Toyota 2008 Annual Report Download - page 76

All financial information discussed in this section is derived
from Toyota’s consolidated financial statements that appear
elsewhere in this annual report on Form 20-F. The financial
statements have been prepared in conformity with accounting
principles generally accepted in the United States of America.
The business segments of Toyota include automotive operations,
financial services operations and all other operations. Automotive
operations is Toyota’s most significant business segment,
accounting for 89% of Toyota’s total revenues before the elimina-
tion of intersegment revenues and 95% of Toyota’s total operat-
ing income before the elimination of intersegment revenues and
costs for fiscal 2008. The operating income from automotive
operations as a percentage of total operating income increased
by 4% compared with fiscal 2007 due to an increase in operating
income from automotive operations. Toyota’s primary markets
based on vehicle unit sales for fiscal 2008 were: Japan (25%),
North America (33%), Europe (14%), and Asia (11%).
■Automotive Market Environment
The worldwide automotive market is highly competitive and
volatile. The demand for automobiles is affected by a number of
factors including social, political and general economic condi-
tions; introduction of new vehicles and technologies; and costs
incurred by customers to purchase and operate vehicles. These
factors can cause consumer demand to vary substantially from
year to year in different geographic markets and for different
types of automobiles.
The following table sets forth Toyota’s consolidated vehicle
unit sales by geographic market based on location of customers
for the past three fiscal years.
Thousands of units
Years ended March 31,
2006 2007 2008
Japan .................................................. 2,364 2,273 2,188
North America ................................... 2,556 2,942 2,958
Europe................................................ 1,023 1,224 1,284
Asia ..................................................... 880 789 956
Other*................................................. 1,151 1,296 1,527
Overseas total.................................... 5,610 6,251 6,725
Total.................................................... 7,974 8,524 8,913
* “Other” consists of Central and South America, Oceania, Africa and the
Middle East, etc.
Toyota’s consolidated unit sales in Japan decreased during
fiscal 2007 and 2008 as compared to each of the respective
prior years reflecting a decline in the overall domestic market.
During fiscal 2008, however, Toyota’s market share (including
Daihatsu and Hino) including mini-vehicles representing a
record high, and Toyota and Lexus’ market share excluding
mini-vehicles remained at a high level close to prior fiscal year
reflecting the sales efforts of domestic dealers. Overseas vehicle
unit sales increased during fiscal
2007 and 2008. During fiscal
2007, vehicle unit sales increased
in North America and Europe
due to extensive product offer-
ings that catered to regional
needs but decreased in Asia due
to a decline in certain countries’
markets, such as Indonesia and
Taiwan. During fiscal 2008, vehi-
cle unit sales increased in North
America, Europe, Asia, and
Other reflecting the expansion
of production sites, the introduc-
tion of vehicle models that effec-
tively meet customer needs and
the implementation of various
sales measures.
Toyota’s share of total vehicle unit sales in each market is
influenced by the quality, price, design, performance, safety,
reliability, economy and utility of Toyota’s vehicles compared
with those offered by other manufacturers. The timely introduc-
tion of new or redesigned vehicles is also an important factor in
satisfying customer demand. Toyota’s ability to satisfy changing
customer preferences can affect its revenues and earnings
significantly.
The profitability of Toyota’s automotive operations is affect-
ed by many factors. These factors include:
• vehicle unit sales volumes,
• the mix of vehicle models and options sold,
• the level of parts and service sales,
• the levels of price discounts and other sales incentives and
marketing costs,
• the cost of customer warranty claims and other customer
satisfaction actions,
• the cost of research and development and other fixed
costs,
• high prices of raw materials,
• the ability to control costs,
• the efficient use of production capacity, and
• changes in the value of the Japanese yen and other currencies
in which Toyota does business.
Changes in laws, regulations, policies and other governmen-
tal actions can also materially impact the profitability of Toyota’s
automotive operations. These laws, regulations and policies
include those attributed to environmental matters and vehicle
safety, fuel economy and emissions that can add significantly to
the cost of vehicles. The European Union has enforced a direc-
tive that requires manufacturers to be financially responsible for
taking back end-of-life vehicles and to take measures to ensure
that adequate used vehicle disposal facilities are established
and those hazardous materials and recyclable parts are
removed from vehicles prior to scrapping. Please see
Overview
74 TOYOTA •Annual Report 2008 •
Financial Section
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
■
’04FY ’05 ’06 ’07 ’08
0
4,000
2,000
6,000
10,000
8,000
(Thousands of units)
Consolidated Vehicle Sales