COPYRIGHT NOTICE AND LEGAL DISCLAIMER

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1 Contents Overview... 6 Global market overview... 6 Financial data... 6 Toyota financial overview... 7 Product and platform strategy... 8 Strategy review... 8 Major model programmes... 8 Corolla... 8 Camry...11 Prius Yaris/Vitz RAV Etios Innova Tacoma & Tundra Land Cruiser...17 Hiace Platform strategy Major platforms MC-M (inc. Toyota Camry, RAV4, Prius, Highlander, Avalon, Avensis, Lexus RX) MC-C (inc. Toyota Corolla, Auris, Verso, Lexus CT, Scion tc, xb) IMV (Toyota Hilux, Fortuna, Innova) NBC2 (inc. Toyota Vitz/Yaris, Belta, Aqua) D91B (Daihatsu Mira, Tanto, Toyota Pixis) F2 (inc. Toyota Hilux, Land Cruiser Prado) J (inc. Daihatsu Terios and Toyota Avanza) EFC (Toyota Etios) F1 (inc. Toyota Land Cruiser (200), Tundra, Lexus LX) N (inc. Toyota Crown Royal, Crown Majesta, Lexus GS, LS) Component-sharing Volume planning Production strategy Production strategy overview Manufacturing network JAPAN NORTH AMERICA CHINA EUROPE INDIA & SOUTH-EAST ASIA LATIN & SOUTH AMERICA SOUTH AFRICA AND AUSTRALIA Internal supply network Modularisation strategy IHS Automotive SupplierBusiness COPYRIGHT NOTICE AND LEGAL DISCLAIMER 2013 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at customercare@ihs.com, IHS CARE (from North American locations), or +44 (0) (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners edition IHS

2 Supplier parks Cluster of reference Tokai Kanto Kansai Strategies for manufacturing efficiency Purchasing strategy Purchasing strategy overview Levels of vertical integration and outsourcing Purchasing organisation Purchasing offices Key purchasing personnel Purchasing budget Supplier selection Supply base development Major and strategic suppliers Supplier selection criteria Working with Toyota Global sourcing Policy and plans JAPAN NORTH AMERICA CHINA EUROPE Pricing policy Cost reduction programmes and strategies Payment process and terms Raw material price management Quality management Quality level Quality management systems Integration into product development Management of (suppliers and) sub-suppliers Supplier awards Technological positioning Areas of focus R&D spending R&D organisation Access to supplier technology Approach to alternative fuels, electrification and fuel cells Special vehicle development Interview OEM-Supplier survey results Introduction to the SuRe Index Methodology Executive summary Profit potential OEM LEVEL Organization OEM LEVEL Trust OEM LEVEL Pursuit of excellence OEM LEVEL edition IHS

3 Outlook OEM LEVEL Global footprint Forward Model Program Major suppliers Toyota Highlander Toyota Tundra Toyota RAV Toyota Lexus ES Toyota Corolla Figures Figure 1: Global light vehicle sales, Figure 2: The Auris replaced the Corolla in Europe (hybrid version is pictured) Figure 3: The 11th generation of the Corolla was introduced in Figure 4: The Toyota Camry remains the best-selling car in the United States Figure 5: Estimated Sales of Zero-Emissions Vehicles under the 2012 Amended Mandate in California Figure 6: Land Cruiser is Toyota s longest-running vehicle nameplate Figure 7: The Toyota Proace panel van is produced at PSA s Sevelnord plant in France Figure 8: Aisin Seiki Group Companies by Geographic Region Figure 9: Timeline of cost-reduction programmes at Toyota through Figure 10: Integration of Quality in the product development plan of Toyota Figure 11: Orientation of Active Safety Figure 12: Toyota R&D Expenses Figure 13: The Toyota FCV-R Fuel Cell Concept Figure 14: Emin Atac, Toyota Motor Europe Figure 15: SuRe Index Top of the Ranking Figure 16: SuRe Index Middle of the Ranking Figure 17: Profit potential results on scale Figure 18: Organisatiojn results on scale Figure 19: Trust results on scale Figure 20: Pursuit of excellence results on scale Figure 21: Outlook results on scale Figure 22: Toyota - Global assembly plant locations Figure 23: Toyota - Japan assembly plant locations Figure 24: Toyota - Forward Model Program Tables Table 1: Key Toyota financial performance values... 6 Table 2: Global annual sales for Toyota vehicle ranges covered in Major Model Programmes ( ) Table 3: Forecast Top 10 most used platforms across global Toyota production, 2013 and 2018 (by model volume) Table 4: Global and Japanese Toyota production volumes ( ) Table 5: Toyota and OEM affiliates - global production plants with forecast volumes ( ) Table 6: Annual Toyota production (by plant) Japan ( ) Table 7: Annual Toyota production (by plant) North America ( ) Table 8: Annual Toyota production (by plant) China ( ) Table 9: Annual Toyota production (by plant) Europe ( ) Table 10: Annual Toyota production (by plant) India & South-East Asia ( ) edition IHS

4 Table 11: Annual Toyota production (by plant) Latin & South America ( ) Table 12: Annual Toyota production (by plant) South Africa & Australia ( ) Table 13: Toyota Group Companies Table 14: Supplier manufacturing plants in Tokai Table 15: Supplier manufacturing plants in Kanto Table 16: Supplier manufacturing plants in Kansei Table 17: Denso revenues by region Table 18: TEMA 2012 Supplier Awards Table 19: Toyota Domestic and Overseas R&D Bases Table 20: SWOT analysis - Toyota Table 21: Mercedes-Benz plant locations with production forecast for Table 22: Toyota Highlander 2013 Supplier Data Table 23: Toyota Tundra 2013 Supplier Data Table 24: Toyota RAV Supplier Data Table 25: Toyota Lexus ES 2012 Supplier Data Table 26: Toyota Corolla 2013 Supplier Data edition IHS

5 Product and platform strategy Strategy review In 2008, Toyota Motor Corporation (TMC or Toyota), overtook General Motors to become the largest vehicle manufacturing company in the world, but the victory was to be short-lived. The start of the credit crisis that affected large portions of the world can be traced back to the bank BNP Paribas refusing to allow withdrawals from two of its funds that had invested heavily in sub-prime mortgage debt from the United States. The resulting shortfall in cash liquidity between banks carried over into the public banking sector, affecting all areas of credit, including vehicle loans. With the money supply cut off, vehicle sales over 2008 and 2009 collapsed, with Toyota being one of the worst hit OEMs. As sales in some regions, particularly the US and China, started to recover over 2010, a series of fatal accidents involving Toyota vehicles drew the attention of federal authorities in the United States. Ultimately, the OEM was found not to be at fault, but the months of negative publicity surrounding the unintended acceleration events left a black mark on a company that prides itself on its product quality. The third and last blow to TMC was the March 2011 earthquake and tsunami disaster in Japan. Although this event affected all global OEMs to some degree, carmakers based in Japan and heavily reliant on Japanese tier suppliers were particularly badly hit. In some cases, the resulting shortage of parts meant that some Toyota plants were idle for up to four months before affected suppliers could get back online, while others had output slashed by up to 70%. Even after the event, in a US market that was seeing growth rates of 8% over the second half of 2011, Japanese OEMs simply didn t have the inventories to support demand in June, July and August that year, year-onyear Toyota sales fell 23, 21 and 13% respectively. A direct result of this and other lesser problems have seen Toyota recently change strategy. Although the Japanese headquarters will still retain substantial control, the company has effectively been split into four divisions: Toyota No. 1 (North America, Europe and Japan); Toyota No. 2 (China, Asia & Middle East, East Asia & Oceania, Africa, Latin America & Caribbean); Lexus International; and Unit Center. Looking at Toyota 1 and 2, the total number of separate regions has increased from six to eight, to better identify opportunities for market growth in such regions as south-east Asia, while each of the two divisions will have executive vice-presidents in charge of vehicle operations, from development through to marketing. As might be expected, Lexus International will concentrate on development and operations of Toyota s luxury brand, while Unit Center will cover global production of engines and transmissions. Since the three setbacks, Toyota, both as a brand and as a vehicle manufacturer, has proven remarkably resilient. At the end of the fiscal year in March 2013, the company once again was acknowledged to be the world s largest carmaker. With the formation of these four new business units, the company will look to improve the speed of decision-making in order to take advantage of regional opportunities, while also clarifying operations and earnings responsibilities. Although this is a considerable change for a Japanese company that until recently, insisted on having a Japanese national executive present at most global operations, it will likely prove highly beneficial to a company that has simply outgrown the support structure offered from within its home nation. Major model programmes Corolla The first E10 Corolla was introduced in 1966 and the nameplate remains the longest-running in the Toyota portfolio, apart from the Land Cruiser. According to the OEM, the name Corolla translates to crown of flowers, which follows a looselyenforced naming convention started with the Toyota Crown luxury saloon that sees given model names related in some way to regal headwear. The first Corolla was introduced six months after its direct competitor, the Datsun Sunny, which went on to became known as the Sentra in some markets outside Japan. The original model featured a 1,077cc engine, approximately 0.1-litre larger than the Sunny. This gave the Corolla a slight edge in terms of power, but also meant that buyers would be required to pay additional vehicle tax. The larger engine ultimately won out and the first Corolla overtook its competitor only one month after its introduction, with versions of the first K engine (K-B twin carburettor, high-compression K-D, 1.2-litre 3K, 2013 edition IHS

6 and the 3K-B and 3K-D) serving the range until the introduction of the fifth-gen Corolla. Offered with either two or four doors, the original unibody Corolla used front strut and rear leaf spring suspension, with a solid rear axle. Sophisticated it was not, but arriving in the United States in 1968, the car s solid construction helped to erase the reputation Japanese carmakers had with regards to poor build quality (take note, Chinese national OEMs with plans to enter the global market). To improve the look and longevity of the exterior paint, Toyota added an electrostatic component to the electrophoretic coating to build lustre, while the available colours were named after Greek and Roman gods and heroes: Aphrodite white; Zeus blue; and Apollo red, etc. Second-generation E20 versions of the Corolla underwent only minor changes over the previous model, with the suspension being carried over and the introduction of an optional three-speed automatic transmission. A larger 45-litre fuel tank was also added, so that the car could complete the journey on the new 500km highway between Tokyo and Nishinomiya without having to stop for fuel. The range was also expanded with the addition of the first Levin/Trueno Sprinter coupé versions, which featured a 1.6-litre DOHC engine using a Solex carburettor that was taken from the Toyota Celica. In 1975, the third-gen line-up (E30, E40, etc.) grew to include five different versions and in 1979, the fourth-gen range included seven versions, the most ever offered under the Corolla badge. These were: two- and four-door saloon; hardtop; coupé; liftback; and two- and four-door vans. A key change to the vehicles was the switch from a leaf spring rear suspension to a four-link coil spring system. The E70 fourth-generation was the last in which all models used a rear-wheel drive configuration, as with the introduction of the E80 fifth-generation in 1984, the Corolla started the changeover to front-wheel drive. Still, the coupé and liftback versions remained rear-wheel drive, and with the 1.6-litre 16V DOHC Corolla GT-S, Toyota launched what was to become a favourite of the drifting community, a motorsport which involves precise control of cars as they powerslide around a course. The same engine was transferred into the MR2 sports car, which made its debut in Introduced in 1987, the sixth-generation E90 Corolla was largely a carryover of the previous model, although a slightly different version (using the same mechanicals) was launched in Japan as the new Corolla Sprinter. The model also served as the basis for the South African Tazz hatchback. This was also the first vehicle to enter production at the New United Motor Manufacturing Inc. (NUMMI) plant in California, operated as a joint-venture with General Motors. Badged as the Prizm, this was the first offering from the now defunct Geo sub-brand. All models, apart from the All-Trac wagon, featured fourcylinder engines (in various states of tune), fully-independent suspension, and four-wheel disc brakes. The seventh-generation E100 Corolla range was substantially larger than the outgoing model and as such, the new cars were switched from subcompact to compact models in the US where they remain today. Locking retractor seatbelts were added to all versions and air-conditioning units used CFC-free refrigerants, but most notably, the 4A-GE engine featured five-valves-per-cylinder, a configuration that was unheard of when the vehicle was launched in 1991 and remains uncommon today outside the realm of performance vehicles. In 1995 the eighth-generation E110 Corolla was launched, with changes across the vehicle made to improve the growing trend for fuel efficiency and emissions reductions. To cut vehicle weight, body structure was optimized using computeraided analysis and the use of various high-strength steel parts. The weight reductions, 50kg for the saloon and 70kg for the wagon version, helped to improve fuel economy and add torsional stiffness to the chassis. Additionally, North American versions of the Corolla were fitted with new 1ZZ-FE engines highlighting the global reach of the Corolla, Japanese versions would not get this engine until the next generation of cars, with both regions going on to use the motor now fitted with variable valve timing (VVT-i). With the launch of the ninth-gen E120 Corolla in 2000, Toyota introduced the New Century Value concept. As part of this, a proposal was put forward to change the model name of the range, but Takeshi Yoshida, chief engineer at the time, said: Corolla [is] a vehicle that [has] gained a strong reputation worldwide and its compact class vehicle name [has] become representative of Japan. Thus, the Corolla name should remain. Notable additions to the range included the addition of the Corolla Fielder wagon. The design of this Corolla also underwent a fundamental change as Toyota executives refused to sign off on the first designs, 2013 edition IHS

7 stating that the new car looked too much like the out-going model. As such, designers were left with half the allotted time to start the vehicle design process from scratch; the curtailed design timeframe resulted in ideas being solicited from both domestic and overseas design centres. According to Toyota, the final design came from the European offices, the first time a new Corolla had not been designed in Japan. With the 10th gen model, Toyota looked to move the E140 Corolla and its derivatives away from its Japanese heritage and develop a world car. Where Ford and GM develop world cars (Focus, Cruze, etc) to be largely identical over various markets, the equivalent policy at Toyota revolves around a core vehicle, including platform, engineering, etc., that has been reworked to suit the regional market. As such, this version of the Corolla saw the introduction of the Auris in Europe, which while using the same fundamental architecture, is designed to offer improved driving dynamics valued by customers in that region. For the Corolla in North America and Asian markets, cabin space was improved to satisfy local preferences. Figure 2: The Auris replaced the Corolla in Europe (hybrid version is pictured) Source: Toyota The latest E160 version of the Corolla went on sale in Japan in mid-2012; North America, the largest market for the model, will get a mildly revised version in third-quarter The 11th generation of the range, this is an all-new model that has been redeveloped from the ground up. In terms of styling the car features a wrap-around front clip incorporating the semihidden bumper and large lower air intake, while blistered wheel arches (referred to as fender flares in North America) are a departure from previously slab-sided models. In terms of size, the Corolla range has been getting larger with each successive generation. The first car had a 2,286mm (90 inches) wheelbase and by the ninth generation, wheelbase length had increased to 2,600mm (102.4 inches), the same as the original D-segment Camry saloon, launched in The latest Corolla has continued with this trend, with the overall length of the new car being 100mm (four inches) longer than the out-going model, with the additional space primarily used to increase rear passenger legroom. Further, constant velocity (CV) transmissions will replace standard automatic versions to improve fuel economy the units incorporate a simulated shift to mimic a standard auto gearbox. With total global output since 1966 approaching 40 million vehicles, the Corolla holds the record for most units produced under the same nameplate. This, though, has been achieved over what will soon be 11 full generations of cars. By comparison, when production of the Volkswagen Beetle was brought to a close in 2003, 21.5 million units had been produced, with only minor refinements to the original design. Titles aside, the Corolla has been a stunning success for Toyota. Although it is not the most driver-oriented vehicle and retail prices can be marginally higher than competitors in the same segment, the success of the model stands as testament to the fact that most buyers are not interested in how fast a car goes around a track. Dependability is what most customers want and few models can offer the same level of key-turning confidence on a 2013 edition IHS

IHS Automotive. SupplierBusiness Supplying Toyota. Supplying the OEMs edition supplierbusiness.com

IHS Automotive. SupplierBusiness Supplying Toyota. Supplying the OEMs edition supplierbusiness.com IHS Automotive SupplierBusiness Supplying Toyota Supplying the OEMs 2013 edition supplierbusiness.com Contents Overview... 6 Global market overview... 6 Financial data... 6 Toyota financial overview...