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5. Toyota Industries Corporation Business Report FY ended 2015

Automotive division performance by business
1)
-Despite sluggish sales in the Japanese market, the global market continued to expand as a result of strong sales in the Chinese and North American markets. In addition, the European economy recovered.

Vehicle Business
-Sales decreased by 2% year-on-year. Unit sales of the Toyota "RAV4" increased while those of the "Vitz (Yaris overseas)" registered a decrease.

Engine Business
-Sales decreased by 5% year-on-year. This is attributable to a decrease in sales of KD diesel engines and AR gasoline engines.

Air-Conditioning Compressor Business
-Sales increased by 18% year-on-year, resulting from an increase in sales overseas such as North America and China while Japan market decreased.

Electronics Parts, Foundry and Others
-Sales increased by 22% year-on-year because of the increased production volume.

Developing new Diesel engine pacing with Toyota Group's realignment

-Toyota Motor Corporation announced that it will consolidate its development and production operations for diesel engines, manual transmissions, and brake systems into its main suppliers within the Toyota Group. Development and production of diesel engines will be integrated into Toyota Industries Corporation, while that of manual transmissions will be integrated into Aisin AI Co., Ltd., starting in 2016. Production of brake systems and components, which is now handled at Denso Corporation and Aisin Seiki Co., Ltd. in central Japan, will be consolidated into a new plant of Advics Co., Ltd. in the Aisin Group. The new plant is scheduled to be established in Handa, Aichi Prefecture around January 2016. The integration of the powertrain businesses will enable the Toyota Group to improve its development capability in each field and to allocate its management resources more efficiently, especially to the area of next-generation safety and environmental technologies. (From an article in the Nikkan Jidosha Shimbun on November 29, 2014)

-The Company started production of a new diesel engine at its Higashichita Plant in Handa City, Aichi Prefecture, Japan in June 2015. The new "1GD-FTV" is a 2.8-liter direct-injection turbo diesel engine. The Company jointly developed the new diesel engine with Toyota Motor Corporation. The new 1GD-FTV diesel engine has improvements in thermal efficiency and environmental performance over a conventional diesel engine. The new engine is mounted on the partially redesigned "Land Cruiser Prado" that was launched by Toyota Motor on June 17, 2015. (From an article in the Nikkan Jidosha Shimbun on June 23, 2015)

Mass production preparation of Parts for Fuel Cell Vehicle (FCV)

-The Company has started preparation for mass production of air compressors used in fuel cell vehicles (FCVs). The Company will establish a new production technique to efficiently mass-produce its world-first six-lobe helical roots-type rotors. The Company will construct a new processing line at its plant in Obu City, Aichi Prefecture within a year or two. Currently, the Company produces the helical roots-type rotors by entirely cutting an aluminum round-bar with a gear hobbing machine. In contrast, the material is forged before cutting in the new production method to improve production efficiency. The new technique enables mass production of the parts with a monthly production capacity of 100 to 1000 units. The Company has just started supplying parts for FCVs, but it has already started preparing for mass production. (From an article in the Nikkan Jidosha Shimbun on January 9, 2015)

-The Company has developed a new air compressor and a hydrogen recirculation pump for Toyota Motor Corporation's all-new "MIRAI" fuel-cell vehicle (FCV). The air compressor supplies oxygen to the fuel cell (FC) stack of the FCV, employing the world's first six-lobe helical roots system. It can cope with a change in the air flow, establishing a highly efficient air intake system. The Company integrated the hydrogen recirculation pump in the FC stack, achieving downsizing and lightweight of the FC stack. Furthermore, a humidifier in the FC stack is no longer necessary as the Company improved efficiency of the system. (From an article in the Nikkan Jidosha Shimbun on November 20, 2014)

ISO26262 certification for Software development process

-The Company has received ISO 26262 certification for its software development process from TUV SUD AG, a German-based auditing company. The ISO 26262 is a functional safety standard for automobiles. With the acquisition of the certification, the Company has proved that its software development processes for in-vehicle electronic control systems are compliant with ASIL-D, the highest safety integrity level in the standard. The Company regards automotive electronics parts as key products to expand sales of its parts business and is engaged in the development of these products. The international certification will be an objective proof of the Company's technological level in software development for automotive electronics parts. The ISO 26262 defines requirements and processes to ensure functional safety in the development of software for electronic control systems, and was introduced as an international standard in November 2011. (From an article in the Nikkan Jidosha Shimbun on January 16, 2015)

(Sales categorized based on customers' business lines)

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

Business initiatives toward medium term growth

Solution: Materials Handling Equipment (Lift truck)
-Expanding market share of lift trucks in major markets
-Development of fuel cell lift truck
 *Carried out field tests with the government (at Kansai International Airport since 2015)

Key Components: Car Air-conditioning Compressor
-Fixed displacement type: Developing the price competitive models for emerging countries
-Variable displacement type: Developing next-generation models with further greater fuel efficiency
-Electric type: Developing more compact and lighter weight, improve quiet and fuel-efficient models
-Establishing the global production network centered the factories in Japan.

Mobility: Engine (Diesel Engine)
-Consolidate Toyota Group's diesel engine development and production to Toyota Industries.

R&D Facilities

-The "Research & Development Center", which is located in Kyowa, Obu City, Aichi Pref., undertakes the advanced development of fundamental technologies which will be the keys to the future products of each division, and advanced research for the development of new products for new businesses as well as development of materials and other technologies that will come to serve as the common foundation for all divisions.

Development theme (Example)

• A wide variety of functional parts for use in fuel cells
• Non-contact power supply technologies for use in clean logistics
• Super smooth coatings for inside car air-conditioning compressors
• Three dimensional fabric reinforced composite technologies

Product Development

Automobile

• New type diesel engine
• Turbocharger
• High-efficient variable-displacement type compressor
• Fixed-displacement type compressor for compact and light vehicle
• Electric type compressor for hybrid vehicle
• Core components for Toyota's fuel-cell vehicle, the "MIRAI"
• Power supply equipment for hybrid vehicle

Next generation DC-DC converter for hybrid vehicle
-The Company has developed a next-generation DC-DC converter for hybrid vehicles. The Company has commercialized the DC-DC converter based on the Toyota New Global Architecture (TNGA) platform. The DC-DC converter is compatible with multiple models and has flexible specification which supports both automatic assembly in Japan and manual assembly outside Japan. The new DC-DC converter is 60% lighter in weight and 50% smaller in volume compared to the one mounted in the current Toyota "Prius". The DC-DC converter also achieves a 20% reduction in the number of components. These achievements were highly evaluated by Toyota, and a "Superior TNGA Promotion Award" was given to the Company. The Company will start producing and supplying the DC-DC converter at its Anjo Plant (in Anjo City, Aichi Prefecture) in the second half of the fiscal year ending in March 2016. (From an article in the Nikkan Jidosha Shimbun on April 28, 2015)

New scroll-type fixed-displacement compressor for compact and light vehicle
-The Company has developed a new scroll-type fixed-displacement compressor and started supplying the new product to Daihatsu Motor Co., Ltd. The new compressor is composed of three fewer parts than a previous compressor which is made of about 50 parts. With 5% lighter weight, the new compressor contributes to improving fuel efficiency of vehicles. The Company used its own equipment to process parts with high precision technology in-house. This has enabled the new compressor to achieve a 6% reduction in sound pressure and an improvement in quietness. The Company has installed a new production line at its plant in Higashiura-cho, Aichi Prefecture and started production to supply the new product for use in the all-new "Move" that was launched by Daihatsu in December 2014. The Company will propose the new product to various automakers to expand its sales. (From an article in the Nikkan Jidosha Shimbun on February 10, 2015)

Increasing production of compressors in China

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-The Company will double its annual car air-conditioning compressor production in China to 4 million units by the fiscal year ending March 2017 (FY 2016). In December 2013, the Company has established a joint venture in Shandong Province. The new subsidiary, Yantai Shougang TD Automotive Compressor Co., Ltd., currently has annual capacity to produce 2 million car air-conditioning compressors. The annual capacity at the plant will be increased to 2.5 million units by FY 2016. In autumn 2014, the company will start operating another new manufacturing subsidiary in Jiangsu Province to produce additional 1.5 million compressors per year. With the increased capacity, Toyota Industries is poised to meet the growing needs in the Chinese market and expand its market share in China from current 10% to 15% by FY2016. (From an article in the Nikkan Jidosha Shimbun on January 17, 2014)