Toyota Motor (TM)

Japan as the Center of the Global Operations. In Japan, Toyota aims to maintain steady profitability in the Japanese market, which is the center of its global operations, and to develop products and to establish the global core base which leads and supports operations in all other regions. Toyota believes that it is important to maintain and endeavor to improve its high market share in Japan and is committed to maintaining its market leadership in Japan by striving to achieve a consistent market share (excluding mini-vehicles) each year. Toyota held a domestic market share (excluding mini-vehicles) on a retail basis of 45.8% in fiscal 2007, 45.6% in fiscal 2008 and 46.0% in fiscal 2009.

Review of Supply Framework Responding to the Rapid Change in Demand in the North American Market. In North America, one of Toyota’s most significant markets, Toyota expanded its production capacity in the past few years and improved the product lineup in order to secure steady profits and to establish a self-reliant operational framework. As a result of the downturn in the market stemming from the financial crisis since the fall of 2008, Toyota’s North American unit sales on a consolidated basis decreased substantially from 2.96 million units in fiscal 2008 to 2.22 million units in fiscal 2009. While Toyota continues to face difficulty in the North American market, the North American market is an important market representing approximately 29% of its total global unit sales on a consolidated basis in fiscal 2009. The increased sales of models such as the Venza, a model tailored specifically to North America which was introduced at the end of 2008, and the Lexus RX, which was fully-remodeled in February 2009, provide foundational support for Toyota’s total sales. In addition, Toyota plans to increase its share in the North American market, with the introduction of the new Prius in May 2009 and the planned introduction of a Lexus-brand hybrid vehicle. In fiscal 2009, Toyota brand vehicles accounted for approximately 83%, Lexus brand accounted for approximately 12% and Scion line-up vehicles accounted for approximately 5% of the vehicle unit sales in the United States, respectively.

Forging Solid Footing in the European Operation with a Focus on Environmental Responsiveness. In the European market, Toyota is aiming to establish a presence comparable to that of major European automotive manufacturers. Although Toyota’s European unit sales on a consolidated basis decreased by 17.3% compared to fiscal 2008 to 1.06 million units in fiscal 2009 and market share fell short of the level achieved in fiscal 2008 and accounted for only 5.3%, Toyota retained its position as the sixth largest manufacturer operating in the European market, as in the previous fiscal year. Sales results in Western European countries failed to reach the levels achieved in the previous year as a result of significant deterioration in the automotive market stemming from the financial crisis. However, sales of the Aygo and the Prius remained steady in this region, reflecting the increasing demand for compact cars and environmentally-friendly cars. Sales in certain Western European countries benefited from government economic stimulus initiatives implemented in some countries in the region, as exemplified by the scrap incentive program in Germany. The market also slowed significantly in Eastern European countries. In particular, significant market contraction in Russia, which experienced a rapid decline in

exchange rates against both the U.S. dollar and Japanese yen, and other countries in the region resulted in Toyota’s Eastern European unit sales in fiscal 2009 failing to reach the level achieved in the previous year.

Establishing an Advantage in the Increasingly Significant Asian Market. In light of the importance of the Asian market that is expected to grow in the long term, Toyota aims to build an operational framework that is efficient and self-reliant as well as a predominant position in the automotive market in Asia. Operating income for Asia in fiscal 2009 decreased significantly compared to fiscal 2008. This decrease can be partly attributed to the slowdown in the Asian market from the latter half of fiscal 2009 due to the economic downturn experienced simultaneously throughout the world, stemming from the financial crisis. However, Toyota also made strategic investments in this market earlier than its major global competitors and developed relationships with local suppliers in the region. While competition in Asia is further increasing, Toyota believes that its existing local presence in the market provides it with a competitive advantage and expects to be able to promptly respond to demand for vehicles in the region.

Promoting Vehicle Sales in Central and South America, Oceania, Africa and the Middle East. With respect to Central and South America, Oceania, Africa and the Middle East, unit sales decreased other than in the Middle East as a result of a downturn in the markets. As a result, in fiscal 2009, Toyota’s consolidated unit sales in the region was approximately 1.44 million units, a decrease of approximately 5.5% from fiscal 2008. The core models in this region are global models such as the Corolla, IMV and the Camry, which are designed to satisfy regional demands, while keeping production costs down by using common platforms and core parts and components with vehicle models in other regions. Furthermore, Toyota Motor Corporation Australia Ltd., Toyota’s vehicle production base in Australia, plans to commence production of the Camry Hybrid from the beginning of 2010.

Securing Stable Development in China. Toyota has been conducting its operations in China through joint ventures, and its success in producing products that meet local demands and in establishing its sales and service network has significantly contributed to Toyota’s profits. Based on the firm business foundation that it has established, Toyota is conducting its operations with the aim to promote further growth and increase in profitability through further development of its sales and service network and expansion of its product lineup.

Japan as the Center of the Global Operations. In Japan, Toyota aims to maintain steady profitability in the Japanese market, which is the center of its global operations, and to develop products and to establish the global core base which leads and supports operations in all other regions. Toyota believes that it is important to maintain and improve its high market share in Japan and is committed to maintaining its market leadership in Japan by striving to achieve a consistent market share (excluding mini-vehicles) each year. Toyota held a domestic market share (excluding mini-vehicles) on a retail basis of 44.3% in fiscal 2006, 45.8% in fiscal 2007 and 45.6% in fiscal 2008. Amid the continued market downturn and despite increased competition from its domestic competitors, Toyota maintained its market share of over 45% in fiscal 2008 due to the active introduction of new and remodeled car models such as the Allion, Premio, Noah, Voxy, ist, Corolla Rumion, Vanguard, MarkX Zio and the Crown. In addition, in order to respond flexibly to global demand fluctuations, Toyota has implemented the “Global Link Production System”. Specifically, Toyota strives to improve flexible production capabilities for various car models in its plants in Japan, thereby establishing a production system that can respond quickly and flexibly to the fluctuating demands of the overseas markets. Furthermore, Toyota aims to improve its production capacity and operation rate through putting in place a mutual support structure at a global level by maintaining an encompassing view of trends in demands, as well as the operating conditions of plants, in each region in which it operates.

Self-Reliant Growth in North America. In North America, one of Toyota’s most significant markets, Toyota aims to secure steady profits and to establish a self-reliant operational framework. Toyota continues to seek further growth, and in the past few years it has expanded its production capacity and improved its product lineup. Toyota’s North American unit sales on a consolidated basis grew from 2.94 million units in fiscal 2007 to 2.96 million units in fiscal 2008, despite the downturn in the economy due to the subprime mortgage crisis. In fiscal 2008, Toyota’s North American unit sales represented approximately 33% of its total global unit sales on a consolidated basis. Toyota believes its continuing growth in unit sales in the North American market is driven by the successful introduction of products such as the fully remodeled Tundra, Highlander, the xB, xD of the Scion line-up, the Lexus LS Hybrid and IS F. Toyota believes that the unit sales for fuel-efficient vehicles such as the Prius and the Camry Hybrid increased primarily due to increasing gasoline price. Further, in fiscal 2008, Toyota brand vehicles accounted for approximately 82%, Lexus brand accounted for approximately 13% and Scion line-up vehicles accounted for approximately 5% of the vehicle unit sales in the United States, respectively.

Achieving Steady Growth in Europe. In the European market, Toyota is aiming to establish a presence within the automotive industry, comparable to that of European automotive manufacturers. In 2007, while the overall European automotive market grew by 5.8%, Toyota’s European unit sales grew to approximately 1.26 million units, an increase of approximately 10% compared to 2006. Toyota’s European unit sales on a consolidated basis grew to approximately 1.28 million units in fiscal 2008, an increase of approximately 4.9% compared to fiscal 2007 levels.

Establishing Predominance in the Developing Asian Market. In light of the growing importance of the Asian market, Toyota aims to build an operational framework that is efficient and self-reliant as well as a predominant position in the automotive market in Asia. Operating income for Asia in fiscal 2008 doubled as compared to fiscal 2007, with favorable sales in Indonesia and increase in production capacity in Thailand responding to the increase in demand for IMV models (Hilux and Fortuner) from outside Asia. Toyota also made substantial investments in this market earlier than its major global competitors and developed relationships with local suppliers in the region. While competition in Asia is further increasing, Toyota believes that its existing local presence in the market provides it with a competitive advantage and expects to benefit from its early entrance into the market as demand for vehicles in the region continues to grow. Toyota is aiming to further increase its competitiveness by improving product line-up offered in the region and increasing local procurement to decrease its exposure to foreign currency exchange fluctuations. For example, at its Thailand plant, Toyota commenced production of the Vios in 2002 and Wish in 2003. Toyota also began producing IMV models (Hilux, Fortuner and Innova) in Thailand, Indonesia, India, the Philippines and Malaysia in fiscal 2005 and in Vietnam in fiscal 2006. Furthermore, with increased production capacity, the Thailand plant now produces IMV models (Hilux, Fortuner and Innova) for sale outside of Asia, including Australia and the Middle East, and is contributing greatly to the expansion of Toyota’s automotive business. Furthermore, Toyota Motor Thailand Co., Ltd., Toyota’s vehicle production base in Thailand, plans to commence production of the Camry Hybrid in 2009. In addition, the engine production base in Thailand plans to increase diesel engine production capacity from the current 200 thousand units per year to 350 thousand units per year, which would increase engine production capacity including gasoline engines to 650 thousand units per year. In India, Toyota is actively developing its business through local production and sales, and decided to construct the second plant with an annual production capacity of 100 thousand units. In 2010, this plant is scheduled to commence production of the Corolla and other passenger vehicles such as newly developed compact cars.

Promoting Vehicle Sales in Central and South America, Oceania, Africa and the Middle East. In recent years, unit sales in each of Central and South America, Oceania, Africa and the Middle East has increased rapidly. In fiscal 2008, Toyota’s consolidated unit sales was approximately 1.53 million units, an increase of approximately 17.9% from fiscal 2007. Increase in the sale of the Corolla in Brazil, IMV models (Hilux and Fortuner) in Argentina and the Camry in Australia all contributed notably to the increased unit sales in the region. These models are all global models which are designed to satisfy regional demands, while keeping production costs down by using common platforms and core parts and components with vehicle models in other regions. Furthermore, Toyota Motor Corporation Australia Ltd., Toyota’s vehicle production base in Australia, plans to commence production of the Camry Hybrid from the beginning of 2010. In the Middle East, demand for sport-utility vehicles such as the Land Cruiser is on the rise, and Toyota plans to expand supply capacity of the Land Cruiser to this region. In these regions, which are expected to become increasingly more important to Toyota’s business strategy, Toyota aims to develop new products which meet the demands of each region, increase production and further promote sales.

Securing Stable Development in China. Toyota has been conducting its operations in China through joint ventures, and its success in producing products that meet local demands and in establishing its sales and service network has significantly contributed to Toyota’s profits. Based on the firm business foundation that it has established, Toyota is conducting its operations with the aim to promote further growth and increase in profitability through further development of its sales and service network, increased production capacity and expansion of its product lineup.

Maintaining Preeminence in Japan. In Japan, Toyota aims to maintain steady profitability in the Japanese market, which is the center of its global operations, and to establish the global core base which leads and supports the operations in all other regions. Toyota believes that it is important to maintain and improve upon its high market share in Japan and is committed to maintaining its market leadership in Japan by consistently striving for a market share (excluding mini-vehicles) of over 40% every year. Toyota held a domestic market share (excluding mini-vehicles) on a retail basis of 44.5% in fiscal 2005, 44.3% in fiscal 2006 and 45.8% in fiscal 2007. Amid the continued market downturn and despite increased competition from its domestic competitors, Toyota maintained its market share of over 45% in fiscal 2007 due to the active introduction of new and remodeled car models such as the Corolla, Lexus LS, Auris and Blade. In the highly competitive Japanese market, Toyota is repositioning its retail channels under a new product and retail strategy in order to respond effectively to evolving consumer preferences and structural changes in the market. Under this new strategy, Toyota reorganized and strengthened its retail network in Japan to better cater to customer demand patterns. Specifically, Toyota combined the “Netz” and “Vista” sales channels into a new “Netz” channel in May 2004 and launched the Lexus brand in Japan in August 2005. In addition, from March 2006, Toyota commenced a new marketing effort, which further distinguishes the identities of the Toyota, Toyopet and Corolla sales channels through their visual appearances, in order to further pursue customer satisfaction in all sales channels including the Netz sales channel.

Self-Reliant Growth in North America. In North America, one of Toyota’s most significant markets, Toyota aims to secure steady profits and to establish a self-reliant operational framework. Toyota continues to seek further growth, and in the past few years it has expanded its production capacity and improved its product lineup. Toyota’s North American unit sales maintained strength in fiscal 2007,

supported by consumer spending in the United States. Toyota’s North American unit sales on a consolidated basis grew from 2.56 million units in fiscal 2006 to 2.94 million units in fiscal 2007. In fiscal 2007, Toyota’s North American unit sales represented approximately 35% of its total global unit sales on a consolidated basis. Toyota believes its continuing success in the North American market is driven by the successful introduction of products such as Yaris, Camry HV, FJ Cruiser, Lexus GS and HV, and the fully remodeled Camry Sedan and Lexus ES. In addition, sales of Corolla, Sienna, RAV4 and Tacoma, which are Toyota’s core models, the Prius and the xA, xB and tC of the Scion line-up, targeted at young drivers, continued to be strong. In February 2007, the new Tundra model was officially introduced in the full-sized pick-up truck market, which completed the lineup in North America. In 2006, light trucks accounted for approximately 43% of Toyota’s vehicle unit sales in the United States, while passenger vehicles accounted for approximately 57%. Further, in 2006, Toyota brand vehicles accounted for approximately 80%, Lexus brand accounted for approximately 13% and Scion line-up vehicles accounted for approximately 7% of the vehicle unit sales in the United States, respectively. Toyota has increased its production capacity in North America and plans to continue to grow its North American business. Toyota commenced production of the Camry Hybrid in October 2006 in Kentucky and started to operate its new Texas plant (Toyota Motor Manufacturing, Texas, Inc.) in November 2006. Toyota also commenced production at Subaru’s Indiana plant in April 2007. In addition, Toyota plans to commence production at the second plant in Canada in 2008 and at the eighth North American plant in Mississippi in 2010. As a result, the local production capacity is expected to reach 2.17 million units.

Achieve Steady Growth in Europe. In the European market, Toyota aims to establish its presence and to develop Europe into a region generating high levels of profit, following Japan and North America. In 2006, while the overall European automotive market grew by 3%, Toyota’s European unit sales grew to approximately 1.14 million units, an increase of approximately 13% compared to 2005. Toyota’s European unit sales on a consolidated basis grew to approximately 1.22 million units in fiscal 2007, an increase of approximately 19.6% compared to fiscal 2006 levels. Toyota is committed to achieving further growth in Europe by enhancing cost competitiveness by increasing local production and procurement thereby reducing its exposure to currency fluctuations, as well as expanding its model lineup by providing more models with diesel engines and actively introducing hybrid models. Furthermore, during fiscal 2007, Toyota continued to strengthen its cost reduction efforts in production, development, and sales and marketing. The sales expansion of the Aygo, Yaris, Corolla and RAV4 has been a major factor behind Toyota’s growth in the European market. As a result of the increased production capacity in Turkey, France, the United Kingdom plants and the Czech Republic plant, which is a joint venture with PSA Peugeot Citroën, the total annual production capacity in Europe increased from 775 thousand units in 2005 to 805 thousand units in 2006. In addition, Toyota built a new plant in Russia in order to meet the growing market in Russia. Starting December 2007, Toyota will produce 20 thousand units of Camry annually. In 2006, local production reached approximately 71% of Toyota vehicles sold in Europe.

Developing Self-Reliance in Asia. In Asia, Toyota aims to build an operational framework that is efficient and self-reliant. Although the automobile market in Asia was momentarily depressed following the Asian currency crisis in 1997, the market has since made a strong recovery and continues its growth. Toyota believes that the market in Asia continues to offer substantial growth opportunities. Toyota believes one factor behind its success in the market is strong sales of core models such as the Hilux, Corolla and VIOS, a new subcompact car using the same platform as the Yaris/Echo. Toyota also made substantial investments in this market earlier than its major global competitors and developed relationships with local suppliers in the region. While competition in Asia is increasing, Toyota believes that its existing local presence in the market provides it with a competitive advantage and expects to benefit from its early entrance into the market as demand for vehicles in the region continues to grow. Toyota plans to further increase its competitiveness by improving product line-up offered in the region and increasing local procurement to decrease its exposure to foreign currency exchange fluctuations. For example, at its Thailand plant, Toyota commenced production of the VIOS at the end of 2002 and, in

order to strengthen its product line-up, commenced production of the Wish at the end of 2003. Toyota’s IMV Project, which was launched in 2004, further pursued Toyota’s foregoing plans and aspires to produce an optimal production and supply network on a worldwide scale. The manufacture of vehicle models based on the IMV Project began in Thailand, Indonesia, India, Philippines and Malaysia in fiscal 2005 and in Vietnam in fiscal 2006. The IMV model has been introduced in over 140 countries and regions including Australia, Middle and Near East, Europe and Africa, in addition to the market in Asia. Furthermore, Toyota is actively expanding its business in India through local production and sales.

Develop Business Foundations in China. Toyota is conducting its operations in China with the aim to establish a firm business foundation in the Chinese market and to implement its growth strategy. Through Toyota’s joint ventures, it continues to establish its sales and service network, increase production capacity and expand its product lineup. Tianjin FAW Toyota Motor Co., Ltd., Toyota’s joint venture with China FAW Group Corporation commenced sales of the VIOS in November 2002. In September 2003, the production of the Land Cruiser Prado started at Sichuan Toyota Motor Co., Ltd. with an annual production capacity of 5 thousand units in September 2003, followed by the start of production of Land Cruiser vehicles at the Changchun Plant of China FAW Group Corporation with an annual production capacity of 10 thousand units in October 2003. In February 2004, production of the Corolla was started at the first plant of Tianjin FAW Toyota Motor Co., Ltd. with an annual production capacity of 30 thousand units. The production of the Crown and REIZ started in March and October 2005 respectively at the second plant of Tianjin FAW Toyota Motor Co., Ltd. with a total annual production capacity of 100 thousand units. In May 2007, production of the Corolla was commenced at the third Tianjin plant with an annual production capacity of 200 thousand units. In April 2007, the Tianjin FAW Toyota Engine Co., Ltd., a joint venture established by Toyota and China FAW Group Corporation began production of ZR engines at the second plant with an annual production capacity of 220 thousand units. In March 2004, Toyota and China FAW Group Corporation established a joint venture, FAW Toyota Changchun Engine Co., Ltd., which plant commenced the production of V6 engines in December 2004 with an annual production capacity of 130 thousand units. In September 2004, Toyota and China FAW Group Corporation executed a basic agreement to cooperate in the promotion and development of hybrid vehicles in China and commenced the assembly of the Prius in China in December 2005. In February 2004, Toyota and Guangzhou Automobile Group Co., Ltd. established a joint venture, Guangqi Toyota Engine Co., Ltd., which plant commenced the production of engine parts and gasoline engines in 2005. Further in September 2004, Toyota and Guangzhou Automobile Group Co., Ltd. established a joint venture, Guangzhou Toyota Motor Co., Ltd., in which the plant commenced production of the Camry in May 2006 with an annual production capacity of 100 thousand units and also plans to expand its annual production capacity to 200 thousand units and commence production of the Yaris in mid 2008, with an expected annual production of 80 to 90 thousand units.

Maintaining Preeminence in Japan. In Japan, as the center of Toyota’s global business operations, Toyota aims to secure steady profits and to establish the global core base which leads and supports the operations in all other regions. Toyota is committed to maintaining its market leadership in Japan by consistently striving for a market share (excluding mini-vehicles) of over 40% every year. Toyota, excluding Daihatsu and Hino, held a domestic market share (excluding mini-vehicles) on a retail basis of 42.9% in fiscal 2004, 44.5% in fiscal 2005 and 44.3% in fiscal 2006. Amid the continued market

downturn and despite increased competition from its domestic competitors, Toyota maintained its market share of over 44% in fiscal 2006 due to the active introduction of new and remodeled car models such as, the Vitz, Ractis, Belta, RAV4 and Estima. In the highly competitive Japanese market, Toyota is repositioning its retail channels under a new product and retail strategy in order to respond effectively to evolving consumer preferences and structural changes in the market. Under this new strategy, Toyota reorganized and strengthened its retail network in Japan to better cater to customer demand patterns. Specifically, Toyota combined the “Netz” and “Vista” sales channels into a new “Netz” channel in May 2004 and launched the Lexus brand in Japan in August 2005. In addition, from March 2006, Toyota commenced a new marketing effort, which further distinguishes the identities of the Toyota, Toyopet and Corolla sales channels through their visual appearances, in order to further pursue customer satisfaction in all sales channels including the Netz sales channel.

Developing Self-Reliance in Asia. In Asia, Toyota aims to build an operational framework that is efficient and self-reliant. Although the automobile market in Asia was momentarily depressed following

the Asian currency crisis in 1997, the market has since made a strong recovery and continues its growth. Toyota believes that the market in Asia continues to offer substantial growth opportunities. Toyota believes one factor behind its success in the market is strong sales of core models such as the Hilux, Corolla and VIOS, a new subcompact car using the same platform as the Yaris/Echo. Toyota also made substantial investments in this market earlier than its major global competitors and developed relationships with local suppliers in the region. While competition in Asia is increasing, Toyota believes that its existing local presence in the market provides it with a competitive advantage and expects to benefit from its early entrance into the market as demand for vehicles in the region continues to grow. Toyota plans to further increase its competitiveness by improving product line-up offered in the region and increasing local procurement to decrease its exposure to foreign currency exchange fluctuations. For example, at its Thailand plant, Toyota commenced production of the VIOS at the end of 2002 and, in order to strengthen its product line-up, commenced production of the Wish at the end of 2003. Toyota’s IMV Project, which was launched in 2004, further pursued Toyota’s foregoing plans and aspires to produce an optimal production and supply network on a worldwide scale. The manufacture of vehicle models based on the IMV Project began in Thailand, Indonesia, India, Philippines and Malaysia in fiscal 2005 and in Vietnam in fiscal 2006. The IMV model has been introduced in over 140 countries and regions including Europe and Africa, in addition to the market in Asia. Furthermore, Toyota is actively expanding its business in India through local production and sales.

Capitalize on Success in North America. Toyota’s North American unit sales continued to be strong in fiscal 2005, supported by an increase in consumer spending in the United States. Toyota’s North American unit sales on a consolidated basis grew from 2.10 million units in fiscal 2004 to 2.27 million units in fiscal 2005. In fiscal 2005, Toyota’s North American unit sales represented 31% of its total global unit sales on a consolidated basis. Toyota attributes its continuing success in the North American market to successful new product introductions such as Camry and Lexus RX330/Hybrid and strong sales of core models such as the Corolla, Camry, Highlander and Lexus RX330 and ES300. These product introductions in the past included the Matrix in 2002, the Lexus GX470 and the Scion xA and the Scion xB (marketed in Japan as the ist and the bB, respectively), which target younger drivers, in 2003 and the Scion tC in 2004. Toyota has also undertaken regular model changes and updates of major models in order to meet changing market demand. For example, Toyota recently completed a full model

change of the Prius, the Lexus RX330 and the Tacoma. In 2004, light trucks accounted for approximately 47% of Toyota’s vehicle unit sales in the United States, while passenger vehicles accounted for approximately 53%. Further, in 2004, Toyota brand vehicles accounted for approximately 81%, Lexus brand vehicles accounted for approximately 14% and Scion brand vehicles accounted for approximately 5% of the vehicle unit sales in the United States, respectively. As a part of its strategy to globalize operations through localization, Toyota has increased its production capacity and upgraded its production facilities in North America over the past few years. In May 2003, Toyota’s manufacturing facility in the state of Alabama commenced operation of V8 engine production with the annual capacity of 120,000 units. Toyota also opened new plants in Mexico in September and December 2004, which produces truck beds for the Tacoma pickup trucks and assembles Tacoma pickup trucks respectively. An annual production capacity for the Tacoma’s truck bed is 180,000 units and that for the assembly of Tacoma pickup trucks is 30,000 units. In 2004, 1.46 million vehicles, or approximately 64% of Toyota vehicles manufactured for the sales in North America, were produced in North America. Toyota plans to continue to grow its North American business and, after the opening of its new Texas plant, expects to increase its local annual production capacity to 1.65 million vehicles by 2006.

Maintain Commitment to East and Southeast Asia. Although the automobile markets in East and Southeast Asia were depressed following the Asian currency crisis in 1997, the markets have generally continued to recover. The market in 2004 maintained the same level of 2003, the year in which the market recovered to the peak level in 1996. Toyota believes that the markets in East and Southeast Asia

continue to offer substantial growth opportunities. Toyota believes one factor behind its success in these markets is strong sales of core models such as the Hilux, the Corolla and the VIOS, a new subcompact car using the same platform as the Yaris and the Echo (marketed in Japan as the Platz). Toyota also made substantial investments in these markets earlier than its major global competitors and developed relationships with local suppliers in the region. While competition in East and Southeast Asia is increasing, Toyota believes that its existing local presence in the market provides it with a competitive advantage and expects to benefit from its early entrance into the market as demand for vehicles in the region continues to grow. Toyota plans to further increase its competitiveness by improving product lines offered in the region and increasing local procurement to decrease its exposure to foreign currency exchange fluctuations. For example, at its Thailand plant, Toyota commenced production of the VIOS at the end of 2002 and, in order to strengthen its product line, commenced production of the Wish at the end of 2003. Toyota’s IMV Project, which was launched in 2004, aspires to produce an optimal production and supply network on a worldwide scale. The manufacture of vehicle models based on the IMV Project began in Thailand, Indonesia, India, Philippines and Malaysia in fiscal 2005. In the near term, Toyota will continue to operate its plants in the region and export products to meet the growing demand in Southeast Asia as well as the demand in other regions. Furthermore, Toyota is actively expanding its business in India and China through local production and sales. Toyota Kirloskar Private Motor Ltd. in India commenced sales of the Qualis, a multi-purpose vehicle aimed exclusively at the Indian market, in January 2000. Local production and sales of the Corolla in India commenced in early 2003. In China, Sichuan Toyota Motor Co., Ltd. released the Coaster small bus, the first Toyota vehicle bearing the Toyota name, in April 2001. Tianjin FAW Toyota Motor Co., Ltd. Toyota’s joint venture with Tianjin FAW Xiali Corporation, Ltd., commenced sales in November 2002 of the VIOS. In April 2003, Toyota and China FAW Group Corporation agreed to jointly produce four different Toyota-brand vehicle models in China. Under the agreement, production of the Corolla started at the first plant of Tianjin FAW Toyota Motor Co., Ltd. with an annual production capacity of 30,000 in February 2004; production of Land Cruiser vehicles started at the Chang Chun Plant of China FAW Group Corporation with an annual production capacity of 10,000 in October 2003; production of the Land Cruiser Prado started at Sichuan Toyota Motor Co., Ltd. with an annual production capacity of 5,000 in September 2003; and production of the Crown luxury car started production at the second plant of Tianjin FAW Toyota Motor Co., Ltd. with an annual production capacity of 150,000 in March 2005. In March 2004, Toyota and China FAW Group Corporation established a joint venture, FAW Toyota Changchun Engine Co., Ltd., which plant commenced the production of V6 engines in December 2004 with an annual production capacity of 130,000 units. Further in September 2004, Toyota and China FAW Group Corporation executed a basic agreement to cooperate in the promotion and development of hybrid vehicles in China and are discussing to commence the assembly of the Prius in China during 2005. In February 2004, Toyota and Guangzhou Automobile Group Co., Ltd. established a joint venture, Guangqi Toyota Engine Co., Ltd., which plant is expected to commence the production of engine parts and gasoline engines in 2005. Further in September 2004, Toyota and Guangzhou Automobile Group Co., Ltd. established a joint venture, Guangzhou Toyota Motor Co., Ltd., which plant is expected to commence the production of the Camry in mid-2006 with an annual production capacity of 100,000.