Toyota’s Global Strategy Toyota’s

—Moving toward Global Motorization— —Moving Motorization—

April 16, 2003

Toyota Motor Corporation

1

Cautionary Statement with Respect to Forward-Looking Statements
This presentation contains forward-looking statements that reflect Toyota’s plans and expectations. These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause Toyota’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. These factors include: (i) changes in economic conditions affecting, and the competitive environment in, the automotive markets in Japan, North America, Europe and other markets in which Toyota operates; (ii) fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar, the euro and the British pound; (iii) Toyota’s ability to realize production efficiencies and to implement capital expenditures at the levels and times planned by management; (iv) changes in the laws, regulations and government policies affecting Toyota’s automotive operations, particularly laws, regulations and policies relating to environmental protection, vehicle emissions, vehicle fuel economy and vehicle safety, as well as changes in laws, regulations and government policies affecting Toyota’s other operations, including the outcome of future litigation and other legal proceedings; (v) political instability in the markets in which Toyota operates; (vi) Toyota’s ability to timely develop and achieve market acceptance of new products; and (vii) fuel shortages or interruptions in transportation systems, labor strikes, work stoppages or other interruptions to, or difficulties in, the employment of labor in the major markets where Toyota purchases materials, components and supplies for the production of its products or where its products are produced, distributed or sold. A discussion of these and other factors which may affect Toyota’s actual results, performance, achievements or financial position is contained in the “Operating and Financial Review and Prospects” and “Information on the Company” sections and elsewhere in Toyota’s annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission.

2

Fujio Cho
President Toyota Motor Corporation

3

I. Global Manufacturing & Marketing in 2002
Growth in Production Volume
Global output (Millions of units) Overseas output (Millions of units)

3 years 3 years
6.0

2002 Global 2002 Global (million units) (million units) Output :: 6.31** Output 6.31 Sales :: 6.17** Sales 6.17

13 years

5.0 2.17 4.0 1.62 1.0 0.45 3.0 1986 1999
Overseas output

2.0

* includes Toyota/Lexus, Daihatsu and Hino brands.

Annual sales surpass

1 million units

0 2002
Global output

Corolla
4

II. 2010 Global Vision
Major change in the global economic environment
Taking on Taking on the challenges the challenges for change for change

<Expected society>

Global motorization

Achieve global production & sales of 6 million units

* Regional strategies – North America, Europe, Asia, China and Japan * Technological innovation

Market & population growth in the US Rise of markets in Eastern & Central Europe and in Russia Strong growth of Asian markets

2002

2010s
5

III. Regional Strategy
North American Market (1): Creating market through new product launches
(Millions of units) 2002 sales:

million units

1.91

Luxury SUVs

Full-sized trucks

15

10

Commercial vehicle (light truck) market Passenger vehicle market

Lexus GX470

Lexus RX330

Tundra Double Cab

Entry-level vehicle for young drivers No. 1
in 2002 passenger vehicle sales

5

Scion

Corolla 0 1990 1995

Camry 2000 2002

xA

xB

<US market>

6

III. Regional Strategy
North American Market (2): Production growth centered on light truck manufacturing
#3 Canada

⇒First Lexus
production base

#1 NUMMI

#4 Indiana

#2 Kentucky

#5 Mexico

“Made-in-Texas” trucks ⇒
<Manufacturing capacity expansion plan>
(Millions of units)

#6 Texas

1.65
Texas plant (Tundra)

1.48
Canada plant expansion (RX330)

1.50
Mexico plant (Tacoma)

1.40

Indiana plant expansion (Sienna)

Present

Fall 2003

2005

2006

7

III. Regional Strategy
European Market: Integrated manufacturing & marketing
2002 sales:

760,000
units

Marketing Marketing organization organization restructuring restructuring starting starting April 2003 April 2003 United Kingdom France

Action in the wider EU market
Czech Republic

New “Avensis” launched in March 2003 as upper core model

⇒First Japan market
launch of UK-made vehicle in fall 2003

Turkey

Toyota Motor Europe (TME) Leading marketing companies

Manufacturing plants
8

III. Regional Strategy
Asian Market: Manufacturing & export base for pickups/multipurpose vehicles
⇒Development of global manufacturing base and mutual distribution network (IMV Project starts in 2004)
Thailand: Global manufacturing base Other Asian nations: Manufacturing bases for engines & main components

To more than 80 nations/regions

Japan
South Africa & Argentina: Intra-regional manufacturing bases

To Europe & Africa

India

Thailand
Others Philippines Indonesia

To South America South Africa Argentina

: Pickups & multipurpose vehicles : Engines & main components

9

III. Regional Strategy
Chinese Market: Manufacturing & marketing to be strengthened in response to market growth
Product lineup
Luxury SUV Large & Luxury sedan Crown Land Cruiser/Prado Compact Vios Compact

Establish full product lineup Establish Toyota brand image

Daihatsu
(Compact)

Corolla

Aggressive product launches
Production capacity
50,000 units/year

30,000 units/year

Several hundred thousand units/year

25,000 units → 115,000 units/year 50,000 units/year

2002

2003

2004

2005

2006

2007

2008

2009

2010
10

III. Regional Strategy
Japanese Market: Introduction of Lexus & Reorganization of Sales Channel
⇒Preparations for future changes (in market structure & customer values)

After reorganization
Lexus (new) Toyota brand
Development of new Lexus dealership network in 2005 (150 dealers)

11

III. Regional Strategy
Japanese Market: Introduction of Lexus & Reorganization of Sales Channel
⇒Preparations for future changes (in market structure & customer values)

Present
Toyota brand (5 channels) Vista Netz Toyota Toyopet Corolla

After reorganization
Lexus (new) Toyota brand (4 channels) Netz Toyota Toyopet Corolla
Development of new Lexus dealership network in 2005 (150 dealers) Consolidation of Netz & Vista networks in spring 2004 →Foothold in new market segment

Luxury vehicle channel for the Toyota brand Leading channel for the mediumsize car market Largest volume-sales channel, centering on compact vehicles
12

IV. Technology Strategy (1)
Development of a wide range of technologies and products with focus on market creation
<Technology development>
Leading-edge technologies

<Marketing>
Assessing customer needs

Nanotechnology

Material technology

Biotechnology

Energy technology

Next-generation technologies

Existing technologies

Engine

Body

Electronics Chassis

Transmission Environment

Proposal of business vision

Safety

IT

Products focused on market creation “Comfort ” “Kindness” “Excitement”
13

IV. Technology Strategy (2)

Harmonizing “Ecology” with “Emotion” Harmonizing “Ecology” with “Emotion”

Ecology Ecology

Emotion Emotion

14

V. Conclusion

Global-scale motorization

Market & population growth in the US

Rise of markets in Eastern & Central Europe and in Russia

Strong growth of Asian markets

Addressing challenges for change — toward further growth

15

Toyota’s Global Strategy Toyota’s
—Moving toward Global Motorization— —Moving Motorization—

April 16, 2003

Toyota Motor Corporation

16

Toyota’s Financial Strategy Toyota’s

April 16, 2003

Toyota Motor Corporation

1

Ryuji Araki
Executive Vice President Toyota Motor Corporation

2

I. Business Performance
Operating income by market segment
(Billions of yen)

FY1998
(April,1997-March,1998)

FY2002
(April,2001-March,2002)

FY2003/9mos.
(April-Dec.,2002)

Japan North America Europe Asia & other regions Consolidated elimination Consolidated total

649 175 -2 8 -12 818

870 265 -12 19 -19 1,123

813 268 5 41 -17 1,110
(Japan GAAP)
3

II. Profit Earnings
Growth and targets in operating income ratio & ROE
Operating income ratio
9 (%)

6.1% 6% 6.5%
6 ~ ~
(%)

7.4%

9.1%
● 11.3%

9%
(Billions of yen)

1,000

10

8.5% 5.8% ●

●10%
500

6.8% ● 6.3% ●
April-Dec.,2002

ROE
5

FY1999 FY2000 FY2001 FY2002

Operating income

Target (Japan GAAP) Operating income ratio ROE
4

0

III. Dividend Payments & Share Buyback
(Billions of yen)

1,000

Cash flow allocated to dividend payments and share buyback

Capital expenditures

R&D

500 ~ 400 ~

0

FY1999

FY2000

FY2001

FY2002
(Japan GAAP)
5

Cash flow

Dividend & share buyback

* Cash flow = Current net income + Depreciation costs - Capital expenditures

IV. Change in Share Ownership
Shareholding by banks

VS

Increase in foreign shareholders (listed on NY and London exchanges in September 1999) Increase in individual shareholders (reduction in stock unit in August 2000)

[Sept. 30, 1999]

[March 31, 2003 (estimate)]

Banks

34%

Dramatic d rop

Approx. 15%

6

V. Toyota’s Actions on Corporate Governance and Information Disclosure
Internal Mechanisms ⇒Reinforcement of internal controls
<Internal/external auditing>
Accounting audits Accounting audits based on US & based on US & Japan auditing Japan auditing standards standards Board of statutory Board of statutory auditors auditors
Half are external Half are external auditors auditors
Monitoring

General shareholders’ General shareholders’ meeting meeting

<Monitoring>
International Advisory International Advisory Board Board

Board of directors Board of directors
Monitoring Monitoring

Monitoring

President
Monitoring

Labor-Management Labor-Management Council & Forum Council & Forum

Managing Officers
Monitoring Monitoring

Social Contribution Social Contribution Program Committee Program Committee

Corporate Ethics Corporate Ethics Committee Committee

<Internal information management>

Disclosure Committee Disclosure Committee
Stock Option Committee Stock Option Committee NY/London stock listing NY/London stock listing
-- Disclosure based on SEC standards Disclosure based on SEC standards -- Identical information disclosure in New York, Identical information disclosure in New York, London and Tokyo London and Tokyo

7

Toyota’s Financial Strategy Toyota’s

April 16, 2003

Toyota Motor Corporation

8

Toyota’s Technology Strategy Toyota’s

April 16, 2003

Toyota Motor Corporation
1

Akihiko Saito
Executive Vice President Toyota Motor Corporation

2

3

Prius: The World’s First Production Hybrid Vehicle
Power train

Design

Packaging

4

Development Goals of First-Generation Prius
Fuel economy
1.5 times

x Innovative advances in fuel economy, surpassing conventional gasoline-fuel engine x Drastically cleaner emissions

2.0 times

1/10 of regulation levels

5

Toyota Hybrid System (THS)
Generator Battery

Gasoline engine
Power control unit (Inverter etc.)

Electric motor
Power split device

Start-up
Electric motor only

Normal driving Acceleration Deceleration
Engine operating with maximum efficiency Motor and engine Battery charging Energy recovery

Stopping
Engine shuts off No energy consumption
6

HV Technology Matrix
THSII SU-HV

*EV Drive
Toyota Coaster
European Concept Vehicle

THSII NG-Prius

THS Prius
Estima HV

Plug-in/Switching

non EV Drive

Japanese Vehicle A

Mild

Japanese Vehicle B

Crown Mild HV Series/Parallel HV ( HV of Hybrids)

Series HV

Parallel HV

*

: propelled by electric motor only

7

Motor Power / Vehicle Power Ratio

Strong

Overall Efficiency < Well-to- Wheel >
10-15 mode

Well to Tank (%)

Tank to wheel (%)

Overall efficiency (%)
10 20 30

0
Gasolineengine vehicle Dieselengine vehicle

88 91 88

16 20 30
Estimated by Toyota
8

Prius (THS)

Low Environmental Impacts (Emissions)
ppmc
50

Gas Concentration Gas Concentration

Conventional level

Gasoline Engine approaching Ambient Air level Hybrids help catalyst warm up hence reach very low emission level
Cold start emission Hot start emission

5

Prius
0

96

98

00

02

04

Year
9

City Air City Air

Internal Development of Toyota Hybrid System
Engine Generator
Secondary battery Power control unit

Motor

Hybrid ECU

Engine & Motor & Generator

Power control unit

Internally developed components
10

Increased Sales of Hybrid Vehicles

Units 100,000 Units 100,000

Total Total

vehicles vehicles
Crown Mild Hybrid

50,000 50,000
Estima Hybrid (4WD)

Gas turbine HV (1969) Gas turbine HV (1969)

Prius

Year 2001 Year 2001

11

Hybrid Synergy Drive
Fuel Economy
Existing hybrid vehicle

Hybrid Synergy Drive

Improvement of conventional engines

Fun to Drive

12

Next-Generation Hybrid System (THS II)
Secondary battery
Power control unit Voltage boost converter

Generator Engine

Inverter Motor

Power split device

(150% increase in output)

Driving wheel

Hybrid Synergy Drive
13

Broader Application of the Next-Generation Hybrid System

(SU-HV) (SU-HV)
14

Fuel Cell Vehicle

15

Development of Toyota FCHV
FCHV: Fuel Cell Hybrid Vehicles

1992
Start of FCHV development

1996
Announcement of the hydrogen FCHV at the EVS-13 (Osaka)

1997
The world’s first FCHV with Methanol Reformer

1996

2001
Announcement of the FCHV-3, FCHV-4, FCHV-BUS1, and FCHV-5

2002
Announcement of FCHV-BUS2 & limited marketing with the delivery of Toyota FCHV

1997

2002

2002

2001
16

Internal Development of Core Technologies
Independent In-house Development of Total System Including Fuel Cell Stacks

Power control unit

Air Secondary battery compressor High-pressure Power hydrogen control unit storage tank HV EUC TOYOTA FC Stack

Motor Motor

Air compressor

Motor

Internally developed components
TOYOTA FC Stack

17

Application of Hybrid Technology
PRIUS TOYOTA FCHV

ICE Hybrid Vehicle (PRIUS)
Engine Power Control Unit Secondary Battery

Toyota Fuel Cell Hybrid Vehicle
Fuel Cell Power Control Unit Secondary Battery

Motor

Motor

18

Overall Efficiency <Well-to-Wheel>
Well to Tank to

Overall efficiency (%)
10 20 30 40

tank( %) Wheel(%) 0

Gasolineengine vehicle

88

16

FCV (High-pressure hydrogen)

38 58

FCHV (High-pressure hydrogen)

50
10-15 modes Estimated by Toyota
* Based on current consumption
19

Future Image of Powertrain Development
2 (in billions)

Fuel cost + fuel cell cost Total world vehicle ownership

1

Internal combustion engine vehicles Internal combustion engine HV Fuel cell vehicle
20X0
Year
20

Internal combustion engine fuel cost + Internal combustion engine cost

0 2000

Toyota’s Environmental Technology Development
The Ultimate ECO-Car

FCHV THS Hybrid Technology
CNG
Alternative fuel

D-4 DPNR Diesel DI Lean Burn VVT-i
Diesel-engine vehicle Gasoline-engine vehicle

EV

EV & FCV

21

Toyota’s Technology Strategy Toyota’s

April 16, 2003

Toyota Motor Corporation
22

Toyota’s Global Strategy Toyota’s
—Moving toward Global Motorization— —Moving Motorization—

April 16, 2003

Toyota Motor Corporation

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