicles.
North America
The North American region is one of Toyotas most significant markets. Toyota has reorganized its production structure and made
improvements to its product lineup. In addition, Toyota is actively working to promote increased local operations independence in North America, in accordance with the Toyota Global Vision, announced in 2011.
18
In the North American region, of which the U.S. is the center, Toyota has a wide product
lineup (excluding large trucks and buses), and sold 2,837 thousand vehicles on a consolidated basis in fiscal 2017. This represents approximately 32% of Toyotas total unit sales on a consolidated basis. The U.S., in particular, is the
largest market in the North American region, accounting for 87% of the retail sales of Toyota in such region. Sales figures for fiscal 2017 were 99.9% of those in the prior fiscal year.
Toyota commenced sales of the first-generation Prius hybrid model in North America in 2000. The Prius became Toyotas bestselling
model behind the Corolla and Camry, having gained particular support among customers concerned with the environment. Toyota introduced the first hybrid model under the Lexus brand, the RX400h, and the Highlander hybrid in 2005. Toyota continued
further expansion of its environmentally friendly vehicles with the introduction of models such as the CT200h in 2011, the ESh and the Avalon HV in 2012, the NXh in 2014, the
all-new
Prius and the fuel cell
vehicle MIRAI in 2015 and the
all-new
Prius PHV in 2016.
Since the introduction of
the LS and ES models under the premium brand model, Lexus, in the United States in 1989, Toyota has expanded its Lexus sales with models including the GS, IS and RX. Toyota is seeking to steadily increase sales every year and achieved sales of
311 thousand units through the introduction of the new NX and RC models in 2014, 344 thousand units through the introduction of the new RX model in 2015 and 352 thousand units in 2016.
Toyota is continuing to revise its vehicle models and North American production capacities in response to changes in market conditions.
Starting 2011, Toyota, instead of importing from Japan, began production of the Corolla at its Mississippi plant. In 2013, the production capacity at the Woodstock plant in Canada increased from 150 to 200 thousand units per year, and the
production capacity at the Indiana plant also increased. Toyota commenced production of the RX450h hybrid model at its Cambridge plant in Canada in 2014. Through the business alliance with Mazda Motor Corporation, the production of Toyota brand
light vehicles for sale mainly in North America began at Mazdas plant in Mexico in June 2015. In addition, Toyota commenced production of the Lexus ES350 at its Kentucky plant for sale in the North America market starting in October 2015.
In terms of auto parts, Toyota increased production capacity of engine plants in Kentucky and Alabama in 2013 and 2014,
respectively, to meet rising demand, and also increased production capacity of auto parts at its automatic transmission plant in West Virginia in 2014. Toyota plans to increase the production capacity of the Tacoma from 100,000 to 160,000 in Baja
California, Mexico in 2018 and of the Highlander at its Indiana plant in 2019. In the meantime, consignment production that started at SIA in 2007 ceased in May 2016.
In order to further strengthen competitiveness in North America, Toyota will continue the realignment of North American manufacturing operations going forward. As part of this effort, a new plant will be
built in Mexico in 2019 and production of the Corolla will be shifted from the plant in Canada to the new plant in Mexico. In addition to the plant in Mississippi, compact cars will also be produced at the new plant. Toyota will consider focusing
its production of
mid-sized
vehicles in the plant in Canada, along with the plants in Indiana and Kentucky, by commencing production of
mid-sized
vehicles instead of the
Corolla in Canada starting in 2019.
As for Toyotas vehicle development in North America, the Toyota Technical Center
spearheads the design, planning, and evaluation of vehicles and parts as to their ability to meet customer needs. Toyota will continue to promote self-reliance towards producing even better cars in the future.
In April 2014, Toyota decided to relocate its North American headquarters for manufacturing, sales and marketing, financial services
and other functions to the city of Plano in northern Dallas, Texas. By unifying its North American operations, Toyota plans to promote collaboration and efficiencies across functions, position itself to deliver ever-better cars to
customers and work towards realizing sustainable growth in the North America market. The relocation is expected to take place following the completion of the construction of the new headquarters by the end of 2017.
19
Europe
Toyotas principal European markets are Germany, France, the United Kingdom, Italy, Spain and Russia. Toyotas principal competitors in Europe are Volkswagen, Renault, Ford, Opel and Peugeot, as
well as Korean manufacturers Hyundai and Kia.
While competition in Europe continues to intensify, Toyota has expanded its
lineup of hybrid models to further strengthen its sales operations, and has entered into supply agreements with BMW and PSA for diesel engines and light commercial vehicles, respectively. As a result, Toyota launched the BMW engine-equipped Verso in
early 2014 and started equipping the RAV4 with BMW engines beginning in 2015. Toyota also began sales of light commercial vehicles supplied by PSA from
mid-2013.
To strengthen its business setup so that it is
less likely to be affected by exchange rates, Toyota launched RAV4 for Russia at OOO TOYOTA MOTOR (TMR) and
C-HR
for Europe at Toyota Motor Manufacturing Turkey Inc. (TMMT)
in 2016 in the form of local production. In addition, Toyota is actively promoting production and sales measures that meet local demand by strengthening its value chain including used car dealerships, after-sales services and finance and insurance
services.
In 2016, while sales in the United Kingdom fell slightly below that of previous year and the market in Russia
continued to suffer from sluggish economic recovery, the European market expanded from the previous year as the Eurozone market recovered steadily due to its strong economy.
Sales in 2016 in Europe hit a new record due to higher sales in principal markets such as Germany, France, Italy and Spain from the sales expansion of hybrid core models including Yaris, as well as solid
sales in Poland, Turkey and Israel, even though the sales in Russia remained around the same as the previous year. Toyotas consolidated vehicle sales in Europe in fiscal 2017 was 925 thousand units, an increase of 9.5% from fiscal 2016.
Toyota has in the past increased European production in response to sales growth, establishing Toyota Motor Manufacturing
(UK) Ltd. (TMUK) in 1992, TMMT in 1994 and Toyota Motor Manufacturing France S.A.S. (TMMF) in 2001. Further, in 2005, Toyota Peugeot Citroën Automobile Czech was formed as a result of a joint venture with PSA Peugeot
Citroën as vehicle supply factories to Europe.
Toyota commenced production of the compact crossover
C-HR
by increasing the annual production capacity of TMMT from 150,000 units to 280,000 units (three-shift) in September 2016.
Toyota opened the Toyota Motor Manufacturing Russia plant in 2007 as a base for its manufacturing operations in the Russian market (integrated to sales entity TMR in March 2013). A
two-shift
production operation started in September 2012 and production capacity was increased from 20,000 units to 50,000 units per year. In August 2016, the production capacity was increased to 100.000 units
and the production of the RAV4 commenced in addition to the Camry. Toyota commenced complete knock down, or CKD, production of the IMV Fortuner in Kazakhstan beginning in the spring of 2014.
In terms of auto parts, in October 2016, Toyota decided to produce hybrid transaxles and gasoline engines in Poland. Toyota will start
production of hybrid transaxles in 2018 at Toyota Motor Manufacturing Poland (TMMP), a production plant for transmissions and engines, and add two gasoline engines a 1.5L in 2017 and a 2.0L in 2019 at Toyota Motor
Industries, Poland (TMIP), a production plant for diesel engines. In concert with the enhancement of the gasoline engine business, the two companies were integrated in April 2017.
Asia
Toyotas consolidated vehicle sales in Asia (including China) in
fiscal 2017 was 1,588 thousand units, an increase of 18.1% from fiscal 2016.
20
In light of the importance of the Asian market that is further expected to grow in the long
term, Toyota aims to build an operational framework that is efficient and self-reliant as well as a predominant position in the automotive market in Asia. Toyota has responded to increasing competition in Asia by making strategic investments in the
market and developing relationships with local suppliers. Toyota believes that its existing local presence in the market provides it with an advantage over new entrants to the market and expects to be able to promptly respond to demand for vehicles
in the region.
In this region, Toyota has been further strengthening its business foundations by improving its product
line-up,
expanding local procurement and increasing production capacities.
Toyotas
principal Asian markets are Thailand, India, Indonesia, Malaysia and Taiwan.
As part of Toyotas efforts to expand
business, Toyota Motor Thailand Co., Ltd. commenced production of hybrid vehicles such as the Camry hybrid in 2009. Toyota also started operation of its second Gateway plant in 2013, expanding production capacity by 80 thousand units in
Thailand to 810 thousand units. In April 2015, Toyota implemented a full model change for IMV models manufactured at its Samrong Plant and Ban Pho Plant in Thailand.
In India, Toyota constructed a second plant with an annual production capacity of 70 thousand units and commenced production and sales of the Etios compact model designed specifically for the Indian
market in 2010. Furthermore, Toyota increased production capacity in India during 2012 and 2013 to 210 thousand units. Moreover, Toyota began exporting the gasoline-fueled model of the Etios to South Africa from India in 2012.
In Indonesia, Toyota introduced the Etios and commenced operation of a second plant in Karawang in 2013 in order to meet the diverse
customer needs and the expanding market. In 2014, Toyota increased the initial production capacity of 70 thousand units per year to 120 thousand units per year with the introduction of the Vios and the Yaris, and also began exporting the
Vios to the Middle East. Toyota also constructed a passenger vehicle engine plant that commenced production in February 2016.
In Malaysia, Toyota began production of the Camry hybrid in March 2015, and is planning to reorganize its production structure there
in 2019 by building a new plant dedicated to passenger vehicles while making the existing plant dedicated to commercial vehicles. In addition, in 2016 Toyota began production and sales of the Sienta in Taiwan in response to diversifying demands.
China
Toyota has been conducting operations in China through joint ventures, and its success in producing products that meet local demands and
in establishing its sales and service network has significantly contributed to Toyotas profits. Based on the firm business foundation that it has established, Toyota is conducting its operations with the aim of promoting further growth and
increasing profitability through further development of its sales and service network and expansion of its product lineup.
In
China, Toyota has been conducting joint ventures with two major partners. First, with respect to the joint venture with China FAW Group Corporation since Toyota first launched the Vios through the joint venture in 2002, Toyota has been producing and
selling the Land Cruiser Prado, the Corolla, the Corolla HV, the Crown, the REIZ, the Coaster and the RAV4 in China. With regard to production capacity, in 2007, Toyota commenced production at the new Tianjin Teda plant, which has an annual
production capacity of 200 thousand units, and in 2012, commenced production at a new factory of Sichuan FAW Toyota Motor Co., Ltd. in Changchun, China, which has an annual production capacity of 100 thousand units. Toyota
also increased annual production capacity of the plant in Sichuan from 30 thousand units to 50 thousand units in the spring of 2015 to increase production of the Prado. Toyota plans to construct a new production line to replace an aging
existing line at the Tianjin Teda plant in the middle of 2018. In addition, Toyota sought to improve production efficiency by closing small, aging production lines at the Changchun East Plant of Sichuan FAW Toyota Motor Co., Ltd. in
December 2016 and the Xiqing Plant of Tianjin FAW Toyota Motor Co., Ltd. in February 2017.
21
GAC Toyota Motor Co., Ltd., a joint venture between Toyota and Guangzhou Automobile Group
Co., Ltd., commenced sales of the Camry in 2006, followed by production and sales of the Yaris, the Highlander, the Ez, the Levin and the Levin HV. In 2006, it commenced production at the first plant with an annual production capacity of
around 200 thousand units. In addition, a second plant commenced production in 2009 and Toyota plans to expand its annual production capacity to approximately 460 thousand units by completing construction of a third plant in 2017.
In terms of auto parts, in 2014, Toyota opened a plant in Changshu in Jiangsu, China for the production of the CVT as the
first CVT plant outside of Japan and in September 2015, Toyota also began production of HV Transaxles at the CVT plant. Toyota also launched a plant to produce hybrid vehicle batteries in October 2015.
Total vehicle sales in the Chinese market increased 13% from 25.00 million in 2015 to 28.30 million in 2016. In this market,
Toyotas sales in 2016 were 1.22 million vehicles, up 8% from the previous year. In the passenger vehicle market (22.57 million units), Toyota had a market share of 6%. In 2016, favorable conditions in the
less-than-1.6
liter market continued, and in particular sales of SUVs expanded as a result of customers value diversification. As for Toyotas distribution network, Toyota has been expanding the
distribution network for locally produced vehicles in cooperation with Chinese joint venture partners under Tianjin FAW Toyota Motor Co., Ltd. and Guanqi Toyota Motor Co., Ltd., and for imported vehicles, Toyota has also been expanding primarily the
Lexus brand sales network. Toyota plans to further increase sales by expanding the number of dealers and the product lineup for both locally produced and imported vehicles. In addition, as the market in China develops, Toyota plans to promote the
so-called
Value Chain businesses such as used cars, services, financing and insurance.
South
and Central America, Oceania, Africa and the Middle East
Toyotas consolidated vehicle sales in South and Central
America, Oceania, Africa and the Middle East (collectively, the Four Regions) in fiscal 2017 were 1,347 thousand units, a decrease of 15.5% from fiscal 2016.
In these regions, which are expected to become increasingly important to Toyotas business strategy, Toyota aims to develop new products which meet the specific demands of each region, increase
production and further promote sales.
Toyotas principal markets in the Four Regions are Brazil in South and Central
America, Australia in Oceania, South Africa in Africa and Saudi Arabia in the Middle East.
The core models in this region are
global models such as the Corolla, IMV (the Hilux) and Camry. In order to increase production of IMVs, Toyota expanded the annual production capacity of its Argentina factory from 70 thousand units to 90 thousand units in 2011. Toyota
further increased annual production capacity to 140 thousand units per year at the end of 2015 and is seeking to increase production to meet demand after 2016. In order to expand business in Brazil, Toyota constructed a new factory in Sorocaba
with an annual production capacity of 70 thousand units, and in 2012, began production and sales of compact vehicles. Starting from the beginning of 2016, Toyota increased production capacity to 110 thousand units per year.
Further, Toyota began local production of the Fortuner in Egypt in 2012.
Moreover, in terms of auto parts, Toyota commenced production at a plant in Brazil for passenger vehicle engines in February 2016.
Toyota plans to end production of vehicles and engines at Toyota Motor Corporation Australia Ltd. by October 2017.
22
Production
Toyota and its affiliated companies produce automobiles and related parts and components through more than 50 overseas manufacturing companies in 28 countries and regions besides Japan. Toyotas
major manufacturing facilities include plants in Japan, the United States, Canada, the United Kingdom, France, Turkey, Thailand, China, Taiwan, India, Indonesia, South Africa, Australia, Argentina and Brazil. Daihatsu brand vehicles are produced at
4 factories in Japan and 2 manufacturing companies in 2 other countries of Indonesia and Malaysia. Hino brand vehicles are produced at 2 factories in Japan and 10 manufacturing companies in 10 countries, including Indonesia and Thailand. For a
listing of Toyotas principal production facilities, see Information on the Company Property, Plants and Equipment.
In promoting a sustainable growth strategy, establishing a system capable of providing optimal supply of products in the global market is integral to Toyotas strategy.
In line with its basic policy of manufacturing where there is demand and where Toyota is truly competitive, Toyota will make efficient
use of and maximize capacity utilization at its existing plants to respond to the expanding market and will continue to focus on making efficient capital investments as necessary. Furthermore, Toyota will continue to place top priority on safety and
quality in strengthening true competitiveness with the aim of achieving sustainable growth.
In 2016, 76.5% of Toyota vehicles
sold in overseas markets were manufactured in overseas plants by Toyota and its unconsolidated affiliated companies. In 2016, approximately 75.9% of Toyota vehicles sold in North America were produced in North America. Of the vehicles sold in Europe
in 2016, approximately 75.2% were produced in Europe. In fiscal 2017, Toyota produced on a consolidated basis 4,109 thousand vehicles in Japan and 4,866 thousand vehicles overseas, compared to 3,981 thousand vehicles in Japan and
4,595 thousand vehicles overseas in fiscal 2016.
The following table shows the worldwide vehicle unit production by
Toyota for the periods shown. These production figures do not include vehicles produced by Toyotas unconsolidated affiliated companies. The sales unit information elsewhere in this annual report includes sales of vehicles produced by these
affiliated companies. Vehicles produced by Daihatsu and Hino are included in the vehicle production figures set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
Units Produced
|
|
|
8,698,454
|
|
|
|
9,032,165
|
|
|
|
8,929,887
|
|
|
|
8,575,899
|
|
|
|
8,975,509
|
|
Toyota closely monitors its actual units of sale, market share and units of production data and uses this
information to allocate resources to existing manufacturing facilities and to plan for future expansions.
See
Capital Expenditures and Divestitures for a description of Toyotas recent investments in completed plant constructions and for a description of Toyotas current investments in ongoing plant constructions.
The Toyota Production System
Toyota pioneered the internationally recognized production system known as the Toyota Production System. The Toyota Production System is based on Toyotas own concepts of efficient
production of only necessary and quality products and efficient cost reduction, and has the following two principal elements:
23
Just-in-Time
is an approach in which necessary
parts and components are manufactured and delivered in just the right quantity in a timely manner just as they are needed. This allows Toyota to maintain low levels of inventory while maintaining operating efficiency.
Jidoka
is a production concept which involves immediate stop of work when problems arise in the production line in order to stop
the production of defective items from being passed on to subsequent stages of the process, and therefore making quality assurance an inherent part of the production process. To achieve this, Toyotas equipment is designed to detect and
highlight abnormalities and to stop whenever abnormalities occur. Toyota also authorizes its machine operators and other members of its production team to stop production whenever they note anything suspicious. This helps Toyota to build quality
into the production process by avoiding defects and preventing the waste that would result from producing a series of defective items.
Toyota believes that the Toyota Production System allows it to achieve mass-production efficiencies even in
high-mix,
low-volume
production. This belief gives Toyota the flexibility to respond to changing consumer demand without significantly increasing production costs. While the Toyota Production System remains the basis of
Toyotas automobile production, the system has been expanded for use in Toyotas parts production, logistics and customer service activities as well.
Through the Toyota Production System, issues are identified and analyzed at the actual site, the entire production process is made visible and production efficiency as well as product quality are improved
through the application of measures to address the sources of problems. As one method to implement these measures, Toyota utilizes sophisticated information technologies to improve each step of its vehicle development process, from product planning
to commencement of mass-production. These technologies are intended to enhance flexibility, simplification, quality, cost competitiveness and speed. Specifically, detailed virtual assembly and other simulations of manufacturing processes are
conducted on computers for a new vehicle or new production equipment/systems before a prototype is made. An actual prototype is made only after defects and related issues have been identified and resolved by computer simulation, thereby minimizing
the time required for rebuilding prototypes and significantly shortening the time required before starting mass production. Moreover, this system is used to prepare virtual factories and other visual aids in order to facilitate training and
communication at overseas plants and enable the efficient transfer of necessary technology and skills.
In order to strengthen
manufacturing and promote localization of overseas production, Toyota established the Global Production Center (GPC) in July 2003 as a development and training center for global human resources. The GPC is intended to introduce
local managers to the Toyota methodology, allowing them to train their subordinates while managing locally. GPC develops simple,
easy-to-understand
and efficient
training systems for the development of explicit knowledge. One characteristic of the GPC is that managers and supervisors, new hires and experienced workers can all receive common skill-training. GPCs training system involves a
pre-training
phase where trainees learn basic skills and discover the skills that they must acquire through image training. This is followed by various steps, from basic skill training and elemental task training to
standard task training, which ensures a
step-by-step
training. The fruits of this training method are reduced training time, higher levels of achievement and the
efficiency of training. Since January 2006, Toyota has opened regional GPCs in North America, Europe and Asia. In each region, Toyota commenced courses where trainees from each department are trained by local trainers to become trainers
themselves.
In April 2015, the GPC was reorganized into the TPS Promotion Center. In concert with each
in-house
company, the TPS Promotion Center inherited and utilizes the way of thinking and methods of TPS (Toyota Production System) in order to contribute to challenge, growth and creation of solid
foundation that support all of Toyota. In order to improve its overall manufacturing abilities, Toyota is also comprehensively promoting TPS, sound and efficient launches of global vehicle models, activities centering on improving production,
engineering and manufacturing methods at each manufacturing process, reinforcement of infrastructure, fostering highly skilled workers, development of best practices and strengthening maintenance power and systematic structures, as well as has been
working to resolve issues relating to the entire supply chain, including distributors and technical divisions.
24
Toyota is working company-wide towards the production of ever-better cars. The
production engineering and manufacturing divisions are developing Toyotas own innovative production systems, equipment and processing technologies and deploying them in production lines in order to produce vehicles that create excitement, joy
and fun for customers through truly competitive manufacturing methods.
Distribution
Toyotas automotive sales distribution network is the largest in Japan. As of March 31, 2017, this network consisted of 280
dealers employing approximately 32 thousand sales personnel and operating approximately 4.7 thousand sales and service outlets. Toyota owns 15 of these dealers and the remainder is independent.
Toyota believes that this extensive sales network has been an important factor in its success in the Japanese market. A large number of
the cars sold in Japan are purchased from salespersons who visit customers in their homes or offices. In recent years, however, the traditional method of sales through home visits is being replaced by showroom sales and the percentage of automobile
purchases through showrooms has been gradually increasing. Toyota expects this trend to continue, and accordingly, is working to improve its sales activities such as customer reception and meticulous service at showrooms to increase customer
satisfaction.
Sales of Toyota vehicles in Japan are conducted through four sales channels Toyota,
Toyopet, Corolla and Netz. In addition, Toyota introduced the Lexus brand to the Japanese market in August 2005, and currently distributes the Lexus brand vehicles through a network of 168 sales outlets in
order to enhance its competitiveness in the domestic luxury automobile market. The following table provides information for each channel as of March 31, 2017.
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Dealers
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|
Channel
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|
Toyota
Owned
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|
|
Independent
|
|
|
Total
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|
Market Focus
|
Toyota
|
|
|
4
|
|
|
|
45
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|
|
|
49
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|
|
Luxury channel for Toyota brand vehicles
|
Toyopet
|
|
|
4
|
|
|
|
48
|
|
|
|
52
|
|
|
Leading channel for the medium market
|
Corolla
|
|
|
4
|
|
|
|
70
|
|
|
|
74
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|
|
Volume retail channel centering on compact models
|
Netz
|
|
|
3
|
|
|
|
102
|
|
|
|
105
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|
|
Sales channel targeting customers with new values for the 21
st
century
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|
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|
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|
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|
|
|
|
Brand
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|
|
Sales
Outlets
|
|
|
Market Focus
|
Lexus
|
|
|
|
168
|
|
|
Premium brand
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Outside Japan, Toyota vehicles are sold through approximately 170 distributors in approximately
190 countries and regions. Through these distributors, Toyota maintains networks of dealers. The chart below shows the number of Toyota distributors as of March 31, 2017 by country and region:
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|
Country/Region
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|
Number of Countries
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|
|
Number of Distributors
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|
North America
|
|
|
3
|
|
|
|
5
|
|
Europe
|
|
|
53
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|
|
|
30
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|
China
|
|
|
1
|
|
|
|
4
|
|
Asia (excluding China)
|
|
|
19
|
|
|
|
12
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|
Oceania
|
|
|
17
|
|
|
|
15
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|
Middle East
|
|
|
16
|
|
|
|
14
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|
Africa
|
|
|
55
|
|
|
|
48
|
|
Central and South America
|
|
|
30
|
|
|
|
40
|
|
25
Improving Efficiency
Toyota is working on the following to create a corporate structure allowing for efficient development, production and sales that can respond flexibly to changes in the external environment:
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working with suppliers as one team to dramatically increase the efficiency of development;
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creating a production structure that can better withstand fluctuations in demand and currency exchange rates; and
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strengthening sales capabilities in line with local conditions.
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Toyota also plans to improve profitability and enhance operating efficiency by continuing to pursue aggressive cost reduction programs,
including:
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improving product development and production efficiencies through the
re-integration
and improvement of vehicle
platforms and power trains as well as through the development of electronic platforms which organize electronic devices of vehicles as a package and standardize electronic structure and infrastructure;
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implementing Ryohin-Renka Cost Innovation
(RR-CI)
activity, which aims for the elimination of waste
in all processes from design to production while ensuring the reliability and safety of each part;
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applying advanced information technologies to improve efficiency throughout the product development and production processes;
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promoting global reinforcement of the supply base under an open and fair purchasing policy;
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streamlining production systems; and
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improving the efficiency of domestic and international distribution.
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Toyota is further improving production efficiency by installing more versatile equipment and systems, modifying vehicle body designs to
allow for a greater variety of models on each production line and sharing more parts among vehicles, not simply among different models but also among different platforms.
In April 2012, Toyota announced a new development framework, the TNGA, which reconciles sweeping advances in product appeal with cost reductions. The new framework sets forth an architecture that
incorporates not only the three fundamental vehicle functions of moving, turning and stopping, but also ergonomics such as driving position as well as freedom of design. Toyota plans to efficiently develop cars with high basic-performance attributes
by developing parts and modules based on this architecture. The TNGA provides for handling multiple models simultaneously in grouped development projects that will increase the sharing of parts and core vehicle components. This sharing, carried out
in cooperation with suppliers, will result in lowered costs, thereby allowing developmental manpower and funds to be reinvested in R&D to meet consumer preferences and R&D to meet regional needs, resulting in further product improvement.
By April 2013, Toyota established systems to rapidly promote the TNGA and carried out product development under this new
way of doing business. As a result, Toyota realized high basic performance and marketability in the Prius that was introduced in Japan in December 2015. Toyota has rolled out, and plans to continue to roll out, the results of such development to
other vehicles as well.
Enhancing Vehicle Functionality and Realizing a Smart Mobility Society
Toyota is striving to realize a smart mobility society in which people feel at ease and excited about being in cars and in everyday life
by connecting vehicles, people and communities in order to meet the needs of rapidly changing societies, including the falling birth rate and aging populations in developed nations and an increasingly diverse range of energy sources, among others.
In particular, Toyota aims to contribute to an affluent lifestyle
26
that offers peace of mind by enhancing vehicle functionality that will increase the attractiveness of vehicles and the excitement of driving, enhancing transport systems that make being in cars
more comfortable and more environmentally friendly, and realizing Smart Communities that aim for optimization of local energy use and establishment of a
low-carbon
emission transportation system.
Enhancing Vehicle Functionality Information Service Functions
To Toyota, enhancing vehicle functionality means advancing information service functions that integrate vehicles with telecommunication systems, and driving assistance functions that use communication
technologies and sensor technologies to create vehicles with intelligent features. Information service functions can improve convenience and enrich the driving experience through information communication technologies that add new functions that are
connected to the basic vehicle functions of running, turning and stopping. Examples include the following:
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Toyota is advancing enhancement of car navigation systems, such as car parking maps that display detailed information inside car parks, as well as the
VICS system (Vehicle Information and Communication System) that provides real-time road traffic information such as congestion, accidents, traffic restrictions and parking. Car navigation systems play an increasingly important role in providing
drivers with various types of information on safety, smooth traveling, comfort and convenience.
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T-Connect/G-BOOK
is the latest information network service that merges
the latest network technologies and car multimedia a step ahead of the arrival of the ubiquitous network society.
T-Connect/G-BOOK
provides various types of information
useful for driving, as well as safety and security services that detect unusual conditions in the vehicle, thereby supporting a lifestyle with ones vehicles anytime and anywhere through a network. In 2005, Toyota started
G-BOOK
ALPHA and
G-Link
for Lexus, each with additional various features including traffic congestion forecast service. In 2007, Toyota launched
G-BOOK
mX, which in addition to the well-received conventional safety and security services of
G-BOOK,
introduced even more useful car navigation services such as
Map-on-Demand
the worlds first technology for automatically updating map data and Probe Communication Traffic Information that
provides drivers with highly precise information on traffic congestion. In 2014, Toyota launched
T-Connect,
which in addition to conventional telematics services, provides new services and functions through
the distribution of applications to
on-board
device, as well as destination and other information searches through the adoption of a voice recognition system.
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HELPNET is an emergency dial system that, in the event of a traffic accident or medical emergency, transmits information required for emergency rescue,
such as present-location data and vehicle details, either automatically or with the touch of a button. It immediately contacts police and fire departments through the HELPNET Operation Center. This system is integrated into
T-Connect/G-BOOK
and
G-Link
to improve the quality of services. HELPNET shortens the time taken to report following an emergency
situation, which contributes to decreasing the number of traffic accident fatalities and reducing the level of impact, while at the same time aiming to prevent secondary disasters and ease traffic congestion.
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In addition to the above, Toyota also operates a Japanese-language web portal for automobile information, GAZOO.com. The name
GAZOO originates from the Japanese word
gazo
, meaning images. GAZOO was established as an Internet membership service linking Toyota, its national dealer network and GAZOO members, and has provided information on new and used
Toyota vehicles and related services, as well as online shopping services. GAZOO later provided information on not only Toyota vehicles but also other automakers, as well as offering a rich blog feature as a social networking portal site on
automobiles. In addition, GAZOO has exhanced its contents
line-up
through which Toyota aims to expand the fan base of car enthusiasts by promoting activities where customers can experience in real life the
enjoyment that cars offer, such as TOYOTA GAZOO Racing. GAZOO is currently in charge of all Toyota motor sports activities (such as WRC, WEC and SuperGT). Toyota utilized its GAZOO technology that links the customers, distributors and Toyota to
further expand its automobile information service by launching the
G-BOOK
telematics service in Japan in fall 2002 and
G-Link,
which is a service exclusive to Lexus, in
August 2005. Toyota also offers a theft detection system, vehicle tracking service
27
and operator support service as standard services to enhance services aiming to provide safety, security and comfort for
T-Connect/G-BOOK
and
G-Link
users in their lifestyle using vehicles. With
G-BOOK
mX
announced in April 2007, Toyota started offering services that allow drivers to use more convenient navigation systems such as
Map-on-Demand
the
worlds first technology for automatically updating map data. In addition, Toyota has further strengthened its linkage between GAZOO and
G-BOOK
and has, for example, allowed map information searched on a
blog on GAZOO.com to be used on
G-BOOK,
further maturing as a comprehensive telematics service. In Japan, Toyota is seeking to promote the use of the
T-Connect/G-BOOK
by equipping all Lexus models and certain Crown models with the
T-Connect/G-BOOK
as a standard feature. Toyota
has also licensed its
T-Connect/G-BOOK
technology to certain other competitors in Japan. Toyota is applying the technology and experience which it has accumulated in
Japan to regions outside Japan;
G-BOOK
services were introduced in China in March 2009, and unique telematics services in the United States were launched in August 2009. In addition, Toyota began
offering telematics services for smartphones in December 2010 in Japan, and began to offer the same service in Thailand in March 2012 and the Middle East from January 2014 (UAE, Qatar and Lebanon in January 2014, Saudi Arabia in
August 2014, Bahrain in October 2014 and Kuwait in January 2015).
In addition, in March 2004, Toyota
launched its CRM (Customer Relationship Management) system called
e-CRB
(evolutionary Customer Relationship Building) in Thailand.
e-CRB
builds on a technology
cultivated through the development of Gazoo and
G-BOOK
and offers its customers a variety of services such as providing information on new vehicles, accepting requests for brochures and estimates and notifying
customers when it is time for maintenance by keeping track of the vehicles maintenance history and mileage. In addition,
e-CRB
offers an advanced operation system that can be utilized comprehensively at
dealers including new and used cars and services. Toyota is promoting
e-CRB
in countries such as China, Thailand, Australia, India and Brazil where steady progress has been made as the
service-in
ratio has increased. In 2013, Toyota introduced the next-generation
e-CRB
that adopts tablet terminals (portable information processing terminals) in China. These
tablet terminals are supporting the improvement of customer satisfaction at points of sale and in after-sale service.
Toyota
also introduced a system called Sales Logistics Integrated Management (SLIM) in Guangzhou, China and India. By utilizing real sales information and linking with production and distribution, Toyota is able to realize the
Just-in-Time
production system of producing and delivering only the number of vehicles that have been sold. SLIM has been recognized to significantly increase the freshness of
inventory and improve cash flow.
In September 2010, Toyota announced its smart-grid initiatives, which are intended to
demonstrate efficient energy use toward the realization of a
low-carbon
and energy-saving society. By utilizing technology cultivated through the Internet and telematics services mentioned above, Toyota
developed the Toyota Smart Center (TSC) that optimally controls electricity and links EV (electric vehicles) and PHV
(plug-in
hybrid vehicles) with homes, and conducted a demonstration project in
Rokkasho Village in Aomori aimed at reducing overall CO2 emissions and users electricity costs. In addition, in order to develop a global platform of the TSC, Toyota announced a partnership with Microsoft Corp. in April 2011 and a
partnership with Salesforce.com in May 2011. Toyota plans to utilize the cloud technology of these two companies in its Internet and telematics services to build a framework for TSCs global implementation. In January 2012, Toyota
began eConnect and TOYOTA friend services for PHV. In May 2013, Toyota utilized the latest version of Microsofts SharePoint to comprehensively redesign GAZOO, the automobile information portal site. Toyota aims to offer new
services, achieve better vehicle quality and enhance product attractiveness as well as contribute further to society by utilizing the vehicle information, road conditions and other parameters collected via telematics services and stored at the TSC.
With regard to contribution to society, Toyota began offering the Big Data Traffic Information Service in June 2013, through which traffic information, statistics and other related information are provided to local governments, universities and
businesses to support traffic flow improvement and assist disaster prevention measures. In December 2016, Toyota launched the TC Smartphone Navigation
free-of-charge
to
users, including those other than Toyota users, to provide readily usable route history maps. Toyota plans to continue to work with new information technologies and the IT industry to establish a framework for TSCs global implementation and to
realize a mobility society of the future.
28
In 2016, Toyota has been working actively on connected car technology and
alliances with other companies for effective vehicle data utilization to make ever-better cars and for safer and securer connected service. In January 2016, Toyota announced a connected vehicle framework to
increase installation of a Data Communication Module (DCM) into a broader range of its vehicles starting in the United States from 2017. In April 2016, Toyota established a new company, Toyota Connected, Inc., in the United States to
consolidate and analyze information collected from vehicles and to develop new products, and thereby promoting making ever-better cars through utilizing big data. In addition, Toyota is collaborating with insurance companies on
developing insurance services as well as tying up with a sharing service company, thereby actively advancing research for new services and the realization of a mobility society utilizing big data.
As a further engagement in the insurance industry, Toyota established Toyota Insurance Management Solutions USA, LLC (TIMS),
a new U.S. telematics car insurance services company, to promote analysis of big data and development of algorithms. TIMS provides telematics insurance services best suited to Toyotas customers by consolidating Toyotas data, financing
and insurance knowhow.
In November 2016, based on the proliferation and popularity of mobility services
such as
car-sharing,
Toyota started to establish the Mobility Services Platform (MSPF), which has various functions to support mobility services, leveraging the TSC, the Toyota Big Data Center, and
financial services. MSPF is a platform that aggregates and covers individual business functions, such as vehicle management systems and leasing programs, that Toyota developed and offered to mobility service providers such as ridesharing operators
when working together with them. As one example of the functions that MSPF offers, to enhance a MSPF-based
car-sharing,
Toyota developed the smart key box (SKB) that enables users to lock and
unlock doors and to start the engine with their smartphone thus providing a safer and more secure way of lending and renting cars. Using the MSPF and SKB, Toyota started a pilot program in collaboration with Getaround, a venture company
providing
car-sharing
services targeted at individuals in the United States, in March 2017 in San Francisco, California.
Toyota and Uber Technologies, Inc. have entered into a memorandum of understanding to explore collaboration with respect to ridesharing. As part of the partnership, the companies created new leasing
options in which car purchasers can lease vehicles with connected terminals from Toyota Financial Services and cover their payments through earnings generated as Uber drivers.
Toyota and Japan Federation of Hire-Taxi Associations have entered into a memorandum of understanding to explore areas for collaboration, so as to develop and introduce the Japanese taxi of the
future. Through use of taxis to collect and analyze of information concerning the road traffic environment, and applying those results to the development of the Mobility Teammate Concept, which embodies Toyotas vision of automated
driving, Toyota and the Japan Federation of Hire-Taxi Associations will continue to be important partners in helping to develop Japanese taxis into the worlds safest, most pleasant, world-class public transportation service and to
strengthen the Japanese transportation infrastructure.
Enhancing Vehicle Functionality Driving Assistance Functions
Toyotas driving assistance functions offer functions that assist drivers with an aim to lessen the burden of driving, enhance safety
and provide to everyone the pleasure of driving. Toyota has commercialized enhancements to various functions that assist the driver in sensing external information, avoiding danger and making appropriate maneuvers. Examples of driving assistance
functions include the following:
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VDIM (Vehicle Dynamics Integrated Management) is a system that constantly monitors the drivers operations and the vehicles situation and
centrally manages the engine, steering mechanisms and brakes. By stabilizing the vehicle before the driver loses control of the vehicle, VDIM achieves a high level of active safety and improves driving performance, consisting namely of
running, turning and stopping.
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29
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Pre-collision
System is a system that perceives possibilities of a crash with obstacles, cars in
front or crossing pedestrians through a sensor installed in a vehicle. If a collision seems likely, it proceeds to activate warnings as well as brake assistance, which aids the drivers operation of the brake, or the automatic braking system,
which aids in avoiding the collision altogether or mitigates any damage.
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Radar Cruise Control (with
all-speed
tracking function) allows the vehicle to keep a constant
distance between itself and the preceding vehicle within a speed range from zero to a preset speed, automatically slowing down and stopping if necessary to avoid collision. When the car in front speeds up, it allows the driver to accelerate.
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Lane Departure Alert is a system that uses a camera to detect white or yellow lane markers while driving. The system warns the driver with
a buzzer and displays if it detects possible deviation in order to assist in avoiding a collision accident resulting from deviation. In addition, Lane Keeping Assist System, a system that assists the drivers operation of the
steering wheel with electric power steering in order to help keep the vehicle traveling between lane markers, has been developed.
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Automatic High Beam detects the headlights of oncoming vehicles or taillights of vehicles running in front and adjusts the headlight range,
automatically switching to low beam or high beam, in order to avoid dazzling the visions of the drivers with bright lights, as well as to secure the drivers forward visions at night.
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Blind Spot Monitor is a system which aims to reduce accidents by alerting the driver to other vehicles in the drivers blind spot
diagonally behind the drivers seat with sound and visual display in the side mirrors while changing lanes.
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From these driving assistance functions, in 2015 Toyota commercialized the Toyota Safety Sense, a collision avoidance support package that includes the
Pre-collision
System, the Lane Departure Alert and the Automatic High Beam. By the end of 2017, Toyota plans to install this package on nearly all models sold in Japan, the United States and Europe at an
affordable price aimed at widespread adaption.
Enhancing Transport Systems
Enhancing transport systems requires taking a general approach that addresses various factors across a wide scope that are pertinent not
only to vehicles but also roads, people and public transport systems in order to ensure smooth and efficient movement of people and vehicles and to build a safe transportation environment. In addition to VICS and ETC (Electronic Toll Collection
System), which are already standard in Japan, the Cooperative ITS, which combines cutting edge IT and vehicle technology, is in development and has begun to be partially implemented.
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The operation of ETC2.0 commenced in 2009 and corresponding products are available for purchase. Mainly for use on highways, this service
provides drivers with information related to road traffic and safe driving that is transmitted from road infrastructures to car navigation systems via video and voice.
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In the summer of 2011, Toyota introduced products corresponding to the driving safety support system, DSSS, which the National Police
Agency has started operating. Mainly for use on general roads, this system supports safe driving, including by preventing the driver from overlooking red lights, by transmitting traffic control information (such as traffic lights and signs) and
peripheral information from road infrastructures to automobiles.
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Aiming at further reducing accidents, ITS Connect, a driving safety support system that uses a dedicated ITS frequency of 760 MHz, was
introduced in the fall of 2015. Through direct and continuous exchange of information between vehicles and the road and among vehicles, this system aims to mitigate accidents near intersections, which have been difficult to mitigate to date. The
system also includes Communicating Radar Cruise Control features, which supports smooth acceleration and
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30
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deceleration when following behind another vehicle. Toyota aims at the realization of automated driving in which all drivers can move safely, smoothly and freely by integrating ITS technology and
vehicle control technology.
|
Toyota is committed to developing new ITS products. Toyota believes that
intelligent transport systems will become an integral part of its overall automotive operations and enhance the competitiveness of its vehicles. As familiarity with and demand for ITS products grow, Toyota expects an increasing number of ITS
products to become commercially available and achieve greater acceptance each year.
Smart Communities
In April 2010, Toyota City was selected as a Model Region for Next-Generation Energy Systems by the Ministry of Economy, Trade
and Industry. Toyota since joined the Toyota City
Low-Carbon
Society Verification Council (established in August 2010), and carried out experiments relating to the Optimization of Local
Energy Use in Households and Destinations (commercial and public facilities) and Establishment of a System for
Low-Carbon
Emission Transportation until March 2015. As a way of building on the
results of such experiments, starting in October 2014, Toyota launched an experimental ultra-compact electric vehicle sharing program in Grenoble, France, together with the city of Grenoble and local companies, as well as in Tokyo from April 2015.
It also launched an experimental ultra-compact electric vehicle program for tourism using a Toyota developed
car-sharing
system in Okinawa from January 2016. An experimental car-sharing program was also
implemented in Okayama City from October through December 2016. Furthermore, in Toyota City and Okinawa, local companies and organizations began operating
car-sharing
business in April 2017.
In February 2013, Toyota, together with Toyota affiliated companies, established the
F-Grid
Ohira, Miyagi Limited Liability Partnership, a smart community business which operates the
F-Grid
in the Northern Sendai Industrial Park
in the village of Ohira, Miyagi. The Partnership began supplying electricity and heat to partners in the industrial park in April 2013. This business aims to contribute to creating a safe and secure community with the community and the
industrial park working as one, revitalizing local industry and revitalizing the community. Toyota believes that the elemental technologies developed through these experiments and businesses will help in the creation of
new systems for society that meet differing social environments and municipal needs, not just in Japan but around the world, in both developed and emerging countries, and will play a role in the creation of energy and transportation infrastructure
to help spread next-generation
eco-cars.
Research and Development of, and Collaboration Regarding,
Connected Platforms
With respect to research and development of platform technologies to make connected services a reality
in the future, Toyota is moving forward with the following research and development activities related to
in-vehicle
system technologies as well as telecommunication and data processing system technologies by
means of both open collaboration led by a nonprofit organization as well as collaboration with certain other companies.
For
in-vehicle
system technologies, a collaborative open source project is underway to develop an operating system for
in-vehicle
multimedia telematics systems based on the open
source software Linux, but incorporating
in-vehicle
requirements. Named Automotive Grade Linux, the operating system is being developed in collaboration with other auto companies as well as companies that
design a manufacture the hardware and software for devices that make up
in-vehicle
systems, under the initiative of Linux Foundation, an incorporated nonprofit organization. With respect to functions that link
in-vehicle
multimedia system to smartphones, Toyota established a nonprofit organization called Smart Device Link Consortium in November 2016, jointly with Ford and certain other auto companies, to develop
specifications for
in-vehicle
multimedia systems and their related platform software.
For telecommunication and server system technologies, Toyota is developing a global mobile communications platform, which
allows for globally integrated management of the telecommunication
31
environment, in collaboration with KDDI Corporation. Toyota is also conducting research and development jointly with the NTT Group in the areas of data processing system technologies and mobile
communications technologies that will enable the processing of big data obtained from vehicles in the future.
Financial Services
Toyotas financial services include loan programs and leasing programs for customers and dealers. Toyota believes
that its ability to provide financing to its customers is an important value-added service. In July 2000, Toyota established a wholly-owned subsidiary, Toyota Financial Services Corporation (TFSC), to oversee the management of
Toyotas finance companies worldwide, through which Toyota aims to strengthen the overall competitiveness of its financial business, improve risk management and streamline decision-making processes. Toyota has expanded its network of financial
services, in accordance with its strategy of developing auto-related financing businesses in significant markets. Accordingly, Toyota currently operates financial services companies in 36 countries and regions, which support its automotive
operations globally.
Toyotas revenues from its financial services operations were ¥1,823.6 billion in fiscal
2017, ¥1,896.2 billion in fiscal 2016 and ¥1,661.1 billion in fiscal 2015. In fiscal 2016, although economic weakness was seen in areas such as Asia, including China, recovery in the United States, among other places, continued and
the balance of loan receivables increased steadily. In fiscal 2017, although uncertainties related to political trends emerged primarily in Europe and North America, Toyotas business remained solid in areas where Toyotas financial
services business is operated. In such an environment, as a result of Toyotas continued collaboration with dealers in various countries and regions and efforts to expand products and services that meet customer needs, Toyotas share of
financing provided for new car sales of Toyota and Lexus vehicles in regions where TFSC operates remained at a high level of approximately 35% and the balance of loan receivables, mainly in the United States, continued to increase steadily.
Meanwhile, Toyota is making efforts to provide both its customers and dealers with stable financial services by diversifying its funding methods using such means as commercial paper, corporate bonds, bank borrowings, ABCP (Asset Backed Commercial
Paper) and ABS (Asset Backed Securities). Toyota continued to perform detailed credit appraisals and serve customers by monitoring bad debt and loan payment extensions, and the percentage of credit losses remained low, at 0.37% and 0.36% in fiscal
years 2017 and 2016, respectively. Toyota continues to work towards improving its risk management measures in connection with credit and residual value risks.
Toyota Motor Credit Corporation is Toyotas principal financial services subsidiary in the United States. Toyota also provides financial services in 35 other countries and regions through various
financial services subsidiaries, including:
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Toyota Finance Corporation in Japan;
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Toyota Credit Canada Inc. in Canada;
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Toyota Finance Australia Ltd. in Australia;
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Toyota Kreditbank GmbH in Germany;
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Toyota Financial Services (UK) PLC in the United Kingdom;
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Toyota Leasing (Thailand) Co., Ltd. in Thailand; and
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Toyota Motor Finance (China) Co., Ltd. in China.
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Toyota Motor Credit Corporation provides a wide range of financial services, including retail financing, retail leasing, wholesale financing and insurance. Toyota Finance Corporation also provides a range
of financial services, including retail financing, retail leasing and credit cards. Toyotas other finance subsidiaries provide services including retail financing, retail leasing and wholesale financing.
In June 2016, Toyota established Toyota Financial Services Portugal, Limited, a Portuguese branch of Toyota Kreditbank GmbH, and started
its operation in March 2017.
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Net finance receivables for all of Toyotas dealer and customer financing operations
were ¥1,520,877.2 billion as of March 31, 2017, representing an increase of 4.5% as compared to the previous year. The majority of Toyotas financial services are provided in North America. As of March 31, 2017, 59.1% of
Toyotas finance receivables were derived from financing operations in North America, 11.3% from Asia, 10.3% from Europe, 8.1% from Japan and 11.2% from other areas.
Approximately 50% of Toyotas unit sales in the United States during fiscal 2017 included a finance or lease arrangement with Toyota. Because the majority of Toyotas financial services
operations are related to the sale of Toyota vehicles, a decrease in vehicle unit sales may lead to a contraction of Toyotas financial services operations.
The worldwide financial services market is highly competitive. Toyotas competitors in retail financing and retail leasing include commercial banks, credit unions and other finance companies.
Commercial banks and other automobile finance subsidiary companies serving their parent automobile companies are competitors of Toyotas wholesale financing activities. Competitors in Toyotas insurance operations are primarily national
and regional insurance companies.
For information on Toyotas finance receivables and operating leases, please see
Operating and Financial Review and Prospects Operating Results Financial Services Operations.
Retail
Financing
Toyotas finance subsidiaries acquire new and used vehicle installment contracts primarily from Toyota
dealers. Installment contracts acquired must first meet specified credit standards. Thereafter, the finance company retains responsibility for installment payment collections and administration. Toyotas finance subsidiaries acquire security
interests in the vehicles financed and can generally repossess vehicles if customers fail to meet their contractual obligations. Almost all retail financings are
non-recourse,
which relieves the dealers from
financial responsibility in the event of repossession. In most cases, Toyotas finance subsidiaries require their retail financing customers to carry automobile insurance on financed vehicles covering the interests of both the finance company
and the customer.
Toyota has historically sponsored, and continues to sponsor, special lease and retail programs by
subsidizing below market lease and retail contract rates.
Retail Leasing
In the area of retail leasing, Toyotas finance subsidiaries acquire new vehicle lease contracts originated primarily through Toyota
dealers. Lease contracts acquired must first meet specified credit standards after which the finance company assumes ownership of the leased vehicle. The finance company is generally permitted to take possession of the vehicle upon a default by the
lessee. Toyotas finance subsidiaries are responsible for contract collection and administration during the lease period. The residual value is normally estimated at the time the vehicle is first leased. Vehicles returned to the finance
subsidiaries at the end of their leases are sold by auction. For example, in the United States, vehicles are sold through a network of auction sites as well as through the Internet. In most cases, Toyotas finance subsidiaries require lessees
to carry automobile insurance on leased vehicles covering the interests of both the finance company and the lessee.
Wholesale Financing
Toyotas finance subsidiaries also provide wholesale financing primarily to qualified Toyota dealers to finance
inventories of new Toyota vehicles and used vehicles of Toyota and others. The finance companies acquire security interests in vehicles financed at wholesale. In cases where additional security interests would be required, the finance companies take
dealership assets or personal assets, or both, as additional security. If a dealer defaults, the finance companies have the right to liquidate any assets acquired and seek legal remedies.
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Toyotas finance subsidiaries also make term loans to dealers for business
acquisitions, facilities refurbishment, real estate purchases and working capital requirements. These loans are typically secured with liens on real estate, other dealership assets and/or personal assets of the dealers.
Insurance
Toyota
provides insurance services in the United States through Toyota Motor Credit Corporations wholly-owned subsidiary, Toyota Motor Insurance Services, Inc. (TMIS) and its wholly-owned insurance company subsidiaries. Their principal
activities include marketing, underwriting and claims administration. TMIS also provides coverage related to vehicle service agreements and contractual liability agreements through Toyota dealers to customers. In addition, TMIS also provides
coverage and related administrative services to affiliated companies of Toyota Motor Credit Corporation. Toyota dealers in Japan and in other countries and regions also engage in vehicle insurance sales.
Other Financial Services
Toyota Finance Corporation launched its credit card business in April 2001 and began issuing Lexus credit cards in 2005 when the Lexus brand was introduced in Japan. As of March 31, 2017, Toyota
Finance Corporation has 14.9 million card holders (including Lexus credit card holders).
All Other Operations
In addition to its automotive operations and financial services operations, Toyota is involved in a number of other
non-automotive
business activities. Net sales for these activities totaled ¥1,321.0 billion in fiscal 2017, ¥1,177.3 billion in fiscal 2016 and ¥1,255.7 billion in fiscal 2015.
Housing
Toyota
established its subsidiary Toyota Housing Corporation in April 2003 and has transferred to it product planning and sales operations related to the manufacture and sale of housing. Furthermore, in order to quickly and accurately grasp
clients needs and to plan, develop and sell products on a timely basis, in April 2008, Toyota transferred the product development operation to Toyota Housing Corporation. In October 2010, Toyota
spun-off
its housing operations (project planning, technology development and manufacturing) through a statutory demerger and integrated them into Toyota Housing Corporation. Toyota believes that in the vastly
changing housing market environment, the integration of the development, manufacture and sales functions will expedite decision making and lead to flexible business operations that will enable Toyota to better respond to the needs of even more
customers. In March 2005, Toyota, together with institutional investors, agreed to jointly invest in Misawa Home Holdings, Inc. (Misawa; renamed Misawa Homes Co., Ltd.) pursuant to its request for assistance in its rehabilitation.
In April 2010, determining that a stronger collaboration with Misawa would be desirable in order to achieve further growth in the difficult operating environment of the housing industry, Toyota Housing Corporation agreed to purchase Misawa
shares from an institutional investor. In addition, Toyota transferred ownership of Misawa to Toyota Housing Corporation in October 2010. Through these activities, Toyota has strengthened the housing business of both companies.
Information Technology
See Enhancing Vehicle Functionality and Intelligent Transport Systems for a description of Toyotas information technology.
Governmental Regulation, Environmental and Safety Standards
Toyota is subject to laws in various jurisdictions regulating the levels of pollutants generated by its plants. In addition, Toyota is subject to regulations relating to the emission levels, fuel economy,
noise and safety of its
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products. Toyota has incurred significant costs in complying with these laws and regulations and expects to incur significant compliance costs in the future. Toyotas management views
leadership in environmental protection as an important competitive factor in the marketplace.
Vehicle Emissions
Japanese Standards
The
Air Pollution Control Law of Japan and the Road Vehicle Law and the Law Concerning Special Measures for Total Emission Reduction of Nitrogen Oxides from Automobiles in Specified Areas regulate vehicle emissions in Japan. In addition, both the Noise
Regulation Law and the Road Vehicles Law provide for noise reduction standards on automobiles in Japan. Toyotas vehicles manufactured for sale in Japan comply with all Japanese exhaust emission and noise level standards.
U.S. Federal Standards
The federal Clean Air Act directs the Environmental Protection Agency (EPA) to establish and enforce air quality standards,
including emission control standards on passenger vehicles, light-duty trucks and heavy-duty vehicles. The EPA decided in February 2000 to adopt more stringent vehicle emission and fuel economy standards applicable to passenger vehicles and
light-duty trucks produced in model years 2004 and beyond. In the standards adopted for model years 2004 and beyond, manufacturers must guarantee that their vehicles meet the requirements for ten years or 120 thousand miles, whichever
occurs first. Manufacturers are not permitted to sell vehicles in the United States that do not meet the standards. In April 2007, EPA regulations that further restrict emissions from passenger vehicles and light-duty trucks operating at cold
temperatures became effective. The new emission standards set by these regulations were phased in between 2010 and 2013. Similar standards that further restrict emissions from heavy-duty vehicles operating at cold temperatures were phased in from
2012 to 2015. In March 2014, the EPA finalized new vehicle emission and evaporative emission standards for passenger vehicles and light-duty trucks for model years 2017 and onwards. Under the new standards, emission standards for volatile
organic compounds and nitrogen oxides are to be strengthened in phases from 2017 to 2025, bringing the emission standards in line with emission standards in California, resulting in the unification of the differing California and federal emission
standards. In addition, the particulate matter standards and fuel evaporative emission standards will also be strengthened to be brought in line with Californias emission standards. This is expected to lead to reductions in the burden on
development, such as a reduction in the number of tests required for certification and standardization of emission reduction systems.
Furthermore, in April 2007 the U.S. Supreme Court ruled that the EPA has the authority to regulate automobile emissions of greenhouse gases. In response to this ruling, on April 1, 2010 the EPA
and the federal National Highway Traffic Safety Administration (NHTSA) issued a joint final rule to reduce the emission of greenhouse gases from passenger vehicles, light-duty trucks and medium-duty passenger vehicles for model years
2012 through 2016. These vehicles were required to meet an estimated combined average emissions level of 250 grams of carbon dioxide per mile, equivalent to 35.5 miles per gallon if the requirements were met through fuel economy standards. The
NHTSA also set Corporate Average Fuel Economy (CAFE) standards for passenger vehicles and light-duty trucks that required manufacturers of those vehicles to meet an estimated combined average fuel economy level of 34.1 miles per gallon
in model year 2016.
On August 28, 2012, the EPA and the NHTSA jointly issued the final rule to further reduce greenhouse
gas emissions and improve fuel economy for passenger vehicles, light-duty trucks and medium-duty passenger vehicles for model years 2017 through 2025. In the final rule, these vehicles are required to meet an estimated combined average emission
level of 163 grams of carbon dioxide per mile in model year 2025, equivalent to 54.5 miles per gallon if these requirements were met through improvements in fuel economy standards. The NHTSA also issued CAFE standards for passenger vehicles and
light-duty trucks that would require manufacturers to meet an estimated combined average fuel economy level of 49.6 miles per gallon in model year 2025.
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On January 13, 2017, the EPA issued its final determination to maintain the
final rule for model years 2022 through 2025. On March 13, 2017, however, the newly-appointed Administrator of the EPA and the newly-appointed Secretary of the Department of Transportation issued a notice that they were reconsidering the final
determination. The EPA announced that it and the NHTSA would issue a new final determination by April 1, 2018. Also, on March 13, 2017, the Alliance of Automobile Manufacturers petitioned the U.S. Court of Appeals for the
District of Columbia to review the EPAs final determination. However, upon issuance of the notice regarding the reconsideration of the EPAs final determination, the Alliance promptly withdrew its petition for review by the Court. On
March 14, 2017, California petitioned the Court to protect its interests in the EPAs final determination to maintain the final rule. As discussed below, California had adopted a deemed to comply rule, which provided that
compliance with the federal final rule would also satisfy Californias greenhouse gas emission standards for model years 2022 through 2025. It is unclear at this time whether the final rule will remain in its current form or whether the
standards will be eased.
In addition, in July 2015, the EPA adopted final rules to limit, in relation to greenhouse gas
emissions, the use of various hydroflourocarbons (HFCs) and
HFC-containing
refrigerant blends used in motor vehicle air conditioning systems for new vehicles, among other applications. Toyota
purchases air conditioning systems from third parties for use in its vehicles. The final rules list HFC-134a, the most dominant refrigerant used in light-duty vehicles worldwide, as unacceptable for use in motor vehicle air conditioning systems in
new light-duty vehicles beginning in model year 2021. The final rules also list additional refrigerant blends as unacceptable for use in new light-duty vehicles beginning in model year 2017. Feasible alternatives to these refrigerants that will be
prohibited by the rules may be costly or present other risks, such as flammability or other safety concerns.
As discussed
above, the EPA has been granted the authority to set fuel standards in connection with the regulation of automobile emissions. In October 2010, the EPA approved the sale and use of fuel with a 15% ethanol blend (E15) for model years
2007 and later passenger vehicles and light-duty trucks. The use of E15 is not permitted for engines used in lawnmowers, small generators, motorbikes, boats and other vehicles and equipment. Subsequently, in February 2011, the EPA approved the
use of E15 for certain 2001 model year or newer vehicles, such as light-duty passenger vehicles and small trucks. However, E15 is prohibited for use in other 2000 model year or older vehicles and general purpose engines. As a result, the EPA
promulgated regulations in July 2011, effective August 2011, requiring businesses that sell E15 to put a warning label regarding E15 on gasoline fuel dispensers.
California Standards
Under the federal Clean Air Act, the State of
California is permitted to establish its own vehicle emission control standards if it receives a waiver from the EPA. As a result, the California Air Resources Board (CARB) established the Low Emission Vehicle Program and set emission
standards for certain regulated pollutants that were phased in beginning in the 2004 model year. Under these standards, most light-duty trucks and passenger vehicles are required to meet the same emission standards, which were stricter than the
federal standards. As part of the original Low Emission Vehicle Program, the CARB also required that a specified percentage of a manufacturers passenger vehicles and light-duty trucks sold in California for all model years 1998 and after be
zero-emission
vehicles (vehicles producing no emissions of regulated pollutants). This
zero-emission
vehicles requirement also permitted certain advanced
technology vehicles such as
Plug-in
Hybrid Vehicles (PHVs), hybrid cars and alternative fuel vehicles that meet partial
zero-emission
vehicles
requirements to be granted partial qualification as Electronic Vehicles (EVs) or Fuel Cell Vehicle (FCVs). The current
zero-emission
regulations mandate substantial annual
increases in the production and sale of battery-electric, fuel cell and
plug-in
hybrid vehicles such that, by 2025, the state of California has estimated that approximately 15% of the new vehicles sold in the
state would be
zero-emission
or
plug-in
hybrid vehicles. Toyotas MIRAI qualifies as
zero-emission
vehicles. The current
Prius
plug-in
hybrid qualifies as partial
zero-emission
vehicles. Toyota intends to continue to develop additional advanced technologies and alternative fuel
technologies that will allow other vehicles using such technologies to qualify as
zero-emission
vehicles or
partial-zero-emission
vehicles.
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In July 2002, the California legislature passed legislation that required the CARB to
develop and adopt, by the end of 2004, regulations that achieved the maximum feasible reduction in greenhouse gas emissions from vehicles. In September 2004, the CARB adopted regulations that required a 20 to 30 percent reduction of
greenhouse gas emissions from passenger vehicles, light-duty trucks and other noncommercial vehicles to be phased in between the 2009 and 2016 model years.
In December 2007, the EPA denied Californias request for a waiver under the Clean Air Act that would have allowed the state to enforce these regulations to control greenhouse gas emissions from
motor vehicles. However, the EPA reconsidered its decision pursuant to a direction issued by the U.S. President in January 2009, and in July 2009 decided to allow the state to enforce such regulations.
In February 2010, the CARB enacted a deemed to comply rule that provides that compliance with federal greenhouse gas emission
standards for model years 2012 through 2016 and 2017 through 2025 also satisfies Californias greenhouse gas emissions standards.
In January 2012, the CARB adopted the Advanced Clean Cars (ACC) program. The ACC program includes new Low-Emission Vehicle regulations that reduce smog-causing pollutants (including
nitrogen oxides and particulate matter) and greenhouse gas emissions from cars and light-duty trucks for model years 2015 to 2025, and more stringent
zero-emission
vehicle regulations which will require
increased production of
zero-emission
vehicles and
plug-in
hybrid electric vehicles for model years 2018 to 2025. The ACC program also lowers allowable smog-forming
particulate emissions to 1 mg/mile or lower, to be phased in beginning with model year 2015.
In a March 24, 2017 ACC
Midterm Review, the CARB affirmed the ACC programs requirements. In this review, the CARB noted the March 13, 2017 decisions of the Administrator of the EPA and the Secretary of the Department of Transportation to reconsider the
EPAs final determination to maintain the final rule for greenhouse gas emissions for model years 2022 through 2025, and suggested that its decision to follow the federal final rule might change if the federal standards were substantially
changed.
Other States Standards
The states of New York, Massachusetts, Connecticut, Maine, Maryland, New Jersey, Oregon, Rhode Island and Vermont have either adopted, or plan to adopt, regulations substantially similar to
Californias
zero-emission
vehicles requirement. With regard to greenhouse gas emissions regulations, in addition to these states, Pennsylvania and Washington have adopted Californias regulations.
Canadian Standards
Canada has established vehicle emission standards equivalent to the federal standards in the United States, including the heightened requirements that became applicable to passenger vehicles and
light-duty trucks in model years 2004 and beyond. In addition, in response to the strengthening of the federal greenhouse gas emission standards in the United States applicable to model years 2017 to 2025, Canada finalized equivalent standards in
October 2014. Furthermore, certain Canadian provinces are currently considering enacting their own regulations on vehicle emissions of greenhouse gases. In Province of Quebec, a bill that requires manufactures to sell (at least a certain
percentage of) FCVs, EVs and PHVs starting with model year 2018 was passed. The details of these regulations are currently under consideration but the Province of Quebec, like the Northeastern United States, has signaled that they plan to follow the
regulations in California. Canada also adopted a more stringent fuel rule, which is based on the fuel rule in the United States, that reduces refineries annual average sulfur concentration of gasoline to 10 mg/kg from 2017 with a new addition
of credit system to secure compliance.
European Standards
The European Union adopted a directive that establishes increasingly stringent emission standards for passenger vehicles and light commercial vehicles in October 1998. Under this directive, the
standards adopted
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beginning with year 2000 require manufacturers to recall any vehicles which fail to meet the standards for five years or 80 thousand kilometers, whichever occurs first. Toyota
introduced vehicles complying with this directive in 1999. Under standards adopted in 2005, manufacturers are obligated to meet the more stringent standards for five years or total vehicle miles of 100 thousand kilometers, whichever occurs
first. In 2007, the European Parliament adopted more stringent emission standards for passenger vehicles and light commercial vehicles. The effective dates for phasing in these stricter standards for passenger vehicles were September 2009 for
Euro 5 and September 2014 for Euro 6. For light commercial vehicles, the effective dates are September 2010 for Euro 5 and September 2015 for Euro 6. Euro 5 provides for lower emission levels for gasoline and diesel powered vehicles
and also extends the manufacturers responsibility for emission performance to total vehicle miles of 160 thousand kilometers. The primary focus of Euro 6 is to limit further emissions of diesel powered vehicles and bring them down to a
level equivalent to gasoline powered vehicles. In addition, Euro 6 will be implemented in two stages, and beginning with the second stage (September 2017 for passenger vehicles and September 2018 for commercial vehicles), the EU is
implementing the Real Driving Emission (RDE) regulations, which will require manufactures to conduct
on-road
emissions tests using portable emissions testers. During the initial phase, which
started in January 2016, the RDE tests are used for monitoring purposes. Beginning in September 2017, manufacturers will be required to reduce the divergence between the regulatory limit tested in laboratory conditions and the values of RDE tests.
The EU has also decided to implement the Worldwide harmonized Light vehicles Test Procedure (WLTP).
Chinese Standards
Emissions regulations are being implemented throughout China pursuant to the Chinese National Standards (GB) of the Ministry of
Environmental Protection of the Peoples Republic of China, and the manufacture and sale of models not meeting these regulations are prohibited.
For passenger vehicles, pursuant to
GB18352.3-2005,
Level 3 Emissions Regulations (China 3) (corresponding to Euro 3 standards) apply to new models after
July 2007 and Level 4 Emissions Regulations (China 4) (corresponding to Euro 4 standards) apply to new models after July 2010. Starting with new models after July 2008,
on-board
diagnostics
must be equipped. Furthermore, pursuant to
GB18352.5-2013,
it has been decided that Level 5 Emissions Regulations (China 5) (corresponding to Euro 5 standards) are to be implemented throughout China for
all models that are sold and registered after January 2018.
In an effort to improve the fuel quality in the market,
stricter China 5 gasoline and diesel fuel standards have been stipulated in GB17930-2013 and GB19147-2013 to achieve the Level 5 Emissions Regulations, and it has been decided that these standards will be implemented from January 2018.
Following that, however, given the accelerated improvement in fuel quality in the market, new China 5 fuel standards (corresponding to Euro 5) have been implemented in 11 provincial capitals in eastern China from January 2016 and nationwide in China
from January 2017, as opposed to January 2018 as initially determined. In connection with this, the Ministry of Environmental Protection and the Ministry of Industry and Information Technology issued a directive on the implementation timing of the
Level 5 Emissions Regulations, in accordance with which, the implementation started for gasoline-powered passenger vehicles in the 11 provincial capitals from April 2016 and nationwide in China from January 2017, as well as will start for
diesel passenger vehicles nationwide in China from January 2018 as initially scheduled. The next-generation emissions regulations for passenger vehicles, or Level 6 Emissions Regulations (China 6), have been issued as
GB18352.6-2016
at the end of 2016, pursuant to which tighter requirements will be implemented in two steps, depending on the regulated subjects and the implementation timing. Specifically, China 6a will apply to all
models to be sold or registered in July 2020 and beyond, and China 6b will apply to all models to be sold or registered in July 2023 and beyond. With respect to fuels in the market, the quality standards and the implementation timing for China 6
gasoline fuel and China 6 diesel fuel have been provided in GB17930-2016 and GB19147-2016 so as to keep up with the implementation timing of China 6 emissions regulations.
For heavy-duty diesel-powered commercial vehicles, pursuant to GB17691-2005, Level III Emissions Regulations (China III) apply to models after January 2007. Although Level IV Emissions Regulations (China
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IV) were to apply to new models after January 2010, and Level V Staged Emissions Regulations (China V) were to apply to new models after January 2012, because the infrastructure to supply
sufficient diesel fuel meeting the Level 4 fuel quality standards had yet to be put in place, the implementation of the China IV Emissions Regulations for all models was postponed to July 2013. In connection with such delay, the implementation
of the China V Emissions Regulations has been postponed from the original plan and is now scheduled to be implemented from July 2017. For heavy-duty gasoline-powered commercial vehicles, pursuant to GB14762-2008, Level III Emissions Regulations
(China III) apply to new models after July 2009 and Level IV Emissions Regulations (China IV) apply to new models after July 2012. After the first day the regulation is implemented to a new model, all new models released during the following
one-year
period also become subject to the regulation. Tightening of the next-generation emissions regulations is currently considered for heavy-duty diesel-powered commercial vehicles and heavy-duty
gasoline-powered commercial vehicles.
Compliance with new and more stringent emissions and fuel consumption standards will
present significant technological challenges to automobile manufacturers and will likely require significant expenditures. Examples of these challenges include the development of advanced technologies, such as high performance batteries and
catalytic converters, as well as the development of alternative fuel technologies. Manufacturers that are unable to develop commercially viable technologies within the time frames set by the new standards will lose their market share and will be
forced to decrease the number of types of vehicles and engines in their principal markets.
Standards of Other Countries
Countries other than Japan, the United States, Europe and China are also proactively introducing emissions regulations. Many countries or
regions such as Australia, Mexico, the Middle East, Taiwan and Hong Kong, as well as countries in Eastern Europe and Asia, have considered or implemented emissions regulations.
In particular, in India, given the worsening air pollution, the government accelerated the implementations of
BS-6
(equivalent to EURO6) to 2020, and in addition the Supreme Court banned the registration of diesel cars with engines that are 2 liters or larger in the National Capital Region, including the Delhi metropolitan
area. In August 2016, the ban on registration was lifted on the condition that a deposit equal to 1% of the vehicles retail price is to be paid to the Environment Pollution Control Authority.
Vehicle Fuel Economy
Japanese
Standards
The Law Concerning the Rational Use, etc. of Energy requires automobile manufacturers to improve their vehicles
to meet specified fuel economy standards. Fuel economy standards are established according to the types of vehicles specified below, and are required to be met by either fiscal 2011 (April 2010-March 2011), fiscal 2016
(April 2015-March 2016), fiscal 2021 (April 2020-March 2021) or fiscal 2023 (April 2022-March 2023).
Among qualifying passenger vehicles are:
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Vehicles which are designated in Article 75, Paragraph 1 of the Road Vehicles Law as type-designated vehicles (type-designated
vehicles) with 10 seats or less using LPG;
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Type-designated vehicles with 9 seats or less or that are 3.5 tons or less in vehicle weight using gasoline, or
type-designated
vehicles with 9 seats or less or 10 seats that are 3.5 tons or less in vehicle weight using gas oil;
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Type-designated vehicles with 11 seats or more that are 3.5 tons or less in vehicle weight using gasoline or gas oil; and
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Type-designated vehicles with 10 seats or more that are over 3.5 tons in vehicle weight using gas oil, or designated carbon monoxide emission control
vehicles (designated carbon monoxide emission control vehicles) which are designated in Article 75-3 Paragraph 1 of the Road Vehicles Law.
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Among qualifying cargo vehicles are:
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Type-designated vehicles that are 3.5 tons or less in vehicle weight using gasoline, gas oil or LPG; and
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Type-designated vehicles that are over 3.5 tons in vehicle weight using gas oil or LPG, or designated carbon monoxide emission control vehicles.
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Toyota is promoting the improvement of its vehicles in order to achieve compliance with these standards.
Japan is a signatory to the Framework Convention on Climate Change and has agreed to take measures to reduce its greenhouse
gas emissions. Improved vehicle fuel economy is contributing to the reduction in carbon dioxide emissions.
U.S. Standards
The Federal Motor Vehicle Information and Cost Savings Act requires automobile manufacturers to comply with CAFE standards. A manufacturer
is subject to substantial civil penalties if, in any model year, its vehicles do not meet the CAFE standards. Manufacturers that exceed the CAFE standards earn credits determined by the difference between the average fuel economy performance of
their vehicles and the CAFE standards. Credits earned for the five model years preceding the current model year, and credits projected to be earned for the next three model years, can be used to meet CAFE standards in a current model year.
In April 2006, the NHTSA established CAFE standards applicable to light-duty trucks for model year 2008 and beyond.
These CAFE standards aimed at shifting the framework from one that used to be advantageous only to compact car manufacturers to one that is fair to full line manufacturers. The requirements were changed so that the CAFE standards are now determined
by a sales rate based on vehicle size (measured by the area of the wheel and wheel base) for each manufacturer.
On
April 1, 2010, the EPA and the NHTSA issued a joint final rule to reduce the emission of greenhouse gases from passenger vehicles, light-duty trucks and medium-duty passenger vehicles for model years 2012 through 2016. These vehicles were
required to meet an estimated combined average emissions level of 250 grams of carbon dioxide per mile, equivalent to 35.5 miles per gallon if the requirements were met through fuel economy standards. The NHTSA also set CAFE standards for passenger
vehicles and light-duty trucks that will require manufacturers of those vehicles to meet an estimated combined average fuel economy level of 34.1 miles per gallon in model year 2016. Furthermore, the EPA and the NHTSA joint final rule allows the two
agencies and California standards to act in a unified way, and creates a regulatory framework that makes compliance less burdensome for the manufacturers. In addition, in December 2011, the EPA and the NHTSA issued a joint proposed rule to
further reduce greenhouse gas emissions and improve fuel economy for passenger vehicles, light-duty trucks and medium-duty passenger vehicles for model years 2017 through 2025. In the rule, which was finalized in August 2012, these vehicles are
required to meet an estimated combined average emission level of 163 grams of carbon dioxide per mile in model year 2025, equivalent to 54.5 miles per gallon if these requirements are met through improvements in fuel economy standards. At the same
time, the NHTSA also issued CAFE standards for passenger vehicles and light-duty trucks that would require manufacturers to meet an estimated combined average fuel economy level of 49.6 miles per gallon in model year 2025. As discussed above,
however, the EPA and NHTSA are reconsidering the final rule for model years 2022 through 2025, and they are expected to issue a final determination, either upholding the standards or easing them, by April 1, 2018. The standards of fuel economy
are stringent, and Toyota strives to meet the fuel economy standards by further developing fuel-efficient technology, alternative fuel technology and other advanced technology.
In addition, the Energy Tax Act of 1978 imposes a gas guzzler tax on automobiles with a fuel economy rating below specified
levels.
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European Standards
In December 2008, the European Parliament approved a new regulation that established an average emission standard of 130 grams of carbon dioxide per kilometer by 2012 for passenger vehicles sold in
member states, made effective in June 2009. The regulation was phased in gradually, initially requiring 65% of new cars to comply with the new standards in 2012 and increasing to 100% of new cars in 2015. As a result of the new regulations,
different targets applied to each manufacturer, based on their respective fleets of vehicles and weight. Penalties applied to those manufacturers who fail to meet their targets from 2012, in amounts corresponding to the degree of shortfall.
Manufacturers failing to meet their targets between 2012 and 2018 will incur penalties of between 5 and 95 per each gram of carbon dioxide per kilometer shortfall for each
non-compliant
vehicle, and such penalties will rise to 95 in 2019 and beyond. Furthermore, in June 2011, a new carbon dioxide emission standard applicable to light commercial vehicles entered into force establishing an average emissions target of 175
grams of carbon dioxide per kilometer. This regulation has the same basic regulatory framework as passenger vehicles, raising the compliance rate from 70% in 2014 to 100% in 2017.
Furthermore, in February 2014, the European Parliament and Council adopted a regulation to reduce the average carbon dioxide
emissions target for light commercial vehicles to 147 grams per kilometer beginning in 2020. In March 2014, the European Parliament and Council adopted a regulation to reduce the average carbon dioxide emissions target for passenger vehicles to
95 grams per kilometer beginning in 2021. 95% of each manufacturers new cars must comply with this new standard by 2020. The relevant legislation requested the European Commission to conduct a review by 2015 and, if appropriate, propose new
targets for the period beyond 2020, including possibly setting a 2025 target. A public consultation on revision of the legislation was conducted in 2016.
An increasing number of EU member states are introducing vehicle tax laws based on carbon dioxide emission levels pursuant to the directive issued by the European Commission in 2005. This trend is
expected to continue in accordance with the recent increases in environmental awareness.
An EU directive on motor vehicle air
conditioning units required manufacturers to replace currently used refrigerants with refrigerants having a lower global warming impact for all newly registered vehicles starting in January 2017.
Chinese Standards
Fuel
consumption regulations are being implemented pursuant to the Chinese National Standards (GB), and the manufacture and sale of vehicle models not meeting these regulations are prohibited. For passenger vehicles, pursuant to GB19578-2004,
Level 1 Fuel Consumption Regulations apply to new models after July 2005 and Level 2 Fuel Consumption Regulations apply to new models after January 2008. For small commercial vehicles, pursuant to GB20997-2007, Level 2 Fuel
Consumption Regulations apply to new models after February 2008, Level 1 Fuel Consumption Regulations apply to all vehicles as of January 2009 and Level 2 Fuel Consumption Regulations apply to all models as of January 2011.
These regulations determine the consumption standards that apply depending on the mass of the applicable vehicle and set forth a method for determining whether each model has met the regulation. With respect to passenger vehicles, GB27999-2011 has
been issued to further strengthen fuel consumption regulations from 2012 and beyond. In these Level 3 Fuel Consumption Regulations for passenger vehicles, the regulation framework was substantially revised, such as the introduction of new
regulations requiring automobile manufacturers to meet standards of corporate average fuel consumption across models in addition to existing regulations requiring each model to meet consumption standards. Furthermore, in order to achieve the
national target for average fuel efficiency for 2020, the following more stringent fuel consumption regulations have been enacted and enforced. First, GB19578-2014, which has been enacted to strengthen regulations for each model, is being applied to
new models after January 2016. Second, GB27999-2014, which has been enacted as Level 4 Fuel Consumption Regulations for passenger vehicles to strengthen corporate average regulations, has been in effect since 2016. In addition,
Level 5 Fuel Consumption Regulations for passenger vehicles are being examined as more stringent next-generation fuel consumption regulations.
41
Standards of Other Countries
As momentum gathers to increase energy security and prevent global warming, other countries in addition to Japan, the United States, Europe and China are moving to introduce fuel consumption regulations,
and Korea, Mexico, Brazil, Taiwan, India, Saudi Arabia and Canada have already decided to introduce or implemented fuel consumption regulations. Australia is also considering the introduction of new regulations to reduce average carbon dioxide
emissions by vehicles. Toyota predicts that this trend will spread to other countries, and in the future many nations will consider new regulations related to fuel consumption and carbon dioxide.
Vehicle Safety
Japanese
Standards
In Japan, efforts have been made since 1998 to bring Japanese standards in line with the regulations of the
United Nations Economic Commission for Europe (UN).
With respect to standards that were previously brought in
line with the UN regulations, the Japanese standards regarding steering systems require disabling of automatic steering functions when vehicles travel at more than 10km/h. These standards began to apply to new model cars in July 2016. As amendments
to the requirement to disable automatic steering functions are currently being discussed at the United Nations, and in light of the fact that vehicles equipped with automatic steering functions are already being sold in Japan, a provision was added
to suspend the application of the requirement to disable automatic steering functions for the time being in Japan. Standards for the brake assistance system and the electronic stability control were established as new standards separately from
standards for brake equipment and began to apply in February 2017. A requirement for the tire pressure monitoring systems will be established as a new standard separately from standards for emergency temporary use spare units and tire pressure
monitoring systems and apply beginning in February 2018, as applicable. With respect to standards that were newly brought in line with the UN regulations, safety standards for hydrogen fuel cell vehicles will apply in stages to new model cars
beginning in September 2018. Standards for protection of passengers from full-wrap
head-on
collision will apply in stages to new models beginning in September 2018. Standards for indirect vision will
apply to new models beginning in June 2019 and to existing models still in production beginning in June 2021. Standards for approaching vehicle audible system will apply to new models beginning in March 2018 and to existing models still in
production beginning in October 2020. Standards for day time running lamps began to apply in October 2016, as applicable. Standards for tire fitting will apply to new models beginning in September 2019 and to existing models still in production
beginning in September 2022. With respect to standards that are scheduled to be newly brought in line with the UN regulations, standards for compressed natural gas vehicles and liquid natural gas vehicles will apply to new models beginning in
March 2020 and to existing models still in production beginning in March 2021.
Furthermore, unique to Japan, technical
guidelines for driver medical emergency response system (slowdown and stop type) were established. Requirements for equipment with automatic
on-off
headlight (autolight) function will apply in stages to new
model cars beginning in April 2020 and to existing models still in production beginning in October 2021. The enhancement of visibility standards for rearward and surrounding area, as well as the standardization of measures relating to brake override
systems, the strengthening of anti-spinal injury measures, anti-drunk driving measures and automated emergency call systems are currently under consideration.
U.S. Standards
The U.S. National Traffic and Motor Vehicle Safety Act of
1966, or Safety Act, requires vehicles and equipment sold in the United States to meet various safety standards issued by the NHTSA. The Safety Act also authorizes the NHTSA to investigate complaints relating to vehicle safety and to order
manufacturers to recall and repair vehicles found to have safety-related defects. The cost of these recalls can be substantial depending on the nature of the repair and the number of vehicles affected.
42
The Transportation Recall Enhancement, Accountability and Documentation Act was enacted in
the United States on November 1, 2000. This Act required the NHTSA to regulate the dynamic rollover standards and to upgrade federal motor vehicle safety standards relating to tires. It also required the NHTSA to enhance its authority to gather
information potentially relating to motor vehicle defects. This Act substantially increases the maximum civil penalties for violation of regulatory requirements and specifies possible criminal penalties for violations of the federal Fraud and False
Statements Act. In 2003, the NHTSA expanded its New Car Assessment Program (NCAP) to implement consumer information programs for vehicle rollover resistance and child restraints and, beginning in 2003, adopted extensive early warning
defect reporting requirements. Regulations regarding tire-pressure monitoring systems were strengthened in 2005.
Legislation
on a transportation budget plan promoting a safe and efficient vehicle safety program for drivers, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users
(SAFETEA-LU)
was
passed in August 2005. The legislation requires the NHTSA to propose and issue safety standards to reduce rollover accidents, to complete the creation of standards for the reduction of vehicle passengers released from cars at the time of
rollover accidents, to upgrade door lock standards, to complete the upgrade of roof crash standards, to decide on the side impact protection standards for passengers in all seat locations, to review seat belt wearing technology and complete a study
that includes a proposal for improving the rate of seat belt usage, to establish standards to display NCAP ratings on new car labels and to complete the upgrade of the standard for power windows that will require pulling up switches. Some actions
have already been taken and completed in response to the above requirements.
In February 2008, legislation to prevent
non-traffic
related injuries to young children caused by vehicles, the Cameron Gulbransen Kids Transportation Safety Act, was passed. Pursuant to this legislation, the NHTSA finalized standards requiring
vehicles to be equipped with rearview camera systems in order to ensure rearward visibility to prevent children from being struck by backing vehicles and mandating the use of brake shift interlock systems.
In January 2011, legislation to improve the safety of the visually impaired and other pedestrians, the Pedestrian Safety
Enhancement Act of 2010, was passed. Based on this standard, the NHTSA determined minimum sound standards for electric and hybrid vehicles.
In response to the unintended acceleration issue in 2010, the NHTSA has started to examine and implement measures to strengthen safety standards, such as mandating brake override systems, mandating Event
Data Recorders, or EDR, and standardizing push-start switches.
In December 2015, in reaction to quality issues of motor
vehicles and recalls conducted by automobile companies in recent years, a bill to strengthen U.S. motor vehicle safety regulations was passed. In response to the passage of the bill, NHTSA began to examine firmer measures.
In 2016, the NHTSA and the Insurance Institute for Highway Safety announced that they have agreed with twenty major vehicle manufacturers
to standardize equipment of automatic emergency brakes on almost all new models by 2022. In the same year, the NHTSA also announced a policy regarding automatic driving vehicles to promote such vehicles safely, as well as best practices to enhance
cybersecurity for vehicles.
In 2017, the NHTSA proposed to establish a new safety standard to require passenger vehicles and
light-duty commercial vehicles to have dedicated short-range communication units that enable
Vehicle-to-Vehicle
communication.
European Standards
In
2009, the European Union overhauled its safety regulations and enacted a new regulation and a simplified framework, repealing more than 50 existing European Commission directives regarding vehicle safety other than pedestrian protection, and
replacing them with a single regulation aimed at incorporating the UN regulations. The
43
new regulation also requires the adoption of advanced safety systems. The EU Regulation directly incorporating the UN Regulations commenced in 2012 and requires advanced safety systems, including
requiring new type vehicles to have electronic stability control systems from 2011, to introduce regulations relating to low rolling resistance tires in 2013, to require tire pressure monitoring systems starting in 2012 and to require heavy vehicles
to have advanced emergency braking systems and lane departure warning systems from 2013. All of the technical requirements for these advanced safety systems were discussed in the United Nations. Further, application of UN regulation came into force
from November 2012 for new vehicle types and from 2014 for all new vehicles sold in the EU market. The new mandatory measures include electric car safety requirements and gear shift indicators.
In October 2010, CARS 21 was resumed in order to proceed with the realization of the 2020 Strategy (CARS 2020) by the
European Commission that aims for high-level, sustainable and comprehensive growth, and the CARS 21 final report was issued in June 2012. The final report addresses issues facing the widespread adoption of electric vehicles, including charging
infrastructure in the EU, establishing battery requirements, adopting seat belt reminder devices for all seats, connection of alcohol interlock devices to vehicles, adopting speed management devices, establishing safety requirements for micro urban
mobility, strengthening safety regulation to protect the vulnerable from collisions and the possibility of regulation in connection with preventative safety technology. In November 2012, CARS 2020: Action Plan for a competitive and
sustainable automotive industry in Europe was issued based on the final report. The action plan is built on four core concepts, and within these concepts it discusses enhancement of road safety, improving the market conditions within the EU
and the implementation of smart regulations. Each item is given a target date and is to be monitored going forward.
On the
widespread adoption of emergency call systems (eCall), eCall will become mandatory from the end of March 2018 for light-duty passenger vehicles and light-duty commercial vehicles using the framework of Whole Vehicle Type
Approval. New rulemaking regarding eCall has also been proposed by the United Nations, and this proposal is expected to be passed by the end of 2017. In addition, it will be necessary to build infrastructure such as communication bases in the
different member states of the EU for the receipt and handling of eCalls, and rulemaking regarding eCall also covers the creation of such infrastructure.
The possibility of regulation in connection with ITS and other advanced driver assist systems for 2020 and beyond is also under consideration. In addition, the adoption of Advanced Emergency Breaking
systems and lane departure warning systems on light vehicles, Advanced Emergency Breaking systems which detect pedestrians and regulations to require information disclosure for installation of blind spot monitors, reverse system which detect
pedestrians, reverse detection, Evert Data Recorders and alcohol interlock devices on trucks are also expected to be considered. In March 2015, the European Commission published a final report on the benefit and feasibility of a range of new
safety technologies. Currently, a process to revise the General Safety Regulation (EC) No 661/2009 and Regulation (EC) No 78/2009 with regards to pedestrian protection is ongoing. With respect to individual matters that are to be strengthened
through regulations, the European Commission plans to propose amendments to the United Nations rules regarding matters that are already regulated by the United Nations, while other matters are likely to be considered within the EU. In either case,
deliberations will be conducted with the goal of application to new vehicle models from 2020 and regulations for registrants from 2022, although target date of the regulations vary for each matter. Matters to be strengthened include requirement for
installation of AEB to small cars, LKAS to small cars, driver monitoring systems, ESS and EDR, as well as TPMS regulations, expansion of application of regulations on collision, creation of regulations on small lap, creation of laws and regulations
on
far-side
impact tests, requirement for installation of camera monitoring system and requirement for A pillar windscreen head impact.
From April 2009, the applicable scope for Whole Vehicle Type Approval (WVTA) was extended to cover all vehicle categories. Furthermore, an amendment was issued in 2011 which clarifies the
categories (especially those for passenger and light-duty commercial vehicles). Through this amendment, the criteria for light-duty commercial vehicles was clarified, and there is a possibility that vehicles currently classified as light-duty
commercial vehicles become classified as passenger vehicles. In addition, revisions to EU regulations related to
44
vehicle mass and dimensions were issued in 2012. These revisions clarified the mass, criteria and definitions which comprise the base specifications for vehicles. In 2016, the European
Commissions proposal regarding major amendments to the WVTA, including a strengthening of type approval process (e.g. enabling access to software algorithm; five year approval limit (type approval validity)) with the market surveillance
requirements (addition of auditing authority by the European Commission), strengthening of auditing of technical service, clarification of recall requirements and increased surveillance of cars already in circulation, was submitted. Currently, the
bill is under deliberation by the European Council and the European Parliament.
In addition, GEAR2030 (the High Level Group
on the Competitiveness and Sustainable Growth of the Automotive Industry in the European Union) was established in January 2016 as a successor body of the CARS2020 and deliberations on recommendations to the European Commission, member states and
high-level related stakeholders for strengthening the competitiveness of the automobile value chain in Europe by 2030 commenced. In particular, a roadmap for smooth development of automatic driving vehicles is scheduled to be discussed. The
finalization of the recommendation is aimed for the end of 2017.
United Nations Regulations
The 1958 Agreement (Agreement Concerning the Adoption of Uniform Technical Prescriptions for Wheeled Vehicles, Equipment and Parts
which can be Fitted and/or be Used on Wheeled Vehicles and the Conditions for Reciprocal Recognition of Approvals Granted on the Basis of These Prescriptions) was originally based on the European regulations, but the UN Regulations are
developing as an established international law, and Japan, Thailand, Malaysia and Egypt as well as other countries outside the EU have become members after the amendment in 1995, and many other countries are expected to join in the future. The
countries bound by the 1958 Agreement have incorporated the UN Regulations into their own domestic policies (The EU and Japan have directly included the UN Regulations into their domestic legislations). While automotive parts and vehicle systems are
regulated by the UN regulations, there are currently no regulations with respect to Whole Vehicle Type Approval (WVTA) such as those in Europe. Japan proposed legislation establishing International Whole Vehicle Type Approval (IWVTA) under the
United Nations in 2016, and the matter is being deliberated by the United Nations. IWVTA is expected to take effect in January 2018 (although the mutual recognition of IWVTA will not take place) and IWVTA is expected to be implemented with the
mutual recognition in October 2018. If IWVTA is established, integration of global approval administrative regulations of each country and simplification of vehicle construction regulations are expected. IWVTA would only be partially applicable at
the time of its establishment in 2016 and deliberation toward the full application would continue after establishment.
An
amendment to the 1958 Agreement has been considered in order to establish R0 (IWVTA). The bill of such amendment to the 1958 Agreement was passed in June 2016 and it is expected to take effect in around September 2017 without trouble. Such amendment
will increase the flexibility of the regulations, enabling approvals to be granted for the old series of regulations according to the needs of the signatory countries to the 1958 Agreement. The percentage of required votes for voting in connection
with proposed UN regulations will also be considered and the 1958 Agreement is expected to become fairer. Such amendment to the 1958 Agreement is expected to make the 1958 Agreement more attractive to countries that are not currently party to the
1958 Agreement, and aims to increase the number of signatory countries.
The 1998 Agreement (Agreement Concerning the
Establishing of Global Technical Regulations for Wheeled Vehicles, Equipment and Parts which can be Fitted and/or be Used on Wheeled Vehicles) is a U.S.-led agreement that aims to harmonize technical regulations, and defines each regulation as
a Global Technical Regulation (GTR). At present, there are 16 GTRs in total. Currently, numerous provisions are under discussion in order to include more regulations. The countries bound by the 1998 agreement are required to incorporate
the GTRs into their domestic laws. The parties to the 1998 agreement include the United States, Canada, China and India, which are not parties to the 1958 agreement, so GTRs will also influence those countries.
45
Chinese Standards
Vehicle safety regulations in China were drafted with reference to the UN regulations and cover almost the same matters as the UN regulations. However, recently, these regulations also include unique
provisions which take into account the distinctive characteristics of the Chinese market environment and the progress of technological development in China and there are increasing number of legislations that differ from the latest UN regulations or
other international standards. As for future safety regulations, standards related to batteries, motors, the charging of electric vehicles and data communication are currently being planned.
Standards of Other Countries
Vehicle safety regulations in Canada are
basically similar to those in the United States. In regions outside of North America, movements for adoption and conformity with the UN regulations have become active, including in those countries without automotive manufacturing industries. The
list of signatories to the 1958 agreement of the United Nations continues to grow, and now includes Korea, Thailand and Malaysia in Asia, as well as Russia, South Africa, Egypt and Morocco. In addition, ASEAN, pursuant to its economic community
mission, has decided to adopt the UN regulations as its regional agreement. Latin America, India and countries in the Middle East that are not signatories to the 1958 agreement of the United Nations are also moving forward to conform their
respective regulations to the UN regulations or to adopt new regulations consistent with the UN regulations.
Environmental Matters
Japanese Standards
Toyotas automotive operations in Japan are subject to substantial environmental regulation under laws such as the Air Pollution Law, the Water Pollution Control Law, the Noise Regulation Law and the
Vibration Control Law. Under these laws, if a business entity establishes or alters any facility that is regulated by these laws, the business entity is required to give prior notice to regulators, and if a business entity discharges, uses or stores
substances that are environmental burdens or causes noise or vibration from such facility, the business entity is also required to comply with the applicable standards. Toyota is also subject to local regulations, which in some cases impose more
stringent obligations than the Japanese central government requirements. Toyota has complied with these regulations. Under the Waste Disposal and Public Cleaning Law, producers of industrial waste must dispose of industrial waste in the manner
prescribed in the Waste Disposal and Public Cleaning Law. Toyota has also complied with the Waste Disposal and Public Cleaning Law.
The Soil Contamination Countermeasures Law of Japan requires that land owners conduct contamination testing and submit a report at the time they cease to use hazardous substances, such as in connection
with the sale of a former factory, or if there is a possibility of health hazards due to land contamination. If it is found that land contamination exceeds a certain level, the relevant prefectural authority designates the area considered to be
contaminated and orders the land owner to take necessary measures. Toyota is suitably managing its land in accordance with the same law. In addition, under the Law on Recycling of
End-of-Life
Vehicles, vehicle manufacturers are required to take back and recycle specified materials (automotive shredder residues, air bags and fluorocarbons) of
end-of-life
vehicles and the provisions concerning such obligations of vehicle manufacturers became effective in January 2005. Toyota has coordinated with relevant
parties to establish a vehicle take-back and recycle system throughout Japan. As a result, in fiscal 2016, Toyota achieved a recycling/recovery rate of 97% for automobile shredder residue (the legal requirement being 70%) and 93% for air bags (the
legal requirement being 85%) and reached the targets set forth in this law.
U.S. Standards
Toyotas assembly, manufacturing and other operations in the United States are subject to a wide range of environmental regulation
under the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Pollution Prevention Act and the Toxic Substances Control Act. Toyota is also subject to a variety of state legislation that parallels, and in some cases
imposes more stringent obligations than, federal
46
requirements. These federal and state regulations impose severe restrictions on
air-
and water-borne discharges of pollution from Toyota facilities, the
handling of hazardous materials at Toyota facilities and the disposal of wastes from Toyota operations. Toyota is subject to many similar requirements in its operations in Europe, Canada and other countries.
Pursuant to the Clean Air Act, the EPA has promulgated National Ambient Air Quality Standards (NAAQS) for six
criteria pollutants, including for ozone and particulate matter. The Clean Air Act requires that the EPA review and possibly revise these NAAQS every five years. On December 14, 2012, the EPA made the annual health-based
particulate matter NAAQS more stringent. On October 1, 2015, the EPA made the annual health-based and welfare-based ozone NAAQS more stringent. The revised annual health-based particulate matter NAAQS and the revised annual health-based and
welfare-based ozone NAAQS, as well as any future NAAQS revisions, could lead to additional pollution control requirements on the industry, including on Toyotas manufacturing operations.
Toyota expects growing pressure in the next several years to further reduce emissions from motor vehicles and manufacturing facilities.
European Standards
In October 2000, the European Union brought into effect a directive that requires member states to promulgate regulations implementing the following:
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automotive manufacturers shall bear all or a significant part of the costs for taking back
end-of-life
vehicles sold after July 1, 2002 and dismantling and recycling those vehicles. Beginning January 1, 2007, this requirement became applicable to vehicles put on the market before
July 1, 2002 as well;
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automotive manufacturers may not use certain hazardous materials in vehicles sold after July 1, 2003;
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type-approved vehicle models put on the market after December 15, 2008 shall be
re-usable
and/or
recyclable to a minimum of 85% by weight per vehicle and shall be
re-usable
and/or
re-use
as material or energy to a minimum of 95% by weight per vehicle; and
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end-of-life
vehicles must meet actual
re-use
and/or recycling of 80% and
re-use
and/or recovery of 85%, respectively, of vehicle weight by 2006, rising respectively to 85% and 95% by 2015.
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Laws to implement this directive came into effect in each of the EU member states. Currently, there are
uncertainties surrounding the implementation of the applicable regulations in different EU member states, particularly regarding automotive manufacturer responsibilities and resultant expenses that may be incurred.
In addition, under this directive, the member states must take measures to ensure that car manufacturers, distributors and other
auto-related economic operators establish adequate used vehicle collection and treatment facilities and to ensure that hazardous materials and recyclable parts are removed from vehicles prior to shredding. This directive impacts Toyotas
vehicles sold in the EU. Toyota accommodated, in offering its products, any measures the EU member states chose to implement in order to comply with this directive.
The EU has also issued directives and made proposals relating to the following subjects on environmental matters:
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emission standards that include a framework permitting member states to introduce fiscal incentives to promote early compliance; and
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reform of rules governing automotive distribution and service. The block exemption on distribution has been amended so that dealers may engage in
cross-border sales actively within the EU and open additional facilities for sales and services. Additionally, dealers may no longer be required by manufacturers to operate both sales and service facilities side by side.
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47
In December 2011, the European Commission proposed to reduce noise produced by cars,
vans, buses, coaches and light and heavy trucks. As proposed, noise limit values would ultimately be lowered by four
A-weighted
decibels for vehicles other than trucks, and three
A-weighted
decibels for trucks. Compliance would be achieved in three steps over a 10 to 12 year period. In May 2014, a regulation adopting the proposal was published in final form in the EU Official
Journal.
Toyota believes that its operations are materially in compliance with environmental regulatory requirements
concerning its facilities and products in each of the markets in which it operates. Toyota continuously monitors these requirements and takes necessary operational measures to ensure that it remains in material compliance with all of these
requirements.
Toyota believes that environmental regulatory requirements have not had a material adverse effect on its
operations. However, compliance with environmental regulations and standards has increased costs and is expected to lead to higher costs in the future. Therefore, Toyota recognizes that effective environmental cost management will become
increasingly important. Moreover, innovation and leadership in the area of environmental protection are becoming increasingly important to remain competitive in the market. As a result, Toyota has proceeded with the development and production of
environmentally friendly technologies, such as hybrid vehicles, fuel cell vehicles and high fuel efficiency, low emission engines.
In addressing environmental issues, based on an assessment of the environmental impact of its products through their entire life cycles, from production through sales, disposal and recycling, Toyota, as a
manufacturer, strives to take all possible measures from development stage and continues to work toward technological innovations to make efficient use of resources and to reduce the burden on the environment.
Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934
None.
Research and
Development
The overriding goals of Toyotas technology and product development activities are to minimize the
negative aspects of cars, such as traffic accidents and impact on the environment, and maximize the positive aspects, such as driving pleasure, comfort and convenience. By achieving these sometimes conflicting goals to a high degree, Toyota seeks to
open the door to the automobile society of the future. To ensure efficient progress in research and development activities, Toyota coordinates and integrates all research and development phases, from basic research and advanced research to
forward-looking technology and product development. With respect to long-term basic research in areas such as energy, the environment, information technology, telecommunications and materials, projects are regularly reviewed and evaluated in
consultation with outside experts to achieve research and development cost control. With respect to forward-looking, leading-edge technology and product development, Toyota establishes cost-performance benchmarks on a
project-by-project
basis to ensure efficient development investment.
The chart below provides an overview of Toyotas R&D at each phase.
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Basic research
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Phase to discover development theme
Research on basic vehicle-related technology
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Forward-looking and leading-edge technology development
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Phase requiring technological breakthroughs such as components and systems
Development of leading-edge components and systems that are more
advanced than those of competitors
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Product development
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Phase mainly for development of new models
Development of
all-new
models and existing-model upgrades
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Toyota is promoting research and development into the early commercialization of next
generation environmentally friendly, energy-efficient and safe-vehicle technology and is making efforts to produce vehicles that are friendly to people and the environment by focusing on the following areas:
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further improvements in hybrid technologies, including in functions and cost, and contributions to the environment through advancements;
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improvement in gasoline engine fuel economy technology as well as improvement in technology in connection with more stringent emission standards;
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promoting improvements in functions and fuel economy of clean diesel engines;
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development of electric vehicles, fuel cell vehicles and other alternative fuel vehicles; and
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development of technology designed to promote driving and vehicle safety.
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For a detailed discussion of the companys research and development infrastructure, see Operating and
Financial Review and Prospects Research and Development, Patents and Licenses.
Components and Parts, Raw Materials and Sources of Supply
Toyota purchases parts, components, raw materials, equipment and other supplies from multiple competing suppliers located around the world. Toyota works closely with its suppliers to pursue the most
optimal purchasing possible. Toyota believes that this policy encourages technological innovation, cost reduction and other measures to strengthen its vehicle competitiveness. Toyota plans to continue purchases based on the same principle and does
not anticipate any difficulty in obtaining stable supplies in the foreseeable future.
Because Toyota had more than 50
overseas operations in 28 countries and regions as of March 31, 2017, procurement of parts and components is being carried out not only locally in the country of the production site but also from third countries, and the distribution network has
become increasingly more complex. In order to realize timely and efficient distribution at the same time as keeping total costs at a minimum, Toyota is promoting efforts to optimize each stage of the supply-chain. To this end, Toyota has developed a
standardized system of global distribution and is supporting the operation of the system at each production base. The use of the global distribution system aims at implementing parts procurement that meets changes in vehicle production in a timely
manner. These varying efforts, combined together, have led to maximized customer satisfaction, as well as to building a good working relationship with Toyotas suppliers.
Toyota aims to share information and collaborate among the procurement divisions in each of the regions throughout the world in order to procure parts and materials from the most competitive suppliers
among Toyota factories located in various areas worldwide. At the same time, Toyota carries out streamlining efforts undertaken together with suppliers in each country in order to achieve sustainable growth. Toyota has been working on a cost
reduction measure referred to as
RR-CI
and VA activities.
RR-CI
activities aim to improve competitive power through thorough localization, sharing parts and
components and manufacturing reforms together with producing products matching customers needs in each region and vehicle category. Toyota is advancing
RR-CI
activities in conjunction with the TNGA and
has been continuously working on VA (value analysis) Activities for the various types of vehicles already on sale in collaboration with
in-house
vehicle companies. In addition, Toyota has been working on the
TNGA to achieve sweeping advances in basic performance and product appeal of parts and units as well as seeking cost reductions by sharing more parts and implementing manufacturing reforms.
In the first half of fiscal 2017, market prices of raw materials such as steel generally decreased in comparison to the first half of
prior fiscal year due in part to decreased demand in China. In the latter half, prices recently picked up after remaining flat for a while. The direction of prices is still unforeseeable and Toyota is continually promoting cost reduction efforts,
such as reducing the amount of raw materials it uses.
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Toyotas ability to continue to obtain supplies in an efficient manner is subject to a
number of factors, some of which are not in Toyotas control. These factors include the ability of its suppliers to provide a continued source of supplies and the effect on Toyota of competition by other users in obtaining the supplies.
Intellectual Property
Toyota holds numerous Japanese and foreign patents, trademarks, design patents and some utility model registrations. It also has a number of applications pending for Japanese and foreign patents. While
Toyota considers all of its intellectual property to be important, it does not consider any specific subset of its patents, trademarks, design patents or utility model registrations to be so important that their expiration or termination would
materially affect Toyotas business.
Capital Expenditures and Divestitures
Set forth below is a chart of Toyotas principal capital expenditures between April 1, 2014 and March 31, 2017, the
approximate total costs of such activity, as well as the location and method of financing of such activity, presented on a by subsidiary basis and as reported in Toyotas annual Japanese securities report filed with the director of
the Kanto Local Finance Bureau.
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Description of Activity
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Total Cost
(Yen in billions)
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Location
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Primary
Method of
Financing
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Japan
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Investment primarily in technology and products by
Toyota Motor Corporation
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946.9
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Japan
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Internal funds,
financing
from
issuance
of bonds, etc.
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Investment primarily in technology and products by
Hino Motors, Ltd.
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133.2
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Japan
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Internal funds
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Investment primarily in technology and products by
Daihatsu Motor Co., Ltd.
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72.1
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Japan
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Internal funds
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Investment primarily in technology and products by
Toyota Auto Body Co., Ltd.
|
|
|
71.4
|
|
|
Japan
|
|
Internal funds
|
|
|
|
|
Investment primarily in technology and products by
Toyota Motor Kyushu, Inc.
|
|
|
70.4
|
|
|
Japan
|
|
Internal funds
|
|
|
|
|
Investment primarily in technology and products by
Primeearth EV Energy Co., Ltd.
|
|
|
54.2
|
|
|
Japan
|
|
Borrowings
|
|
|
|
|
Outside of Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment primarily to promote localization by
Toyota Motor Manufacturing, Kentucky, Inc.
|
|
|
219.5
|
|
|
United States
|
|
Internal funds
|
|
|
|
|
Investment primarily to promote localization by
Toyota Motor Thailand Co., Ltd.
|
|
|
128.5
|
|
|
Thailand
|
|
Internal funds
|
|
|
|
|
Investment primarily to establish office facilities by
Toyota Motor North America, Inc.
|
|
|
95.2
|
|
|
United States
|
|
Internal funds
|
|
|
|
|
Investment primarily to promote localization by
Toyota Motor Manufacturing Canada Inc.
|
|
|
93.6
|
|
|
Canada
|
|
Internal funds
|
|
|
|
|
Investment primarily to promote localization by
PT. Toyota Motor Manufacturing Indonesia
|
|
|
91.9
|
|
|
Indonesia
|
|
Internal funds
|
|
|
|
|
Investment primarily to promote localization by
Toyota Argentina S.A.
|
|
|
89.6
|
|
|
Argentina
|
|
Borrowings
|
50
|
|
|
|
|
|
|
|
|
Description of Activity
|
|
Total Cost
(Yen in billions)
|
|
|
Location
|
|
Primary
Method of
Financing
|
|
|
|
|
Investment primarily to promote localization by
Toyota Motor Europe NV/SA .
|
|
|
68.7
|
|
|
Belgium
|
|
Internal funds
|
|
|
|
|
Investment primarily to promote localization by
Toyota do Brazil Ltda.
|
|
|
59.9
|
|
|
Brazil
|
|
Internal funds
|
|
|
|
|
Investment primarily in leased automobiles by
Toyota Motor Credit Corporation
|
|
|
6,574.4
|
|
|
United States
|
|
Internal funds,
financing
from issuance
of bonds, etc.
|
Set forth below is information with respect to Toyotas material plans to construct, expand or
improve its facilities between April 2017 and March 2018, presented on a by subsidiary basis and as reported in Toyotas annual Japanese securities report filed with the director of the Kanto Local Finance Bureau.
|
|
|
|
|
|
|
|
|
Description of Activity
|
|
Total Cost
(Yen in billions)
|
|
|
Location
|
|
Primary
Method of
Financing
|
Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment primarily in manufacturing facilities by
Toyota Motor Corporation
|
|
|
350.0
|
|
|
Japan
|
|
Internal funds
|
|
|
|
|
Outside of Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment primarily in manufacturing facilities by
Toyota Motor Manufacturing, Kentucky, Inc.
|
|
|
94.4
|
|
|
United States
|
|
Internal funds
|
|
|
|
|
Investment primarily in manufacturing facilities by
Toyota do Brazil Ltda.
|
|
|
41.6
|
|
|
Brazil
|
|
Internal funds
|
|
|
|
|
Investment primarily in manufacturing facilities by
Toyota Motor Manufacturing, Indiana, Inc.
|
|
|
39.8
|
|
|
United States
|
|
Internal funds
|
|
|
|
|
Investment primarily in manufacturing facilities by
Toyota Motor Manufacturing Canada Inc.
|
|
|
38.3
|
|
|
Canada
|
|
Internal funds
|
|
|
|
|
Investment primarily in manufacturing facilities by
Toyota Motor Thailand Co., Ltd.
|
|
|
34.3
|
|
|
Thailand
|
|
Internal funds
|
Set forth below is additional information with respect to Toyotas material plans to construct,
expand or improve its facilities.
Toyota completed annual production capacity increase at its Russian factory from
50 thousand units to 100 thousand units in August 2016 and at its Turkish factory from 150 thousand units to 280 thousand units beginning at the end of 2016. In Mexico, Toyota plans to increase production capacity at its Baja
California factory from 100 thousand units to 160 thousand units in 2018 and to build a new plant in 2019. In China, Toyota plans to launch a third plant in Guangzhou in 2018. Tianjin FAW Toyota Motor Co., Ltd. also plans to construct a
new production line to replace an aging existing line in the middle of 2018. At the beginning of 2019, Toyota plans to launch a new plant in Malaysia dedicated to passenger vehicles with annual production capacity of 50,000 cars.
To enhance production capacity of auto parts, Toyota constructed a plant for hybrid vehicle battery production in China in September 2015
and a plant for passenger vehicle engine production in Indonesia and Brazil in February 2016.
Toyota does not collect
information on the amount of expenditures already paid for each plant under construction because Toyota believes that it is difficult and it would require unreasonable effort or expense to
51
identify and categorize each expenditure item with reasonable accuracy as past and future expenditures. Toyotas construction projects consist of numerous expenditures, each of which is
continually being adjusted and incurred in variable and constantly changing amounts as part of the overall
work-in-progress.
Seasonality
Toyota does
not consider its seasonality material in the sense of significantly higher sales during any certain period of the year as compared to other periods of the year.
Legal Proceedings
From
time-to-time,
Toyota issues vehicle recalls and takes other safety measures including safety campaigns relating to its vehicles. Since 2009, Toyota issued safety campaigns related to the risk of floor mat
entrapment of accelerator pedals and vehicle recalls related to
slow-to-return
or sticky accelerator pedals. In March 2014, Toyota entered into a Deferred Prosecution
Agreement (DPA) to resolve an investigation by the U. S. Attorney for the Southern District of New York (SDNY) related to unintended acceleration in certain of its vehicles. The DPA provides for an independent monitor to
review and assess policies and procedures relating to Toyotas safety communications process, its process for sharing vehicle accident information internally and its process for preparing and sharing certain technical reports.
Personal injury and wrongful death claims involving allegations of unintended acceleration are pending in several consolidated
proceedings in federal and state courts, as well as in individual cases in various other states. The judges in the consolidated federal action and the consolidated California state action have approved an Intensive Settlement Process
(ISP) for such claims in those actions. Under the ISP, all individual claims within the consolidated actions are stayed pending completion of a process to assess whether they can be resolved on terms acceptable to the parties. Cases not
resolved after completion of the ISP will then proceed to discovery and toward trial. Toyota has offered the ISP process to plaintiffs in other consolidated actions and in individual cases, as well.
Toyota has been named as a defendant in 33 economic loss class action lawsuits in the United States, which, together with similar
lawsuits against Takata and other automakers, have been made part of a multi-district litigation proceeding in the United States District Court for the Southern District of Florida, arising out of allegations that airbag inflators manufactured by
Takata are defective. Toyota has reached a settlement with the plaintiffs in the United States economic loss class actions. Court approval is being sought for the settlement. Toyota and other automakers have also been named in certain class actions
filed in Mexico and Canada, as well as some other actions by states or territories of the United States. Those actions have not been settled and are being litigated.
Toyota has received a request for information from the SDNY related to statements concerning one or more reported injuries sustained in Toyota vehicles following deployments of Takata airbags. Toyota has
cooperated with the request.
Toyota self-reported a process gap in fulfilling certain emissions defect information reporting
requirements with the U.S. Environmental Protection Agency (EPA) and California Air Resources Board, including updates on its repair completion rates for recalled emissions components and certain other reports concerning emissions
related defects. Toyota is involved in discussions with these agencies. The SDNY and EPA have requested certain
follow-up
information regarding this reporting issue, and Toyota is cooperating with the request.
Toyota also has various other pending legal actions and claims, including without limitation personal injury and wrongful
death lawsuits and claims in the United States, and is subject to government investigations
from-time-to-time.
Beyond the amounts accrued with respect to all aforementioned matters, Toyota is unable to estimate a range of reasonably possible loss,
if any, for the pending legal matters because (i) many of the proceedings are in
52
evidence gathering stages, (ii) significant factual issues need to be resolved, (iii) the legal theory or nature of the claims is unclear, (iv) the outcome of future motions or
appeals is unknown and/or (v) the outcomes of other matters of these types vary widely and do not appear sufficiently similar to offer meaningful guidance. Based upon information currently available to Toyota, however, Toyota believes that its
losses from these matters, if any, beyond the amounts accrued, would not have a material adverse effect on Toyotas financial position, results of operations or cash flows.
4.C ORGANIZATIONAL STRUCTURE
As of
March 31, 2017, Toyota Motor Corporation had 295 Japanese subsidiaries and 302 overseas subsidiaries. The following table sets forth for each of Toyota Motor Corporations principal subsidiaries, the country of incorporation and the
percentage ownership interest and the voting interest held by Toyota Motor Corporation.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Subsidiary
|
|
|
|
Country of
Incorporation
|
|
Percentage
Ownership
Interest
|
|
|
Percentage
Voting
Interest
|
|
Toyota Financial Services Corporation
|
|
|
|
Japan
|
|
|
100.00
|
|
|
|
100.00
|
|
Hino Motors, Ltd.
|
|
|
|
Japan
|
|
|
50.21
|
|
|
|
50.32
|
|
Toyota Motor Kyushu, Inc.
|
|
|
|
Japan
|
|
|
100.00
|
|
|
|
100.00
|
|
Daihatsu Motor Co., Ltd.
|
|
|
|
Japan
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Finance Corporation
|
|
|
|
Japan
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Auto Body Co., Ltd.
|
|
|
|
Japan
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor East Japan, Inc.
|
|
|
|
Japan
|
|
|
100.00
|
|
|
|
100.00
|
|
Daihatsu Motor Kyushu Co., Ltd.
|
|
|
|
Japan
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Engineering & Manufacturing North America, Inc.
|
|
|
|
United States
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Manufacturing, Kentucky, Inc.
|
|
|
|
United States
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor North America, Inc.
|
|
|
|
United States
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Credit Corporation
|
|
|
|
United States
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Manufacturing, Indiana, Inc.
|
|
|
|
United States
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Manufacturing, Texas, Inc.
|
|
|
|
United States
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Sales, U.S.A., Inc.
|
|
|
|
United States
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Manufacturing, Mississippi, Inc.
|
|
|
|
United States
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Manufacturing Canada Inc.
|
|
|
|
Canada
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Credit Canada Inc.
|
|
|
|
Canada
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Canada Inc.
|
|
|
|
Canada
|
|
|
51.00
|
|
|
|
51.00
|
|
Toyota Motor Europe NV/SA
|
|
|
|
Belgium
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Manufacturing France S.A.S.
|
|
|
|
France
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Finance (Netherlands) B.V.
|
|
|
|
Netherlands
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Manufacturing Turkey Inc.
|
|
|
|
Turkey
|
|
|
90.00
|
|
|
|
90.00
|
|
Toyota Motor Manufacturing (UK) Ltd.
|
|
|
|
United Kingdom
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Financial Services (UK) PLC
|
|
|
|
United Kingdom
|
|
|
100.00
|
|
|
|
100.00
|
|
OOO TOYOTA MOTOR
|
|
|
|
Russia
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor (China) Investment Co., Ltd.
|
|
|
|
China
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Motor Finance (China) Co., Ltd.
|
|
|
|
China
|
|
|
100.00
|
|
|
|
100.00
|
|
P.T. Astra Daihatsu Motor
|
|
|
|
Indonesia
|
|
|
61.75
|
|
|
|
61.75
|
|
PT. Toyota Motor Manufacturing Indonesia
|
|
|
|
Indonesia
|
|
|
95.00
|
|
|
|
95.00
|
|
Toyota Motor Asia Pacific Pte Ltd.
|
|
|
|
Singapore
|
|
|
100.00
|
|
|
|
100.00
|
|
Kuozui Motors, Ltd.
|
|
|
|
Taiwan
|
|
|
70.00
|
|
|
|
70.00
|
|
Toyota Leasing (Thailand) Co., Ltd.
|
|
|
|
Thailand
|
|
|
86.84
|
|
|
|
86.84
|
|
Toyota Motor Thailand Co., Ltd.
|
|
|
|
Thailand
|
|
|
86.43
|
|
|
|
86.43
|
|
Toyota Motor Asia Pacific Engineering and Manufacturing Co., Ltd.
|
|
|
|
Thailand
|
|
|
100.00
|
|
|
|
100.00
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Subsidiary
|
|
|
|
Country of
Incorporation
|
|
Percentage
Ownership
Interest
|
|
|
Percentage
Voting
Interest
|
|
Toyota Motor Corporation Australia Ltd.
|
|
|
|
Australia
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Finance Australia Ltd.
|
|
|
|
Australia
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota Argentina S.A.
|
|
|
|
Argentina
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota do Brasil Ltda.
|
|
|
|
Brazil
|
|
|
100.00
|
|
|
|
100.00
|
|
Toyota South Africa Motors (Pty) Ltd.
|
|
|
|
South Africa
|
|
|
100.00
|
|
|
|
100.00
|
|
4.D PROPERTY, PLANTS AND EQUIPMENT
As of March 31, 2017, Toyota and its affiliated companies produced automobiles and related components through more than 50 overseas
manufacturing organizations in 28 countries and regions besides Japan. The facilities are located principally in Japan, the United States, Canada, the United Kingdom, France, Turkey, Thailand, China, Taiwan, India, Indonesia, South Africa,
Australia, Argentina and Brazil.
In addition to its manufacturing facilities, Toyotas properties include sales offices
and other sales facilities in major cities, repair service facilities and research and development facilities.
The following
table sets forth information, as of March 31, 2017, with respect to Toyotas principal facilities and organizations, all of which are owned by Toyota Motor Corporation or its subsidiaries. However, small portions, all under approximately
20%, of some facilities are on leased premises.
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility or Subsidiary Name
|
|
Location
|
|
Land Area
(thousand
square
meters)
|
|
|
Number of
Employees
|
|
|
Principal
Products or
Functions
|
Japan (Toyota Motor Corporation)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tahara Plant
|
|
Tahara City, Aichi Pref.
|
|
|
4,029
|
|
|
|
6,966
|
|
|
Automobiles
|
Higashi-Fuji Technical Center
|
|
Susono City, Shizuoka Pref.
|
|
|
2,041
|
|
|
|
3,174
|
|
|
Research and
Development
|
Toyota Head Office and Technical Center
|
|
Toyota City, Aichi Pref.
|
|
|
1,930
|
|
|
|
24,139
|
|
|
Research and
Development
|
Motomachi Plant
|
|
Toyota City, Aichi Pref.
|
|
|
1,593
|
|
|
|
7,452
|
|
|
Automobiles
|
Takaoka Plant
|
|
Toyota City, Aichi Pref.
|
|
|
1,312
|
|
|
|
4,079
|
|
|
Automobiles
|
Tsutsumi Plant
|
|
Toyota City, Aichi Pref.
|
|
|
937
|
|
|
|
5,079
|
|
|
Automobiles
|
Kamigo Plant
|
|
Toyota City, Aichi Pref.
|
|
|
868
|
|
|
|
2,862
|
|
|
Automobile parts
|
Kinu-ura
Plant
|
|
Hekinan City, Aichi Pref.
|
|
|
836
|
|
|
|
3,099
|
|
|
Automobile parts
|
Honsha Plant
|
|
Toyota City, Aichi Pref.
|
|
|
551
|
|
|
|
2,002
|
|
|
Automobile parts
|
Nagoya Office
|
|
Nagoya City, Aichi Pref.
|
|
|
3
|
|
|
|
2,295
|
|
|
Office
|
|
|
|
|
|
Japan (Subsidiaries)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hino Motors, Ltd.
|
|
Hino City, Tokyo, etc.
|
|
|
6,256
|
|
|
|
12,622
|
|
|
Automobiles
|
Daihatsu Motor Co., Ltd. .
|
|
Ikeda City, Osaka, etc.
|
|
|
7,875
|
|
|
|
11,387
|
|
|
Automobiles
|
Toyota Auto Body Co., Ltd.
|
|
Kariya City, Aichi Pref., etc.
|
|
|
2,256
|
|
|
|
10,920
|
|
|
Automobiles
|
Toyota Motor East Japan, Inc.
|
|
Kurokawa-gun,
Miyagi Pref., etc.
|
|
|
2,576
|
|
|
|
7,234
|
|
|
Automobiles
|
Toyota Motor Kyushu, Inc.
|
|
Miyawaka City, Fukuoka Pref., etc.
|
|
|
1,940
|
|
|
|
7,534
|
|
|
Automobiles
|
|
|
|
|
|
Outside Japan (Subsidiaries)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toyota Motor Manufacturing, Kentucky, Inc.
|
|
Kentucky, U.S.A.
|
|
|
5,161
|
|
|
|
7,863
|
|
|
Automobiles
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility or Subsidiary Name
|
|
Location
|
|
Land Area
(thousand
square
meters)
|
|
|
Number of
Employees
|
|
|
Principal
Products or
Functions
|
Toyota Motor Thailand Co., Ltd.
|
|
Samutprakan, Thailand
|
|
|
4,414
|
|
|
|
10,221
|
|
|
Automobiles
|
Toyota Motor Manufacturing Canada, Inc.
|
|
Ontario, Canada
|
|
|
4,752
|
|
|
|
7,423
|
|
|
Automobiles
|
Toyota Motor Sales, U.S.A., Inc.
|
|
California, U.S.A.
|
|
|
3,348
|
|
|
|
6,032
|
|
|
Sales facilities
|
PT. Toyota Motor Manufacturing, Indonesia
|
|
Jakarta, Indonesia
|
|
|
2,810
|
|
|
|
6,038
|
|
|
Automobiles
|
Toyota is constantly engaged in upgrading, modernizing and revamping the operations of its manufacturing
facilities based on its assessment of market needs and prospects. To respond flexibly to fluctuations in demand in each of its production operations throughout the world, Toyota continually reviews and implements appropriate production measures such
as revising takt time and adjusting days of operation. As a result, Toyota believes it would require unreasonable effort to track the exact productive capacity and the extent of utilization of each of its manufacturing facilities with a reasonable
degree of accuracy.
As of March 31, 2017, property, plant and equipment having a net book value of approximately
¥599.9 billion was pledged as collateral securing indebtedness incurred by Toyota Motor Corporations consolidated subsidiaries. Toyota believes that there does not exist any material environmental issues that may affect the
companys utilization of its assets.
Toyota considers all its principal manufacturing facilities and other significant
properties to be in good condition and adequate to meet the needs of its operations.
See Business Overview
Capital Expenditures and Divestitures for a description of Toyotas material plans to construct, expand or improve facilities.
ITEM 5.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
5.A OPERATING RESULTS
Financial information
discussed in this section is derived from Toyotas consolidated financial statements that appear elsewhere in this annual report. The financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America.
Overview
The business segments of Toyota include automotive operations, financial services operations and all other operations. Automotive operations are Toyotas most significant business segment, accounting
for 89% of Toyotas total revenues before the elimination of intersegment revenues for fiscal 2017. Toyotas primary markets based on vehicle unit sales for fiscal 2017 were: Japan (25.4%), North America (31.6%), Europe (10.3%) and
Asia (17.7%).
Automotive Market Environment
The worldwide automotive market is highly competitive and volatile. The demand for automobiles is affected by a number of factors including social, political and general economic conditions; introduction
of new
55
vehicles and technologies; and costs incurred by customers to purchase or operate vehicles. These factors can cause consumer demand to vary substantially in different geographic markets and for
different types of automobiles.
During fiscal 2017, although markets have progressed in a steady manner in the developed
countries and expanded in China due to effects of a sales tax cut on small cars, markets in resource-rich countries have slowed down. Meanwhile, efforts toward improvement across businesses in areas including automated driving technology, connected
vehicles, environmental technologies used in fuel cell vehicles and electric vehicles, as well as car-sharing and ride-sharing have become active.
The following table sets forth Toyotas consolidated vehicle unit sales by geographic market based on location of customers for the past three fiscal years.
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|
|
|
|
|
|
|
|
|
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|
Thousands of units
|
|
|
|
Year Ended March 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
Japan
|
|
|
2,154
|
|
|
|
2,059
|
|
|
|
2,274
|
|
North America
|
|
|
2,715
|
|
|
|
2,839
|
|
|
|
2,837
|
|
Europe
|
|
|
859
|
|
|
|
844
|
|
|
|
925
|
|
Asia
|
|
|
1,489
|
|
|
|
1,345
|
|
|
|
1,588
|
|
Other*
|
|
|
1,755
|
|
|
|
1,594
|
|
|
|
1,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overseas total
|
|
|
6,818
|
|
|
|
6,622
|
|
|
|
6,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,972
|
|
|
|
8,681
|
|
|
|
8,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Other consists of Central and South America, Oceania, Africa and the Middle East, etc.
|
During fiscal 2016, Toyotas consolidated vehicle unit sales in Japan decreased compared to the previous fiscal year, while during
fiscal 2017, vehicle unit sales in Japan increased primarily as a result of the active introduction of new products and the efforts of dealers nationwide. For fiscal 2016 and fiscal 2017, the Toyota and Lexus brands market share excluding
mini-vehicles in Japan was 46.8% and 47.8%, and the market share (including Daihatsu and Hino brands) including mini-vehicles was 43.2% and a record high of 45.0%, each remaining at a high level, consistent with in fiscal 2015. Overseas consolidated
vehicle unit sales decreased as a whole during fiscal 2016, due mainly to decreases in Asia and the Middle East, despite an increase in North America, while vehicle unit sales increased as a whole during fiscal 2017, due mainly to increases in Asia
and Europe, despite a decrease in the Middle East.
Toyotas share of total vehicle unit sales in each market is
influenced by the quality, safety, reliability, price, design, performance, economy and utility of Toyotas vehicles compared with those offered by other manufacturers. The timely introduction of new or redesigned vehicles is also an important
factor in satisfying customer needs. Toyotas ability to satisfy changing customer preferences can affect its revenues and earnings significantly.
The profitability of Toyotas automotive operations is affected by many factors. These factors include:
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vehicle unit sales volumes,
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|
|
the mix of vehicle models and options sold,
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|
|
|
the level of parts and service sales,
|
|
|
|
the levels of price discounts and other sales incentives and marketing costs,
|
|
|
|
the cost of customer warranty claims and other customer satisfaction actions,
|
56
|
|
|
the cost of research and development and other fixed costs,
|
|
|
|
the prices of raw materials,
|
|
|
|
the ability to control costs,
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|
|
|
the efficient use of production capacity,
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|
|
|
the adverse effect on production due to the reliance on various suppliers for the provision of supplies,
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|
|
the adverse effect on market, sales and productions of natural calamities and interruptions of social infrastructure, and
|
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|
changes in the value of the Japanese yen and other currencies in which Toyota conducts business.
|
Changes in laws, regulations, policies and other governmental actions can also materially impact the profitability of Toyotas
automotive operations. These laws, regulations and policies include those attributed to environmental matters, vehicle safety, fuel economy and emissions that can add significantly to the cost of vehicles.
Many governments also impose local content requirements, impose tariffs and other trade barriers, and enact price or exchange controls
that can limit an automakers operations and can make the repatriation of profits unpredictable. Changes in these laws, regulations, policies and other governmental actions may affect the production, licensing, distribution or sale of
Toyotas products, cost of products or applicable tax rates. From time-to-time when potential safety problems arise, Toyota issues vehicle recalls and takes other safety measures including safety campaigns relating to its vehicles. Since 2009,
Toyota issued safety campaigns related to the risk of floor mat entrapment of accelerator pedals and vehicle recalls related to slow-to-return or sticky accelerator pedals. The recalls and other safety measures described above have led to a number
of claims and lawsuits against Toyota. For a more detailed description of these claims and lawsuits, see Information on the Company Business Overview Legal Proceedings and note 24 to the consolidated financial
statements.
The worldwide automotive industry is in a period of global competition which may continue for the foreseeable
future, and in general the competitive environment in which Toyota operates is likely to intensify. Toyota believes it has the resources, strategies and technologies in place to compete effectively in the industry as an independent company for the
foreseeable future.
Financial Services Operations
The competition in the worldwide automobile financial services industry is intensifying. As competition increases, margins on financing transactions may decrease and market share may also decline as
customers obtain financing for Toyota vehicles from alternative sources.
Toyotas financial services operations mainly
include loans and leasing programs for customers and dealers. Toyota believes that its ability to provide financing to its customers is an important value added service. Therefore, Toyota has expanded its network of finance subsidiaries in order to
offer financial services in many countries.
Toyotas competitors for retail financing and retail leasing include
commercial banks, credit unions and other finance companies. Meanwhile, commercial banks and other captive automobile finance companies also compete against Toyotas wholesale financing activities.
Toyotas total finance receivables increased during fiscal 2017 mainly due to an increase in the average lending balance. Also,
vehicles and equipment on operating leases, net increased during fiscal 2017 mainly due to an increase in the number of operating leases in financial services subsidiaries in North America.
57
The following table provides information regarding Toyotas finance receivables and
operating leases in the past two fiscal years.
|
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|
|
|
|
|
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|
Yen in millions
|
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2017
|
|
Finance Receivables
|
|
|
|
|
|
|
|
|
Retail
|
|
|
11,156,798
|
|
|
|
11,453,352
|
|
Finance leases
|
|
|
1,144,312
|
|
|
|
1,265,882
|
|
Wholesale and other dealer loans
|
|
|
2,994,171
|
|
|
|
3,281,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,295,281
|
|
|
|
16,000,376
|
|
Deferred origination costs
|
|
|
169,467
|
|
|
|
172,298
|
|
Unearned income
|
|
|
(754,836
|
)
|
|
|
(804,591
|
)
|
Allowance for credit losses
|
|
|
|
|
|
|
|
|
Retail
|
|
|
(98,853
|
)
|
|
|
(104,354
|
)
|
Finance leases
|
|
|
(24,600
|
)
|
|
|
(23,962
|
)
|
Wholesale and other dealer loans
|
|
|
(30,828
|
)
|
|
|
(30,896
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(154,281
|
)
|
|
|
(159,212
|
)
|
|
|
|
|
|
|
|
|
|
Total finance receivables, net
|
|
|
14,555,631
|
|
|
|
15,208,871
|
|
Less Current portion
|
|
|
(5,912,684
|
)
|
|
|
(6,196,649
|
)
|
|
|
|
|
|
|
|
|
|
Noncurrent finance receivables, net
|
|
|
8,642,947
|
|
|
|
9,012,222
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
|
|
|
|
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|
|
Vehicles
|
|
|
5,778,463
|
|
|
|
6,105,527
|
|
Equipment
|
|
|
12,836
|
|
|
|
13,096
|
|
Less Deferred income and other
|
|
|
(138,677
|
)
|
|
|
(152,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
5,652,622
|
|
|
|
5,966,579
|
|
Less Accumulated depreciation
|
|
|
(1,133,785
|
)
|
|
|
(1,263,774
|
)
|
Less Allowance for credit losses
|
|
|
(13,049
|
)
|
|
|
(18,889
|
)
|
|
|
|
|
|
|
|
|
|
Vehicles and equipment on operating leases, net
|
|
|
4,505,788
|
|
|
|
4,683,916
|
|
|
|
|
|
|
|
|
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|
Toyotas finance receivables are subject to collectability risks. These risks include consumer and
dealer insolvencies and insufficient collateral values (less costs to sell) to realize the full carrying values of these receivables. See discussion in Critical Accounting Estimates Allowance for Doubtful Accounts and Credit
Losses and note 10 to the consolidated financial statements.
Toyota continues to originate leases to finance new Toyota
vehicles. These leasing activities are subject to residual value risk. Residual value losses could be incurred when the lessee of a vehicle does not exercise the option to purchase the vehicle at the end of the lease term. See discussion in
Critical Accounting Estimates Investment in Operating Leases and note 2 to the consolidated financial statements.
Toyota enters into interest rate swap agreements and cross currency interest rate swap agreements to convert its fixed-rate debt to variable-rate functional currency debt. A portion of the derivative
instruments are entered into to hedge interest rate risk from an economic perspective and are not designated as a hedge of specific assets or liabilities on Toyotas consolidated balance sheet and accordingly, unrealized gains or losses related
to derivatives that are not designated as a hedge are recognized currently in operations. See discussion in Critical Accounting Estimates Derivatives and Other Contracts at Fair Value and Quantitative and Qualitative
Disclosures about Market Risk and notes 21 and 27 to the consolidated financial statements.
The fluctuations in funding
costs can affect the profitability of Toyotas financial services operations. Funding costs are affected by a number of factors, some of which are not in Toyotas control. These factors
58
include general economic conditions, prevailing interest rates and Toyotas financial strength. Funding costs decreased during fiscal 2016, mainly as a result of lower interest rates, while
funding costs increased during fiscal 2017, mainly as a result of higher interest rates.
Toyota launched its credit card
business in Japan in April 2001. As of March 31, 2016, Toyota had 14.3 million cardholders, an increase of 0.8 million cardholders compared with March 31, 2015. As of March 31, 2017, Toyota had 14.9 million cardholders,
an increase of 0.6 million cardholders compared with March 31, 2016. Credit card receivables as of March 31, 2016 increased by ¥2.7 billion from March 31, 2015 to ¥383.6 billion, and that as of March 31, 2017
increased by ¥26.0 billion from March 31, 2016 to ¥409.6 billion.
Other Business Operations
Toyotas other business operations consist of housing (including the manufacture and sale of prefabricated homes), information
technology related businesses (including information technology and telecommunications, intelligent transport systems and GAZOO) and other businesses.
Toyota does not expect its other business operations to materially contribute to Toyotas consolidated results of operations.
Currency Fluctuations
Toyota is affected by fluctuations in foreign
currency exchange rates. Toyota is exposed to fluctuations in the value of the Japanese yen against the U.S. dollar and the euro as well as the Australian dollar, the Russian ruble, the Canadian dollar, the British pound, and others. Toyotas
consolidated financial statements, which are presented in Japanese yen, are affected by foreign currency exchange fluctuations through both translation risk and transaction risk.
Translation risk is the risk that Toyotas consolidated financial statements for a particular period or for a particular date will
be affected by changes in the prevailing exchange rates of the currencies in those countries in which Toyota does business compared with the Japanese yen. Even though the fluctuations of currency exchange rates to the Japanese yen can be
substantial, and, therefore, significantly impact comparisons with prior periods and among the various geographic markets, the translation risk is a reporting consideration and does not reflect Toyotas underlying results of operations. Toyota
does not hedge against translation risk.
Transaction risk is the risk that the currency structure of Toyotas costs and
liabilities will deviate from the currency structure of sales proceeds and assets. Transaction risk relates primarily to sales proceeds from Toyotas non-domestic operations from vehicles produced in Japan.
Toyota believes that the location of its production facilities in different parts of the world has significantly reduced the level of
transaction risk. As part of its globalization strategy, Toyota has continued to localize production by constructing production facilities in the major markets in which it sells its vehicles. In calendar 2015 and 2016, Toyota produced 75.1% and
76.5%, respectively, of its non-domestic sales outside Japan. In North America, 72.2% and 75.9% of vehicles sold in calendar 2015 and 2016, respectively, were produced locally. In Europe, 76.3% and 75.2% of vehicles sold in calendar 2015 and 2016,
respectively, were produced locally. Localizing production enables Toyota to locally purchase many of the supplies and resources used in the production process, which allows for a better match of local currency revenues with local currency expenses.
Toyota also enters into foreign currency transactions and other hedging instruments to address a portion of its transaction
risk. This has reduced, but not eliminated, the effects of foreign currency exchange rate fluctuations, which in some years can be significant. See notes 21 and 27 to the consolidated financial statements for additional information.
59
Generally, a weakening of the Japanese yen against other currencies has a positive effect on
Toyotas revenues, operating income and net income attributable to Toyota Motor Corporation. A strengthening of the Japanese yen against other currencies has the opposite effect. In fiscal 2016, the Japanese yen was on average weaker against
the U.S. dollar in comparison to the previous fiscal year, but in fiscal 2017, was on average stronger against the U.S. dollar in comparison to the previous fiscal year. At the end of each of fiscal 2016 and 2017, the Japanese yen was stronger
against the U.S. dollar in comparison to the end of fiscal 2015 and 2016, respectively. In fiscal 2016 and 2017, the Japanese yen was on average stronger against the euro in comparison to fiscal 2015 and 2016, respectively. At the end of each of
fiscal 2016 and 2017, the Japanese yen was stronger against the euro in comparison to the end of fiscal 2015 and 2016, respectively. See further discussion in Quantitative and Qualitative Disclosures about Market Risk Market Risk
Disclosures Foreign Currency Exchange Rate Risk.
Segmentation
Toyotas most significant business segment is its automotive operations. Toyota carries out its automotive operations as a global
competitor in the worldwide automotive market. Management allocates resources to, and assesses the performance of, its automotive operations as a single business segment on a worldwide basis and assesses financial and non-financial data such as
vehicle unit sales, production volume, market share information, vehicle model plans and plant location costs to allocate resources within the automotive operations. Toyota does not manage any subset of its automotive operations, such as domestic or
overseas operations or parts, as separate management units.
Geographic Breakdown
The following table sets forth Toyotas net revenues in each geographic market based on the country location of the parent company or
the subsidiaries that transacted the sale with the external customer for the past three fiscal years.
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|
|
|
|
|
|
|
|
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|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
Japan
|
|
|
8,338,881
|
|
|
|
8,588,437
|
|
|
|
8,798,903
|
|
North America
|
|
|
9,430,450
|
|
|
|
10,822,772
|
|
|
|
10,033,419
|
|
Europe
|
|
|
2,690,803
|
|
|
|
2,507,292
|
|
|
|
2,517,601
|
|
Asia
|
|
|
4,531,178
|
|
|
|
4,475,623
|
|
|
|
4,279,617
|
|
Other*
|
|
|
2,243,209
|
|
|
|
2,008,994
|
|
|
|
1,967,653
|
|
*
|
Other consists of Central and South America, Oceania, Africa and the Middle East.
|
60
Results of Operations Fiscal 2017 Compared with Fiscal 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan
|
|
|
14,759,488
|
|
|
|
14,830,868
|
|
|
|
71,380
|
|
|
|
0.5
|
%
|
North America
|
|
|
11,051,970
|
|
|
|
10,239,091
|
|
|
|
(812,879
|
)
|
|
|
(7.4
|
)
|
Europe
|
|
|
2,661,331
|
|
|
|
2,681,039
|
|
|
|
19,708
|
|
|
|
0.7
|
|
Asia
|
|
|
5,003,859
|
|
|
|
4,819,821
|
|
|
|
(184,038
|
)
|
|
|
(3.7
|
)
|
Other*
|
|
|
2,210,214
|
|
|
|
2,161,074
|
|
|
|
(49,140
|
)
|
|
|
(2.2
|
)
|
Intersegment elimination/unallocated amount
|
|
|
(7,283,744
|
)
|
|
|
(7,134,700
|
)
|
|
|
149,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28,403,118
|
|
|
|
27,597,193
|
|
|
|
(805,925
|
)
|
|
|
(2.8
|
)
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan
|
|
|
1,677,522
|
|
|
|
1,202,245
|
|
|
|
(475,277
|
)
|
|
|
(28.3
|
)
|
North America
|
|
|
528,819
|
|
|
|
311,194
|
|
|
|
(217,625
|
)
|
|
|
(41.2
|
)
|
Europe
|
|
|
72,416
|
|
|
|
(12,244
|
)
|
|
|
(84,660
|
)
|
|
|
|
|
Asia
|
|
|
449,189
|
|
|
|
435,179
|
|
|
|
(14,010
|
)
|
|
|
(3.1
|
)
|
Other*
|
|
|
108,909
|
|
|
|
58,694
|
|
|
|
(50,215
|
)
|
|
|
(46.1
|
)
|
Intersegment elimination/unallocated amount
|
|
|
17,116
|
|
|
|
(696
|
)
|
|
|
(17,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,853,971
|
|
|
|
1,994,372
|
|
|
|
(859,599
|
)
|
|
|
(30.1
|
)
|
Operating margin
|
|
|
10.0
|
%
|
|
|
7.2
|
%
|
|
|
(2.8
|
)%
|
|
|
|
|
Income before income taxes and equity in earnings of affiliated companies
|
|
|
2,983,381
|
|
|
|
2,193,825
|
|
|
|
(789,556
|
)
|
|
|
(26.5
|
)
|
Net margin from income before income taxes and equity in earnings of affiliated companies
|
|
|
10.5
|
%
|
|
|
7.9
|
%
|
|
|
(2.6
|
)%
|
|
|
|
|
Equity in earnings of affiliated companies
|
|
|
329,099
|
|
|
|
362,060
|
|
|
|
32,961
|
|
|
|
10.0
|
|
Net income attributable to Toyota Motor Corporation
|
|
|
2,312,694
|
|
|
|
1,831,109
|
|
|
|
(481,585
|
)
|
|
|
(20.8
|
)
|
Net margin attributable to Toyota Motor Corporation
|
|
|
8.1
|
%
|
|
|
6.6
|
%
|
|
|
(1.5
|
)%
|
|
|
|
|
*
|
Other consists of Central and South America, Oceania, Africa and the Middle East.
|
Net Revenues
Toyota had net revenues for fiscal 2017 of
¥27,597.1 billion, a decrease of ¥805.9 billion, or 2.8%, compared with the prior fiscal year. This decrease mainly reflected the unfavorable impact of fluctuations in foreign currency translation rates of ¥2,380.0 billion, partially
offset by the changes in vehicle unit sales and sales mix of ¥1,250.0 billion. For fiscal 2017 automotive market, Europe and Japan progressed in a steady manner and the market in Europe increased by 8.1% in calendar 2016 compared with the prior
calendar year and the market in Japan increased by 7.5% compared with the prior fiscal year. Under these automotive market conditions, Toyotas consolidated vehicle unit sales increased by 3.3% compared with the prior fiscal year to
8,971 thousand vehicles.
61
The table below shows Toyotas net revenues from external customers by product category
and by business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Vehicles
|
|
|
22,267,136
|
|
|
|
21,540,563
|
|
|
|
(726,573
|
)
|
|
|
(3.3
|
)%
|
Parts and components for overseas production
|
|
|
493,499
|
|
|
|
468,214
|
|
|
|
(25,285
|
)
|
|
|
(5.1
|
)
|
Parts and components for after service
|
|
|
2,042,623
|
|
|
|
1,955,781
|
|
|
|
(86,842
|
)
|
|
|
(4.3
|
)
|
Other
|
|
|
1,120,555
|
|
|
|
1,067,671
|
|
|
|
(52,884
|
)
|
|
|
(4.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Automotive
|
|
|
25,923,813
|
|
|
|
25,032,229
|
|
|
|
(891,584
|
)
|
|
|
(3.4
|
)
|
All Other
|
|
|
625,298
|
|
|
|
781,267
|
|
|
|
155,969
|
|
|
|
24.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales of products
|
|
|
26,549,111
|
|
|
|
25,813,496
|
|
|
|
(735,615
|
)
|
|
|
(2.8
|
)
|
Financial Services
|
|
|
1,854,007
|
|
|
|
1,783,697
|
|
|
|
(70,310
|
)
|
|
|
(3.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28,403,118
|
|
|
|
27,597,193
|
|
|
|
(805,925
|
)
|
|
|
(2.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toyotas net revenues include net revenues from sales of products, consisting of net revenues from
automotive operations and all other operations, which decreased by 2.8% during fiscal 2017 compared with the prior fiscal year to ¥25,813.4 billion, and net revenues from financial services operations which decreased by 3.8% during fiscal 2017
compared with the prior fiscal year to ¥1,783.6 billion. The decrease in net revenues from sales of products is mainly due to the unfavorable impact of fluctuations in foreign currency translation rates.
The following table shows the number of financing contracts by geographic region at the end of fiscal 2017 and 2016, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of financing contracts in thousands
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Japan
|
|
|
1,961
|
|
|
|
1,977
|
|
|
|
16
|
|
|
|
0.8
|
%
|
North America
|
|
|
5,252
|
|
|
|
5,394
|
|
|
|
142
|
|
|
|
2.7
|
|
Europe
|
|
|
954
|
|
|
|
1,019
|
|
|
|
65
|
|
|
|
6.8
|
|
Asia
|
|
|
1,531
|
|
|
|
1,575
|
|
|
|
44
|
|
|
|
2.9
|
|
Other*
|
|
|
767
|
|
|
|
786
|
|
|
|
19
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,465
|
|
|
|
10,751
|
|
|
|
286
|
|
|
|
2.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Other consists of Central and South America, Oceania and Africa.
|
Geographically, net revenues (before the elimination of intersegment revenues) for fiscal 2017 increased by 0.5% in Japan and 0.7% in Europe, while they decreased by 7.4% in North America, 3.7% in Asia,
and 2.2% in Other compared with the prior fiscal year. Excluding the impact of changes in the Japanese yen values used for translation purposes of ¥2,380.0 billion, net revenues in fiscal 2017 would have increased by 0.5% in Japan, 3.1% in
North America, 17.1% in Europe, 8.0% in Asia and 12.8% in Other compared with the prior fiscal year.
62
The following is a discussion of net revenues in each geographic market (before the
elimination of intersegment revenues).
Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales*
|
|
|
3,818
|
|
|
|
4,000
|
|
|
|
182
|
|
|
|
4.8
|
%
|
* including number of exported vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
14,638,709
|
|
|
|
14,705,518
|
|
|
|
66,809
|
|
|
|
0.5
|
%
|
Financial services
|
|
|
120,779
|
|
|
|
125,350
|
|
|
|
4,571
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,759,488
|
|
|
|
14,830,868
|
|
|
|
71,380
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toyotas domestic and exported vehicle unit sales increased by 182 thousand vehicles compared
with the prior fiscal year and net revenues in Japan increased. For fiscal 2016 and 2017, exported vehicle unit sales were 1,759 thousand units and 1,726 thousand units, respectively.
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales
|
|
|
2,839
|
|
|
|
2,837
|
|
|
|
(2
|
)
|
|
|
(0.1
|
)%
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
9,741,529
|
|
|
|
8,951,333
|
|
|
|
(790,196
|
)
|
|
|
(8.1
|
)%
|
Financial services
|
|
|
1,310,441
|
|
|
|
1,287,758
|
|
|
|
(22,683
|
)
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,051,970
|
|
|
|
10,239,091
|
|
|
|
(812,879
|
)
|
|
|
(7.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
Net revenues in North America decreased due primarily to the unfavorable impact of
fluctuations in foreign currency translation rates despite vehicle unit sales being nearly equal to those of the prior fiscal year.
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales
|
|
|
844
|
|
|
|
925
|
|
|
|
81
|
|
|
|
9.5
|
%
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
2,562,788
|
|
|
|
2,588,968
|
|
|
|
26,180
|
|
|
|
1.0
|
%
|
Financial services
|
|
|
98,543
|
|
|
|
92,071
|
|
|
|
(6,472
|
)
|
|
|
(6.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,661,331
|
|
|
|
2,681,039
|
|
|
|
19,708
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Despite the unfavorable impact of fluctuations in foreign currency translation rates, net revenues in
Europe increased due primarily to the 81 thousand vehicles increase in vehicle unit sales compared with the prior fiscal year. The vehicle unit sales increased due mainly to strong sales of new models such as C-HR and RAV4.
Asia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales
|
|
|
1,345
|
|
|
|
1,588
|
|
|
|
243
|
|
|
|
18.1
|
%
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
4,850,563
|
|
|
|
4,689,774
|
|
|
|
(160,789
|
)
|
|
|
(3.3
|
)%
|
Financial services
|
|
|
153,296
|
|
|
|
130,047
|
|
|
|
(23,249
|
)
|
|
|
(15.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,003,859
|
|
|
|
4,819,821
|
|
|
|
(184,038
|
)
|
|
|
(3.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in Asia decreased due primarily to the unfavorable impact of fluctuations in foreign
currency translation rates despite vehicle unit sales increasing by 243 thousand compared with the prior fiscal year. The increase in vehicle unit sales was due mainly to increased sales of new models such as Calya, Sienta and IMV in Indonesia
and the Philippines.
64
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales
|
|
|
1,594
|
|
|
|
1,347
|
|
|
|
(247
|
)
|
|
|
(15.5
|
)%
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
2,023,206
|
|
|
|
1,996,087
|
|
|
|
(27,119
|
)
|
|
|
(1.3
|
)%
|
Financial services
|
|
|
187,008
|
|
|
|
164,987
|
|
|
|
(22,021
|
)
|
|
|
(11.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,210,214
|
|
|
|
2,161,074
|
|
|
|
(49,140
|
)
|
|
|
(2.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in Other decreased due primarily to the 247 thousand vehicles decrease in vehicle unit
sales compared with the prior fiscal year. The decrease in vehicle unit sales was due mainly to decreased sales in the Middle East and Africa.
Operating Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
21,456,086
|
|
|
|
21,543,035
|
|
|
|
86,949
|
|
|
|
0.4
|
%
|
Cost of financing operations
|
|
|
1,149,379
|
|
|
|
1,191,301
|
|
|
|
41,922
|
|
|
|
3.6
|
|
Selling, general and administrative
|
|
|
2,943,682
|
|
|
|
2,868,485
|
|
|
|
(75,197
|
)
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
25,549,147
|
|
|
|
25,602,821
|
|
|
|
53,674
|
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2017 v. 2016 Change
|
|
Changes in operating costs and expenses:
|
|
|
|
|
Effect of changes in vehicle unit sales and sales mix
|
|
|
1,060,000
|
|
Effect of fluctuation in foreign currency translation rates
|
|
|
(1,470,000
|
)
|
Effect of increase of cost of financing operations
|
|
|
174,000
|
|
Effect of cost reduction efforts
|
|
|
(440,000
|
)
|
Effect of increase of miscellaneous costs and others
|
|
|
729,674
|
|
|
|
|
|
|
Total
|
|
|
53,674
|
|
|
|
|
|
|
Operating costs and expenses increased by ¥53.6 billion, or 0.2%, to ¥25,602.8 billion during
fiscal 2017 compared with the prior fiscal year. This increase resulted from the ¥1,060.0 billion impact of changes in vehicle unit sales and sales mix, the ¥174.0 billion increase in cost of financing operations (excluding the effect of
fluctuation in foreign currency translation rates) and the ¥729.6 billion increase of miscellaneous costs and others, partially offset by the ¥1,470.0 billion favorable impact of fluctuations in foreign currency translation rates, and the
¥440.0 billion impact of cost reduction efforts.
The increase in miscellaneous costs and others was due mainly to the
¥310.0 billion increase in product quality related expenses, the ¥80.0 billion increase in labor costs, the ¥50.0 billion increase in depreciation expenses and the ¥105.0 billion increase in other various costs.
65
The increase in product quality related expenses was due mainly to an increase in provisions
for recalls and other safety measures resulting from an increase in actual payments during fiscal 2017. See note 13 to the consolidated financial statements for further discussion.
During fiscal 2017 and beyond, Toyota announced recalls and other safety measures including the following:
In June 2016, Toyota announced in Japan and other regions recalls on certain Toyota and Lexus vehicles in relation to the fuel suction
plate assembled to the fuel tank. In June 2016, Toyota announced in Japan and other regions recalls on certain Toyota and Lexus vehicles in relation to the curtain shield air bags in the driver and passenger side roof rails. In May, June and October
2016 and in January and March 2017, Toyota announced in Japan and other regions recalls on certain Toyota and Lexus vehicles in relation to the driver/front passenger airbag inflators.
Cost Reduction Efforts
During fiscal 2017, continued cost reduction
efforts together with suppliers contributed to a reduction of operating costs and expenses by ¥440.0 billion. This was due to ¥370.0 billion in cost reduction efforts concerning design related costs due mainly to ongoing value engineering
activities, and ¥70.0 billion in cost reduction efforts at plants and logistics departments.
These cost reduction efforts
related to ongoing value engineering and value analysis activities, the use of common parts resulting in a reduction of part types and other manufacturing initiatives designed to reduce the costs of vehicle production. The amount of the effect of
cost reduction efforts includes the impact of fluctuation in the price of steel, precious metals, non-ferrous alloys including aluminum, plastic parts and other production materials and parts.
Cost of Products Sold
Cost of products sold increased by ¥86.9 billion, or 0.4%, to ¥21,543.0 billion during fiscal 2017 compared with the prior fiscal
year. The increase resulted mainly from the impact of changes in vehicle unit sales and sales mix, as well as the increase in product quality related expenses, depreciation expenses and labor costs, partially offset by the favorable impact of
fluctuations in foreign currency translation rates and the impact of cost reduction efforts.
Cost of Financing Operations
Cost of financing operations increased by ¥41.9 billion, or 3.6%, to ¥1,191.3 billion during fiscal 2017 compared with the prior
fiscal year. The increase resulted mainly from the increase in expenses related to residual value losses.
Selling, General and
Administrative Expenses
Selling, general and administrative expenses decreased by ¥75.1 billion, or 2.6%, to
¥2,868.4 billion during fiscal 2017 compared with the prior fiscal year. This decrease mainly reflected the favorable impact of fluctuations in foreign currency translation rates, partially offset by the impact of changes in vehicle unit sales
and sales mix.
66
Operating Income
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2017 v. 2016 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
440,000
|
|
Effect of marketing efforts
|
|
|
210,000
|
|
Effect of increase of miscellaneous costs and others
|
|
|
(530,000
|
)
|
Effect of changes in exchange rates
|
|
|
(940,000
|
)
|
Other
|
|
|
(39,599
|
)
|
|
|
|
|
|
Total
|
|
|
(859,599
|
)
|
|
|
|
|
|
Toyotas operating income decreased by ¥859.5 billion, or 30.1%, to ¥1,994.3 billion during
fiscal 2017 compared with the prior fiscal year. This decrease was due mainly to the ¥940.0 billion unfavorable impact of changes in foreign currency exchange rates and the ¥530.0 billion increase in miscellaneous costs and others, partially
offset by the ¥440.0 billion impact of cost reduction efforts and the ¥210.0 billion impact of marketing efforts. The increase in miscellaneous costs and others was due to the ¥310.0 billion increase in product quality related expenses,
¥80.0 billion increase in labor costs, the ¥50.0 billion increase in depreciation expenses and the ¥105.0 billion increase in other various costs.
Marketing efforts and marketing activities include changes in vehicle unit sales and sales mix, sales expenses and other. Other includes valuation gains and losses from interest rate swaps
etc.
From fiscal 2017, the effect of changes in exchange rates includes translational impacts concerning operating income of
overseas subsidiaries and concerning provisions in foreign currencies at the end of the fiscal year. During fiscal 2017, the negative effect of changes in exchange rates includes ¥130.0 billion in translational impacts concerning operating
income of overseas subsidiaries (North America ¥40.0 billion, Europe ¥15.0 billion, Asia ¥50.0 billion and Other ¥25.0 billion) and ¥30.0 billion in translational impacts concerning provisions in foreign currencies at the
end of the fiscal year.
During fiscal 2017, operating income (before elimination of intersegment profits) compared with the
prior fiscal year decreased by ¥475.2 billion, or 28.3%, in Japan, ¥217.6 billion, or 41.2%, in North America, ¥84.6 billion in Europe, ¥14.0 billion, or 3.1%, in Asia, and ¥50.2 billion, or 46.1%, in Other.
The following is a description of operating income in each geographic market.
Japan
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2017 v. 2016 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
320,000
|
|
Effect of marketing efforts
|
|
|
85,000
|
|
Effect of increase of miscellaneous costs and others
|
|
|
(185,000
|
)
|
Effect of changes in exchange rates
|
|
|
(690,000
|
)
|
Other
|
|
|
(5,277
|
)
|
|
|
|
|
|
Total
|
|
|
(475,277
|
)
|
|
|
|
|
|
67
North America
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2017 v. 2016 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
110,000
|
|
Effect of marketing activities
|
|
|
(125,000
|
)
|
Effect of increase of miscellaneous costs and others
|
|
|
(115,000
|
)
|
Effect of changes in exchange rates
|
|
|
(45,000
|
)
|
Other
|
|
|
(42,625
|
)
|
|
|
|
|
|
Total
|
|
|
(217,625
|
)
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2017 v. 2016 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
25,000
|
|
Effect of marketing efforts
|
|
|
25,000
|
|
Effect of increase of miscellaneous costs and others
|
|
|
(100,000
|
)
|
Effect of changes in exchange rates
|
|
|
(40,000
|
)
|
Other
|
|
|
5,340
|
|
|
|
|
|
|
Total
|
|
|
(84,660
|
)
|
|
|
|
|
|
Asia
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2017 v. 2016 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
25,000
|
|
Effect of marketing efforts
|
|
|
75,000
|
|
Effect of increase of miscellaneous costs and others
|
|
|
(20,000
|
)
|
Effect of changes in exchange rates
|
|
|
(115,000
|
)
|
Other
|
|
|
20,990
|
|
|
|
|
|
|
Total
|
|
|
(14,010
|
)
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2017 v. 2016 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
(40,000
|
)
|
Effect of marketing efforts
|
|
|
150,000
|
|
Effect of increase of miscellaneous costs and others
|
|
|
(95,000
|
)
|
Effect of changes in exchange rates
|
|
|
(50,000
|
)
|
Other
|
|
|
(15,215
|
)
|
|
|
|
|
|
Total
|
|
|
(50,215
|
)
|
|
|
|
|
|
68
Other Income and Expenses
Interest and dividend income increased by ¥1.1 billion, or 0.7%, to ¥158.9 billion during fiscal 2017 compared with the prior
fiscal year.
Interest expense decreased by ¥6.0 billion, or 17.1%, to ¥29.3 billion during fiscal 2017 compared with
the prior fiscal year.
Foreign exchange gain (loss), net increased by ¥39.1 billion to ¥33.6 billion during fiscal
2017 compared with the prior fiscal year. Foreign exchange gains and losses include the differences between the value of foreign currency denominated assets and liabilities recognized through transactions in foreign currencies translated at
prevailing exchange rates and the value at the date the transaction settled during the fiscal year, including those settled using forward foreign currency exchange contracts, or the value translated by appropriate year-end exchange rates. The
¥39.1 billion increase in foreign exchange gain (loss), net was due mainly to the losses recorded in fiscal 2016 resulting from the Japanese yen being stronger against foreign currencies at the dates of settlement of the foreign currency trade
accounts receivable than at the dates of the transactions.
Other income, net increased by ¥23.6 billion to ¥36.2
billion during fiscal 2017 compared with the prior fiscal year.
Income Taxes
The provision for income taxes decreased by ¥249.3 billion, or 28.4%, to ¥628.9 billion during fiscal 2017 compared with the prior
fiscal year due mainly to the decrease in income before income taxes and equity in earnings of affiliated companies. The effective tax rate for fiscal 2017 was 28.7%, which was lower than the statutory tax rate in Japan. This was due mainly to the
increase in tax credits and the effect of foreign subsidiaries where statutory tax rates are lower than that of Japan.
Net Income
Attributable to Noncontrolling Interests and Equity in Earnings of Affiliated Companies
Net income attributable to
noncontrolling interests decreased by ¥25.6 billion, or 21.1%, to ¥95.8 billion during fiscal 2017 compared with the prior fiscal year. This was due mainly to a decrease during fiscal 2017 in net income attributable to the shareholders of
consolidated subsidiaries.
Equity in earnings of affiliated companies during fiscal 2017 increased by ¥32.9 billion, or
10.0%, to ¥362.0 billion compared with the prior fiscal year. This increase was due mainly to an increase during fiscal 2017 in net income attributable to the shareholders of affiliated companies accounted for by the equity method.
Net Income Attributable to Toyota Motor Corporation
Net income attributable to the shareholders of Toyota Motor Corporation decreased by ¥481.5 billion, or 20.8%, to ¥1,831.1 billion during fiscal 2017 compared with the prior fiscal year.
Net income attributable to common shareholders during fiscal 2017 is ¥1,821.3 billion, which is derived by deducting
dividends and accretion to Model AA Class Shares of ¥9.7 billion from net income attributable to Toyota Motor Corporation.
Other
Comprehensive Income and Loss
Other comprehensive income and loss increased by ¥896.9 billion to ¥30.1 billion
for fiscal 2017 compared with the prior fiscal year. This increase resulted from unfavorable foreign currency translation adjustment losses of ¥52.4 billion in fiscal 2017 compared with losses of ¥362.9 billion in the prior fiscal year due
mainly to
69
appreciation of the yen against the U.S. dollar, from unrealized holding losses on securities in fiscal 2017 of ¥8.0 billion compared with losses of ¥302.6 billion in the prior
fiscal year due mainly to an increase in prices of marketable securities in stock exchange markets in Japan, and from pension liability adjustment gains in fiscal 2017 of ¥92.8 billion compared with losses of ¥201.1 billion in the prior
fiscal year due mainly to an increase in fair value of plan assets.
Segment Information
The following is a discussion of the results of operations for each of Toyotas operating segments. The amounts presented are prior
to intersegment elimination.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2017 v. 2016 Change
|
|
|
|
2016
|
|
|
2017
|
|
|
Amount
|
|
|
Percentage
|
|
Automotive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
25,977,416
|
|
|
|
25,081,847
|
|
|
|
(895,569
|
)
|
|
|
(3.4
|
)%
|
Operating income
|
|
|
2,448,998
|
|
|
|
1,692,973
|
|
|
|
(756,025
|
)
|
|
|
(30.9
|
)
|
Financial Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
1,896,224
|
|
|
|
1,823,600
|
|
|
|
(72,624
|
)
|
|
|
(3.8
|
)
|
Operating income
|
|
|
339,226
|
|
|
|
222,428
|
|
|
|
(116,798
|
)
|
|
|
(34.4
|
)
|
All Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
1,177,387
|
|
|
|
1,321,052
|
|
|
|
143,665
|
|
|
|
12.2
|
|
Operating income
|
|
|
66,507
|
|
|
|
81,327
|
|
|
|
14,820
|
|
|
|
22.3
|
|
Intersegment elimination/unallocated amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
(647,909
|
)
|
|
|
(629,306
|
)
|
|
|
18,603
|
|
|
|
|
|
Operating income
|
|
|
(760
|
)
|
|
|
(2,356
|
)
|
|
|
(1,596
|
)
|
|
|
|
|
Automotive Operations Segment
The automotive operations segment is Toyotas largest operating segment by net revenues. Net revenues for the automotive segment decreased during fiscal 2017 by ¥895.5 billion, or 3.4%, to
¥25,081.8 billion compared with the prior fiscal year. The decrease mainly reflects the ¥2,180.0 billion unfavorable impact of fluctuations in foreign currency translation rates, partially offset by the ¥1,250.0 billion favorable impact
of changes in vehicle unit sales and sales mix.
Operating income from the automotive operations decreased by ¥756.0
billion, or 30.9%, to ¥1,692.9 billion during fiscal 2017 compared with the prior fiscal year. This decrease in operating income was due mainly to the ¥940.0 billion unfavorable impact of changes in foreign currency exchange rates and
the ¥530.0 billion increase in miscellaneous costs and others, partially offset by the ¥440.0 billion impact of cost reduction efforts and ¥210.0 billion impact of marketing efforts.
The increase in miscellaneous costs and others was due mainly to the ¥310.0 billion increase in product quality related expenses,
¥80.0 billion increase in labor costs, the ¥50.0 billion increase in depreciation expenses and the ¥105.0 billion increase in other various costs. The impact of marketing efforts was due primarily to the increase in Toyotas vehicle
unit sales by 290 thousand vehicles compared with the prior fiscal year. Vehicle unit sales increased due mainly to new models in Japan, Asia and Europe, despite the fall in demand resulting from the downturn in the economy and market in the
Middle East caused by the low price of crude oil.
Financial Services Operations Segment
Net revenues for the financial services operations decreased during fiscal 2017 by ¥72.6 billion, or 3.8%, to ¥1,823.6 billion
compared with the prior fiscal year. This decrease was primarily due to the ¥190.0 billion unfavorable impact of fluctuations in foreign currency translation rates.
70
Operating income from financial services operations decreased by ¥116.7 billion, or
34.4%, to ¥222.4 billion during fiscal 2017 compared with the prior fiscal year. This decrease was due primarily to the increase in expenses related to credit losses and residual value losses, mainly in North America.
All Other Operations Segment
Net revenues for Toyotas other operations segments increased by ¥143.6 billion, or 12.2%, to ¥1,321.0 billion during fiscal 2017 compared with the prior fiscal year.
Operating income from Toyotas other operations segments increased by ¥14.8 billion, or 22.3%, to ¥81.3 billion during
fiscal 2017 compared with the prior fiscal year.
Results of Operations Fiscal 2016 Compared with Fiscal 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan
|
|
|
14,403,867
|
|
|
|
14,759,488
|
|
|
|
355,621
|
|
|
|
2.5
|
%
|
North America
|
|
|
9,677,596
|
|
|
|
11,051,970
|
|
|
|
1,374,374
|
|
|
|
14.2
|
|
Europe
|
|
|
2,848,294
|
|
|
|
2,661,331
|
|
|
|
(186,963
|
)
|
|
|
(6.6
|
)
|
Asia
|
|
|
4,981,240
|
|
|
|
5,003,859
|
|
|
|
22,619
|
|
|
|
0.5
|
|
Other*
|
|
|
2,449,238
|
|
|
|
2,210,214
|
|
|
|
(239,024
|
)
|
|
|
(9.8
|
)
|
Intersegment elimination/unallocated amount
|
|
|
(7,125,714
|
)
|
|
|
(7,283,744
|
)
|
|
|
(158,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
27,234,521
|
|
|
|
28,403,118
|
|
|
|
1,168,597
|
|
|
|
4.3
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan
|
|
|
1,571,476
|
|
|
|
1,677,522
|
|
|
|
106,046
|
|
|
|
6.7
|
|
North America
|
|
|
584,519
|
|
|
|
528,819
|
|
|
|
(55,700
|
)
|
|
|
(9.5
|
)
|
Europe
|
|
|
81,118
|
|
|
|
72,416
|
|
|
|
(8,702
|
)
|
|
|
(10.7
|
)
|
Asia
|
|
|
421,782
|
|
|
|
449,189
|
|
|
|
27,407
|
|
|
|
6.5
|
|
Other*
|
|
|
111,509
|
|
|
|
108,909
|
|
|
|
(2,600
|
)
|
|
|
(2.3
|
)
|
Intersegment elimination/unallocated amount
|
|
|
(19,840
|
)
|
|
|
17,116
|
|
|
|
36,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,750,564
|
|
|
|
2,853,971
|
|
|
|
103,407
|
|
|
|
3.8
|
|
Operating margin
|
|
|
10.1
|
%
|
|
|
10.0
|
%
|
|
|
(0.1
|
)%
|
|
|
|
|
Income before income taxes and equity in earnings of affiliated companies
|
|
|
2,892,828
|
|
|
|
2,983,381
|
|
|
|
90,553
|
|
|
|
3.1
|
|
Net margin from income before income taxes and equity in earnings of affiliated companies
|
|
|
10.6
|
%
|
|
|
10.5
|
%
|
|
|
(0.1
|
)%
|
|
|
|
|
Equity in earnings of affiliated companies
|
|
|
308,545
|
|
|
|
329,099
|
|
|
|
20,554
|
|
|
|
6.7
|
|
Net income attributable to Toyota Motor Corporation
|
|
|
2,173,338
|
|
|
|
2,312,694
|
|
|
|
139,356
|
|
|
|
6.4
|
|
Net margin attributable to Toyota Motor Corporation
|
|
|
8.0
|
%
|
|
|
8.1
|
%
|
|
|
0.1
|
%
|
|
|
|
|
*
|
Other consists of Central and South America, Oceania, Africa and the Middle East.
|
Net Revenues
Toyota had net revenues for fiscal 2016 of
¥28,403.1 billion, an increase of ¥1,168.5 billion, or 4.3%, compared with the prior fiscal year. This increase mainly reflected the favorable impact of fluctuations in foreign currency translation rates of ¥386.4 billion and changes in
vehicle unit sales and sales mix of ¥330.0 billion. Excluding the impact of changes in the Japanese yen values used for translation purposes of ¥386.4 billion, net revenues would have been ¥28,016.6 billion during fiscal 2016, a 2.9%
increase compared with the prior fiscal
71
year. The North America automotive market increased by 6.2% in calendar 2015 compared with the prior calendar year due to the market in the U.S. progressing in a steady manner. However,
Toyotas consolidated vehicle unit sales decreased in Japan due mainly to the slowdown of the mini-vehicles market, in Asia due mainly to the heating up of the competitive climate as well as a market downturn, and in the Middle East, Africa and
Central and South America due mainly to the fall in demand resulting from the low price of crude oil and currency weakness. Under these automotive market conditions, Toyotas consolidated vehicle unit sales decreased by 3.2% compared with the
prior fiscal year to 8,681 thousand vehicles.
The table below shows Toyotas net revenues from external customers
by product category and by business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Vehicles
|
|
|
21,557,684
|
|
|
|
22,267,136
|
|
|
|
709,452
|
|
|
|
3.3
|
%
|
Parts and components for overseas production
|
|
|
402,864
|
|
|
|
493,499
|
|
|
|
90,635
|
|
|
|
22.5
|
|
Parts and components for after service
|
|
|
1,921,764
|
|
|
|
2,042,623
|
|
|
|
120,859
|
|
|
|
6.3
|
|
Other
|
|
|
1,123,912
|
|
|
|
1,120,555
|
|
|
|
(3,357
|
)
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Automotive
|
|
|
25,006,224
|
|
|
|
25,923,813
|
|
|
|
917,589
|
|
|
|
3.7
|
|
All Other
|
|
|
606,612
|
|
|
|
625,298
|
|
|
|
18,686
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales of products
|
|
|
25,612,836
|
|
|
|
26,549,111
|
|
|
|
936,275
|
|
|
|
3.7
|
|
Financial Services
|
|
|
1,621,685
|
|
|
|
1,854,007
|
|
|
|
232,322
|
|
|
|
14.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
27,234,521
|
|
|
|
28,403,118
|
|
|
|
1,168,597
|
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toyotas net revenues include net revenues from sales of products, consisting of net revenues from
automotive operations and all other operations, which increased by 3.7% during fiscal 2016 compared with the prior fiscal year to ¥26,549.1 billion, and net revenues from financial services operations which increased by 14.3% during fiscal 2016
compared with the prior fiscal year to ¥1,854.0 billion. Excluding the impact of changes in the Japanese yen values used for translation purposes of ¥311.9 billion, net revenues from sales of products would have been ¥26,237.1 billion
during fiscal 2016, a 2.4% increase compared with the prior fiscal year. The increase in net revenues from sales of products is mainly due to changes in vehicle unit sales and sales mix. Excluding the impact of changes in the Japanese yen values
used for translation purposes of ¥74.5 billion, net revenues from financial services operations would have been ¥1,779.4 billion during fiscal 2016, a 9.7% increase compared with the prior fiscal year.
The following table shows the number of financing contracts by geographic region at the end of fiscal 2016 and 2015, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of financing contracts in thousands
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Japan
|
|
|
1,873
|
|
|
|
1,961
|
|
|
|
88
|
|
|
|
4.7
|
%
|
North America
|
|
|
5,046
|
|
|
|
5,252
|
|
|
|
206
|
|
|
|
4.1
|
|
Europe
|
|
|
910
|
|
|
|
954
|
|
|
|
44
|
|
|
|
4.8
|
|
Asia
|
|
|
1,382
|
|
|
|
1,531
|
|
|
|
149
|
|
|
|
10.8
|
|
Other*
|
|
|
741
|
|
|
|
767
|
|
|
|
26
|
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,952
|
|
|
|
10,465
|
|
|
|
513
|
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Other consists of Central and South America, Oceania and Africa.
|
Geographically, net revenues (before the elimination of intersegment revenues) for fiscal 2016 increased by 2.5% in Japan, 14.2% in North America, and 0.5% in Asia, whereas net revenues decreased by 6.6%
in Europe,
72
and 9.8% in Other compared with the prior fiscal year. Excluding the impact of changes in the Japanese yen values used for translation purposes of ¥386.4 billion, net revenues in fiscal 2016
would have increased by 2.5% in Japan, 5.6% in North America, 2.8% in Europe and 3.3% in Other, and would have decreased by 2.6% in Asia compared with the prior fiscal year.
The following is a discussion of net revenues in each geographic market (before the elimination of intersegment revenues).
Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales*
|
|
|
3,938
|
|
|
|
3,818
|
|
|
|
(120
|
)
|
|
|
(3.0
|
)%
|
*
|
including number of exported vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
14,283,195
|
|
|
|
14,638,709
|
|
|
|
355,514
|
|
|
|
2.5
|
%
|
Financial services
|
|
|
120,672
|
|
|
|
120,779
|
|
|
|
107
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,403,867
|
|
|
|
14,759,488
|
|
|
|
355,621
|
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in Japan increased due primarily to the effect of changes in exchange rates related to
export transactions, despite Toyotas domestic and exported vehicle unit sales decreasing by 120 thousand vehicles compared with the prior fiscal year. For fiscal 2015 and 2016, exported vehicle unit sales were 1,784 thousand units
and 1,759 thousand units, respectively.
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales
|
|
|
2,715
|
|
|
|
2,839
|
|
|
|
124
|
|
|
|
4.6
|
%
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
8,601,879
|
|
|
|
9,741,529
|
|
|
|
1,139,650
|
|
|
|
13.2
|
%
|
Financial services
|
|
|
1,075,717
|
|
|
|
1,310,441
|
|
|
|
234,724
|
|
|
|
21.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,677,596
|
|
|
|
11,051,970
|
|
|
|
1,374,374
|
|
|
|
14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in North America increased due primarily to the 124 thousand vehicles increase in
vehicle unit sales compared with the prior fiscal year. The vehicle unit sales increased due mainly to the market progressing in a steady manner and strong sales of the RAV4, NX and other car models.
73
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales
|
|
|
859
|
|
|
|
844
|
|
|
|
(15
|
)
|
|
|
(1.7
|
)%
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
2,750,164
|
|
|
|
2,562,788
|
|
|
|
(187,376
|
)
|
|
|
(6.8
|
)%
|
Financial services
|
|
|
98,130
|
|
|
|
98,543
|
|
|
|
413
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,848,294
|
|
|
|
2,661,331
|
|
|
|
(186,963
|
)
|
|
|
(6.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in Europe decreased due primarily to the 15 thousand vehicles decrease in vehicle unit
sales compared with the prior fiscal year. The vehicle unit sales decreased due mainly to decreased sales in Russia, despite the strong sales in Western Europe, especially in France and Spain.
Asia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales
|
|
|
1,489
|
|
|
|
1,345
|
|
|
|
(144
|
)
|
|
|
(9.7
|
)%
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
4,833,952
|
|
|
|
4,850,563
|
|
|
|
16,611
|
|
|
|
0.3
|
%
|
Financial services
|
|
|
147,288
|
|
|
|
153,296
|
|
|
|
6,008
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,981,240
|
|
|
|
5,003,859
|
|
|
|
22,619
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in Asia increased due primarily to the favorable impact of fluctuations in foreign currency
translation rates despite the vehicle unit sales decreasing by 144 thousand compared with the prior fiscal year. The decrease in vehicle unit sales was due mainly to decreased sales in Indonesia and Thailand, which in turn was attributable
mainly to the downturn of the market and intensifying competitive market conditions.
74
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of units
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Toyotas consolidated vehicle unit sales
|
|
|
1,755
|
|
|
|
1,594
|
|
|
|
(161
|
)
|
|
|
(9.2
|
)%
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products
|
|
|
2,255,122
|
|
|
|
2,023,206
|
|
|
|
(231,917
|
)
|
|
|
(10.3
|
)%
|
Financial services
|
|
|
194,115
|
|
|
|
187,008
|
|
|
|
(7,107
|
)
|
|
|
(3.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,449,238
|
|
|
|
2,210,214
|
|
|
|
(239,024
|
)
|
|
|
(9.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in Other decreased due primarily to the 161 thousand vehicles decrease in vehicle unit
sales compared with the prior fiscal year. The decrease in vehicle unit sales was due mainly to decreased sales in the Middle East, Africa and Central and South America.
Operating Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
20,916,362
|
|
|
|
21,456,086
|
|
|
|
539,724
|
|
|
|
2.6
|
%
|
Cost of financing operations
|
|
|
925,314
|
|
|
|
1,149,379
|
|
|
|
224,065
|
|
|
|
24.2
|
|
Selling, general and administrative
|
|
|
2,642,281
|
|
|
|
2,943,682
|
|
|
|
301,401
|
|
|
|
11.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
24,483,957
|
|
|
|
25,549,147
|
|
|
|
1,065,190
|
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2016 v. 2015 Change
|
|
Changes in operating costs and expenses:
|
|
|
|
|
Effect of changes in vehicle unit sales and sales mix
|
|
|
510,000
|
|
Effect of fluctuation in foreign currency translation rates
|
|
|
350,700
|
|
Effect of increase of cost of financing operations
|
|
|
161,000
|
|
Effect of cost reduction efforts
|
|
|
(390,000
|
)
|
Effect of increase of miscellaneous costs and others
|
|
|
433,490
|
|
|
|
|
|
|
Total
|
|
|
1,065,190
|
|
|
|
|
|
|
Operating costs and expenses increased by ¥1,065.1 billion, or 4.4%, to ¥25,549.1 billion during
fiscal 2016 compared with the prior fiscal year. This increase resulted from the ¥510.0 billion impact of changes in vehicle unit sales and sales mix, ¥350.7 billion unfavorable impact of fluctuations in foreign currency translation rates,
¥161.0 billion increase in cost of financing operations (excluding the effect of fluctuation in foreign currency translation rates) and the ¥433.4 billion increase of miscellaneous costs and others, partially offset by the ¥390.0
billion impact of cost reduction efforts.
The increase in miscellaneous costs and others was due mainly to the
¥110.0 billion increase in labor costs, the ¥50.0 billion increase in research and development expenses, the ¥50.0 billion increase in depreciation expenses and the ¥130.0 billion increase in other various costs, partially offset by
the ¥62.8 billion decrease in product quality related expenses.
75
The decrease in product quality related expenses was due mainly to the effect of the
strengthening of the Japanese yen against other currencies at the end of fiscal 2016 in comparison to the prior fiscal year end, primarily concerning the translation of liabilities denominated in foreign currencies. See note 13 to the consolidated
financial statements for further discussion.
During fiscal 2016 and beyond, Toyota announced recalls and other safety
measures including the following:
In October 2015, Toyota announced in Japan and other regions recalls on certain Toyota
vehicles in relation to the power window master switch. In November 2015, Toyota announced in Japan and other regions recalls on certain Toyota vehicles in relation to the clutch piston in the continuously variable transmission. In May, June,
August, September and November 2015 and in March, May and June 2016, Toyota announced in Japan and other regions recalls on certain Toyota and Lexus vehicles in relation to the driver/front passenger airbag inflator.
Cost Reduction Efforts
During fiscal 2016, continued cost reduction efforts together with suppliers contributed to a reduction of operating costs and expenses by
¥390.0 billion. This was due to ¥340.0 billion in cost reduction efforts concerning design related costs due mainly to ongoing value engineering activities, and ¥50.0 billion in cost reduction efforts at plants and logistics departments.
These cost reduction efforts related to ongoing value engineering and value analysis activities, the use of common parts
resulting in a reduction of part types and other manufacturing initiatives designed to reduce the costs of vehicle production. The amount of the effect of cost reduction efforts includes the impact of fluctuation in the price of steel, precious
metals, non-ferrous alloys including aluminum, plastic parts and other production materials and parts.
Cost of Products Sold
Cost of products sold increased by ¥539.7 billion, or 2.6%, to ¥21,456.0 billion during fiscal 2016 compared with
the prior fiscal year. The increase resulted mainly from the ¥450.0 billion impact of changes in vehicle unit sales and sales mix, the ¥252.2 billion unfavorable impact of fluctuations in foreign currency translation rates, the ¥60.0
billion increase in labor costs and the ¥50.0 billion increase in research and development expenses, partially offset by the ¥390.0 billion impact of cost reduction efforts.
Cost of Financing Operations
Cost of financing operations increased by
¥224.0 billion, or 24.2%, to ¥1,149.3 billion during fiscal 2016 compared with the prior fiscal year. The increase resulted mainly from the increase in depreciation expenses, which was mostly attributable to an increase in operating leases.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by ¥301.4 billion, or 11.4%, to ¥2,943.6 billion during fiscal 2016 compared with the prior fiscal year. This increase mainly reflected the
¥60.0 billion impact of changes in vehicle unit sales and sales mix, the ¥53.8 billion increase in advertising costs, the ¥50.0 billion increase in labor costs, the ¥35.4 billion unfavorable impact of fluctuations in foreign currency
translation rates and the increase in other various costs.
76
Operating Income
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2016 v. 2015 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
390,000
|
|
Effect of changes in exchange rates
|
|
|
160,000
|
|
Effect of marketing activities
|
|
|
(120,000
|
)
|
Effect of increase of miscellaneous costs and others
|
|
|
(340,000
|
)
|
Other
|
|
|
13,407
|
|
|
|
|
|
|
Total
|
|
|
103,407
|
|
|
|
|
|
|
Toyotas operating income increased by ¥103.4 billion, or 3.8%, to ¥2,853.9 billion during
fiscal 2016 compared with the prior fiscal year. This increase was due mainly to the ¥390.0 billion impact of cost reduction efforts and the ¥160.0 billion favorable impact of changes in foreign currency exchange rates, partially offset by
the ¥120.0 billion impact of marketing activities, and the ¥340.0 billion increase in miscellaneous costs and others. The increase in miscellaneous costs and others was due to the ¥110.0 billion increase in labor costs, the ¥50.0
billion increase in research and development expenses, the ¥50.0 billion increase in depreciation expenses and the ¥130.0 billion increase in other various costs.
Marketing activities and marketing efforts include changes in vehicle unit sales and sales mix, sales expenses and other.
During fiscal 2016, operating income (before elimination of intersegment profits) compared with the prior fiscal year increased by ¥106.0 billion, or 6.7%, in Japan, and ¥27.4 billion, or 6.5%, in
Asia, whereas it decreased by ¥55.7 billion, or 9.5%, in North America, ¥8.7 billion, or 10.7%, in Europe, and ¥2.6 billion, or 2.3%, in Other.
The following is a description of operating income in each geographic market.
Japan
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2016 v. 2015 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
275,000
|
|
Effect of changes in exchange rates
|
|
|
270,000
|
|
Effect of marketing activities
|
|
|
(190,000
|
)
|
Effect of increase of miscellaneous costs and others
|
|
|
(255,000
|
)
|
Other
|
|
|
6,046
|
|
|
|
|
|
|
Total
|
|
|
106,046
|
|
|
|
|
|
|
77
North America
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2016 v. 2015 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
75,000
|
|
Effect of changes in exchange rates
|
|
|
(65,000
|
)
|
Effect of marketing efforts
|
|
|
5,000
|
|
Effect of increase of miscellaneous costs and others
|
|
|
(75,000
|
)
|
Other
|
|
|
4,300
|
|
|
|
|
|
|
Total
|
|
|
(55,700
|
)
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2016 v. 2015 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
15,000
|
|
Effect of changes in exchange rates
|
|
|
(30,000
|
)
|
Effect of marketing efforts
|
|
|
25,000
|
|
Effect of increase of miscellaneous costs and others
|
|
|
(5,000
|
)
|
Other
|
|
|
(13,702
|
)
|
|
|
|
|
|
Total
|
|
|
(8,702
|
)
|
|
|
|
|
|
Asia
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2016 v. 2015 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
20,000
|
|
Effect of changes in exchange rates
|
|
|
30,000
|
|
Effect of marketing activities
|
|
|
(5,000
|
)
|
Effect of increase of miscellaneous costs and others
|
|
|
(35,000
|
)
|
Other
|
|
|
17,407
|
|
|
|
|
|
|
Total
|
|
|
27,407
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
2016 v. 2015 Change
|
|
Changes in operating income and loss:
|
|
|
|
|
Effect of cost reduction efforts
|
|
|
5,000
|
|
Effect of changes in exchange rates
|
|
|
(45,000
|
)
|
Effect of marketing efforts
|
|
|
45,000
|
|
Effect of increase of miscellaneous costs and others
|
|
|
(5,000
|
)
|
Other
|
|
|
(2,600
|
)
|
|
|
|
|
|
Total
|
|
|
(2,600
|
)
|
|
|
|
|
|
78
Other Income and Expenses
Interest and dividend income increased by ¥10.7 billion, or 7.3%, to ¥157.8 billion during fiscal 2016 compared with the prior
fiscal year.
Interest expense increased by ¥12.5 billion, or 54.8%, to ¥35.4 billion during fiscal 2016 compared with
the prior fiscal year.
Foreign exchange gain (loss), net decreased by ¥93.7 billion to a loss of ¥5.5 billion during
fiscal 2016 compared with the prior fiscal year. Foreign exchange gains and losses include the differences between the value of foreign currency denominated assets and liabilities recognized through transactions in foreign currencies translated at
prevailing exchange rates and the value at the date the transaction settled during the fiscal year, including those settled using forward foreign currency exchange contracts, or the value translated by appropriate year-end exchange rates. The
¥93.7 billion decrease in foreign exchange gain (loss), net was due mainly to the gains recorded in fiscal 2015 resulting from the Japanese yen being weaker against foreign currencies at the dates of settlement of the foreign currency trade
accounts receivable than at the dates of the transactions.
Other income, net increased by ¥82.6 billion to ¥12.5
billion during fiscal 2016 compared with the prior fiscal year. The increase was due mainly to the effect of the reissuance of treasury stock for Toyota Mobility Foundation, a General Incorporated Foundation, being recorded in the prior fiscal year.
See note 17 to the consolidated financial statements for further discussion.
Income Taxes
The provision for income taxes decreased by ¥15.2 billion, or 1.7%, to ¥878.2 billion during fiscal 2016 compared with the prior
fiscal year due mainly to the reduction of the corporation tax rate resulting from fiscal 2015 Japanese tax reforms. The effective tax rate for fiscal 2016 was 29.4%, which was lower than the statutory tax rate in Japan. This was due mainly to the
increase in tax credits and the effect of foreign subsidiaries where statutory tax rates are lower than that of Japan.
Net Income
Attributable to Noncontrolling Interests and Equity in Earnings of Affiliated Companies
Net income attributable to
noncontrolling interests decreased by ¥13.0 billion, or 9.7%, to ¥121.5 billion during fiscal 2016 compared with the prior fiscal year. This was due mainly to a decrease during fiscal 2016 in net income attributable to the shareholders of
consolidated subsidiaries.
Equity in earnings of affiliated companies during fiscal 2016 increased by ¥20.5 billion, or
6.7%, to ¥329.0 billion compared with the prior fiscal year. This increase was due mainly to an increase during fiscal 2016 in net income attributable to the shareholders of affiliated companies accounted for by the equity method.
Net Income Attributable to Toyota Motor Corporation
Net income attributable to the shareholders of Toyota Motor Corporation increased by ¥139.3 billion, or 6.4%, to ¥2,312.6 billion during fiscal 2016 compared with the prior fiscal year.
Net income attributable to common shareholders during fiscal 2016 is ¥2,306.6 billion, which is derived by deducting
dividends and accretion to Model AA Class Shares of ¥6.0 billion from net income attributable to Toyota Motor Corporation.
Other
Comprehensive Income and Loss
Other comprehensive income and loss decreased by ¥1,816.1 billion to a loss of
¥866.7 billion for fiscal 2016 compared with the prior fiscal year. This decrease resulted from unrealized holding losses on securities in
79
fiscal 2016 of ¥302.6 billion compared with gains of ¥567.0 billion in the prior fiscal year due mainly to a decrease in prices of marketable securities in stock exchange markets in
Japan, from unfavorable foreign currency translation adjustment losses of ¥362.9 billion in fiscal 2016 compared with gains of ¥380.4 billion in the prior fiscal year due mainly to appreciation of the yen against the U.S. dollar, and from
pension liability adjustment losses in fiscal 2016 of ¥201.1 billion compared with gains of ¥1.9 billion in the prior fiscal year due mainly to an increase in pension obligations resulting from decreasing discount rates in Japan and a
decrease in fair value of plan assets.
Segment Information
The following is a discussion of the results of operations for each of Toyotas operating segments. The amounts presented are prior
to intersegment elimination.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Year ended March 31,
|
|
|
2016 v. 2015 Change
|
|
|
|
2015
|
|
|
2016
|
|
|
Amount
|
|
|
Percentage
|
|
Automotive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
25,062,129
|
|
|
|
25,977,416
|
|
|
|
915,287
|
|
|
|
3.7
|
%
|
Operating income
|
|
|
2,325,310
|
|
|
|
2,448,998
|
|
|
|
123,688
|
|
|
|
5.3
|
|
Financial Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
1,661,149
|
|
|
|
1,896,224
|
|
|
|
235,075
|
|
|
|
14.2
|
|
Operating income
|
|
|
361,833
|
|
|
|
339,226
|
|
|
|
(22,607
|
)
|
|
|
(6.2
|
)
|
All Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
1,255,791
|
|
|
|
1,177,387
|
|
|
|
(78,404
|
)
|
|
|
(6.2
|
)
|
Operating income
|
|
|
65,650
|
|
|
|
66,507
|
|
|
|
857
|
|
|
|
1.3
|
|
Intersegment elimination/unallocated amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
(744,548
|
)
|
|
|
(647,909
|
)
|
|
|
96,639
|
|
|
|
|
|
Operating income
|
|
|
(2,229
|
)
|
|
|
(760
|
)
|
|
|
1,469
|
|
|
|
|
|
Automotive Operations Segment
The automotive operations segment is Toyotas largest operating segment by net revenues. Net revenues for the automotive segment increased during fiscal 2016 by ¥915.2 billion, or 3.7%, to
¥25,977.4 billion compared with the prior fiscal year. The increase mainly reflects the ¥330.0 billion favorable impact of changes in vehicle unit sales and sales mix and the ¥307.5 billion favorable impact of fluctuations in foreign
currency translation rates.
Operating income from the automotive operations increased by ¥123.6 billion, or 5.3%, to
¥2,448.9 billion during fiscal 2016 compared with the prior fiscal year. This increase in operating income was due mainly to the ¥390.0 billion impact of cost reduction efforts and the ¥160.0 billion favorable impact of changes in
foreign currency exchange rates, partially offset by the ¥110.0 billion impact of marketing activities and the ¥340.0 billion increase in miscellaneous costs and others.
The impact of marketing activities was due primarily to the decrease in Toyotas vehicle unit sales by 291 thousand vehicles
compared with the prior fiscal year. The vehicle unit sales decreased due mainly to the slowdown of the mini-vehicles market in Japan, the heating up of the competitive climate, as well as the market downturn, in Asia, the fall in demand resulting
from the low price of crude oil and currency weakness in the Middle East, Africa, and Central and South America, despite the increase in sales in the steady North American market. The increase in miscellaneous costs and others was due mainly to the
¥110.0 billion increase in labor costs, the ¥50.0 billion increase in research and development expenses, the ¥50.0 billion increase in depreciation expenses and the ¥110.0 billion increase in other various costs.
80
Financial Services Operations Segment
Net revenues for the financial services operations increased during fiscal 2016 by ¥235.0 billion, or 14.2%, to ¥1,896.2 billion
compared with the prior fiscal year. This increase was primarily due to the ¥74.8 billion favorable impact of fluctuations in foreign currency translation rates.
Operating income from financial services operations decreased by ¥22.6 billion, or 6.2%, to ¥339.2 billion during fiscal 2016 compared with the prior fiscal year. This decrease was due primarily
to a ¥19.7 billion worsening overall of valuation gains or losses on interest rate swaps stated at fair value, mainly in North America.
All Other Operations Segment
Net revenues for Toyotas other operations segments decreased by ¥78.4 billion, or 6.2%, to ¥1,177.3 billion during fiscal 2016 compared with the prior fiscal year.
Operating income from Toyotas other operations segments increased by ¥0.8 billion, or 1.3%, to ¥66.5 billion during
fiscal 2016 compared with the prior fiscal year.
Related Party Transactions
Toyota does not have any significant related party transactions other than transactions with affiliated companies in the ordinary course
of business. See note 11 to the consolidated financial statements for further discussion.
Recent Accounting Pronouncements in the United
States
For a detail of recent accounting pronouncements to be adopted in future periods, see note 2 to the consolidated
financial statements.
Critical Accounting Estimates
The consolidated financial statements of Toyota are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements
requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Toyota
believes that of its significant accounting policies, the following may involve a higher degree of judgments, estimates and assumptions:
Product Warranties and Recalls and Other Safety Measures
Toyota generally warrants its products against certain manufacturing and other defects. Provisions for product warranties are provided for specific periods of time and/or usage of the product and vary
depending upon the nature of the product, the geographic location of the sale and other factors. All product warranties are consistent with commercial practices. Toyota includes a provision for estimated product warranty costs as a component of cost
of sales at the time the related sale is recognized. The accrued warranty costs represent managements best estimate at the time of sale of the total costs that Toyota will incur to repair or replace product parts that fail while still under
warranty. The amount of accrued estimated warranty costs is primarily based on historical experience of product failures as well as current information on repair costs. The amount of warranty costs accrued also contains an estimate of warranty claim
recoveries to be received from suppliers. The foregoing evaluations are inherently uncertain, as they require material estimates and some products warranties extend for several years. Consequently, actual warranty costs may differ from the
estimated amounts and could require additional warranty provisions. If these factors require a significant increase in Toyotas accrued estimated warranty costs, it would negatively affect future operating results of the automotive operations.
81
An estimate of warranty claim accrued for each fiscal year is calculated based on the
estimate of warranty claim per unit. The estimate of warranty claim per unit is calculated by dividing the actual amounts of warranty claim, net of claim recovery cost received from suppliers, by the number of sales units for the fiscal year.
As the historical recovery amounts received from suppliers is used as a factor in Toyotas calculation of estimated
accrued warranty cost, the estimated accrued warranty cost may change depending on the average recovery amounts received from suppliers in the past. However, Toyota believes that there is not a significant uncertainty of estimated amounts based on
historical experience regarding recoveries received from suppliers. Toyota may seek recovery to suppliers over the life of the warranty, and there are no other significant special terms and conditions including cap on amounts that can be recovered.
Toyota accrues for costs of recalls and other safety measures, as well as product warranty cost described above, included as
a component of cost of sales at the time of vehicle sale. Toyota provides for such liabilities for recalls and other safety measures at the time of vehicle sales comprehensively by aggregate sales of various models in a certain period by
geographical regions instead of by individual models. While there is no difference in the calculation method among geographical regions, Toyota believes it is reasonable to calculate the liabilities by geographical regions because of factors such as
varying labor costs among geographical regions.
The liabilities for the costs of recalls and other safety
measures recorded in the balance sheet is calculated by deducting the accumulated amount of repair cost paid from the expected liability for the cost of recalls and other safety measures. As such, this liability is
evaluated every period based on new data and are adjusted as appropriate. Toyota calculates these liabilities for units sold in the current period and each of the past 10 fiscal years, and aggregates such liabilities in determining the final
liability amount.
The expected liability for the cost of recalls and other safety measures are calculated by
multiplying the sales unit by the expected average repair cost per unit. The expected average repair cost per unit is calculated based on dividing the accumulated amount of repair cost paid per unit by
the pattern of payment occurrences. The pattern of payment occurrence represents a ratio that shows the measure of payment occurrence over 10 years based on actual payments with regard to units sold within 10 years.
Factors that may cause a difference between the amount accrued at the time of vehicle sale and actual payment on individual
recalls and other safety measures mainly include actual cost of recalls and safety measures during the period being significantly different from the accumulated amount of repair cost paid per unit (generally comprised of parts and labor) and the
actual pattern of payment occurrence during the period being significantly different from the pattern of the payment occurrence in the past, which is considered as part of our estimation process for future recalls and other safety measures.
As described above, in estimating the comprehensive provision, the actual cost of individual recalls and other safety
measures is included as a component of the calculation such as the accumulated amount of repair cost paid per unit. Thus, an individual recall announcement generally does not directly impact the financial statements when it occurs.
Allowance for Doubtful Accounts and Credit Losses
Natures of estimates and assumptions
Retail receivables and finance lease
receivables consist of retail installment sales contracts secured by passenger cars and commercial vehicles. Collectability risks include consumer and dealer insolvencies and insufficient collateral values (less costs to sell) to realize the full
carrying values of these receivables. As a matter of policy, Toyota maintains an allowance for doubtful accounts and credit losses representing managements estimate of the amount of asset impairment in the portfolios of finance, trade and
other receivables. Toyota determines the allowance for doubtful accounts and credit losses based on a systematic, ongoing review and
82
evaluation performed as part of the credit-risk evaluation process, historical loss experience, the size and composition of the portfolios, current economic events and conditions, the estimated
fair value and adequacy of collateral, and other pertinent factors. This evaluation is inherently judgmental and requires material estimates, including the amounts and timing of future cash flows expected to be received, which may be susceptible to
significant change. Although management considers the allowance for doubtful accounts and credit losses to be adequate based on information currently available, additional provisions may be necessary due to (i) changes in management estimates
and assumptions about asset impairments, (ii) information that indicates changes in expected future cash flows, or (iii) changes in economic and other events and conditions. To the extent that sales incentives remain an integral part of
sales promotion with the effect of reducing new vehicle prices, resale prices of used vehicles and, correspondingly, the collateral value of Toyotas retail receivables and finance lease receivables could experience further downward pressure.
If these factors require a significant increase in Toyotas allowance for doubtful accounts and credit losses, it could negatively affect future operating results of the financial services operations. The level of credit losses, which has a
greater impact on Toyotas results of operations, is influenced by two factors: frequency of occurrence and expected severity of loss. For evaluation purposes, exposures to credit losses are segmented into the two primary categories of
consumer and dealer. Toyotas consumer category consists of smaller balances that are homogenous retail receivables and finance lease receivables. The dealer category consists of wholesale and
other dealer loan receivables. The overall allowance for credit losses is evaluated at least quarterly, considering a variety of assumptions and factors to determine whether reserves are considered adequate to cover probable losses.
Sensitivity analysis
The level of credit losses, which could significantly impact Toyotas results of operations, is influenced by two factors: frequency
of occurrence and expected severity of loss. The overall allowance for credit losses is evaluated at least quarterly, considering a variety of assumptions and factors to determine whether reserves are considered adequate to cover probable losses.
The following table illustrates the effect of an assumed change in frequency of occurrence or expected severity of loss mainly in the United States, assuming all other assumptions are held consistent. The table below represents the impact on the
allowance for credit losses in Toyotas financial services operations of the change in frequency of occurrence or expected severity of loss as any change impacts most significantly on the financial services operations.
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Effect on the allowance
for credit
losses
as of March 31, 2017
|
|
10 percent change in frequency of occurrence or expected severity of loss
|
|
|
5,610
|
|
Investment in Operating Leases
Natures of estimates and assumptions
Vehicles on operating leases, where
Toyota is the lessor, are valued at cost and depreciated over their estimated useful lives using the straight-line method to their estimated residual values. Toyota utilizes industry published information and its own historical experience to
determine estimated residual values for these vehicles. Toyota evaluates the recoverability of the carrying values of its leased vehicles for impairment when there are indications of declines in residual values, and if impaired, Toyota recognizes an
allowance for losses on its residual values.
Throughout the life of the lease, management performs periodic evaluations of
estimated end-of-term fair values to determine whether estimates used in the determination of the contractual residual value are still considered reasonable. Factors affecting the estimated residual value at lease maturity include, but are not
limited to, new vehicle incentive programs, new vehicle pricing, used vehicle supply, projected vehicle return rates, and projected loss severity. The vehicle return rate represents the number of leased vehicles actually returned at
83
contract maturity as a percentage of the number of lease contracts originally scheduled to mature in the same period less lease contracts subject to early terminations. A higher rate of vehicle
returns exposes Toyota to higher potential losses incurred at lease termination. Severity of loss is the extent to which the end-of-term fair value of a lease is less than its carrying value at lease end.
To the extent that sales incentives remain an integral part of sales promotion, resale prices of used vehicles and, correspondingly, the
fair value of Toyotas leased vehicles could be subject to downward pressure. The extent of the impact this will have on the end of term residual value depends on the significance of the incentive programs and whether they are sustained over a
number of periods. This in turn can impact the projection of future used vehicle values, adversely impacting the expected residual value of the current operating lease portfolio and increasing the provision for residual value losses. However,
various other factors impact used vehicle values and the projection of future residual values, including the supply of and demand for used vehicles, interest rates, inflation, the actual or perceived quality, safety and reliability of vehicles, the
general economic outlook, new vehicle pricing, projected vehicle return rates and projected loss severity, which may offset this effect. Such factors may adversely affect the results of operations for financial services due to significant charges
reducing the estimated residual value.
Sensitivity analysis
The following table illustrates the effect of an assumed change in the vehicle return rate and end-of-term market values mainly in the United States, which Toyota believes are the critical estimates, in
determining the residual value losses, holding all other assumptions constant. The following table represents the impact on the residual value losses in Toyotas financial services operations of the change in vehicle return rate and end-of-term
market values for returned units as those changes have a significant impact on financial services operations.
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Effect on the residual value losses
over the
remaining terms
of the operating leases
on and after April 1, 2017
|
|
1 percent increase in vehicle return rate
|
|
|
4,600
|
|
1 percent increase in end-of-term market values
|
|
|
11,892
|
|
Impairment of Long-Lived Assets
Toyota periodically reviews the carrying value of its long-lived assets held and used and assets to be disposed of, including intangible assets, when events and circumstances warrant such a review. This
review is performed using estimates of future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value.
Management believes that the estimates of future cash flows and fair values are reasonable. However, changes in estimates of such cash flows and fair values would affect the evaluations and negatively affect future operating results of the
automotive operations.
Pension Costs and Obligations
Natures of estimates and assumptions
Pension costs and obligations are
dependent on assumptions used in calculating such amounts. These assumptions include discount rates, benefits earned, interest costs, expected rate of return on plan assets, mortality rates and other factors. Actual results that differ from the
assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense in future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in
assumptions may affect Toyotas pension costs and obligations.
84
The two most critical assumptions impacting the calculation of pension costs and obligations
are the discount rates and the expected rates of returns on plan assets. Toyota determines the discount rates mainly based on the rates of high quality fixed income bonds or fixed income governmental bonds currently available and expected to be
available during the period to maturity of the defined benefit pension plans. Toyota determines the expected rates of return for pension assets after considering several applicable factors including, the composition of plan assets held, assumed
risks of asset management, historical results of the returns on plan assets, Toyotas principal policy for plan asset management, and forecasted market conditions. A weighted-average discount rate of 0.5% domestically and 4.2% overseas and a
weighted-average expected rate of return on plan assets of 2.4% domestically and 6.1% overseas were used in calculating Toyotas consolidated pension costs for fiscal 2017. Also, a weighted-average discount rate of 0.7% domestically and 4.0%
overseas were used in calculating Toyotas consolidated pension obligations for fiscal 2017.
Sensitivity analysis
The following table illustrates the effects of assumed changes in weighted-average discount rates and the weighted-average expected rate
of return on plan assets, which Toyota believes are critical estimates in determining pension costs and obligations, assuming all other assumptions are consistent.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Domestic
|
|
|
Overseas
|
|
|
|
Effect on pre-tax income
for
the year ended
March 31, 2018
|
|
|
Effect on obligations
for the year ended
March 31,
2017
|
|
|
Effect on pre-tax income
for
the year ended
March 31, 2018
|
|
|
Effect on obligations
for the year ended
March 31,
2017
|
|
Discount rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5% decrease
|
|
|
(10,221
|
)
|
|
|
158,111
|
|
|
|
(7,524
|
)
|
|
|
102,699
|
|
0.5% increase
|
|
|
9,049
|
|
|
|
(139,411
|
)
|
|
|
6,668
|
|
|
|
(76,846
|
)
|
Expected rate of return on plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5% decrease
|
|
|
(7,419
|
)
|
|
|
|
|
|
|
(3,792
|
)
|
|
|
|
|
0.5% increase
|
|
|
7,419
|
|
|
|
|
|
|
|
3,792
|
|
|
|
|
|
Derivatives and Other Contracts at Fair Value
Toyota uses derivatives in the normal course of business to manage its exposure to foreign currency exchange rates and interest rates. The
accounting for derivatives is complex and continues to evolve. Toyota estimates the fair value of derivative financial instruments using industry-standard valuation models that require observable inputs including interest rates and foreign exchange
rates, and the contractual terms. In other certain cases when market data is not available, key inputs to the fair value measurement include quotes from counterparties, and other market data. These estimates are based upon valuation methodologies
deemed appropriate under the circumstances. However, the use of different assumptions may have a material effect on the estimated fair value amounts.
Marketable Securities and Investments in Affiliated Companies
Toyotas accounting policy is to record a write-down of such investments to net realizable value when a decline in fair value below
the carrying value is other-than-temporary. In determining if a decline in value is other-than-temporary, Toyota considers the length of time and the extent to which the fair value has been less than the carrying value, the financial condition and
prospects of the company and Toyotas ability and intent to retain its investment in the company for a period of time sufficient to allow for any anticipated recovery in fair value.
85
Reissuance of treasury stock for Toyota Mobility Foundation, a General Incorporated Foundation
In fiscal 2015, Toyota Motor Corporation reissued treasury stock for Toyota Mobility Foundation, a General
Incorporated Foundation (the Foundation), and the difference between amount of proceeds and fair value of treasury stock on reissuance was included in Other income (expense). The fair value of treasury stock was measured
using a dividend discount model due to the restrictions on transfer in the reissued stock for the Foundation. These estimates were based upon valuation methodologies deemed appropriate under the circumstances. See note 17 to the consolidated
financial statements for further discussion.
Deferred Tax Assets
The factors used to assess the likelihood of realization of the deferred tax assets are the future reversal of existing taxable temporary
differences, the future taxable income and available tax planning strategies that are prudent and feasible. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation
allowance is needed for deferred tax assets which are not more-likely-than-not to be realized.
The accounting for deferred
tax assets represents Toyotas current best estimate based on all available evidence. Unanticipated events or changes could result in re-evaluating the realizability of deferred tax assets.
Outlook
As for our
future business environment, developed countries are expected to continue growing steadily, while the growth rate of emerging countries are expected to increase gradually on the back of the steady growth in developed countries and the effects of
policy measures taken by emerging countries. The Japanese economy is expected to improve mainly in the area of private demand supported by continuing extension of the positive cycle of the economy with improvements in employment and income
conditions, although attention needs to be paid to uncertainty related to policy trends mainly in the U.S. and U.K.
The
automotive market is expected to progress steadily in developed countries and to pick up gradually in emerging countries. Meanwhile, complicated interactions and changes such as changing market and regulations, developments in technology, and entry
from other businesses are changing the automotive business itself. Taking the foregoing external factors into account, Toyota expects that net revenues for fiscal 2018 will decrease compared with fiscal 2017 due mainly to an unfavorable impact of
fluctuations in foreign currency translation rates. Toyota expects that operating income will decrease in fiscal 2018 compared with fiscal 2017 due mainly to the effect of marketing activities and an increase in miscellaneous costs, partially offset
by a favorable impact of cost reduction efforts. Toyota expects that income before income taxes and equity in earnings of affiliated companies and net income attributable to Toyota Motor Corporation will also decrease in fiscal 2018.
For the purposes of this outlook discussion, Toyota is assuming an average exchange rate of ¥105 to the U.S. dollar and ¥115 to
the euro. Exchange rate fluctuations can materially affect Toyotas operating results. In particular, a strengthening of the Japanese yen against the U.S. dollar can have a material adverse effect on Toyotas operating results. See
Operating and Financial Review and Prospects Operating Results Overview Currency Fluctuations for further discussion.
The foregoing statements are forward-looking statements based upon Toyotas managements assumptions and beliefs regarding exchange rates, market demand for Toyotas products, economic
conditions and others. See Cautionary Statement Concerning Forward-Looking Statements. Toyotas actual results of operations could vary significantly from those described above as a result of unanticipated changes in the factors
described above or other factors, including those described in Risk Factors.
86
5.B LIQUIDITY AND CAPITAL RESOURCES
Historically, Toyota has funded its capital expenditures and research and development activities through cash generated by operations.
In fiscal 2018, Toyota expects to sufficiently fund its capital expenditures and research and development activities through
cash and cash equivalents on hand, and cash generated by operations. Toyota will use its funds for the development of environment technologies, maintenance and replacement of manufacturing facilities, and the introduction of new products. See
Information on the Company Business Overview Capital Expenditures and Divestitures for information regarding Toyotas material capital expenditures and divestitures for fiscal 2015, 2016 and 2017, and information
concerning Toyotas principal capital expenditures and divestitures currently in progress.
Toyota funds its financing
programs for customers and dealers, including loans and leasing programs, from both cash generated by operations and borrowings by its sales finance subsidiaries. Toyota seeks to expand its ability to raise funds locally in markets throughout the
world by expanding its network of finance subsidiaries.
Net cash provided by operating activities decreased by ¥1,046.6
billion to ¥3,414.2 billion for fiscal 2017, compared with ¥4,460.8 billion for fiscal 2016.
The decrease was
primarily attributable to the ¥859.5 billion decrease in operating income. Results of operations are recorded on an accrual basis and are therefore different from cash provided or used in operating activities. Other than the operating income
decrease, net cash provided by operating activities decreased primarily due to the ¥239.6 billion increase in accrued trade receivables resulting mainly from increased revenue from sales of after-service parts and components.
Net cash provided by operating activities increased by ¥775.1 billion to ¥4,460.8 billion for fiscal 2016, compared with
¥3,685.7 billion for fiscal 2015.
The increase was primarily attributable to the ¥103.4 billion increase in operating
income and the ¥216.7 billion increase in depreciation expenses, i.e. noncash expenses, resulting from an increase in capital expenditures. Results of operations are recorded on an accrual basis and are therefore different from cash
provided or used in operating activities. Other than the operating income increase, net cash provided by operating activities increased primarily due to the ¥240.5 billion decrease in cash payments for income taxes for fiscal 2016 resulting
mainly from a decrease in provisional tax payment.
Net cash used in investing activities decreased by ¥212.6 billion to
¥2,969.9 billion for fiscal 2017, compared with ¥3,182.5 billion for fiscal 2016. The decrease was primarily attributable to the ¥1,634.6 billion decrease in investments and other assets and the ¥459.1 billion decrease in purchases
of equipment leased to others, partially offset by a ¥1,833.8 billion increase in purchases of marketable securities and security investments.
Net cash used in investing activities decreased by ¥630.9 billion to ¥3,182.5 billion for fiscal 2016, compared with ¥3,813.4 billion for fiscal 2015. The decrease was primarily attributable
to the ¥1,729.6 billion decrease in purchases of marketable securities and security investments, partially offset by the ¥565.4 billion increase in purchases of equipment leased to others and the ¥948.7 billion increase in investments
and other assets.
Net cash used in financing activities decreased by ¥48.4 billion to ¥375.1 billion for fiscal 2017,
compared with ¥423.5 billion for fiscal 2016. The decrease was primarily attributable to the ¥330.6 billion decrease in payments of long-term debt and a ¥283.9 billion increase in short-term borrowings, partially offset by the
¥474.9 billion in proceeds from the issuance of Model AA Class Shares, being recorded in the prior fiscal year.
Net
cash used in financing activities was ¥423.5 billion for fiscal 2016, compared with net cash provided by financing activities of ¥306.0 billion for fiscal 2015, a ¥729.6 billion change. The change was primarily
87
attributable to the ¥713.9 billion increase in payments of long-term debt and a ¥430.3 billion increase in repurchase and reissuance of treasury stock, partially offset by the ¥474.9
billion proceeds from the issuance of Model AA Class Shares.
Total capital expenditures for property, plant and equipment,
excluding vehicles and equipment on operating leases, were ¥1,223.8 billion during fiscal 2017, a decrease of 4.6% from the ¥1,282.5 billion in total capital expenditures during the prior fiscal year. This decrease was due primarily to a
decrease in investments in Asia.
Total capital expenditures for vehicles and equipment on operating leases were ¥2,317.5
billion during fiscal 2017, a decrease of 16.5% from the ¥2,776.6 billion in total capital expenditures during the prior fiscal year. This decrease was due primarily to a decrease in investments in the financial services operations.
Toyota expects investments in property, plant and equipment, excluding vehicles and equipment on operating leases, to be approximately
¥1,300.0 billion during fiscal 2018.
Cash and cash equivalents were ¥2,995.0 billion as of March 31, 2017. Most
of Toyotas cash and cash equivalents are held in Japanese yen or in U.S. dollars. In addition, time deposits were ¥1,082.6 billion and marketable securities were ¥1,821.5 billion as of March 31, 2017.
Liquid assets, which Toyota defines as cash and cash equivalents, time deposits, marketable debt securities and its investment in
monetary trust funds, increased during fiscal 2017 by ¥179.2 billion, or 1.7%, to ¥10,749.5 billion.
Trade
accounts and notes receivable, less allowance for doubtful accounts increased during fiscal 2017 by ¥115.7 billion, or 5.8%, to ¥2,115.9 billion. This increase was due mainly to increased revenue from sales of after-service parts and
components.
Inventories increased during fiscal 2017 by ¥327.1 billion, or 15.9%, to ¥2,388.6 billion. This increase
was due mainly to the increase in vehicle inventories at foreign subsidiaries.
Total finance receivables, net increased
during fiscal 2017 by ¥653.2 billion, or 4.5%, to ¥15,208.8 billion. This increase was due mainly to the increase in the lending balance in the financial services operations. As of March 31, 2017, finance receivables were geographically
distributed as follows: in North America 59.1%, in Asia 11.3%, in Europe 10.3%, in Japan 8.1% and in Other 11.2%.
Marketable
securities and other securities investments, including those included in current assets, increased during fiscal 2017 by ¥550.3 billion, or 6.1%, reflecting the purchases of public and corporate bonds by Toyota Motor Corporation, and the effects
of marking equity securities to market.
Property, plant and equipment increased during fiscal 2017 by ¥456.6 billion, or
4.7%, primarily reflecting the increase in the capital expenditures.
Accounts and notes payable increased during fiscal 2017
by ¥176.8 billion, or 7.4%. This increase was due mainly to the increase in purchase of vehicles in foreign subsidiaries
Accrued expenses increased during fiscal 2017 by ¥411.7 billion, or 15.1%. This increase was due mainly to the increase in accrued
product quality related expenses.
Income taxes payable decreased during fiscal 2017 by ¥119.7 billion, or 34.9%. This
decrease was due mainly to the increase in interim tax payments.
Toyotas total borrowings increased during fiscal 2017
by ¥862.5 billion, or 4.7%. Toyotas short-term borrowings consist of loans with a weighted-average interest rate of 1.86% and commercial paper with a weighted-average interest rate of 1.08%. Short-term borrowings increased during fiscal
2017 by ¥255.5 billion, or 5.4%, to ¥4,953.6 billion. Toyotas long-term debt consists of unsecured and secured loans, medium-term
88
notes, unsecured and secured notes etc. with weighted-average interest rates ranging from 1.35% to 8.14%, and maturity dates ranging from 2017 to 2046. The current portion of long-term debt
increased during fiscal 2017 by ¥467.4 billion, or 12.2%, to ¥4,290.4 billion and the non-current portion increased by ¥139.5 billion, or 1.4%, to ¥9,911.5 billion. The increase in total borrowings resulted mainly from the increasing
demand for financing associated with the increase in the lending balance. As of March 31, 2017, approximately 51% of long-term debt was denominated in U.S. dollars, 11% in Japanese yen, 10% in Australian dollars, 9% in Euros, and 19% in other
currencies. Toyota hedges interest rate risk exposure of fixed-rate borrowings by entering into interest rate swaps. There are no material seasonal variations in Toyotas borrowings requirements.
As of March 31, 2017, Toyotas total interest bearing debt was 109.4% of Toyota Motor Corporation shareholders equity,
compared with 109.2% as of March 31, 2016.
The following table provides information for credit rating of Toyotas
short-term borrowing and long-term debt from rating agencies, Standard & Poors Ratings Group (S&P), Moodys Investors Services (Moodys), and Rating and Investment Information, Inc. (R&I), as of May 31, 2017. A
credit rating is not a recommendation to buy, sell or hold securities. A credit rating may be subject to withdrawal or revision at any time. Each rating should be evaluated separately of any other rating.
|
|
|
|
|
|
|
|
|
S&P
|
|
Moodys
|
|
R&I
|
Short-term borrowing
|
|
A-1+
|
|
P-1
|
|
|
Long-term debt
|
|
AA-
|
|
Aa3
|
|
AA+
|
Toyotas unfunded pension liabilities of Japanese plans decreased during fiscal 2017 by ¥96.3
billion, or 17.7%, to ¥446.6 billion. The liabilities of foreign plans decreased during fiscal 2017 by ¥2.7 billion, or 1.0%, to ¥267.7 billion. The unfunded amounts will be funded through future cash contributions by Toyota or in some
cases will be settled on the retirement date of each covered employee. The decrease in unfunded pension liabilities of the Japanese plans reflects mainly an increase in plan assets that resulted from an increase in stock prices. See note 20 to the
consolidated financial statements for further discussion.
Toyotas treasury policy is to maintain controls on all
exposures, to adhere to stringent counterparty credit standards, and to actively monitor marketplace exposures. Toyota remains centralized, and is pursuing global efficiency of its financial services operations through Toyota Financial Services
Corporation.
The key element of Toyotas financial strategy is maintaining a strong financial position that will allow
Toyota to fund its research and development initiatives, capital expenditures and financial services operations efficiently even if earnings are subject to short-term fluctuations. Toyota believes that it maintains sufficient liquidity for its
present requirements and that by maintaining its high credit ratings, it will continue to be able to access funds from external sources in large amounts and at relatively low costs. Toyotas ability to maintain its high credit ratings is
subject to a number of factors, some of which are not within Toyotas control. These factors include general economic conditions in Japan and the other major markets in which Toyota does business, as well as Toyotas successful
implementation of its business strategy.
5.C RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
Toyotas research and development is dedicated to capturing the increasingly diverse and sophisticated market through the development
of attractive, affordable, high-quality products for customers worldwide. The intellectual property that R&D generates is a vital management resource that Toyota utilizes and protects to maximize its corporate value. For a more detailed
discussion of the companys research and development objectives and policies, see Information on the Company Business Overview Research and Development.
Toyotas research and development expenditures were approximately ¥1,037.5 billion in fiscal 2017,
¥1,055.6 billion in fiscal 2016 and ¥1,004.5 billion in fiscal 2015.
Toyota operates a global research and
development organization with the primary goal of building automobiles that meet the needs of customers in every region of the world. In Japan, research and development
89
operations are led by Toyota and Toyota Central Research & Development Laboratories, Inc., which works closely with Daihatsu Motor Co., Ltd., Hino Motors, Ltd., Toyota Auto Body Co.,
Ltd., Toyota Motor East Japan, Inc., and many other Toyota group companies. Overseas, Toyota has a worldwide network of technical centers as well as design and motorsports research and development centers.
Toyota established Toyota Research Institute, Inc. in January 2016 to accelerate research and development of artificial intelligence
technology, which has significant potential to support future industrial technologies.
The following table provides
information on Toyotas principal research and development facilities.
|
|
|
Facility
|
|
Principal Activity
|
Japan
|
|
|
Toyota Technical Center
|
|
Product planning, style, design and evaluation
|
Higashi-Fuji Technical
Center
|
|
Advanced research and development
|
Tokyo Design
Research & Laboratory
|
|
Research of advanced styling designs
|
Shibetsu Proving
Ground
|
|
Vehicle testing and evaluation
|
Toyota Central R&D
Labs., Inc.
|
|
Basic research
|
United
States
|
|
|
Toyota Motor Engineering
and Manufacturing North America, Inc.
|
|
North American production and product planning, upper body planning, evaluation
|
Calty Design Research,
Inc.
|
|
Design
|
Toyota Research Institute
of North America
(TRI-NA)
|
|
Advanced research relating to energy and environment, safety and mobility infrastructure
|
Toyota Research Institute,
Inc.
|
|
Research and development of artificial intelligence
technology
|
Europe
|
|
|
Toyota Motor Europe
NV/SA
|
|
Upper body planning for European production, evaluation and
advanced research
|
Toyota Europe Design
Development S.A.R.L.
|
|
Design
|
Toyota Motorsport
GmbH
|
|
Development of motor sports vehicles
|
Asia
Pacific
|
|
|
Toyota Daihatsu
Engineering and Manufacturing Co., Ltd.
|
|
Upper body planning for Australian and Asian production and evaluation
|
Toyota Technical Center
Asia Pacific Australia Pty, Ltd.*
|
|
Upper body planning for Australian and Asian production and evaluation
|
China
|
|
|
Toyota Motor Engineering
and Manufacturing (China) Co., Ltd.
|
|
Research of new,
low-energy
vehicle technology, vehicle evaluation and quality assurance in China
|
FAW Toyota
Research & Development Co., Ltd
|
|
Design and evaluation of vehicles manufactured in China
|
GAC Toyota Motor Co., Ltd.
R&D Center
|
|
Design and evaluation of vehicles manufactured in China
|
*
|
Toyota Technical Center Asia Pacific Australia Pty, Ltd. was dissolved in September 2016.
|
90
Toyota reorganized its subsidiary and vehicle development partner Toyota Technical
Development Corporation, integrating its vehicle development functions into Toyota in January 2016.
Toyota carefully
analyzes patents and the need for patents in each area of research to formulate more effective research and development strategies. Toyota identifies research and development projects in which it should build a strong global patent portfolio.
In addition, Toyota wishes to contribute to sustainable mobility by promoting the spread of technologies with environmental
and safety benefits. This is why Toyota takes an open stance to patent licensing and grants licenses when appropriate terms are met. For example, in March 2010, Toyota and Mazda Motor Corporation entered into a licensing agreement regarding the
supply of hybrid system technology.
For a further discussion of Toyotas intellectual property, see Information on
the Company Business Overview Intellectual Property.
5.D TREND INFORMATION
For a discussion of the trends that affect Toyotas business and operating results, see Operating Results and
Liquidity and Capital Resources.
5.E OFF-BALANCE SHEET ARRANGEMENTS
Toyota uses its securitization program as part of its funding through special purpose entities for its financial services operations.
Toyota is considered as the primary beneficiary of these special purpose entities and therefore consolidates them. Toyota has not entered into any off-balance sheet securitization transactions during fiscal 2017.
Lending Commitments
Credit
Facilities with Credit Card Holders
Toyotas financial services operations issue credit cards to customers. As
customary for credit card businesses, Toyota maintains credit facilities with holders of credit cards issued by Toyota. These facilities are used upon each holders requests up to the limits established on an individual holders basis.
Although loans made to customers through these facilities are not secured, for the purposes of minimizing credit risks and of appropriately establishing credit limits for each individual credit card holder, Toyota employs its own risk management
policy which includes an analysis of information provided by financial institutions in alliance with Toyota. Toyota periodically reviews and revises, as appropriate, these credit limits. Outstanding credit facilities with credit card holders were
¥210.2 billion as of March 31, 2017.
Credit Facilities with Dealers
Toyotas financial services operations maintain credit facilities with dealers. These credit facilities may be used for business
acquisitions, facilities refurbishment, real estate purchases, and working capital requirements. These loans are typically collateralized with liens on real estate, vehicle inventory, and/or other dealership assets, as appropriate. Toyota obtains a
personal guarantee from the dealer or corporate guarantee from the dealership when deemed prudent. Although the loans are typically collateralized or guaranteed, the value of the underlying collateral or guarantees may not be sufficient to cover
Toyotas exposure under such agreements. Toyota evaluates the credit facilities according to the risks assumed in entering into the credit facility. Toyotas financial services operations also provide financing to various multi-franchise
dealer organizations, referred to as dealer groups, often as part of a lending consortium, for wholesale inventory financing, business acquisitions, facilities refurbishment, real estate purchases, and working capital requirements. Toyotas
outstanding credit facilities with dealers totaled ¥2,480.4 billion as of March 31, 2017.
91
Guarantees
Toyota enters into certain guarantee contracts with its dealers to guarantee customers payments of their installment payables that arise from installment contracts between customers and Toyota
dealers, as and when requested by Toyota dealers. Guarantee periods are set to match the maturity of installment payments, and as of March 31, 2017, ranged from one month to 35 years. However, they are generally shorter than the useful lives of
products sold. Toyota is required to execute its guarantee primarily when customers are unable to make required payments.
The
maximum potential amount of future payments as of March 31, 2017 is ¥2,596.4 billion. Liabilities for these guarantees of ¥6.3 billion have been provided as of March 31, 2017. Under these guarantee contracts, Toyota is entitled to
recover any amounts paid by it from the customers whose obligations it guaranteed.
5.F TABULAR DISCLOSURE OF
CONTRACTUAL OBLIGATIONS
Contractual Obligations and Commitments
For information regarding debt obligations, capital lease obligations, operating lease obligations and other obligations, including
amounts maturing in each of the next five years, see notes 12, 23 and 24 to the consolidated financial statements. In addition, as part of Toyotas normal business practices, Toyota enters into long-term arrangements with suppliers for
purchases of certain raw materials, components and services. These arrangements may contain fixed/minimum quantity purchase requirements. Toyota enters into such arrangements to facilitate an adequate supply of these materials and services.
The following tables summarize Toyotas contractual obligations and commercial commitments as of March 31, 2017.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Total
|
|
|
Payments Due by Period
|
|
|
|
|
Less than
1 year
|
|
|
1 to
3 years
|
|
|
3 to
5 years
|
|
|
5 years
and after
|
|
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings (note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
1,125,324
|
|
|
|
1,125,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
3,828,358
|
|
|
|
3,828,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt* (note 12)
|
|
|
14,179,796
|
|
|
|
4,285,806
|
|
|
|
5,513,860
|
|
|
|
3,290,910
|
|
|
|
1,089,220
|
|
Estimated amount of interest expense on long-term debt
|
|
|
883,915
|
|
|
|
276,755
|
|
|
|
329,311
|
|
|
|
127,995
|
|
|
|
149,854
|
|
Capital lease obligations (note 23)
|
|
|
22,249
|
|
|
|
4,643
|
|
|
|
5,990
|
|
|
|
2,601
|
|
|
|
9,015
|
|
Non-cancelable operating lease obligations (note 23)
|
|
|
80,515
|
|
|
|
16,107
|
|
|
|
21,598
|
|
|
|
15,081
|
|
|
|
27,729
|
|
Commitments for the purchase of property, plant, other assets and services (note 24)
|
|
|
337,498
|
|
|
|
121,865
|
|
|
|
64,957
|
|
|
|
61,513
|
|
|
|
89,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,457,655
|
|
|
|
9,658,858
|
|
|
|
5,935,716
|
|
|
|
3,498,100
|
|
|
|
1,364,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Long-term debt represents future principal payments.
|
Toyota is unable to make reasonable estimates of the period of cash settlement with respect to liabilities recognized for uncertain tax benefits, and accordingly such liabilities are excluded from the
table above. See note 15 to the consolidated financial statements for further discussion.
92
Toyota expects to contribute ¥39,847 million domestically and
¥16,020 million overseas to its pension plans in fiscal 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen in millions
|
|
|
|
Total
Amounts
Committed
|
|
|
Amount of Commitment Expiration Per Period
|
|
|
|
|
Less than
1 year
|
|
|
1 to
3 years
|
|
|
3 to
5 years
|
|
|
5 years
and after
|
|
Commercial Commitments (note 24):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum potential exposure to guarantees given in the ordinary course of business
|
|
|
2,596,443
|
|
|
|
685,315
|
|
|
|
1,049,831
|
|
|
|
615,982
|
|
|
|
245,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial Commitments
|
|
|
2,596,443
|
|
|
|
685,315
|
|
|
|
1,049,831
|
|
|
|
615,982
|
|
|
|
245,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.G SAFE HARBOR
All information that is not historical in nature disclosed under
Off-Balance
Sheet
Arrangements and Tabular Disclosure of Contractual Obligations is deemed to be a forward-looking statement. See Cautionary Statement Concerning Forward-Looking Statements for additional information.
ITEM 10. ADDITIONAL INFORMATION
10.A SHARE CAPITAL
Not applicable.
10.B MEMORANDUM AND ARTICLES OF ASSOCIATION
Except as otherwise stated, set forth below is information relating to
Toyotas common stock and Model AA Class Shares, including brief summaries of the relevant provisions of Toyotas articles of incorporation and share handling regulations, as currently in effect, and of the Companies Act, Act
Concerning Book-Entry Transfer of Corporate Bonds, Shares and Other Securities (the Book-Entry Transfer Act) and related legislation.
General
Toyotas authorized number of shares as of March 31,
2017 was 10,000,000,000 common shares, of which 3,262,997,492 shares were issued. The articles of incorporation was amended at the 111th Ordinary General Shareholders Meeting held in June 2015 and Toyotas authorized number of shares was
changed to 10,000,000,000 shares, with the total number of authorized shares per class, of 10,000,000,000 for common shares, 50,000,000 for First Series Model AA Class Shares, 50,000,000 for Second Series Model AA Class Shares, 50,000,000
for Third Series Model AA Class Shares, 50,000,000 for Fourth Series Model AA Class Shares and 50,000,000 for Fifth Series Model AA Class Shares, and the total number of shares authorized to be issued with respect to First Series
Model AA Class Shares through the Fifth Series Model AA Class Shares not to exceed 150,000,000 shares. As of June 23, 2017, there were 47,100,000 shares of First Series Model AA Class Shares issued and outstanding.
Toyota does not issue share certificates for its shares. In accordance with the Companies Act, the Book-Entry Transfer Act and
Toyotas articles of incorporation, Toyotas common shares are recorded or registered on (i) Toyotas register of shareholders and (ii) transfer account books of the Japan Securities Depository Center, Inc.
(JASDEC) which is a book-entry transfer institution and securities firms, banks or other account
107
management institutions. The transfer of common shares will generally become effective once the transfer is recorded in the transferees account. In order to assert shareholders rights
against Toyota, a shareholder must generally have his or her name and address recorded or registered on Toyotas register of shareholders. A holder of common shares can assert minority shareholders rights (shareholders rights for
which Toyota has not set a record date) against Toyota if JASDEC provides an individual shareholder notice to Toyota upon the shareholders request. The shareholder of deposited shares underlying the ADSs is the Depositary for the ADSs.
Accordingly, holders of ADSs will not be able directly to assert shareholders rights.
A holder of common shares must
have a transfer account to transfer shares. Holders of common shares who do not have a transfer account with JASDEC must have an account with an account management institution that directly or indirectly has a transfer account with JASDEC. Once
Toyota decides on the record date for its shareholders meeting or makes a request to JASDEC based on justifiable grounds, JASDEC will promptly provide to Toyota names, addresses and other information with respect to the holders of
Toyotas common shares who are recorded on the transfer account books of JASDEC or account management institutions. Upon receiving such information, Toyota will record or register such information received from JASDEC on its register of
shareholders. Accordingly, holders of common shares recorded or registered on Toyotas register of shareholders will be treated as holders of common shares of Toyota and may exercise rights, such as voting rights, and will receive dividends (if
any) and notices to holders of common shares directly from Toyota. Holders of common shares wishing to assert minority shareholders rights against Toyota must request an individual shareholder notice to JASDEC or the account management
institution at which the shareholder has opened a transfer account. In response to such request, JASDEC will provide the individual shareholders notice to Toyota. A holder of common shares may assert his or her minority shareholders rights
against Toyota for a period of four weeks after the date the individual shareholder notice is provided to Toyota. The shares held by a person who is deemed to hold additional shares according to the transfer account books are aggregated for these
purposes.
Model AA Class Shares, once issued, will be recorded or registered on Toyotas register of shareholders.
The transfer of Model AA Class Shares, once issued, will be effective upon an agreement between the transferor and the transferee, but entry or record of a change of holder in the register of shareholders will require an approval from the board
of directors.
Corporate Purpose
Article 2 of Toyotas articles of incorporation states that its purpose is to engage in the following businesses:
|
|
|
the manufacture, sale, leasing and repair of:
|
|
|
|
motor vehicles, industrial vehicles, ships, aircraft, other transportation machinery and apparatus, spacecraft and space machinery and apparatus, and
parts thereof;
|
|
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|
industrial machinery and apparatus, other general machinery and apparatus, and parts thereof;
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electrical machinery and apparatus, and parts thereof; and
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measuring machinery and apparatus, medical machinery and apparatus, and parts thereof.
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the manufacture and sale of ceramics and products of synthetic resins, and materials thereof;
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the manufacture, sale and repair of construction materials and equipment, furnishings and fixtures for residential buildings;
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the planning, designing, supervision, execution and undertaking of construction works, civil engineering works, land development, urban development and
regional development;
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the sale, purchase, leasing, brokerage and management of real estate;
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the service of information processing, information communications and information supply and the development, sale and leasing of software;
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the design and development of product sales systems that utilize networks such as the Internet, sale, leasing and maintenance of computers included
within such systems, and sale of products by utilizing such systems;
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the inland transportation, marine transportation, air transportation, stevedoring, warehousing and tourism businesses;
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the printing, publishing, advertising and publicity, general leasing, security and workers dispatch businesses;
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the credit card operations, purchase and sale of securities, investment consulting, investment trust operation, and other financial services;
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the operation and management of such facilities as parking lots, showrooms, educational facilities, medical care facilities, sports facilities,
marinas, airfields, food and drink stands and restaurants, lodging facilities, retail stores and others;
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the
non-life
insurance agency business and the life insurance agency business;
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the production and processing by using biotechnology of agricultural products including trees, and the sale of such products;
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the sale of goods related to each of the preceding items and mineral oil;
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the conducting of engineering, consulting, invention and research relating to each of the preceding items and the utilization of such invention and
research; and
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any businesses incidental to or related to any of the preceding items.
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Dividends
Dividends General
Toyota normally pays dividends twice per year, including an interim dividend and a
year-end
dividend. Toyotas articles of incorporation provide that retained earnings can be distributed as dividends pursuant to a resolution of its board of directors. Toyotas board of directors resolves to pay
year-end
dividends to holders of common shares and registered pledgees of common shares of record as of March 31, the record date, in each year. In addition, the articles of incorporation provide that in
the event that Toyota pays a
year-end
dividend to holders of common shares, it will pay AA Dividends in cash from surplus to any holders of Model AA Class Shares or registered pledgees of Model AA
Class Shares entered or recorded in the final register of shareholders as of the record date for the
year-end
dividend, in preference to holders of common shares or registered pledgees of common shares.
The amount of annual AA Dividends per Model AA Class Share is calculated by multiplying the amount per Model AA Class Share paid to Toyota as consideration by a rate determined by the board of directors prior to the issuance of such Model
AA Class Share, which rate is not to exceed 5%.
In addition to these
year-end
dividends, Toyota may pay an interim dividend in the form of cash distributions from its distributable surplus to holders of common shares and pledgees of common shares of record as of September 30, the record date, in each year by a resolution
of its board of directors. The articles of incorporation provide that in the event that Toyota pays such interim dividends, Toyota will pay AA Interim Dividends in cash as interim dividend to any holders of Model AA Class Shares or registered
pledgees of Model AA Class Shares entered or recorded in the final register of shareholders as of the record date for the interim dividend, in preference to holders of common shares or registered pledgees of common shares. If AA Interim
Dividends are paid during the fiscal year in which the record date for the
year-end
dividend falls, the amount of AA Interim Dividends is deducted from AA Dividends to be paid per the above paragraph.
If the amount of the dividends from surplus paid in cash to holders of Model AA Class Shares or registered pledgees of
Model AA Class Shares is less than the prescribed amount of AA Dividends in any fiscal year, the
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amount of the shortfall will be carried forward to and accumulate in the following fiscal year and thereafter. Dividends from surplus will be paid in cash to holders of Model AA Class Shares
or registered pledgees of Model AA Class Shares in preference to the payment of interim and
year-end
dividends until such payment reaches the amount of the accumulated unpaid dividends.
In addition, under the Companies Act, dividends may be paid to holders of common shares and pledgees of record of common shares as of any
record date, other than those specified above, as set forth by Toyotas articles of incorporation or as determined by its board of directors from time to time. Under the Companies Act, dividends may be distributed in cash or (except in the case
of interim dividends mentioned in the second preceding paragraph) in kind, subject to limitations on distributable surplus and to certain other conditions.
Dividends Distributable amount
Under the Companies Act,
Toyota is permitted to make distributions of surplus to the extent that the aggregate book value of the assets to be distributed to shareholders does not exceed the distributable amount provided for by the Companies Act and the ordinance of the
Ministry of Justice as at the effective date of such distribution of surplus.
The amount of surplus at any given time shall
be the amount of Toyotas assets and the book value of Toyotas treasury stock after subtracting and adding the amounts of items provided for by the Companies Act and the ordinance of the Ministry of Justice, and the amount of surplus
distributable for dividends is calculated by adding to and subtracting from this amount the amounts of items provided for by the Companies Act and the ordinance of the Ministry of Justice.
Dividends Prescription
Under its articles of incorporation,
Toyota is not obligated to pay any dividends in cash which are left unclaimed for a period of three years after the date on which they first became payable.
Capital Accounts
The amount of the cash or assets paid or contributed by
subscribers for new shares (with certain exceptions) is required to be accounted for as stated capital, although Toyota may account for an amount not exceeding
one-half
of such cash or assets as additional
paid-in
capital.
Under the Companies Act, Toyota may reduce its additional
paid-in
capital and legal reserve without limitation on the amount to be reduced, generally, by a resolution of a general shareholders meeting and if so decided by the same resolution, may account for the
whole or any part of the amount of the reduction of additional
paid-in
capital as stated capital. The whole or any part of surplus which may be distributed as dividends may also be transferred to stated
capital by a resolution of a general shareholders meeting.
Stock Splits
Toyota may at any time split the outstanding shares into a greater number of shares by a resolution of the board of directors. Toyota must
give public notice of the stock split, specifying a record date for the stock split, not less than two weeks prior to the record date. Toyota shall conduct any stock split simultaneously and in the same proportion with respect to the common shares
and the Model AA Class Shares.
Consolidation of Shares
Toyota may at any time consolidate shares in issue into a smaller number of shares by a special shareholders resolution (as defined in Voting Rights). When a consolidation of shares is to be
made, Toyota must give public notice of certain matters two weeks prior to the effective date of the consolidation. Toyota must disclose the reason for the consolidation of shares at a general shareholders meeting. Toyota shall conduct any
consolidation of shares simultaneously and in the same proportion with respect to the common shares and the Model AA Class Shares.
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Japanese Unit Share System
General.
Consistent with the requirements of the Companies Act, Toyotas articles of incorporation provide that 100 common shares or Model AA Class Shares each constitute one
unit. Although the number of shares constituting a unit is included in the articles of incorporation, any amendment to the articles of incorporation reducing (but not increasing) the number of shares constituting a unit or eliminating
the provisions for the unit of shares may be made by a resolution of the board of directors rather than by a special shareholders resolution, which is otherwise required for amending the articles of incorporation.
Voting Rights under the Unit Share System.
Under the unit share system, shareholders have one voting right for each unit of
shares that they hold. Any number of common shares or Model AA Class Shares less than a full unit will carry no voting rights.
Purchase by Toyota of Shares Constituting Less Than a Unit.
A holder of shares constituting less than a full unit may require Toyota to purchase those shares at their market value in the
case of common shares and at fair price in the case of Model AA Class Shares in accordance with the provisions of Toyotas share handling regulations and the Companies Act.
Surrender of American Depositary Receipts.
ADR holders will only be permitted to surrender ADRs and withdraw underlying
common shares constituting an integral number of a whole unit. If a holder surrenders an ADR including ADRs representing common shares that do not constitute an integral number of whole units, the Depositary will deliver to that holder only those
common shares which constitute a whole unit. The Depositary will then issue to the holder a new ADR representing the remaining shares. Holders of an ADR that represents less than a whole unit of underlying shares will be unable to withdraw the
underlying shares. As a result, those holders will be unable to require Toyota to purchase their common shares to the extent those common shares constitute less than one whole unit.
Voting Rights
Toyota holds its ordinary general shareholders meeting
each year. In addition, Toyota may hold an extraordinary general shareholders meeting whenever necessary by giving at least two weeks advance notice. Under the Companies Act, notice of any shareholders meeting must be given to each
shareholder having voting rights or, in the case of a
non-resident
shareholder, to his or her resident proxy or mailing address in Japan in accordance with Toyotas share handling regulations, at least
two weeks prior to the date of the meeting.
Holders of common shares and holders of Model AA Class Shares shall have
voting rights exercisable at a general shareholders meeting. A holder of shares constituting one or more whole units is entitled to one vote per unit of shares subject to the limitations on voting rights set forth in this paragraph. In
general, under the Companies Act, a resolution can be adopted at a general shareholders meeting by a majority of the shares having voting rights represented at the meeting. The Companies Act and Toyotas articles of incorporation require
a quorum for the election of members of the board of directors and audit & supervisory board members of not less than
one-third
of the total number of outstanding shares having voting rights.
Toyotas shareholders are not entitled to cumulative voting in the election of members of the board of directors. A corporate shareholder, the management of which is substantially under Toyotas control as provided by an ordinance of the
Ministry of Justice, either through the holding of voting rights or for any other reason, does not have voting rights.
Shareholders may exercise their voting rights by attending the general shareholders meeting or in writing by mail. Shareholders who
choose to exercise their voting rights by mail must fill out and return to Toyota the voting right exercise form enclosed with the convocation notice of the general shareholders meeting by the date specified in such convocation notice. In
addition, from the general shareholders meeting for fiscal 2009, shareholders may exercise their voting rights through the internet. Shareholders electing to exercise their voting rights through the internet must log on to the Website to
Exercise Voting Rights using the login ID and temporary password provided in the voting right exercise form enclosed with the convocation notice and submit
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their votes by a date specified in the convocation notice, following instructions appearing on the website. Institutional investors may also use the Electronic Proxy Voting Platform operated by
Investor Communications Japan (ICJ) to exercise their voting rights through the use of the Internet, if such institutional investor applies to use the platform in advance. Shareholders may also exercise their voting rights through
proxies, provided that those proxies are also shareholders who have voting rights. Toyota may refuse a shareholder having two or more proxies attend a general shareholders meeting.
The Companies Act provides that a quorum of at least
one-third
of outstanding shares with voting
rights must be present at a shareholders meeting to approve any material corporate actions such as:
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(1)
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any amendment of the articles of incorporation with certain exceptions in which a shareholders resolution is not required;
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(2)
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acquisition of its own shares from a specific party;
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(3)
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consolidation of shares;
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(4)
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any issue or transfer of its shares at a specially favorable price (or any issue of stock acquisition rights or bonds with stock acquisition rights at
specially favorable conditions by Toyota) to any persons other than shareholders;
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(5)
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the removal of an audit & supervisory board member;
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(6)
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the exemption of liability of a director or audit & supervisory board member with certain exceptions;
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(7)
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a reduction of stated capital which meets certain requirements with certain exceptions;
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(8)
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a distribution of
in-kind
dividends which meets certain requirements;
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(9)
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dissolution, merger, or consolidation with certain exceptions in which a shareholders resolution is not required;
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(10)
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the transfer of the whole or a material part of the business;
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(11)
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the transfer in entirety or in part of shares or equity interest of a subsidiary under certain conditions;
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(12)
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the taking over of the entire business of any other corporation with certain exceptions in which a shareholders resolution is not required;
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(13)
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share exchange or share transfer for the purpose of establishing 100% parent-subsidiary relationships with certain exceptions in which a shareholders resolution
is not required; or
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(14)
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company split with certain exceptions in which a shareholders resolution is not required.
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At least
two-thirds
of the shares having voting rights represented at the meeting must approve
these actions.
The voting rights of holders of ADSs are exercised by the Depositary based on instructions from those holders.
Rights to be Allotted Shares
Holders of common shares and Model AA Class Shares have no preemptive rights under Toyotas articles of incorporation. Under the Companies Act, the board of directors may, however, determine
that shareholders shall be given rights to be allotted shares or stock acquisition rights on request in connection with a particular issue or transfer of shares, or issue of stock acquisition rights, respectively. In this case, such rights must be
given on uniform terms to all shareholders as of a specified record date by at least two weeks prior public notice to shareholders of the record date.
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Rights to be allotted shares are nontransferable. However, a shareholder may be allotted
stock acquisition rights without consideration thereto, and may transfer such rights.
Liquidation Rights
In the event of a liquidation of Toyota, the assets remaining after payment of all debts, liquidation expenses and taxes will be
distributed as follows. First, an amount per First Series Model AA Class Share through Fifth Series Model AA Class Share, determined by resolution of the board of directors or calculated using a formula determined by a resolution of the
board of directors prior to the issuance of such Model AA Class Shares based on the amount per Model AA Class Shares paid to Toyota as consideration (the Base Amount), shall be paid in cash to holders of Model AA
Class Shares or registered pledgees of Model AA Class Shares. No other distribution of residual assets shall be made to holders of Model AA Class Shares or registered pledgees of Model AA Class Shares. The remaining residual
assets shall be distributed among the holders of common shares or registered pledgees of common shares in proportion to the respective number of shares they own.
Liability to Further Calls or Assessments
All of Toyotas currently
outstanding shares, including shares represented by the ADSs, are fully paid and nonassessable.
Transfer Agent
Mitsubishi UFJ Trust and Banking Corporation is the transfer agent for all shares. Mitsubishi UFJ Trust and Banking Corporations
office is located at
4-5,
Marunouchi
1-chome,
Chiyoda-ku,
Tokyo,
100-8212
Japan.
Mitsubishi UFJ Trust and Banking Corporation maintains Toyotas register of shareholders and records transfers of record ownership (in the case of common shares, upon receiving notification from JASDEC).
Record Date
The close
of business on March 31 is the record date for Toyotas
year-end
dividends, if paid. A holder of common shares or Model AA Class Shares constituting one or more whole units who is recorded or
registered as a holder on Toyotas register at the close of business as of March 31 is also entitled to exercise shareholders voting rights at the ordinary general shareholders meeting with respect to the business year ending
on March 31. The close of business on September 30 of each year is the record date for interim dividends, if paid. In addition, Toyota may set a record date for determining the shareholders entitled to other rights and for other purposes
by giving at least two weeks prior public notice.
The shares generally trade
ex-dividend
or
ex-rights
in the Japanese stock exchanges on the second business day before a record date (or if the record date is not a business day, the third business
day prior thereto), for the purpose of dividends or rights offerings.
Acquisition by Toyota of Shares
Toyota may acquire its own common shares (i) through a stock exchange on which such shares are listed or by way of tender offer
(pursuant to an ordinary resolution of a general shareholders meeting or a resolution of the board of directors), (ii) by purchase from a specific party (pursuant to a special resolution of a general shareholders meeting) or
(iii) from a subsidiary of Toyota (pursuant to a resolution of the board of directors). In addition, Toyota may acquire its own Model AA Class Shares (i) by purchase from all holders of the relevant series of Model AA
Class Shares who make an offer to transfer the shares to Toyota upon notice from Toyota to acquire the shares (pursuant to an ordinary resolution of a general shareholders meeting), (ii) by purchase from a specific party (pursuant to
a special resolution of a general shareholders meeting) or (iii) from a subsidiary of Toyota (pursuant to a resolution of the board of directors). When such acquisition of common shares is made by Toyota from a specific party other than a
subsidiary of Toyota, any other holder of common shares may make a demand to a representative director, more than five calendar days prior to the relevant shareholders meeting, that
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Toyota also purchase the common shares held by such holder. However, the acquisition of its own common shares at a price not exceeding the market price to be provided under an ordinance of the
Ministry of Justice will not trigger the right of any shareholder to include him/her as the seller of his/her shares in such proposed purchase.
Any acquisition of shares must satisfy certain requirements that the total amount of the acquisition price may not exceed the amount of the distributable dividends. See Dividends.
Shares acquired by Toyota may be held by it for any period or may be cancelled by resolution of the board of directors.
Toyota may also transfer to any person the shares held by it, subject to a resolution of the board of directors, and subject also to other requirements applicable to the issuance of new shares. Toyota may also utilize its treasury stock for the
purpose of transfer to any person upon exercise of stock acquisition rights or for the purpose of acquiring another company by way of merger, share exchange or corporate split through exchange of treasury stock for shares or assets of the acquired
company.
The Companies Act generally prohibits any subsidiary of Toyota from acquiring shares of Toyota.
Model AA Class Shareholders Conversion Right into Common Shares
Holders of Model AA Class Shares may, at certain times specified in resolution of the board of directors as the conversion period at
the time of the issuance of First Series Model AA Class Shares to Fifth Series Model AA Class Shares, demand that Toyota acquire some or all of such Model AA Class Shares held by such holder of Model AA Class shares in exchange
for common shares in a number determined by a formula specified in such board resolution. Any fractions of less than one common share to be delivered in exchange for such Model AA Class Shares shall be disregarded, in which case payment of
money as provided in the Companies Act shall not be made.
Model AA Class Shareholders Cash Put Option
Holders of Model AA Class Shares may, at certain times specified in resolution of the board of directors as the cash put option
period at the time of the issuance of First Series Model AA Class Shares to Fifth Series Model AA Class Shares, demand that Toyota acquire some or all of such Model AA Class Shares in exchange for cash in an amount equivalent to the
Base Amount. If demand for acquisition exceeds the amount available under the Companies Act for distribution as of the date of demand for such acquisition, Model AA Class Shares to be acquired by Toyota shall be determined by a resolution of
the board of directors, and the cash put option in respect of Model AA Class Shares not so acquired shall be deemed not to have been exercised.
Toyotas Cash Call Option
After the lapse of period specified in resolution of its
board of directors at the time of the issuance of First Series Model AA Class Shares to Fifth Series Model AA Class Shares, on an acquisition date separately determined by a resolution of the board of directors, Toyota may acquire all of
such Model AA Class Shares in exchange for cash in an amount equivalent to the Base Amount.
Acquisition or Disposition of Shares or
ADS
Under the Foreign Exchange and Foreign Trade Law and the cabinet orders and ministerial ordinances thereunder
(collectively, the Foreign Exchange Regulations), all aspects of regulations on foreign exchange and foreign trade transactions are, with minor exceptions (which are not generally applicable to the purchase and sale of Toyotas
shares), only subject to post transaction reporting requirements. Acquisitions and dispositions of shares of common stock or ADS by
non-residents
of Japan (including foreign corporations not resident in Japan)
are generally not subject to this reporting requirement. However, the Minister of Finance has the power to impose a licensing requirement for transactions in limited circumstances.
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Report of Substantial Shareholdings
The Financial Instruments and Exchange Law of Japan and regulations under the Law require any person who has become a holder (together
with its related persons) of more than 5% of the total issued shares of a company listed on any Japanese stock exchange (including ADSs representing such shares) to file with the Director of a competent Local Finance Bureau, within five business
days, a report concerning those shareholdings. A similar report must also be filed to reflect any change of 1% or more in any shareholding or any change in material matters set out in reports previously filed. Any such report shall be filed with the
Director of a competent Local Finance Bureau through the Electronic Disclosure for Investors Network (EDINET) system. For this purpose, shares issuable to a shareholder upon exercise of stock acquisition rights are taken into
account in determining both the number of shares held by that stock acquisition rights holder and the companys total issued shares.
10.C MATERIAL CONTRACTS
All contracts concluded by Toyota during the two years preceding this filing were entered
into in the ordinary course of business.
10.D EXCHANGE CONTROLS
The Foreign Exchange Regulations govern the acquisition and holding of shares of capital stock of Toyota by exchange
non-residents
and by foreign investors. The Foreign Exchange Regulations currently in effect do not, however, affect transactions between exchange
non-residents
to purchase or sell shares outside Japan using currencies other than Japanese yen.
Exchange
non-residents
are:
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individuals who do not reside in Japan; and
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corporations whose principal offices are located outside Japan.
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Generally, branches and other offices of
non-resident
corporations that are located within Japan
are regarded as residents of Japan. Conversely, branches and other offices of Japanese corporations located outside Japan are regarded as exchange
non-residents.
Foreign investors are:
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individuals who are exchange
non-residents;
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corporations or other organizations that are organized under the laws of foreign countries or whose principal offices are located outside of Japan; and
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corporations (1) of which 50% or more of their voting rights are held directly or indirectly by individuals who are exchange
non-residents
and/or corporations or other organizations (a) that are organized under the laws of foreign countries or (b) whose principal offices are located outside of Japan or (2) a majority of
whose officers, or officers having the power of representation, are individuals who are exchange
non-residents.
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In general, the acquisition of shares of a Japanese company (such as the shares of capital stock of Toyota) by an exchange
non-resident
from a resident of Japan is
not subject to any prior filing requirements. In certain limited circumstances, however, the Minister of Finance may require prior approval of an acquisition of this type. While prior approval, as described above, is not required, in the case where
a resident of Japan transfers shares of a Japanese company (such as the shares of capital stock of Toyota) for consideration exceeding ¥100 million to an exchange
non-resident,
the resident of Japan
who transfers the shares is required to report the transfer to the Minister of Finance within 20 days from the date of the transfer or the date of receipt of payment, whichever comes later, unless the transfer was made through a bank or financial
instruments business operator licensed or registered under Japanese law.
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If a foreign investor acquires shares of a Japanese company that is listed on a Japanese
stock exchange (such as the shares of capital stock of Toyota) and, as a result of the acquisition, the foreign investor, in combination with any existing holdings, directly or indirectly holds 10% or more of the issued shares of the relevant
company, the foreign investor, with certain exceptions, must file a report of the acquisition with the Minister of Finance and any other competent Ministers having jurisdiction over that Japanese company by the 15th day of the month following the
month in which the date of the acquisition falls. In limited circumstances, such as where the foreign investor is in a country that is not listed on an exemption schedule in the Foreign Exchange Regulations, a prior notification of the acquisition
must be filed with the Minister of Finance and any other competent Ministers, who may then modify or prohibit the proposed acquisition.
Under the Foreign Exchange Regulations, dividends paid on, and the proceeds of sales in Japan of, shares held by
non-residents
of Japan may in general be converted
into any foreign currency and repatriated abroad. Under the terms of the deposit agreement pursuant to which Toyotas ADSs are issued, the Depositary is required, to the extent that in its judgment it can convert yen on a reasonable basis into
dollars and transfer the resulting dollars to the United States, to convert all cash dividends that it receives in respect of deposited shares into dollars and to distribute the amount received (after deduction of applicable withholding taxes) to
the holders of ADSs.
10.E TAXATION
The following discussion is a general summary of the principal U.S. federal income and Japanese national tax consequences of the acquisition, ownership and disposition of shares of common stock or ADSs.
This summary does not purport to address all material tax consequences that may be relevant to holders of shares of common stock or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as
tax-exempt
entities, banks, insurance companies, broker-dealers, traders in securities that elect to use a
mark-to-market
method of
accounting for their securities holdings, regulated investment companies, real estate investment trusts, partnerships and other pass-through entities, investors liable for the U.S. alternative minimum tax, investors that own or are treated as owning
10% or more of Toyotas voting stock, investors that hold shares of common stock or ADSs as part of a straddle, hedge, conversion transaction or other integrated transaction and U.S. Holders (as defined below) whose functional currency is not
the U.S. dollar) may be subject to special tax rules. This summary is based on the tax laws and regulations of the United States and Japan, judicial decisions, published rulings and administrative pronouncements all as in effect on the date hereof,
as well as on the current income tax convention between the United States and Japan (the Treaty), as described below, all of which are subject to change (possibly with retroactive effect), and to differing interpretations.
For purposes of this discussion, a U.S. Holder is any beneficial owner of shares of common stock or ADSs that, for U.S.
federal income tax purposes, is:
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1.
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an individual who is a citizen or resident of the United States;
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2.
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a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof, or
the District of Columbia;
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3.
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an estate the income of which is subject to U.S. federal income tax without regard to its source; or
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4.
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a trust that is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons, or that has a valid election in effect under applicable
Treasury regulations to be treated as a U.S. person.
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An Eligible U.S. Holder is a U.S. Holder that:
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1.
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is a resident of the United States for purposes of the Treaty;
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2.
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does not maintain a permanent establishment in Japan (a) with which the shares of common stock or ADSs are effectively connected and through which the U.S. Holder
carries on or has carried on business, or (b) of which the shares of common stock or ADSs form part of the business property; and
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3.
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is eligible for benefits under the Treaty with respect to income and gain derived in connection with the shares of common stock or ADSs.
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This summary does not address any aspects of U.S. federal tax law other than income taxation and does not discuss any aspects of Japanese
tax law other than income taxation, as limited to national taxes, inheritance and gift taxation. This summary also does not cover any state or local, or
non-U.S.,
non-Japanese
tax considerations. Investors are urged to consult their tax advisors regarding the U.S. federal, state and local and Japanese and other tax consequences of acquiring, owning and disposing of
shares of common stock or ADSs. In particular, where relevant, investors are urged to confirm their status as Eligible U.S. Holders with their tax advisors and to discuss with their tax advisors any possible consequences of their failure to qualify
as Eligible U.S. Holders. In addition, this summary is based in part upon the representations of the Depositary and the assumption that each obligation in the deposit agreement, and in any related agreement, will be performed in accordance with its
terms.
In general, for purposes of the Treaty and for U.S. federal income and Japanese income tax purposes, owners of ADRs
evidencing ADSs will be treated as the owners of the shares of common stock represented by those ADSs, and exchanges of shares of common stock for ADSs, and exchanges of ADSs for shares of common stock, will not be subject to U.S. federal income or
Japanese income tax.
The discussion below is intended for general information only and does not constitute a complete
analysis of all tax consequences relating to ownership of shares of common stock or ADSs. Prospective purchasers of shares of common stock or ADSs should consult their own tax advisors concerning the tax consequences of their particular situations.
Japanese Taxation
The following is a summary of the principal Japanese tax consequences (limited to national taxes) to
non-residents
of Japan or
non-Japanese
corporations without permanent establishments in Japan
(non-resident
Holders) who are holders of shares of common stock or of ADSs of Toyota.
The following information regarding taxation in Japan is based on the tax treaties and tax laws in force and their interpretation by Japans tax authorities as of the date of this annual report. Tax laws and treaties and their interpretations
may change (including with retroactive effect). Toyota will not revise this summary on the basis of any such change occurring after the date of this annual report.
Generally,
non-resident
Holders are subject to Japanese withholding tax on dividends paid by Japanese corporations. Stock splits are, in general, not taxable
events.
In the absence of an applicable income tax treaty, convention or agreement reducing the maximum rate of Japanese
withholding tax or allowing an exemption from Japanese withholding tax, the rate of Japanese withholding tax applicable to dividends paid by Japanese corporations to
non-resident
Holders is generally
20.42 percent, provided that, with respect to dividends paid on listed shares issued by a Japanese corporation (such as the shares of common stock or ADSs of Toyota) to
non-resident
Holders, other than
any individual shareholder who holds 3 percent or more of the total issued shares of the relevant Japanese corporation, the aforementioned 20.42 percent withholding tax rate is reduced to 15.315 percent for dividends due and payable
on or before December 31, 2037. These rates include a special additional withholding tax (2.1 percent of the original withholding tax amount) to secure funds for reconstruction from the Great East Japan Earthquake.
At the date of this annual report, Japan has income tax treaties, conventions or agreements whereby the above-mentioned withholding tax
rate is reduced, in most cases to 15 percent or 10 percent for portfolio investors (15 percent under the income tax treaties with, among other countries, Belgium, Canada, Denmark, Finland,
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Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Singapore, and Spain, and 10 percent under the income tax treaties with, among other countries, Australia, France, Hong Kong, the
Netherlands, Portugal, Sweden, Switzerland, the U.K. and the United States).
Under the Treaty, the maximum rate of Japanese
withholding tax which may be imposed on dividends paid by a Japanese corporation to an Eligible U.S. Holder that is a portfolio investor is generally reduced to 10 percent of the gross amount actually distributed, and dividends paid by a
Japanese corporation to an Eligible U.S. Holder that is a pension fund (as defined in the Treaty) are exempt from Japanese income tax by way of withholding or otherwise, provided that such dividends are not derived from the carrying on of a
business, directly or indirectly, by such pension fund.
If the maximum tax rate provided for in the income tax treaty
applicable to dividends paid by Toyota to any particular
non-resident
Holder is lower than the withholding tax rate otherwise applicable under Japanese tax law or if any particular
non-resident
Holder is exempt from Japanese income tax with respect to such dividends under the income tax treaty applicable to such particular
non-resident
Holder, such
non-resident
Holder who is entitled to a reduced rate of or exemption from Japanese withholding tax on the payment of dividends on shares of common stock by Toyota is required to submit an Application Form for
Income Tax Convention Regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends (together with any other required forms and documents) in advance through the withholding agent to the relevant tax authority
before the payment of dividends. A standing proxy for
non-resident
Holders of a Japanese corporation may provide this application service. In addition, a simplified special filing procedure is available for
non-resident
Holders to claim treaty benefits of exemption from or reduction of Japanese withholding tax by submitting a Special Application Form for Income Tax Convention Regarding Relief from Japanese Income Tax
and Special Income Tax for Reconstruction on Dividends of Listed Stock (together with any other required forms and documents). With respect to ADSs, this reduced rate or exemption is applicable if the Depositary or its agent submits, together with
other documents, two Special Application Forms (one before payment of dividends, the other within eight months after the recording date concerning such payment of dividends) to the Japanese tax authority. To claim this reduced rate or
exemption, any relevant
non-resident
Holder of ADSs will be required to file proof of taxpayer status, residence and beneficial ownership (as applicable) and to provide other information or documents as may be
required by the Depositary. A
non-resident
Holder who is entitled, under an applicable income tax treaty, to a reduced treaty rate lower than the withholding tax rate otherwise applicable under Japanese tax
law or an exemption from the withholding tax, but fails to submit the required application in advance, will be entitled to claim the refund of Japanese taxes withheld in excess of the rate under an applicable tax treaty (if such
non-resident
Holder is entitled to a reduced treaty rate under the applicable income tax treaty) or the entire amount of Japanese tax withheld (if such
non-resident
Holder is
entitled to an exemption under the applicable income tax treaty) by complying with a certain subsequent filing procedure. Toyota does not assume any responsibility to ensure withholding at the reduced rate, or exemption therefrom, for
non-resident
Holders who would be so eligible under an applicable tax treaty, but where the required procedures as stated above are not followed.
Gains derived from the sale of shares of common stock or ADSs outside Japan by a
non-resident
Holder holding such shares of common stock or ADSs as portfolio investors are, in general, not subject to Japanese income tax or corporation tax under Japanese law. Eligible U.S. Holders are not subject to Japanese income or corporation tax with
respect to such gains under the Treaty so long as filings required under Japanese law are made.
Japanese inheritance and gift
taxes at progressive rates may be payable by an individual who has acquired from another individual shares of common stock or ADSs as a legatee, heir or donee even though neither the individual, nor the deceased, nor donor is a Japanese resident.
Holders of shares of common stock or ADSs should consult their tax advisors regarding the effect of these taxes and, in the
case of U.S. Holders, the possible application of the Estate and Gift Tax Treaty between the United States and Japan.
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U.S. Federal Income Taxation
U.S. Holders
The following discussion is a summary of the principal
U.S. federal income tax consequences to U.S. Holders that hold shares of common stock or ADSs as capital assets (generally, for investment purposes).
Taxation of Dividends
Subject to the passive foreign investment
company (PFIC) rules discussed below, the gross amount of any distribution made by Toyota in respect of shares of common stock or ADSs (without reduction for Japanese withholding taxes) will constitute a taxable dividend to the extent
paid out of current or accumulated earnings and profits, as determined under U.S. federal income tax principles. The U.S. dollar amount of such a dividend generally will be included in the gross income of a U.S. Holder, as ordinary income, when
actually or constructively received by the U.S. Holder, in the case of shares of common stock, or by the Depositary, in the case of ADSs. Dividends paid by Toyota will not be eligible for the dividends-received deduction generally allowed to U.S.
corporations in respect of dividends received from other U.S. corporations.
Dividends received on shares and ADSs of certain
foreign corporations by
non-corporate
U.S. investors may be subject to U.S. federal income tax at lower rates than other types of ordinary income if certain conditions are met. Dividends received by
non-corporate
U.S. Holders with respect to shares of common stock or ADSs of Toyota are expected to be eligible for these reduced rates of tax. U.S. Holders should consult their own tax advisors regarding the
eligibility of such dividends for a reduced rate of tax.
The U.S. dollar amount of a dividend paid in Japanese yen will be
determined based on the Japanese yen/U.S. dollar exchange rate in effect on the date that the dividend is included in the gross income of the U.S. Holder, regardless of whether the payment is converted into U.S. dollars on that date. Generally, any
gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in the gross income of a U.S. Holder through the date that payment is converted into U.S. dollars (or otherwise disposed of)
will be treated as U.S.-source ordinary income or loss. U.S. Holders should consult their own tax advisors regarding the calculation and U.S. federal income tax treatment of foreign currency gain or loss.
To the extent, if any, that the amount of any distribution received by a U.S. Holder in respect of shares of common stock or ADSs exceeds
Toyotas current and accumulated earnings and profits, as determined under U.S. federal income tax principles, the distribution first will be treated as a
tax-free
return of capital to the extent of the
U.S. Holders adjusted tax basis in those shares or ADSs, and thereafter will be treated as U.S.-source capital gain.
Distributions of additional shares of common stock that are made to U.S. Holders with respect to their shares of common stock or ADSs,
and that are part of a pro rata distribution to all of Toyotas shareholders, generally will not be subject to U.S. federal income tax.
For U.S. foreign tax credit purposes, dividends included in gross income by a U.S. Holder in respect of shares of common stock or ADSs will constitute income from sources outside the United States, and
will generally be passive category income or, in the case of certain U.S. Holders, general category income. Subject to generally applicable limitations under U.S. federal income tax law and the Treaty, any Japanese
withholding tax imposed in respect of a Toyota dividend may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, or alternatively as a deduction in the computation of such U.S. Holders taxable income if the
U.S. Holder does not elect to claim a credit for any foreign taxes paid or accrued for the taxable year. Special rules generally will apply to the calculation of foreign tax credits in respect of dividend income that qualifies for preferential U.S.
federal income tax rates. Additionally, special rules apply to individuals whose foreign source income during the taxable year consists entirely of qualified passive income
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and whose creditable foreign taxes paid or accrued during the taxable year do not exceed $300 ($600 in the case of a joint return). Further, under some circumstances, a U.S. Holder that:
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(i)
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has held shares of common stock or ADSs for less than a specified minimum period; or
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(ii)
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is obligated to make payments related to Toyota dividends,
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will not be allowed a foreign tax credit for Japanese taxes imposed on Toyota dividends.
U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
Taxation of Capital Gains and Losses
In general, upon a sale or
other taxable disposition of shares of common stock or ADSs, a U.S. Holder will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other taxable disposition and
the U.S. Holders adjusted tax basis in those shares of common stock or ADSs. A U.S. Holder generally will have an adjusted tax basis in a share of common stock or an ADS equal to its U.S. dollar cost. Subject to the PFIC rules discussed below,
gain or loss recognized on the sale or other taxable disposition of shares of common stock or ADSs generally will be capital gain or loss and, if the U.S. Holders holding period for those shares or ADSs exceeds one year, will be long-term
capital gain or loss.
Non-corporate
U.S. Holders, including individuals, currently are eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. Under U.S. federal
income tax law, the deduction of capital losses is subject to limitations. Any gain or loss recognized by a U.S. Holder in respect of the sale or other disposition of shares of common stock or ADSs generally will be treated as U.S.-source income or
loss for U.S. foreign tax credit purposes.
Deposits and withdrawals of common stock in exchange for ADSs will not result in
the realization of gain or loss for U.S. federal income tax purposes.
Passive Foreign Investment Companies
A
non-U.S.
corporation generally will be classified as a PFIC for U.S. federal income tax purposes
in any taxable year in which, after applying look-through rules, either (1) at least 75% of its gross income is passive income or (2) on average at least 50% of the gross value of its assets is attributable to assets that produce passive
income or are held for the production of passive income. Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions. The PFIC determination is made annually and
generally is based on the value of a
non-U.S.
corporations assets (including goodwill) and composition of its income.
Toyota does not believe that it was a PFIC for U.S. federal income tax purposes for its taxable year ended March 31, 2017, and currently intends to continue its operations in such a manner that it
will not become a PFIC in the future. Because the PFIC determination is made annually and the application of the PFIC rules to a corporation such as Toyota (which among other things is engaged in leasing and financing through several subsidiaries)
is not entirely clear, no assurances can be made regarding determination of its PFIC status in the current or any future taxable year. If Toyota is determined to be a PFIC, U.S. Holders could be subject to additional U.S. federal income taxes on
gain recognized with respect to the shares of common stock or ADSs and on certain distributions. In addition, an interest charge may apply to the portion of the U.S. federal income tax liability on such gains or distributions treated under the PFIC
rules as having been deferred by the U.S. Holder. Moreover, dividends that a
non-corporate
U.S. Holder receives from Toyota will not be eligible for the reduced U.S. federal income tax rates on dividends
described above if Toyota is a PFIC either in the taxable year of the dividend or the preceding taxable year. If a U.S. Holder owns shares of common stock or ADSs in any taxable year in which Toyota is a PFIC, such U.S. Holder generally would be
required to file Internal Revenue Service (IRS) Form 8621 (or other form specified by the U.S. Department of the Treasury) on an annual basis, subject
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to certain exceptions based on the value of PFIC stock held. Toyota will inform U.S. Holders if it believes that it will be classified as a PFIC in any taxable year.
Prospective investors should consult their own tax advisors regarding the potential application of the PFIC rules to shares of common
stock or ADSs.
Non-U.S.
Holders
The following discussion is a summary of the principal U.S. federal income tax consequences to beneficial owners of shares of common stock
or ADSs that are neither U.S. Holders, nor partnerships, nor entities taxable as partnerships for U.S. federal income tax purposes
(Non-U.S.
Holders).
A
Non-U.S.
Holder generally will not be subject to any U.S. federal income or withholding tax on
distributions received in respect of shares of common stock or ADSs unless the distributions are effectively connected with the conduct by the
Non-U.S.
Holder of a trade or business within the United States
(and, if an applicable tax treaty requires, are attributable to a U.S. permanent establishment or fixed base of such
Non-U.S.
Holder).
A
Non-U.S.
Holder generally will not be subject to U.S. federal income tax in respect of gain recognized on a sale or other disposition of shares of common stock or
ADSs, unless:
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(i)
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the gain is effectively connected with a trade or business conducted by the
Non-U.S.
Holder within the United States (and, if an
applicable tax treaty requires, is attributable to a U.S. permanent establishment or fixed base of such
Non-U.S.
Holder); or
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(ii)
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the
Non-U.S.
Holder is an individual who was present in the United States for 183 or more days in the taxable year of the
disposition and other conditions are met.
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Income that is effectively connected with a U.S. trade or business of
a
Non-U.S.
Holder, and, if an income tax treaty applies and so requires, is attributable to a U.S. permanent establishment or fixed base of the
Non-U.S.
Holder,
generally will be taxed in the same manner as the income of a U.S. Holder. In addition, under certain circumstances, any effectively connected earnings and profits realized by a corporate
Non-U.S.
Holder may
be subject to an additional branch profits tax at the rate of 30% or at a lower rate that may be prescribed by an applicable income tax treaty.
Backup Withholding and Information Reporting
In general,
information reporting requirements will apply to dividends paid to a U.S. Holder in respect of shares of common stock or ADSs, and to the proceeds received upon the sale, exchange or redemption of the shares of common stock or ADSs within the United
States by U.S. Holders. Furthermore, backup withholding may apply to those amounts (currently at a 28% rate) if a U.S. Holder fails to provide an accurate taxpayer identification number to certify that such U.S. Holder is not subject to backup
withholding or to otherwise comply with the applicable requirements of the backup withholding requirements.
Dividends paid to
a
Non-U.S.
Holder in respect of shares of common stock or ADSs, and proceeds received upon the sale, exchange or redemption of shares of common stock or ADSs by a
Non-U.S.
Holder, generally are exempt from information reporting and backup withholding under current U.S. federal income tax law. However, a
Non-U.S.
Holder may be
required to provide certification of
non-U.S.
status in order to obtain that exemption.
Persons required to establish their exempt status generally must provide such certification under penalty of perjury on IRS Form
W-9,
entitled Request for Taxpayer Identification Number and Certification, in the case of U.S. persons, and on IRS Form
W-8BEN,
entitled Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or IRS Form
W-8BEN-E,
entitled Certificate of Status of Beneficial Owner for United
States Tax Withholding and Reporting (Entities) (or other appropriate IRS
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Form W-8),
in the case of
non-U.S.
persons. Backup withholding is not an additional tax. The amount of backup
withholding imposed on a payment generally may be claimed as a credit against the holders U.S. federal income tax liability, provided that the required information is properly furnished to the IRS in a timely manner.
In addition, certain U.S. Holders who are individuals that hold certain foreign financial assets (which may include shares of common
stock or ADSs) are required to report information relating to such assets, subject to certain exceptions. U.S. Holders should consult their tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of shares
of common stock or ADSs.
THE SUMMARY OF U.S. FEDERAL INCOME AND JAPANESE NATIONAL TAX CONSEQUENCES SET OUT ABOVE IS INTENDED
FOR GENERAL INFORMATION PURPOSES ONLY. PROSPECTIVE PURCHASERS OF COMMON STOCK OR ADSs ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING OR DISPOSING OF COMMON STOCK OR ADSs, BASED ON
THEIR PARTICULAR CIRCUMSTANCES.
10.F DIVIDENDS AND PAYING AGENTS
Not applicable.
10.G STATEMENT BY EXPERTS
Not applicable.
10.H DOCUMENTS ON DISPLAY
Toyota files annual
reports on Form
20-F
and reports on Form
6-K
with the SEC. You may read and copy this information at the SECs Public Reference Room at 100 F Street, N.E., Room
1580, Washington, D.C. 20549 or by accessing the SECs home page (http://www.sec.gov). You can also request copies of the documents, upon payment of a duplicating fee, by writing to the Public Reference Section of the SEC. Please call the SEC
at
1-800-SEC-0330
for further information on the operation of the Public Reference Room. In addition, Toyotas reports,
proxy statements and other information may be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Copies of the documents referred to herein may also be inspected at Toyotas offices by contacting
Toyota at 1
Toyota-cho,
Toyota City, Aichi Prefecture
471-8571,
Japan, attention: Financial Reporting Department, Accounting Division, telephone number:
81-565-28-2121.
10.I SUBSIDIARY INFORMATION
Not applicable.