Toyota Motor Corporation Q3 FY2021 earnings call

• COVID-19 continued to impact sales, with global Toyota and Lexus sales recovering from April floor to above previous year levels from September 2020. - Consolidated financial results for first nine months included sales, operating, pre-tax, and net income figures. - Factors affecting operating income year-on-year included foreign exchange, cost reduction, marketing, and expense changes. - China business and financial services showed positive performance. - Outlook for full fiscal year: consolidated vehicle sales revised to 7.6 million units, Toyota and Lexus brand sales to 8.9 million units, full-year financials forecasted with sales revenue JPY 26500 billion, operating income JPY 2 trillion, etc.

Consolidated vehicle sales for the first nine months ended December 2020 were 5,438,000 units, 79.3% of the previous year's same period. Toyota and Lexus brand vehicle sales were 6,627,000 units, 89.5% of the previous year's first nine months. Consolidated financial results for the first nine months: sales revenue JPY 19,525.2 billion, operating income JPY 1,507.9 billion, pre-tax income JPY 1,869.9 billion, net income JPY 1,468 billion. Operating income was impacted by foreign exchange rates (-JPY 175 billion), cost reduction (+JPY 100 billion), marketing activities (-JPY 615 billion), and expense reduction (+JPY 85 billion). China business: operating income of consolidated subsidiaries increased JPY 75.8 billion to JPY 178 billion, share of profit of equity method affiliates up JPY 25 billion to JPY 113.9 billion. Financial services: operating income excluding swap valuation gains/losses increased JPY 50.6 billion to JPY 355.3 billion.

• Consolidated vehicle sales forecast increased by 100,000 units to 7.6 million units. - Toyota and Lexus brand vehicle sales forecast increased by 300,000 units to 8.9 million units, with fourth quarter sales anticipated at ~110% of previous year. - Full-year consolidated financial performance forecast: sales revenue JPY 26500 billion, operating income JPY 2 trillion, pre-tax income JPY 2550 billion, net income JPY 1900 billion, with operating income forecast up JPY 700 billion from November 2020.

• Ongoing COVID-19 spread remains a significant risk. - Semiconductor shortage globally poses risks to production in near to mid-term. - Impact of electrification policies on Kei vehicles and compliance challenges.

Q: Regarding the change in information, reasons for revenue increase and company structure strengthening, and factors behind improved operating income margin per region.

A: Kenta Kon explained factors like sales impact in Japan, North America, Asia; for Japan, sales positive impact ~¥150 billion; North America sales and model mix effects; Asia China and ASEAN contributions.

Q: About cost reduction ¥185 billion, understanding the number and cost reduction efforts.

A: Kenta Kon discussed full-year cost reduction target ~¥300 billion, ¥185 billion gross impact, volume drop affecting full effect, but fourth quarter showed recovering trend.

Q: Incentives in North America, continuing decrease?

A: Kenta Kon said incentives total amount decreased in first two quarters, third quarter volume up, per unit incentives low, due to unit number, model mix, financial services collaboration, lease residual value review, credit management.

Q: China region results improvement, reason?

A: Jun Nagata and Kenta Kon mentioned new model launches (Camry, Corolla, Levin, RAV4, Wildlander, Lexus ES, RX, NX), used car market positive impact on repurchase, Toyota's used car quality, durability, repairability, parts availability.

Q: Semiconductor shortage impact, near and mid-term?

A: Kenta Kon said near term no production volume decrease, mid to long-term risks, communication with suppliers, BCPs, stock levels.

Q: Tokyo Olympics-Paralympic Committee President Mori's discriminatory comment, Toyota's view?

A: Jun Nagata stated Toyota is disappointed, shared President Akio Toyoda's message aligning with Olympic values.

Q: Semiconductor shortage background after East Japan earthquake, BCPs?

A: Kenta Kon mentioned RESCUE system created post-global financial crisis, communication with suppliers, stock levels, multiple conferences.

Q: Electrification of Kei vehicles, thoughts?

A: Kenta Kon said utilizing Toyota's electrification technologies, hybrids likely solution for Kei vehicles.

Q: Relationship with suppliers and cost reduction transformation?

A: Kenta Kon discussed changed work style, reduced business trips, new relationship with Tier 2 and below suppliers, quality communication improving cost reduction.