Toyota 2007 Annual Report Download - page 64

62 ANNUAL REPORT 2007
Risk Factors
Operational and other risks faced by Toyota that could significantly influence the decisions of investors
are set out below. However, the following does not encompass all risks related to the operations of
Toyota. There are risk factors other than those given below. Any such risk factors could influence the
decisions of investors.
Industry and Business Risks
The worldwide automobile market is highly competitive.
The worldwide automotive market is highly competitive.
Toyota faces strong competition from automobile manufac-
turers in the respective markets in which it operates.
Competition is likely to further intensify in light of continu-
ing globalization and consolidation in the worldwide auto-
motive industry. Factors affecting competition include
product quality and features, innovation and development
time, pricing, reliability, safety, fuel economy, customer ser-
vice and financing terms. Increased competition may lead
to lower vehicle unit sales and increased inventory, which
may result in a further downward price pressure and adversely
affect Toyota’s financial conditions and results of opera-
tions. Toyota’s ability to maintain its competitiveness will be
fundamental to its future success in existing and new mar-
kets and its market share. There can be no assurances that
Toyota will be able to compete successfully in the future.
The worldwide automobile industry is highly volatile.
The markets in which Toyota competes have been subject
to considerable volatility in demand in each market.
Demand for automobile sales depends to a large extent on
general, social, political and economic conditions in a given
market and the introduction of new vehicles and technolo-
gies. As Toyota’s revenues are derived from sales in markets
worldwide such as Japan, North America and Europe, eco-
nomic conditions in these countries and regions are particu-
larly important to Toyota. Demand may also be affected by
factors directly impacting automobile price or the cost of
purchasing and operating automobiles such as sales and
financing incentives, prices of raw materials and parts and
components, cost of fuel and governmental regulations
(including tariffs, import regulation and other taxes).
Volatility in demand may lead to lower vehicle unit sales and
increased inventory, which may result in a further downward
price pressure and adversely affect Toyota’s financial condi-
tions and results of operations.
Toyota’s future success depends on its ability to offer
innovative new, price competitive products that meet and
satisfy customer demand on a timely basis.
Meeting and satisfying customer demand with attractive
new vehicles and reducing product development times are
critical elements to the success of automobile manufactur-
ers. The timely introduction of new vehicle models, at com-
petitive prices, meeting rapidly changing customer
preferences and demands is fundamental to Toyota’s suc-
cess. There is no assurance that Toyota may adequately
perceive and identify changing customer preferences and
demands with respect to quality, styling, reliability, safety
and other features in a timely manner. Even if Toyota suc-
ceeds in perceiving and identifying customer preferences
and demands, there is no assurance that Toyota will be
capable of developing and manufacturing new, price com-
petitive products in a timely manner with its available tech-
nology, intellectual property, sources of raw materials and
parts and components (including the procurement thereof),
production capacity and other factors affecting its produc-
tivity. Further, there is no assurance that Toyota will be able
to implement capital expenditures at the level and times
planned by management. Toyota’s inability to develop and
offer products that meet customer demand in a timely
manner can result in a lower market share and reduced
sales volumes and margins, and may adversely affect
Toyota’s financial conditions and results of operations.
Toyota’s ability to market and distribute effectively, and
Toyota’s maintenance of brand image, are integral parts of
Toyota’s successful sales.
Toyota’s success in the sale of automobiles depends on its
ability to market and distribute effectively based on distribu-
tion networks and sales techniques catered to its customers
as well as its ability to maintain and further cultivate its
brand image across the markets in which it operates. There
is no assurance that Toyota will be able to develop sales
techniques and distribution networks that effectively adapt