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5. JATCO Ltd. Business Report FY ended Mar. 2016

JATCO Ltd. Business Report FY ended Mar. 2016

Business Overview

-The Company announced that its total global production volume of continuously variable transmissions (CVTs) reached 30 million units at the end of March 2016. The Company is the world's first individual manufacturer that has achieved a cumulative CVT production volume of 30 million units. The Company achieved the milestone in 18 years and 8 months from the start of CVT production in 1997. The Company started production of the world's first 2-liter class metal belt-type CVT in Japan in 1997. Sales volume of its CVTs has increased thanks to growing global demand for improved fuel efficiency. The Company built plants in Mexico in 2005, China in 2009, and Thailand in 2013 to expand its production capability outside Japan. In fiscal year ended in March 2016, the Company produced 4.32 million CVTs, 57% of which (2.46 million units) were produced outside Japan. (From an article in the Nikkan Jidosha Shimbun on April 7, 2016)

Recent Development in Japan

-The Company will add new lines to produce continuously variable transmissions (CVTs) in Japan. This move is to meet growing demand in the global market for CVTs in midsize and large-sized vehicles. Considering an increase in cost competitiveness in Japan due to a weak yen and to ensure the quality of CVTs globally, the Company will expand production in Japan. The new lines will be built at the Fuji Area No.1 plant near the headquarters in Fuji City and are planned to start production of the CVT8 for midsize and large-sized vehicles at the end of the fiscal year to end in March 2016. The plant's initial production capacity of 72,000 units per year will be expanded to 240,000 units in the second half of 2016. Construction of a parts processing line and an assembly line will begin in the summer of 2015. The Company will invest approx. JPY 6 billion in the first phase to increase monthly production to 6,000 units. It will later invest additional JPY 7 billion to boost the capacity to 20,000 units a month in the second half of 2016. (From an article in the Nikkan Jidosha Shimbun on June 22, 2015)

-The Company has started production of continuously variable transmissions (CVTs) for hybrid systems, the Jatco CVT8 Hybrid, in Japan. The CVT8 Hybrid has already been produced at its plant in Mexico and has been installed on Nissan Pathfinder Hybrid for North America. The Company has decided to start production of the CVT8 Hybrid in Japan as the CVT is used on the new Nissan X-Trail Hybrid to be launched in Japan. The Company's Yagi plant located in Nantan City, Kyoto, produces both the Jatco CVT8 (for gasoline models) and the Jatco CVT8 Hybrid. (From an article in the Nikkan Jidosha Shimbun on April 8, 2015)

Recent Development Outside Japan

-The Company has postponed a planned production capacity expansion to 700,000 annual units at its plant Thailand. Compared with forecasts when the plant was initially put into operation, demand has slumped, and current capacity is more than is needed for production. Demand in Southeast Asia is expected to increase in the medium-term, and production efficiency for parts and units will be improved for the present. The Thailand plant is the Company's third plant overseas plant, and started production in 2013. It has an annual production capacity of 500,000 vehicles, and is used to produce continuously variable transmissions (CVT) for small vehicles. The Company had planned to raise capacity to 700,000 vehicles, but growth in local car production has stalled due to turmoil in the market. (From an article in the Nikkan Jidosha Shimbun on January 21, 2016)

Contracts

-Mitsubishi Motors Corporation has selected Jatco's new-generation continuously variable transmission "CVT8" for the petrol version of the new Outlander. The new CVT8 achieves a 5% improvement in driving efficiency over the CVT2 fitted on the previous‐generation Outlander. As a result, the new CVT8 offers improved acceleration performance and fuel economy. The new Outlander is the Company's second model that adopts the new CVT8, after the RVR. The new CVT and optimization of the cooperative control system between engine and CVT have improved fuel economy of the new Outlander by 0.8 km/liter to 16.0 km/liter in two-wheel drive models and by 0.2 km/liter to 14.6 km/liter in all-wheel drive models under the JC08 testing standard. (From an article in the Nikkan Jidosha Shimbun on June 19, 2015)

-The Company announced that its transmissions are installed on the Nissan X-Trail Hybrid. The Jatco CVT8 Hybrid transmission was designed for use in for front-wheel drive hybrid vehicles. (From a press release on May 13, 2015)

Product Development

Jatco CVT7 W/R (Wide Range)
-The Company and Nissan Motor Co., Ltd. have jointly developed the "CVT7 W/R (Wide Range)", a new continuously variable transmission (CVT) for small front-wheel drive vehicles. The CVT7 W/R was developed based on the Jatco CVT7 and has a larger CVT ratio coverage. The Company has started producing the new CVT at its plant in China. The CVT7 W/R is used for Nissan's new model "Lannia" that will be on sale in China in October 2015. The Company realized world's largest CVT ratio coverage of 8.7 with the CVT7 W/R, using newly developed steel belts and improved pulleys. Furthermore, the Company has improved fuel efficiency through the reduction of friction losses by adopting an improved small oil pump. (From an article in the Nikkan Jidosha Shimbun on October 15, 2015)

R&D Facilities