Toyota Motor Corporation

Thank you very much for joining us today, and welcome to Toyota Motor Corporation Fiscal Year 2026 Financial Results Briefing. We'd like to thank you very much for attending despite your busy schedules. I am Hatsumoto, the moderator of this conference. I'm from Corporate Communications. So I would like to introduce our speakers first, Kent Bakon, President and Chief Executive Officer. Yoichi Miyazaki, Executive Vice President and Chief Financial Officer. and Takanori Azuma, Accounting Group Chief Officer, and from Corporate Communications, Chief Officer Hiroyuki Ueda. As for our agenda, this conference will begin with presentation by Takanori Azuma. and Yoichi Miyazaki to explain the financial results, followed by a brief greeting by our president, Kenta Kon, and then we will have a Q&A session at the very end. So I'd like to hand it over to Takamori Asuma, please. Hello, ladies and gentlemen. I am Asuma, accounting group chief officer. We'd like to start by sincerely thanking our customers around the world who love Toyota cars, our shareholders who support our efforts, as well as our dealers and suppliers and all other stakeholders involved. Thank you so very much. I'll begin with the summary of the financial results for the fiscal year ended March 26. Operating income for fiscal year 26 amounted to 3.8 trillion yen. Despite the impact of U.S. tariffs, we were able to secure profits in line with our guidance due to increased vehicle sales volumes and the effects of price revisions underpinned by strong product competitiveness as well as steadily accumulated improvement efforts such as expanded value chain profits. Taking into account the Middle East impacts, we are forecasting operating income for the fiscal year ending March 27 of 3.0 trillion yen, representing a year-on-year decrease of 800 billion yen. As a result, we expect operating income to decline for the third consecutive year. We believe this is because our response to changes in the operating environment has been limited to measures that can be implemented in the short term, while progress on business structure transformations from a mid- to long-term perspective remains only partway complete. Therefore, in the current fiscal year, we aim to return to a sustainable growth trajectory. Regarding shareholder returns, the dividends for fiscal year 26 will be 95 yen per share, an increase of 5 yen year-on-year, and for fiscal year 27, we plan another increase of 5 yen for a forecast annual dividend of 100 yen per share, and we will continue to uphold our policy of stable dividend increases to reward our long-term shareholders. Now I'll explain the details of the results for the fiscal year ended March 26th. Consolidated vehicle sales for this fiscal year reached 9,595,000 units, or 102.5% year-on-year. Toyota and Lexus vehicle sales totaled 10,477,000 units, or 102.0% over the previous fiscal year. Thanks to strong demand from customers, mainly in Japan and North America, vehicle sales increased. Sales of electrified vehicles exceeded 5 million units for the first time, primarily driven by ATVs that were well received in regions such as North America and China, while PATVs and BVs also posted volume growth. Consolidated financial results were sales revenues of 50 trillion 684.9 billion yen, operating income of 3 trillion 766.2 billion yen, income before income taxes of 5 trillion 152.9 billion yen, and net income of 3 trillion 848 billion yen. Now, let me explain the factors behind the changes in operating income. Against the backdrop of steady demand centered on hybrids through sales efforts, including increased vehicle sales, price revisions, and value chain profits, we absorbed the negative factors such as foreign exchange fluctuations, higher R&D expenses, increased labor costs, and materials cost inflation. However, we were not able to fully offset the impact of U.S. tariffs amounting to 1.38 trillion yen, and as a result, consolidated operating income declined by 1.39.3 billion yen year-on-year. Now, this slide shows operating income by geographical region. In Japan, operating income decreased due to foreign exchange fluctuations and increases in expenses. In North America, operating income decreased due to the impact of U.S. tariffs, and other regions recorded an increase in operating income due to the impact of price revision.

Chinese business bottom line increases in one operating income due to marketing efforts. two, in share of profit of investments by equity method and cost reductions, and number three, in the financial services segment with an increase of outstanding loan balances. Now, let's talk about the forecast for the current fiscal year ending March 2027. The consolidated vehicle sales forecast has been set at 9.6 million yen, which is 100.1% of the previous fiscal year. While Hino Motors is excluded from consolidation from the fiscal year and in March 27, production will go into full swing for models refreshed in the previous fiscal year, such as the RAV4, resulting in a level comparable to the previous fiscal year. Toyota Lexus vehicle sales are expected to be 10.5 million yen or 100.2% of the previous fiscal year. Additionally, hybrid sales should exceed 5 million units for the first time this fiscal year, and total electrified vehicle sales, approximately 6 million units. Next, on the consolidated financial forecast, the full-year foreign exchange rate assumptions are 150 yen per dollar and 180 yen per euro. For guidance for the full-year consolidated results, sales revenues of 51 trillion yen, operating income of 3 trillion yen, income before taxes of 4,230,000,000 yen, and net income of 3 trillion yen. Now, the year-on-year changes in operating income. In the current fiscal year, we will work to absorb increases in labor costs and other expenses through marketing efforts such as price revisions and expansion of value chain profits. However, we do not believe we can fully offset negative 670 billion yen Middle East impact resulting in the operating income forecast of 3 trillion yen down 766.2 billion yen from the previous fiscal year. Next, let's turn to shareholder returns. Our dividend policy is to increase dividends in a stable and continuous manner in order to reward our long-term shareholders. Despite the decrease in profit for the fiscal year ended March 26, we set the full-year dividend of 95 yen, an increase of 5 yen from the previous year, for the fiscal year ending March 27. While performance is hard to forecast due to impact from the Middle East and other factors, we set a full-year dividend forecast at 100 yen, an increase of 5 yen from the previous year. Regarding share buybacks, we will not set year-end share repurchase limits. Moving forward, taking into account the stock price levels and other factors, in order to respond as necessary to requests to sell our company shares, we will flexibly implement share repurchases.

Next to our CFO, Mr. Miyazaki. Yes, I am Miyazaki, CFO. As Accounting Group Chief Officer Azuma mentioned earlier, the business environment remains extremely uncertain. Against this backdrop, we achieved operating income of 3.8 trillion yen for the fiscal year ended March 26th and have announced operating income outlooks of 3 trillion yen for fiscal year 27th. We would like to express our sincere gratitude for the day-to-day efforts of our employees, as well as the continued support of many stakeholders, including dealers and suppliers. Looking ahead, we intend to move forward with confidence together with such stakeholders. On the other hand, we expect operating income to decline for the third consecutive fiscal year in fiscal 27. I take this very seriously in my capacity as CFO. This reflects the fact that amid the rapid changes in the business environment, the scope of the responses and measures we took have been largely limited to what can be implemented in the short term, resulting in slower progress in business structural transformations that should be performed. performed from a mid- to long-term perspective and slower pace of slowing speed for future growth. This shows the factors contributing to changes in operating income over a three-year period from the actual results for the fiscal year 24 through fiscal year 27. We offset rising material costs and comprehensive investments aimed at future growth with improvement efforts such as cost reductions and expansion of value chain profit, enabling us to maintain an earnings power of 5 trillion yen. However, due to major business environment changes like U.S. tariffs and the situation in the Middle East, we have yet to fully offset these impacts. Now, I'd like to talk about how we will overcome this challenge and how we will once again return to a sustainable growth trajectory. Our initiatives have two main pillars. One is making ever better cars. The other is transforming into a mobility company. Making ever better cars is being advanced by an overwhelming expansion in model lineup through five brands led by Century and by the multiplication of our ability to generate income. On the other hand, transform into a mobility company is being pursued with the following key elements. Further expansion of existing value chain revenue, provision of new mobility across land, sea, and air, and robotics leveraging connected as well as SDV technologies.

So let me walk you through these key points.

First, let me talk about earning power in ever better car market making. As we expand our five-brand lineup, what becomes increasingly important is our ability to produce vehicles properly and deliver them reliably to customers. And the key to this lies in the maximum utilization of production capacity. Specifically, by capturing the effects of initiatives such as Area 35, we will fully utilize existing factory space and capacity, while at the same time proceeding with previously announced capacity expansion, including new plants, in line with actual demand. In addition, to further enhance earnings power, we will proceed in parallel with initiatives such as enhancing capacity for HEV batteries and units in line with the generational evolution, globally reorganizing our production models, further accelerating localization of procurement and pursuing cost reduction by addressing costs beginning at the source, including the reconstruction of parts scenarios. By advancing these initiatives, we aim to maximize the contributional margin per unit for each model at the time of model change. Next, I'd like to explain how we will link our transformation into a mobility company to mid- to long-term business structure reform. Revenue from our existing value chain has been growing at a rate of approximately 150 billion yen per year over the past few years. And going forward, we hope to maintain this current pace of growth by increasing the number of units in operation and expanding initiatives to other regions and countries. Moreover, we will add these as new initiatives, new mobility across land, sea, and air, and robotics leveraging connected and SDV technologies. And by doing so, we aim to achieve further revenue growth. So I would like to now explain Toyota's approach to robotics. Through collaboration between people and robots, Toyota aims to improve productivity and create a more comfortable working environment while also contributing to improvements in quality of life and address the challenges of an aging society. Within Toyota, across the globe, we have production plants producing 10 million vehicles annually, skilled workers that are capable of helping robots grow as partners, and the Toyota production system rooted in production floors. So based on this, we will evolve our robots, and by having robots contribute their skills back to people, we can look to a future for both people and robots to grow as partners, changing the landscape of production plants. Third, the strength in robot development lies precisely in the fusion of manufacturing and intelligent systems, and we believe, through the Toyota Group, it is able to support manufacturing reform in Japan. Now, if I steadily exact the gilding on what I have explained today from a mid- to long-term perspective, we will work to improve our break-even volume while at the same time advancing toward an ROE of 20%. Until now, we have increased shareholder returns as a business structure with high earnings volatility, primarily driven by the new vehicle business. Going forward, by transforming to a business structure that more reliably secures stable growth through the expansion of value chain businesses and nurturing new business domains, we aim to create a greater capacity to provide shareholders with stable and continuous dividend increases. At the same time, through optimizing our capital structure, we would like to aim for an ROE of 20%. With that, I would like to conclude my remarks and sincerely ask for your continued support. Thank you.

Now let me introduce to you Mr. Kon. Hello, I am Kenta Kon. I would like to share my thoughts on Toyota's management philosophy. Since I came on board as an appointed president in April, I have visited many gembas, including development, certification, plant suppliers and dealers. There I saw many colleagues of ours. who are working tirelessly to build ever better cars. There, I've seen firsthand our ability to develop talent, our culture of continuous improvement kaizen in pursuit of TPS, penetration of problem-solving methodologies, online participation by all, and motivation for getting things done with a clear sense of ownership. All of these observations represent Toyota's remarkable gimbal capabilities. Still, there are many challenges. I feel there is still significant room for improvement in our administrative operations. If we further examine where our abilities truly lie, we move beyond just managing the Genba and instead get directly involved in support operations. Instead of just managing numbers on paper, we can take part in reducing costs at Genba. We can shift from work, administrative work, to work that creates value. It is all about returning to the starting point of Toyota, Toyota production system. The strength of manufacturing lies in having both products and genba. The production line speed is an indicator for product sales. Abnormality stops the line, breaks things, and causes defects. Challenges never stop coming. And no two days are ever the same. Unless we solve the problem right in front of us, we cannot deliver cars to our customers. There is no place to hide in Zimba. And that precisely is what motivates us to improve the situation, drawing out wisdom and ingenuity, and cultivating individuals capable of critical thinking. I believe it is my role to create such an environment and continuously send skilled talent into it Our 17 years under Akio Toyoda and Sato-san as presidents was a period during which we were guided by the motto, let's make ever better cars, adopted product and regional-centered management, and established our foundation as a global full-line-up automotive manufacturer. As a result, we can now aim for both carbon neutrality and freedom of movement for all. I will increase the number of people who can build ever better cars. And that is the engine for Toyota's sustainable growth. And that is my mission. Although I'm a novice driver, I sometimes receive driving instructions from our evaluation drivers. Brakes are there to help you go fast. Without good braking, you can't stop, step on the accelerator. Actually, that's what Akio-san told me at the time. To me, to accelerate means not letting up on our growth investments and seeing them through to the end. a global floor lineup, our multi-pathway, a hydrogen society, AI and robotics, and Wubun City. All of these are important, and we have colleagues who are working tirelessly in Genba to develop, to turn them into reality. With so many technologies and new players emerging these days, we are in an era without clear-cut answers. That's precisely why my role is to encourage colleagues to take on challenges without fear of failure. Looking back, when Akio-san became president in 2009, our company had just fallen into the red due to the global financial crisis. We are facing a critical juncture that really threatened our own very existence. At the time, I was an assistant to Akio-san. He said, being in the red means I cannot let anyone take on new challenges. I witnessed Akio-san regularly making hard decisions that sometimes saddened the people, decisions to abandon various undertakings. I have never forgotten that. I have always been committed to sustainable growth, believing that even rapid growth would highly inconvenience many people if we were to reverse suddenly. It is precisely because we have this foundation that even the current situation, where environment is becoming increasingly uncertain, we can remain determined to implement reform and continue taking steps toward our future growth. Our automotive industry is broad-based. It is indispensable. We have to be Toyota all the time. We have to remain strong, and we must endeavor to have many people see Toyota's growth as a good thing. We will grow sustainably together with our 5.5 million colleagues across Japan and with our stakeholders worldwide. I believe that is the kind of Toyota management.

required.

While visiting various work sites in Genba, many people approached me and taught me a lot. Cherishing colleagues who speak their minds in this way, I will strive so that they will be able to say to me, you've made a decision and you've taken responsibility. While cherishing opportunities for many colleagues to take on new challenges, All of our members will strive in unison to realize a Toyota in which both the company and its people can continue to grow. I would greatly appreciate your continued support.

Thank you. Thank you. Now we'd like to take questions from the floor.

If you have any questions, please press the raise hand button on the screen. And when we call your name, please unmute your line. with the camera and your microphone. And we would like to receive questions from as many people as possible, so please restrict yourself to one question each. Any questions? Yes? Asahi newspaper, Kondo-san, please. We'll switch to camera, so please start to speak when you see yourself on the screen. Yes, this is Kondo from Asahi Newspaper. Can you hear me? Yes, we hear you fine. Thank you. Thank you for this opportunity. Now, a question to President Kohn, and I would like you to present a certain question on the financial results. Now, Kohn-san, I believe that you have shown that the increasing breakage in volume is a challenge, and under the Trump tariffs, you were able to record very good operating income. So based on these challenges, if you could give us your overall impression of the financial results for fiscal year 26. As for the forecast for fiscal year 27, I believe that you have... forecast a decline in operating profits due to the Middle East situation and think it's very difficult to foresee into the future. So on what assumptions did you set the forecast for 2027? What were your assumptions? And though this may be from a short-term perspective, from here, what sort of measures, concrete measures do you intend to take to improve the operating profit or the financial results from here on? Yes. Thank you, Kondo-san, for those questions. Regarding the first question, I, Kon, would like to present my overall impressions. As for our forecast for this fiscal year, fiscal year 27, Azuma will respond to that question, if that's okay. Now, as for my impressions for the past fiscal year, fiscal year 26, as the was mentioned in the presentations by Miyazaki and Azuma. Despite the very major changes in environment, we were able to generate a profit of $3.8 trillion. And, of course, the financial results is actually the financial results for Toyota Motor Corporation for this year, but it's actually an accumulation of many years of efforts, and not only efforts by Toyota Motors, but by many, many different stakeholders and collaborations, co-working with all of these stakeholders. But they accumulated results. So the fact that we were able to generate such good results, I think, We owe a very deep appreciation to all of our stakeholders as well as all of the past colleagues. And we did not have to apply breaks, sudden breaks, on our growth strategy despite the environment. So I really thank our predecessors for this. But as you mentioned, for the break-even volume, we are not able to apply the breaks on the increase in the break-even volume, as you said. indicated, but like in the Lehman shop, the number has not exceeded 8 million. like during the Lehman Shock, but still it's quite the truth that it is on an increasing trend. So as mentioned in the presentation, I believe that we are able to do things that we had to do in the short term, and these initiatives have only begun this term, so we will continue with these initiatives over the next 11 months. As for the medium to long-term initiatives, We have just embarked on them. And last fiscal year and this fiscal year, of course, many have not actually generated results. But if we continue steadfastly on these initiatives, I'm sure they'll begin to generate impact. Therefore, from my overall impression, I believe that we are able to step on the accelerator because we are in a situation where we can continue with our growth investments. So rather than applying the brakes fully, we will remove waste one by one, and one by one, we will restructure the business. So I think that's the situation we're in now.

Thank you.

Regarding the second question about the Middle East situation, and assumptions for the forecast this is azuma to reply to that question it's largely divided into two one is a reduction in sales volume and that has we have forecasted 173 again impact and this is because the lead time to the middle east will of course be become longer so once we on the assumption that if this situation continues over one year, that's half of the actual impact that we forecast. The other would be about 400 billion yen in inflated materials costs, and this is based on the levels of material costs as of march and if this this high inflated level were to continue over one year then that would lead to these forecasts for example fuel and transportation costs as well as a paint used for painting and materials used for painting all of these are factored in to and the forecast is based on the assumption that this works to continue for one year. Of course, these are just forecasts, so we are thinking of, for example, relocating or redirecting these products to other destinations and other customers in order to alleviate the impact. Thank you.

Thank you. Thank you.

I'm sorry. Maybe I may have been upside down because my camera was upside down. Thank you for that. Sorry for that.

Let us move on to the next question.

We shall switch the screen.

If you see yourself on the screen, please start your question. Tokumitsu-san, do you hear me?

Sorry, do you hear me?

Yes, loud and clear.

Am I being heard?

Yes, you are. Please start your questions. Sorry about this. I am Tokumitsu from Kyodo Press. I have two questions about the fiscal year that has just ended. Kondo-san asked you about operating income, more than 50 trillion for the domestic sales. Sorry, I received the chat that I'm not being heard. But now, over 50 trillion yen for the very first time. What is your reflections on that? Of course, your hybrid vehicles are performing well, but there are other factors. So please provide us with that insight.

Number two, multi-pathway strategy of yours.

You have been focusing on that for some time. Yesterday, Nexus... EV three-row passenger seat vehicles was announced. Under Mr. Kohn's managerial philosophy, what will be your policies on BEVs?

This is Miyazaki.

I would like to respond to the first question about the previous year's results. Well, actually, 50 trillion yen is not the number that we have been aiming at as we do our operations. Each day, we consider how we may be able to deliver successfully our cars to our customers. And together with our stakeholders, we have taken a very solid step in just doing so, and it's just the result of doing that. As Azumasa mentioned earlier, the overall sales volume is increasing, and a large part of that, certainly, is hybrid vehicles. It is very true, as you mentioned. We have put efforts into hybrid vehicles, of course, and our dealerships' efforts have been combined to achieve these results. We will continue to offer products that our customers will choose, and together with our stakeholders, we will continue to deliver such valuable products. Thank you very much for your questions about

our policies and thinking about BEMS.

As I mentioned earlier in my presentation, we continue to pursue carbon neutrality. At the same time, we will remain a global, full-line-up automotive mass production manufacturer. So, to our mass consumers, we will deliver our cars together with the convenience that such mobility provides. That will remain our mission. The question is, what sort of markets are out there? It is very difficult, if not impossible, to predict the markets going forward, but we will continue listening to our customers to understand the different markets, different countries, different regions. There are differences in market requirements and demands we will always listen to what these customers want in those different regions and reflect such input into our product development. That's what we have done in the past, and that's what we will continue to do. Whatever the cars that our customers want, we would like to deliver. If our customers want beds, we will deliver them good beds, and that will remain the fundamental part of our strategy. Our multi-pathway strategy is the ideal for offering our customers what they want to have. Pursuing such an ideal

It's a must that we have to continue because that's our mission as a Toyota.

Actually, we are in a fortunate position to be able to do so. Thank you for your questions.

Thank you, Tokumichi-san. Yes, thank you very much.

We're going to the next question.

From Nikkan Auto News, please. We'll switch over to you. So if you see yourself on the screen, please start with your question. So please wait. A moment.

This is Fukui from Nikkan Auto News.

Can you hear me?

Yes, we hear you.

Now, the sales of electrified vehicles is about 6 million units, and this exceeds 50% of your total lineup for the first time, and this is mainly hybrids, I believe. But the electrified vehicles, And sales increases. Where do you intend to strengthen in order to increase the sales of electrified vehicles? And the other point is about earnings power that Miyazaki-san talked about. In particular, the value chain and the new mobility, these two areas. How do you intend to enhance earnings? because new mobility is a new area, so I think there will be some birth pains to begin with. So how do you intend to link these pains to actual earnings?

Yes, thank you.

I would like to respond to both questions in that session. Well, originally, you have asked, when are you going to reach 5 million units? We've received that question all along from you. And my view was we wanted to achieve this 5 million sooner than we did. And from our customers, especially in Japan, we still have many customers waiting for the delivery of their cars. So 50% is a statistical number, but we would like to continue to deliver reliably to areas of demand. And we have a full lineup. We have four hybrids for almost all of our models, so we would like to enhance ever better car making in order to enhance our hybrid line. And so we wanted to create a production system and a delivery system that can keep pace with that demand.

That comes first.

And as I said earlier, as the basis of earnings power, we want to utilize to the fullest our current production capacity, and we will prepare with that in mind for electrified vehicles as well. And the value chain and new mobility, how are we going to enhance that to lead to earnings power? Well, for value chain, We began that effort in full gear just before or after COVID-19 because until then, we tended to focus only on new cars. But after COVID-19, we decided that one of the strengths that we have is the unity in operation. We wanted to utilize or leverage that strength. So globally, we are not engaged in such value chain activities at all uniform levels all across the world, but we would like to cross-deploy these efforts, and we believe that by doing so, we'll be able to maintain a growth of 1.5 trillion per year. now your question is then what does new mobility mean well we're going to test as many possibilities as possible and as president said earlier we would not like to release the accelerator but we will remove the waste so as to make the acceleration more effective and to find which mobility areas will be most effective in increasing our earnings power. And so both ground, land, sea, and air, and robotics, these will be the new areas of mobility that we will most likely focus our efforts on going forward.

Thank you.

Fukui-san, thank you.

Let us move on to the next question.

Please wait until the screen is switched to yourself.

Thank you for your patience.

Thank you.

I am Kurama from Yomiuri Daily. Am I being heard loud and clear?

Thank you very much. I would like to ask you about the forecast for this fiscal year.

In major markets, or the U.S., Japan, Europe, and China, how do you forecast your business environment? And another question, which is about the tariffs imposed by the U.S. It is not factored in into your changes in the performance, but 1.38 trillion yen is what you expect out of this. Are there any efforts to avoid such impacts going forward? Thank you very much for your questions. I would like to respond to the first question about our forecast of different markets.

To begin with, fiscal year 26, as we just began our new fiscal year, as we look at the first three months, the U.S., Japan, and Europe, all of them

have remained rather stable in terms of our business performance.

The U.S.

market remains healthy for us, and the Japanese market, although there have been some changes in the tax situation in March, there have been some delays in registration, not much impact has been felt. And we have seen solid demand in Europe as well, and plus China, the same situation.

But then, we have seen some mid-term changes in all of these markets.

We will not take a one-size-fits-all. all type of an approach when we address different markets. As we assume different numbers in those different markets, macroeconomic situations really tell us that we have to be vigilant. But as we see the backlog of orders, the number of vehicles that our customers are waiting, The first thing we have to achieve is to deliver the cars to our customers. So we will have to continue keeping balance between the two. Low inventory situation continues. Our customers continue to wait. Therefore, we do have a room even if the situation rapidly changes in the market. So we will be able to respond. Thank you. This is Azuma. I would like to respond to your second question. The impact of tariff 1.38 trillion is factored in, just like we did last year. We may revisit this, of course, together with our suppliers.

We will work toward the betterment.

Last year, we shouldered a large part of that at Toyota. But together with our suppliers, we have to work together to reduce costs in all fronts, not only the tariff impact. So that's the important part of it. We will work together with our suppliers. We do not know whether the impact will be felt this year. But local production, local procurement will be further pursued going forward in different regions and markets. So those are the focus points of our efforts going forward. Thank you for your questions. Thank you very much. Kurama-san, thank you very much. Going on to the next question now.

From Bloomberg, Yajima-san.

I will switch over to your screen. So if you see your face on the screen, please start. Please wait a moment.

This is Yajima from Bloomberg. Can you hear me?

Yes, we hear you.

Thank you. I have two questions to President Kahn.

First question, I believe you talked about reducing the rate even volume as an important point when you assume presidency. And in your presentation, I believe you talked about increasing the earnings power. So I think there's some overlap. But towards the reduction of your break-even volume, what sort of initiatives or steps do you intend to take? And also, if you have a specific target regarding to what level you want to decrease your break-even volume. I believe that because you came from the accounting department, there's very much expectation on improvement of ROE from the market. So how much are you committed to the ROE improvement? And also, you have set a target of 20% ROE, and when do you intend to achieve that target? What's your schedule?

Yes, thank you very much.

First of all, about the earnings power and reducing the break-even volume, Miyazaki, in his presentation, talked about enhancing earnings power through business structure, transformation and I believe that herein lies the majority of the steps and initiatives we intend to take and our hybrid customers have been waiting a long time to receive delivery so we must deliver to these customers That's the first thing we must achieve because we are a manufacturer. That's our biggest mission. For reorganizing our production models, well, I myself believe that this will, of course, include a review of the model mix as well as the numbers. production numbers, but as we pursue along the line of multi-pathway, that will naturally increase the number of models, but that means there will be an increase in the number of parts and the number of specifications, which will make things even more complex for customers. So I believe that if we can review that complexity, that will have a major impact. So inclusive of that, we would like to reduce costs. And up to now, we have been, with our suppliers and dealers, been creating a strong foundation. Now we'd like to link that to productivity increases. I think the time is right to do that. So we're communicating with them on that. Of course, there are many areas where we have not been able to... established a strong foundation for some suppliers, I believe that's true. So we would like to continue with the efforts in areas where we haven't been able to complete these efforts. We would like to review each challenge so that we can continue to reduce costs. And as a result, I believe an accumulation of that would lead to the decline in break-even volume. As for the target breakage in volume, there's no specific numerical target that we want to achieve because that is not the target or objective in itself.

The objective is to restructure our revenue structure or mix, and that would be, I think,

That would lead to the creation of the next structure that would help us to achieve that goal. As for the ROE 20%, as I've mentioned in the presentation, we have not... published any timeline or target date for achieving this 20%, but we would like to engage in this continuous growth so as to achieve that ROE target. And as Miyazaki said earlier, value chain profits and also new mobility through these efforts, we want to enhance our operating margin. As for capital, our revenue structure will, once it shifts to value chain and new mobility, then of course,

we will be able to lighten our capital structure to match that shift. And that's within size as well.

But of course, this capital is something we receive from our shareholders, so we have to listen to the shareholders' voices. But having done that, we would like to aim towards that flag of 20% and take many initiatives to achieve that goal. Thank you.

Thank you. Thank you, Inajima-san.

Let us move on.

Yamamoto-san, Shinya Yamamoto-san.

Please wait until we switch the screen. If you see yourself in the screen, please start your questions.

This is Yamamoto speaking.

Am I being heard loud and clear? Please start.

Thank you. Earlier, the earning power was mentioned a number of times.

Now, the cars should be profitable. That's what it means, I thought. But then, When Akio-san, before Akio-san was the president, there was a thinking of selling volume of cars and which has deteriorated. It caused the deteriorated quality of products and product power. But now you're focusing on enhancing product power. Now, building ever better cars and building stronger earning power. Are there anything that you will endeavor to achieve in order to hit both of them, achieve both of those initiatives? Well, thank you for your question. As I mentioned earlier, we do not pursue any numbers. we pursue individual customers, each individual customer's satisfaction so that they will be satisfied with our cars and they will continue to select Toyota.

So for those five brands, we define roles, different roles for those vehicles.

And along with that line, we continue building ever better cars and deliver those to our customers. On the other hand, since we are a business, we have to really respond to our customers' demand, especially those customers who are still waiting for the hybrid cars. Hybrid cars evolved, and a part of our technological innovation is to reduce cost. As hybrid performance increases, Customers may be willing to pay something additional for the enhanced performance, such as cost reduction and ever-better cars. should be combined along the way.

As Konsan mentioned earlier, there are multiple processes that are involved in making cars.

We will continue to deliver affordable cars, good quality and affordable, and if ever better cars certainly will entail a wide range of lineups of our products. Yamamoto-san, you mentioned there was a time when we only pursued the volumes.

We will never go back to that.

And each of our employees understands that we will continue to value and cherish smiles on every face of our customers. That's what we mean by ever better cars. Thank you. Kon-san earlier mentioned you have to have a good braking in order to accelerate. Braking is also used to turn your vehicles. I hope you'll be able to turn to a better direction. Yamamoto-san, thank you very much. That's encouraging.

Moving on to the next question now.

Nihon Keisai Shinbun, Asahi Hina-san. So we will switch over to your screen.

So when you see your face on the screen, please begin your question.

Asayama from Nikkei. Can you hear me?

Yes, we hear you.

Thank you.

Thank you for this opportunity. Thank you. Regarding the forecast for this fiscal year, I have a question. The dollar-yen exchange rate. Can you hear me?

Yes.

Can you hear my voice? No, we hear you fine. Yes. Sorry. The dollar-yen exchange rate, your assumption was 150 yen to the dollar. Currently, it's 156 to 157 yen. So I think you have such assumptions at a relatively high yen rate. So what are the assumptions for calculating this exchange rate assumption? And the second question is a softer question, constant. The question is to you. If I could ask about your thoughts about car building. Now, I think that recently you're beginning to see results on the... For example, Kastasan winning at the WOC, so building better cars through the development of people and developing good cars. So you have developed good cars as well as good engineers. But for this to become a business and an earning source, I think that you need to develop cars that can earn money. Now, I think that Kon-san declared yourself as a car guy, I believe. So what sort of cars do you want to build, and what sort of cars do you think will be required by society going forward?

Thank you.

So let me reply to the first question regarding the exchange rate assumptions. So normally, We, quite mechanically, take the monthly average. That is the monthly average of the month before the beginning of this term. without any other additional factors. But for this month, as you know, there has been many fluctuations, including the Middle East situation. So for this year, we have decided to take the six-month average rather than one-month average. the exchange rate assumption. That's why we arrived at the number of 150 yen to the dollar. So this is something that's different from past years. The practice has changed because this is a very highly fluctuating year. Yes, thank you very much, Asayama-san, for that question. Through motorsports, I believe developing cars through motorsports is the initial philosophy of Toyota, and we would like to continue that philosophy going forward.

Now, when it comes to car making, I perhaps don't have a...

can experience direct experience but with limited resources and limited time and the extreme specifications required the cars are trained and you'll be able to see defects that will not appear during mass production so i think that motorsports is something that can really refine your efforts to build good cars, and that's absolutely necessary for car making, good car making. Another result in the world of professional motorsports, Toyota is getting results, which is something wonderful. But of course, if you want to turn this into a business, of course, just because there's good opportunity, you can't just throw money and investment on that opportunity, because within some restrictions, within limited capacity, you have to use your ingenuity, I think, to make the best investment. And I think it's the same for motorsports. So we will continue investment in motorsports, but it will not be unlimited. Blue Sky investment, Kurozumori Space Racing or Kazoo Racing and all others have their respective capacity. So they have to also use their ingenuity and that would lead to better development capabilities and the development of better talent. So GR Yaris, that car, has enhanced the Yaris brand in Europe and the base car model has been highly appreciated by customers. On the other hand, Corolla is building its brand in North America. So the brand and also the strength of the car, which was trained and honed in motorsports, I think we'll be required to gain the customer's assessment and appreciation over many years. So this is going to be a long journey, and we would like to sustain our efforts toward that long journey. So my role, I think, is to give very good, solid support to that effort. Thank you. Thank you very much, Asayama-san.

Let us move on. Automotive News, Hanson.

Please wait until we switch the screen. If you see yourself on the screen, you can start your questions. Thank you for your patience.

Hello there, can you hear me?

I hear you.

Thank you for taking my question today. I have a couple questions about the U.S. market in particular. I see that North America has had a regional operating loss for many quarters in this current year. Can you explain a little bit the background of why that is a regional operating loss? I guess it's because or partly due to tariffs, but can you get to a place where you can eventually fully absorb the tariffs and have a normal, profitable business in North America? When do you think that can happen, and how do you get there? And related to tariffs, I'd like to ask about Chinese cars in the U.S. market. There's lots of concern among many car makers that if Chinese automakers are allowed to sell their cars in the United States, that the legacy makers can't compete in the U.S. market against them. Do you think that there is a need to put up barriers to keep the Chinese out to give the legacy automakers time and space to improve their products against Chinese low-cost Chinese automakers? Thank you.

Hans-san, thank you very much for your questions.

First of all, about our business in the U.S. market, as you mentioned quite rightly, as a region, we continue to struggle over the past couple of years.

There are two background factors.

Number one, TNGA shift that we have seen in the past, Kamri, Karola was the starting point, and then into trucks, the truck platforms been revisited as well. As we did so, electrification also had to be taken into consideration.

So investment in the U.S. multiplied over the past couple of years.

So that's an important part of our business structure. So currently we see our profitability structure led by such investment. And then that challenge is compounded by tariffs. Our business structure in North America therefore continues to be very challenging, and that is reflected in the financial results this year. What will we do going forward? As I mentioned earlier, we have to make sure we solidify our earning power there as well, based on building ever better cars. So, as you see on the slide, these are the initiatives that we will implement solidly going forward. So that will be my response to your first question.

Is it being translated simultaneously? I hope it is.

Now, let me go on to the second question. Now, our basic thought is that, well, actually, in the past, Toyota used to be a new emerging manufacturer, especially for the big three incumbents in the U.S. led by GM. Those incumbents, well, actually, Toyota learned from those incumbents, and that's what got us here. Now, what we have to ensure is that Competition gives delight to the customers through better technologies and innovations, making cars more affordable and close to them. and that would be a healthy situation. Therefore, we have to have a level playing field where we can have fair competition, and different OEMs compete fairly with each other to offer ever better products to our customers, leading to even better societies going forward. To that end, we will continue to hone our capabilities to be able to effectively do so. And during the course, there will be different challenges to which we will continue to adjust our strategies.

If I could ask one follow-up to your question or to your answer. Without tariffs, do Chinese entrance into the markets like Europe or the United States or Canada, are they playing on a level playing field without tariffs?

Actually, I'm not in the position of being able to guess what the Chinese manufacturers are thinking. I can only speak for ourselves.

In Asia, for example, we see many emerging manufacturers.

Now, local production, working together with local suppliers, is something that we do so that we can contribute to the local economies. So that's what we do at Toyota.

Now, there are cars which are made in China. not locally produced, they may not be a contribution to the economy of the market.

We will probably remain in the position of being able to contribute to the local market and local economy in that manner. I hope I answered your question.

Thank you.

Thank you very much.

Next question. From Chunichi newspaper, Atsumi-san. Atsumi-san, please. So please start speaking.

Can you see your name or face on the screen?

This is Atsumi from Chiunichi Newspaper.

Can you hear me? Yes, we can hear you. Please go ahead. I have two questions to President Kohn. Just before, when you were still in presidency, you said your role, and you mentioned the name of Taizo Ishida, And regarding Ishtar Taizo, you said that he would not exert any money to raise for things, but he did make a very ambitious investment. for the future. Now, we asked about your business structure transformation earlier. So as a president, what would be wasteful for Toyota today? What would be the investment that's necessary for the future for Toyota? And the second question is about relations with the suppliers. And here, Taito Ishida said that it will be a relationship of coexistence and co-prosperity but not one of reliance. And I think that it's necessary to enhance your supply chain because of the very tough environment. So what is the ideal relationship in your mind with the suppliers and how do you intend to achieve that ideal relationship with suppliers?

Yes.

Thank you, Asumi-san.

Well, it should be investment for the future.

What would be the future investment? I'd like to respond to that question first. Well, as I said earlier, mobility. is something that's absolutely necessary for people and society for the far future and it's something we have to establish or improve because mobility can really change people's lives not only their lives but also change their hearts and, for example, their emotions. being able to see things that they've seen for the first time, to meet people they meet for the first time. And for that, I think mobility plays an extremely important role to provide such delight to people.

So mobility will continue to become absolutely necessary for people and society.

And so my image of future investments is something to achieve that sort of mobility. And that's what we are investing in today. And the other part of the question has to do with waste. And in terms of TPS, it will be the types of work that is not value-added work. That is work that does not generate true value-add. And so I guess removing waste is to exhaustively remove such non-value-added work. But nobody is doing work that they think is wasteful. So what is value-added work? What is the sort of tasks or work or activities that are absolutely necessary for Toyota? That has to be defined, I believe, very strictly. And that is the role of the management to do.

And in any workplace, any work site, I think the same holds true. So that is the sort of waste that I would like to remove. As for our relationship with suppliers, through our meetings with various suppliers, and from the Kyōhekai Kyōhokai,

they call Toyota their colleagues or patriots. And in order to make sure that they continue to call us colleagues or patriots, we as an OEM believe that we must not flee from our end users who are the most strict customers for us and deliver good cars to them. And I believe that that would be the first condition that must be met for us to be regarded as colleagues or co-patriots by our suppliers. And if we can't do that, then we are not worthy of being called co-patriots. And for the suppliers, our

they must continue to become our toughest customers.

And if you wanted to deliver really good cars to our customers, we have to make some demand, very demanding conditions on the suppliers. But that is not for Toyota. It's for the sake of our customers, the end users of our cars. And if that's necessary, then we will be determined to make demanding demands of the suppliers. But when things really come to a critical situation, then we will work together with the suppliers and coordinate with the suppliers and maybe, if necessary, support our suppliers. And I think we want to continue to play that sort of a role with our suppliers as well. And that, I think, will achieve the goal of Taizo Ishida, who says that it's co-existence and co-prosperity and not just over-reliance on each other.

Thank you, Asumi-san. Let us move on.

Nikkei Cross-Tex, Chikaoka-san.

Please wait until we switch the screen to yourself. Can you turn on your video? There seems to be some problems with the connection.

We'll come back to you later.

Tanigawa-san, your turn.

Then when you see yourself on the screen, please start your questions.

Thank you. I am Tanigawa. Am I being heard?

Loud and clear. Thank you. Thank you. In your presentation, robotics was mentioned as a part of your earning power enhancement initiatives. Robotics are being focused as physical AI, multiple layers, AI, robotics, semiconductors are involved. Which part of that robotics are you focusing on to enhance your earning power? Now, in this physical AI arena, autonomous vehicles as well as robotics will be the two major markets. Now, Toyota has a green OS, a green platform. Will there be some common development for robotics as well? or will robotics be something totally separate? Will you remain captive for Toyota alone, or do you also see outside of Toyota markets globally?

Tanigawa-san, thank you very much for your questions. Actually, you are far ahead of us, Tanigawa-san.

Well, actually, SDVs are something that we continue to pursue and explore.

Autonomous driving enables various types of automation. Let's take a look at the plant, for example. When we receive components in a plant, something unloaded from the truck, can be automatically conveyed. But then, as we look at the groups, forklifts are automated, and other machines can also be automated as well. We have lots of opportunities. As we think of that, as you mentioned, the physical AI may be able to enable autonomous driving. And as I mentioned in my presentation, Toyota really has lots of different types of genba, different genbas with different areas of expertise, which can be combined to build robotics, which can be used in different fronts.

And robots will learn expert craftsmen's skills

and be able to teach other robots after that learning is done. So we can dream big as a matter of fact. Currently, we are discussing and exploring different opportunities, and we will continue to do so to realize something tangible going forward. What sort of technological pillars we will have going forward has not really been defined, but you can teach us so that we'll be able to solidly develop our AI and robotics capabilities. Thank you very much. Thank you. Tesla, for example, have TeraFabs, so they're into semiconductors as well. How about Toyota? Well, it is too early to discuss that publicly. Thank you. Tanigawa-san, thank you.

Moving on to the next question. Terasaki-san will switch over the screen, so please start your question when you see yourself on the screen.

Terasaki from Beskar.

Can you hear me?

Yes, we hear you. Thanks for this opportunity. I have two questions. First question to President Kohn. After you assumed the presidency, this is the first financial results briefing, and for us, it was an out-of-the-blue change of president and not It's not been half a year yet. And at the outset, you said that your outlook has changed because you visited many work sites. If you could explain in more detail your feelings and maybe things that were unexpected. After you became president, I think you found to be different from your expectations, et cetera. Second question, I want to ask about your products and next year's products. BEV would be 246%. That is 600,000 sales volume. That is your forecast. And BEV around the world, has reached a plateau, many people say. So compared to the global sales, I believe this may be a bit conservative. But still, you intend to increase your sales volume by close to 2.5 times. So where would you be able to sell how many of these BEVs to the extent you can divulge such numbers? So these two questions, please.

Yes.

Thank you, Terasaki-san, for your questions. Well, yes, I did visit many road sites, and your question was if I found things to be rather unexpected of my expectations.

Well,

I don't know if it's off my expectations or not, but I have found that many people candidly say many things to me, and that was my very candid impression. And there were many things that were being improved, and sadly speaking, there are many concerns, And there are some people who said that they're so frustrated they sometimes fall into tears. And I listened to these statements. And I talked about the value-added work earlier. I felt, well, not one of these colleagues thinks that what they're doing is wasteful, but they're frustrated that that is not leading to value-added work, and they're also frustrated that they cannot deliver cars to customers as the customers expect. And I felt very strongly that frustration or their desire yearnings and that was my very frank and candid impression after making rounds of the work sites. This is Miyazaki to respond to your second question. Thank you for that question. Well, up to now, I think that we were told you're only selling this much in many cases, but Sasaki-san said you're going to sell so much. That's a big surprise, but from what we had initially expected, it is true that we were able to adjust the actual sales numbers to the actual demand. And in areas where BEV will grow, one would be China, also Europe and North America, these three regions are areas which will cover the growth in the battery EV, because China is a mainstream market to begin with for battery EVs, and so So now we have been telling you that we'll be developing cars that can sell in that market, and these products are actually working there, and that's why we have grown the sales volume and trying to do so. And for Europe... There are cars that we produce jointly with Suzuki, and so we have received delivery of these cars. And so for Europe, we do have plans to introduce our own battery EVs, so there will be growth. And for North America, as we pursue the full lineup approach, our share of battery EVs will increase as well. So in China and the developed countries, our plan is to grow the BEV business. Thank you. Thank you, Sarasaki-san.

Now we are getting too close to the closing time, so last two people to ask questions. From Nikkei, Yao-san, please.

Please wait until we switch the screen.

Thank you. I am Yao from Nikkei Inc.

Am I being heard?

Loud and clear. Thank you.

I have two questions. Number one, about 30th slide, your forecast for the volume. Production, 10 million for the year, which is about 100,000. increase from the previous year and your sales i believe is increasing as well now if there was no mid-east crisis do you expect the numbers would have been larger the second question about 29th slide r d and

CapEx, 1.6 trillion in R&D. Is this the record high?

And what it means is that you will continue stepping on the accelerator in investment. Is it reflecting your comment? And what do you do in R&D? Software? Any cutting-edge technologies? And then in CAPEX, CAPEX seems to be lower than the previous year. Why? Because I think you're planning on building a new plant. Thank you for your questions. This is Azuma speaking. I'd like to respond to your questions. About the volumes, you're very right. As I mentioned, we do have some impact from Middle East, and that's factored in. So these numbers would have been greater if there were no Middle East crisis. So you're right in there. About 500,000 to 600,000 is the number for our exports to Mideast, and about half of that will be reduced. Your second question about our R&D and CapEx. R&D is a record high.

You're right.

Now, our R&D expenses are increasing year on year.

over the past several years starting two years ago certification issues that we had to respond we are spending money for the right way of working so that's a part of our investment when that is done the R&D expenditures may plateau

But it is true, it remains record high, as you mentioned. As for CapEx, in the fourth quarter, as you mentioned in our previous briefing, third quarter and fourth quarter saw lower profit level. Therefore, starting in fourth quarter, CapEx, especially for BEVs, increased so for the next for going forward CapEx is also likely to become more stable but from the last quarter we started investing in CapEx actually we do not have any clear cut forecast for the following quarters but Anything that we invested in CapEx, depreciation cost is likely to go up. So we have to continuously revisit our fixed cost. Thank you very much. Now, in R&D, what are you investing in other than certification? like Woven City or software? Well, investment for talent and investment for future are the two directions for our future investment. Now, for future, we have BEVs, hydrogen, Woven City-related investment, autonomous driving as well. So these are the areas where we expect to see some R&D investment increasing. So those are the areas where we make investment in addition to investment in people. And this is something that we expect to continue.

Thank you very much. Thank you, Yao-san.

Final question.

So we'll switch over to you. So once you see your name or face on the screen, please start your question.

This is Kawaguchi-san, Nikkan Kogyo newspaper.

Can you hear me? Yes. Thank you for this opportunity.

I have two questions.

As a forecast for the 27th year, I think the forecast is 51 trillion yen, and the hybrid, you foresee an increase in sales volume, I believe. But on the other hand, As Konstantin Mizasaki-san said, you have to reliably deliver the product to customers, and I think that the dilapidated factory and the need for maintenance report factories was mentioned during the spring labor offensive. So in the medium to medium term, I think that you are taking various measures. But how do you intend to deliver to customers? How do you intend to build a reliable structure for production? If you could talk about your policies for 2027 for that. And the second question, this has to do with international competitiveness. Across the supply chain, you are developing some cost reduction efforts. I think this will be very important And I think you've been doing this for many years. So against this external environment, how do you intend to speed up or accelerate this initiative? Because the way your supply chain works you know, because you're such a, Toyota is such the biggest carbon production world. What are your views of improving the supply chain? Thank you very much, Kawaguchi-san. As you said, how to produce and deliver reliably to customers is a key question. And during the labor management negotiations, we talked about the reality at the work site and how we should communicate our roles to the people at the work site. And there's been a catch-all. And I think that understanding, mutual understanding has deepened. And stopping the production lines will have a major impact on customers. We agreed on this. And we wanted to correct the situation from here. So the management went to the work site and listened to the issues at the work site in order to improve the situation. And domestically, for example, we have a very broad lineup. There are some models where there is some restrictions on taking of orders or some models where we could not take orders and there's been some vacuum. And one would be the minivan and the small compact cars. I think are witnessing such difficulty. And if we cannot produce these kinds of cars, they will not be able to achieve our cause of delivering to all customers. So for family cars and compact cars, We want to make sure that we can produce these cars for customers, and so we have prioritized these models. For many fans, due to hard work by our colleagues and the cooperation from our suppliers, our delivery time is becoming shorter, and so what remains is the compact cars. And compact cars are, for example, manufactured in Tohoku area, and so regarding the logistics routes, We are having to receive the cooperation of many stakeholders, and there are many issues that remain, but this year we want to commit ourselves to centralize or focus our efforts on that. And now, to get that backdrop, how to engage in the cost reduction activities across the supply chain, As was indicated earlier, inflation and the Middle East impact will, of course, increase our costs. And we must make various efforts to alleviate that impact, but the first is not to manufacture wasteful or redundant parts. We must go back to such spaces. So Area 35 is an activity that we are actually promoting for this. And suppliers give us information such as, well, this part is not selling well. Do you really need to manufacture it? And also, we will go to the suppliers, visit the suppliers. And although they're very hesitant to say this, if it's a product to deliver it to Toyota, even with just a small scratch, we hesitate to deliver the part to Toyota, they say. And so we will listen to their voices, and we can give them assurance that they can deliver such parts to us if the scratch is very small. So we would like to steadfastly engage in cost-reduction activities from the perspective of the customers. Now, Tom talked about our relationship with our suppliers earlier. And we will not be able to manufacture a car if we are lacking even just one part. So we would like to work with the suppliers to improve quality and also to reduce costs. So we ask for your continued support and guidance toward that. Thank you. Thank you, Koguchi-san. Now then, we would like to conclude the session. Thank you very much for participating despite your very busy schedules today. Thank you.