Isuzu: Domestic Market Share Targets of 40% for Small Trucks and 30% for Medium-Sized and Large Trucks are Attainable
Strengthening the overseas sales network; building a structure capable of producing 350,000 pickups in ASEAN countries

  Isuzu Motors has positioned the 2005-2007 period as the preparation time to enable the automaker to continue to grow to become "a global leading company in commercial vehicles and diesel engines" - a new corporate vision - and has been implementing the mid-term business plan for a three year period.

  In 2005, the first year of the plan, the automaker achieved production of 300,000 LCVs (pickups and SUVs) in the ASEAN countries, one of the main numerical targets in the plan, and has come within a stone's throw of meeting the share targets for the Japanese market, which are 40% for small trucks and 30% for medium-sized and large trucks.

  The automaker plans to launch a next generation truck, which integrates a medium-sized truck (the Forward class) and small truck (the Elf class), in Japan and the USA in 2006 and in other markets in 2007 in order to sell 300,000 commercial vehicles (trucks with over 2-ton payload and buses, but the one-ton pickup D-MAX is not included) abroad. The automaker is also expanding and upgrading the overseas distributors in joint efforts with Japanese trading firms.

  The automaker upped its stake in Qingling Motors Co., Ltd. to 20% and is considering setting up an engine production company in order to meet its targets for producing 100,000 commercial vehicles and starting to produce diesel engines in China.

  The expansion of cooperative work with GM group, which was included in the mid-term business plan, listed as targets an increased supply of diesel engines, increased sales of the USA-made commercial vehicles, joint development of the next generation LCV and the next generation medium-sized trucks for the USA. Isuzu's supply of diesel engines decreased substantially in Europe in 2005, and the capital ties which had existed between the two companies since 1971 were terminated in April 2006. However, the two automakers have stated their intention to continue to work together and established a fifty-fifty joint development company for the next generation LCV in June 2006.

Note: For the Elf Hybrid, which is a hybrid truck, launched by Isuzu in April 2006, please refer to the MarkLines Report No.514 (October 2006 issue) "Hybrid Electric Vehicles (HEV) for Commercial Use: 2-Ton Trucks Launched by Mitsubishi Fuso and Isuzu
http://www.marklines.com/en/amreport/rep514_200610.jsp."
  For the details of the 2005-2007 mid-term business plan, please refer to the MarkLines Report No.389 (July 2005 issue) "Isuzu's Mid-term Business Plan Includes Production of 300,000 LCV in ASEAN in FY2007
http://www.marklines.com/en/amreport/rep389_200507.jsp."

■The target domestic market shares of 40% for small trucks and 30% for medium-sized and large trucks are attainable

  The automaker has a target of 2007 to achieve domestic market shares of 40% for small trucks with a 2-3 ton payload and 30% for medium-sized and large trucks with a payload over 4 tons. The result for 2005 was 39.7% for small trucks and 28.8% for medium-sized and large trucks. The automaker has come within a stone's throw of achieving the target in 2007 through the introduction in 2006 of the next generation truck which will integrate medium-sized and small trucks.

  The automaker has increased its overall market share by introducing a series of steps to strengthen its position in the segment (tractors and pickups for private use) and geographical areas where it has been weaker. The steps also helped to build a stronger sales network. In addition, Isuzu announced in June 2006 that it would establish a holding company jointly with Itochu, which will integrate Isuzu's consolidated sales company and other companies dealing in used commercial vehicles, accessories and vehicle bodies.

■Isuzu Motors' truck market share in Japan

	2002	2003	2004	2005	2006 Plan	2007 Plan	Apr.-Jun. 2005	Apr.-Jun. 2006
Light trucks (with 2-3 ton payload)	33.9%	36.1%	38.4%	39.7%	-	40.0%	37.7%	36.5%
Medium and Heavy trucks (with over 4 ton payload)	24.0%	24.9%	27.4%	28.8%	-	30.0%	28.5%	27.6%
Lightl truck sales (units)	95,325	147,106	114,176	117,093	120,000		8,447	10,799
Medium and Heavy truck sales (units)	78,601	117,143	99,584	105,504	105,000		5,450	6,498

Sources: Isuzu's press release on May. 16, 2006, etc
Note 1:	The target for 2007 is as per the 2005-2007 mid-term business plan announced in November 2004.
Note 2:	The automaker has in the lineup the Elf, Forward, and Giga, representing the Light truck, Medium truck, and Heavy truck, respectively.
Note 3:	Buses (the Gala for sightseeing and Erga for fixed routes), most of them being of large size, had a market share of 28% in 2005.

■Started reorganizing the domestic sales network. Setting up a holding company jointly with Itochu.

The automaker has been strengthening the business makeup of its dealers to cope with a shrinking market in Japan for commercial vehicles expected in the future, through the introduction of measures such as reorganizing the dealers by extending their geographical reach, combining them, and bolstering their financial footing by recapitalization and better capital procurement.

Furthermore, the automaker will reinforce its operating base by integrating various services which are provided during the lifetime of a vehicle from when it is sold, substituted for repair and until when it is scrapped, and their surrounding "life cycle" business. For this purpose, Isuzu will establish a holding company which will integrate the consolidated sales company and other companies dealing in used commercial vehicles, accessories, and vehicle bodies.

Isuzu and Itochu have a 75% stake and 25% stake in the holding company, respectively. A company to prepare for the establishment of the holding company was founded in June 2006. As soon as the reorganization is over, the holding company will take over and start its business within 2006.

Sources: Isuzu's press release on May. 11, 2006, etc.

  The expansion of diesel engine business, one of the pillars of the 2005-2007 mid-term business plan, is being delayed. It is largely due to a drop in the production at Opel in Poland, to which Isuzu planned to make a full supply in 2005 after having increased its annual production capacity from 270,000 to 330,000 diesel engines in 2004 (Opel is, however, increasing the production of the 1.3 liter diesel engine sharply, which is smaller than Isuzu's diesel engine and jointly produced with Fiat in Poland).

  As well as their increased supply to GM, Isuzu is considering the production of diesel engines in China to support the expansion of its diesel engine business. For this purpose, the automaker is currently discussing with Qingling Motors Co., Ltd. the establishment of a new company to produce diesel engines.

■Isuzu: the production of diesel engines by country

(1,000 units)

	Japan	U.S.	Poland	Thailand	Indonesia	China	Total
JFY 2004	432	173	317	171	23	26	1,143
JFY 2005	437	202	239	216	24	26	1,144
JFY 2006 Plan	428	208	156	217	18	35	1,062

Source: Isuzu's publicity material on May 16, 2006
Note:	The above figures include industrial diesel engines. The diesel engines are produced by DMAX, Ltd. (annual capacity 200,000) in the USA, ISPOL (Isuzu Motors Polska Sp. zo.o. with annual capacity of 330,000) in Poland, IEMT (Isuzu Engine Manufacturing Co., (Thailand) Ltd.) in Thailand, MII (P.T. Mesin Isuzu with annual capacity of 50,000) in Indonesia, and Qingling Motors Co., Ltd. in China.

  The automaker achieved the best operating profit and ordinary profit in fiscal 2005 (which ended in March 2006) for three straight years. It is expecting the best operating profit, ordinary profit and current profit in fiscal 2006, as well.

■Isuzu: consolidated production and sales results by product

			Production			Sales
			JFY 2003	JFY 2004	JFY 2005	JFY 2003	JFY 2004	JFY 2005
Units	Large	Trucks	51,167	48,933	50,456	54,118	50,573	53,465
		Buses	2,408	2,820	2,934
		Total	53,575	51,753	53,390
	Small	Trucks	142,490	151,717	160,826	226,300	288,589	392,819
		RVs	34,535	84,719	167,423
		Total	177,025	236,436	328,249
	Grand total		230,600	288,189	381,639	280,418	339,162	446,284
Amount (Million yen)	Vehicles					719,417	763,576	992,263
	Components for overseas production		40,511	66,604	70,251	37,309	68,324	65,767
	Engines and components		161,537	222,958	146,281	391,730	350,185	207,764
	Service parts		136,464	113,049	115,191	281,881	311,481	316,063
	Total					1,430,339	1,493,567	1,581,857

Sources: Isuzu Financial Reports, Isuzu Fact Book
Note:	A drop in the 2005 sales amount of the engines and components is largely due to a change in classification for pickups for Thailand, which are now treated as vehicles (the change is due to the Thai production company being consolidated).

■The capital tie-up with GM was terminated. Business tie-ups will continue.

  The capital tie-up between Isuzu and GM, which had continued since 1971, was terminated in April 2006. GM's shares in Isuzu were acquired by Mitsubishi Corporation, Itochu, and Mizuho Corporate Bank.

  Isuzu and GM state that they will continue to work together. In June 2006, they established an equally-owned company to jointly develop the next generation pickup and its derivative's platform.

■Isuzu and GM: they have terminated the capital tie-up. GM's shares were acquired by Mitsubishi Corporation, Itochu and other companies.

Isuzu and GM terminated the capital tie-up in April 2006, which had continued since 1971. Based on Isuzu's request, GM's 10.26% stake in the automaker was acquired by three companies including Japanese trading firms which are the automaker's strategic business partners.   The three companies - Mitsubishi Corporation, Itochu, and Mizuho Corporate Bank - now own, after the purchase, 3.72%, 4.23%, and 3.67% of Isuzu, respectively.

Sources: Isuzu's press release on Apr.11, 2006, etc.
■Isuzu: jointly developing with GM the next generation pickup and its derivative's platform

Isuzu and GM established LCV Platform Engineering Corporation (LPEC) within the premises of Isuzu's Fujisawa plant in June 2006, an equally-owned company to jointly develop the next generation pickup and its derivative's platform. It is capitalized at 100 million Yen.

Isuzu and GM worked together in the initial phase of developing the current Isuzu D-Max/Chevrolet Colorado. The next generation model's platform will be integrated and its development will be planned and managed by LPEC. Both automakers will use the jointly-developed platform: Isuzu will develop pickup and GM will develop its derivatives such as SUV.

Sources: Isuzu's press release on Jul. 13, 2006, etc.

■Isuzu: main business tie-ups with GM
■Engine supply	(as of September 2006)

	Production location	Supplied to	Started when	2004 result (units)
1.7L indirect diesel engine	Isuzu Engine Manufacturing Hokkaido	GM Colmotores (Colombia), GM Argentina	1987	2,200
1.7L direct injection diesel	ISPOL (Poland)	Opel, GM South Africa, GM do Brasil, GM Argentina	1999	239,000
6.6L direct injection diesel (Duramax 6600)	DMAX, Ltd. (Ohio, USA.)	GM North America	2000	202,000
3.0L direct injection diesel	Isuzu Fujisawa	Opel	Jun. 2001	4,400
		GM North America	1996	6,600

■The supply of truck components

Cabin for F-series medium-duty truck	Isuzu Fujisawa	GM North America	May. 1996	2,300
CKD for multi-purpose diesel vehicle	Isuzu Fujisawa, Pantja Motor (Indonesia)	GM India	Jun. 2004	16,900

■Production of vehicles on contract

Light Truck (Elf)	GM Janesville plant (Wisconsin, USA)	Isuzu America, GM North America	1994	4,700
1t Pickup Truck	GM Thailand	Isuzu Thailand	Jun. 2003	38,400

■Vehicle OEM supply

N-series light-duty truck	Isuzu Fujisawa	GM North America	1986	8,300
Multi-purpose gasoline vehicle	GM Shreveport plant (Louisiana, USA.)	GM Indonesia	Jun. 2005	3,200

Source: Isuzu Fact Book

■Isuzu: its OEM relationships with automakers other than GM
■Supplied by Isuzu to other automakers	(as of September 2006)

Supplied to	Products	Initial target annual volume	Sold under	Started when
Nissan	Elf (2-3 ton truck)	9,000 units	Atlas	1995
Nissan Diesel		6,000 units	Condor	1995
Mazda		6,000 units	Titan	2004
Renault	3.0L V6 Diesel engine	-	-	2002

■Supplied to Isuzu by other automakers

Supplied by	Products	Initial target annual volume	Isuzu's brand	Started when
Nissan	Civilian (micro bus)	840 units	Journey	1993
	Atlas (1-ton truck)	2,000 units	Elf 100	1995
	Caravan (van)	6,000 units	Como	1995

Source: Isuzu Fact Book

■Thailand: expanding annual production capacity to 350,000 pickups and strengthening the model's development structure

  Isuzu has close to a 40% share of the pickup market which in turn occupies 60% of the Thai new vehicle market. Thailand is Isuzu's global supply base for the model. The automaker completed the expansion of its plant in Thailand to 350,000 pickups a year in August 2006, bringing forward the scheduled completion for 2007. It is also strengthening the development structure for the model.

■Isuzu: expanding annual production capacity to 350,000 pickups in Thailand

In August 2006, Isuzu expanded the annual production capacity of the D-MAX by 30,000 to 350,000, which include export KD kits and vehicles produced on contract by GM Thailand. The 350,000 units are broken down into 200,000 produced by Isuzu Motors Co., (Thailand) Ltd.'s Samrong plant, 50,000 KD kits produced by Gateway plant, and 100,000 produced on contract by GM Thailand for export CBU's. The 2006 plan calls for the production of 340,000 including the MU-7, a SUV version of the D-MAX.

In 2004, Isuzu injected roughly 18.5 billion Yen in Isuzu Motors Co., (Thailand) Ltd. to increase its stake from 49.8% to over 70%, making the Thai company one of its consolidated subsidiaries (the other production companies in Thailand all became consolidated at the same time). The automaker planned in 2004 to complete the expansion of the Samrong plant's annual production capacity from 140,000 to 200,000 by 2007.

Sources: Isuzu's press release on Aug 8, 2006, etc.
■Strengthening development capability for pickups in Thailand

Isuzu will strengthen the development capability of ITA (Isuzu Technical Center of Asia Co., Ltd. established in 1991, made a wholly-owned subsidiary in 2004, with the current 170 strong workforce). In December 2006, the automaker will complete a building in Samutprakarn, which will house not only benchmark facilities but also the departments of prototype, testing and evaluation, currently located separately, under one roof.

Source: Isuzu's press release on Aug 9, 2006.

■Thai automotive market and Isuzu's pickup market share

(1,000 units)

		1998	1999	2000	2001	2002	2003	2004	2005
New Vehicle Sales	Pickup	81	121	146	164	234	309	369	433
	Others	63	97	116	133	176	224	257	270
	Total	144	218	262	297	410	533	626	703
Isuzu's Pickup Market Share		36%	40%	36%	40%	37%	40%	39%	37%

Source: Isuzu's press release on May 16, 2006.

■China: Isuzu upped its stake in Qingling Motors Co., Ltd. to 20% and is planning a full-scale production of diesel engines

  Isuzu increased its stake in Qingling Motors Co., Ltd. of China - a manufacturer of the Elf since 1985 - from 6.91% to 20% in June 2005. In September 2005, the automaker agreed with the Chinese automaker to consider establishing a new company to produce diesel engines. The new company would be producing not only small diesel engines but also diesel engines for large commercial vehicles and selling some of them to Chinese automakers.

  Isuzu is still taking a close look at producing large trucks in China, which was to start in 2007.

■Isuzu: the automaker upped its stake in Qingling Motors Co., Ltd. of China to 20% and is planning to establish a new engine plant

Isuzu increased its stake in Qingling Motors Co., Ltd. based in Chongqing, China by a takeover bid (which cost the Japanese automaker 8.8 billion Yen). The Chinese automaker has been producing the small Elf truck since 1985 and the medium-sized Forward truck since 2001. The production at the automaker including one ton pickups, SUVs and buses totaled about 30,000 in 2005.

In September 2005, Isuzu and Qingling Motors agreed to start the feasibility study on establishing a new company to produce engines. The Japanese automaker is carefully looking at the possibility of producing large trucks in China, taking to examine the business environment.

It has been reported in the Chinese press that the new company under study will take over the diesel engine production for the Elf currently carried out at Qingling Motors, and produce large diesel engines as well: the initial annual production capacity is forecast to be 100,000 engines, going up to 200,000 in the mid-term, some of which will be sold to Chinese automakers.

Sources: Isuzu's press release 05.6.27/05.9.21/06.5.16, etc

■Isuzu: production and sales in Thailand, Indonesia, China and the USA

(units)

		Production			Sales
		2003	2004	2005	2003	2004	2005
Thailand	Heavy/medium Trucks	4,308	5,664	5,449	3,550	5,240	5,589
	Light Trucks	3,444	5,364	5,919	4,014	4,905	5,542
	Pickup	127,516	141,345	319,643	123,842	139,768	165,582
	Total	169,351	245,447	331,011	131,406	149,913	176,713
Indonesia	Heavy/medium Trucks	261	212	244	276	256	304
	Light Trucks	4,839	6,068	5,088	4,763	5,567	5,010
	Panther	14,497	16,057	18,846	13,993	16,130	18,731
	Total	19,597	22,337	24,178	19,032	21,953	24,045
China	Light Trucks	22,000	17,000	19,000	21,963	16,312	18,192
	TF/UC	11,000	8,700	10,000	10,898	8,614	9,955
	Heavy Trucks	500	850	710	6,942	5,940	703
	Bus	125	300	170	113	257	170
	Total	33,625	26,850	29,880	39,916	31,123	29,020
U.S.A.	SIA	25,239	13,150	-	27,358	25,712	9,342
	GM Janesville	3,793	4,219	4,681	20,808	24,694	25,391
	Total	29,032	17,369	4,681	48,166	50,406	34,733

Source: Isuzu Fact Book
Note 1:	The pickup models for Thailand are the D-MAX (launched in May 2002), and the MU-7 (launched in November 2004) which is a seven seater SUV version of the D-MAX. Both models were facelifted in August 2006. The pickup production for 2005 was 193,286 (202,000 planned for 2006) for Thailand, 73,827 of export CBUs (produced on contract by GM, 78,000 planned for 2006), and 52,530 of KD sets (70,000 planned for 2006).
Note 2:	The Panther, which is produced in Indonesia, was jointly developed with GM on the 160 project and was sold in 2000. The model is a 10-seater vehicle designed exclusively for Asia and its layout can be changed depending on the number of passengers and cargo. It is produced at PT Pantja Motor with an annual capacity of 75,000. Isuzu has a 12.5% stake in the company.
Note 3:	The TF is one ton pickup and the UC is SUV.
Note 4:	The SIA and GM Janesville are both plants in the USA. The sales figures in the upper line represent the Rodeo/Axiom and in the lower line small and medium-sized trucks.

■Started producing small trucks in Russia. Expanding overseas distributor network in cooperation with Japanese trading firms

  Isuzu is strengthening its overseas distributor network which now includes newly established companies in order to build a structure early capable of selling 300,000 commercial vehicles a year. In the last year, new distributors were set up in Ukraine, Germany/Austria, Mexico, and Australia. Japanese trading firms have a stake in the distributors except in that of Australia.

  The automaker will start producing and selling small trucks in Russia and medium-sized buses in India.

■Strengthening overseas business in cooperation with trading firms
■Russia: starting to produce small trucks at UAZ

Isuzu will start a full-scale sales of the small NQR truck (the Elf) to be produced at UAZ (OAO Ulyanovsky Avtomobilny Zavod) which is under the umbrella of SSA (OAO Severstal-Avto) in Russia.

Isuzu supplied small trucks in SKD form to UAZ, which began to produce them in July 2006 and will sell them in Russia in its sales network and others under Isuzu brand. The Russian automaker plans to produce and sell 500 in 2006, 10,000 a year within the next three years, and 30,000 a year as a target for the future.

The automotive department of Severstal, Russia's largest steelmaker, was spun off as SSA in 2002, which owns UAZ and ZMZ (OAO Zavolzhsky Motonyj Zavod), an engine maker, as a holding company. UAZ is a truck manufacturer founded in 1941and located in Ulyanovsky, roughly 800 km east of Moscow.

Source: Isuzu's press release on July 11, 2006.
■Ukraine: establishing a sales company of trucks and buses jointly with Sojitz

Isuzu will set up Isuzu Automotive Company, Ukraine, which will sell trucks and buses made by Bogdan Corporation.

The new company came into being in May 2006, with capital of 25 million hryvnia (roughly 500 million Yen). Bogdan, Isuzu and Sojitz have a 50%, 30% and 20% stake, respectively.

Bogdan has been producing and selling small buses which are based on the platform of the Isuzu small Elf truck since 1999. In the future, Isuzu Automotive Company, Ukraine will be responsible for selling small trucks and buses made by Bogdan

3,123 Bogdan-made buses were shipped in 2005, with 3,500 expected for 2006. The target is to sell 20,000 buses a year including exports to neighboring countries.

Sources: Isuzu's press release on Feb. 28, 2006/Apr. 28, 2006
■Founded a sales company covering Germany and Austria jointly with Mitsubishi Corporation

In September 2006, Isuzu founded, jointly with Mitsubishi Corporation, Isuzu Sales Deutschland GmbH which imports and sells vehicles and spare parts in Germany and Austria. The company is capitalized at 3 million Euros (roughly 450 million Yen) and owned by Isuzu (20%) and Mitsubishi (80%).

Roughly 40,000 small trucks including about 9,000 pickups are sold yearly in the combined market of Germany and Austria. The new company plans to sell 400 Elf series and 900 of the D-MAX in 2007, with the target for 2010 of 800 Elfs and 2,300 D-MAXs

The new company for Germany and Austria is the third sales company in Europe jointly set up with Mitsubishi Corporation following Isuzu Benelux N.V. (Isuzu with a 10% stake, Mitsubishi 10%, and local capital 80%) founded in December 2004 and Isuzu Iberia S.L. (Isuzu with a 20% stake, Mitsubishi 20%, and local capital 60%) founded in February 2005.

Source: Isuzu's press release on Sep. 13, 2006.
■India: producing medium-sized buses at Swaraji Mazda

Isuzu and Swaraj Mazda of India concluded an agreement on the production and sales of medium-sized buses in India. In 2007, Isuzu will start supplying the medium-sized buses in CKD form to Swaraj and selling them under Isuzu brand in India. The dealers will be selected out of roughly 130 Swaraji-exclusive dealers.

Isuzu plans to sell 100 in 2007 and 1,000 in 2009. It will also look at producing small trucks and medium-sized trucks in India.

Swaraj Mazda was founded in 1983 to produce and sell Mazda's commercial vehicles. The company sold roughly 12,000 in 2005. Mazda, however, pulled out of its tie-up with the Indian company to produce and sell commercial vehicles and, later in August 2005, dissolved the capital tie-up, too. Sumitomo Corporation is the biggest shareholder in the Indian company with a 41% stake.

Source: Isuzu's press release on July 3, 2006.
■Mexico: started selling small trucks. Set up a sales company jointly with Mitsubishi Corporation.

In November 2005, Isuzu started selling the small Elf truck in Mexico which has concluded an economic partnership agreement with Japan. The automaker sold 300 Elfs in 2005 (or what was left of the year after the start of the sales), plans to sell 1,800 in 2006 and 2,300 in 2007.

Isuzu Motors de Mexico S.de R.L., which was set up in July 2005 jointly with Mitsubishi Corporation, is responsible for importing and selling Isuzu vehicles in Mexico. The company is capitalized at 40 million Mexican pesos (roughly 400 million Yen), out of which 51% is owned by Isuzu and 49% by the Japanese trading firm.

Source: Isuzu's press release on Nov. 7, 2005.
■Australia: Isuzu made a sales company of commercial vehicles its wholly-owned subsidiary

Isuzu will increase its stake in Isuzu General Motors Australia (IGM), the automaker's Australian sales subsidiary, from 60% to 100% and will change the sales company's name to Isuzu Australia Limited. IGM sold 7,585 Isuzu vehicles in 2005.

Sources: Isuzu's press release on Nov. 2, 2005, etc

■Isuzu's light vehicle annual production volume will stay at 270,000 level (forecast by CSM Worldwide)

  CSM Worldwide forecasts that Isuzu brand's light vehicle annual production volume in the world will stay at 270,000 level (light vehicles effectively comprise one ton pickups and SUVs, and exclude medium-sized and large trucks and buses, and the small Elf trucks. Only Isuzu brand pickups are counted in and non-Isuzu brand pickups are not).

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