Toyota 2009 Annual Report Download - page 34

Industry and Business Risks
The worldwide automotive market is highly competitive.
The worldwide automotive market is highly competitive. Toyota faces intense
competition from automotive manufacturers in the respective markets in which
it operates. Competition has intensified particularly as a result of the
contraction of the automotive market, due to the worldwide deterioration in
the economy stemming from the financial crisis unfolding since last fall. In
addition, competition is likely to further intensify in light of continuing
globalization in the worldwide automotive industry, possibly resulting in
industry reorganization. Factors affecting competition include product quality
and features, the amount of time required for innovation and development,
pricing, reliability, safety, fuel economy, customer service 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 condition and results of operations. Toyota’s ability to
adequately respond to the recent rapid changes in the automotive market and
to maintain its competitiveness will be fundamental to its future success in
existing and new markets and its market share. There can be no assurances
that Toyota will be able to compete successfully in the future.
The worldwide automotive industry is highly volatile.
Each of the markets in which Toyota competes has been subject to
considerable volatility in demand. Demand for vehicles depends to a large
extent on social, political and economic conditions in a given market and the
introduction of new vehicles and technologies. As Toyota’s revenues are
derived from sales in markets worldwide, economic conditions in such markets
are particularly important to Toyota. In reflection of the worldwide
deterioration in the economy stemming from the financial crisis, the demand
for automobiles in Japan, North America and Europe, which are Toyota’s main
markets, declined substantially particularly since the latter half of 2008,
adversely affecting Toyota. Such decline in demand for automobiles and the
adverse effect on Toyota are currently ongoing, and it is unclear how long this
situation would continue or how it would transition in the future. Toyota’s
financial condition and results of operations may be affected adversely if the
demand for automobiles remain weak or further weakens as a result of a
further decline in the world economy. Demand may also be affected by factors
directly impacting vehicle price or the cost of purchasing and operating
vehicles 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 condition and
results of operations.
Toyota’s future success depends on its ability to offer new
innovative, price competitive products that meet and satisfy
customer demand on a timely basis.
Meeting and satisfying customer demand with attractive new vehicles and
reducing the amount of time required for product development are critical
elements to the success of automotive manufacturers. The timely introduction
of new vehicle models, at competitive prices, meeting rapidly changing
customer preferences and demands is more fundamental to Toyota’s success
than ever as the automotive market is rapidly transforming in light of the
deterioration in the world economy. There is no assurance, however, that
Toyota may adequately and appropriately perceive on a timely basis changing
customer preferences and demands with respect to quality, styling, reliability,
safety and other features in a timely manner. Even if Toyota succeeds in
perceiving customer preferences and demands, there is no assurance that
Toyota will be capable of developing and manufacturing new, price
competitive products in a timely manner with its available technology,
intellectual property, sources of raw materials and parts and components, and
production capacity. 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 could result in a lower market share and
reduced sales volumes and margins, and may adversely affect Toyota’s
financial condition and results of operations.
Toyota’s ability to market and distribute effectively and maintain
its brand image is an integral part of Toyota’s successful sales.
Toyota’s success in the sale of vehicles depends on its ability to market and
distribute effectively based on distribution networks and sales techniques
tailored to the needs of 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 to changing customer preferences
or changes in the regulatory environment in the major markets in which it
operates. Nor is there assurance that Toyota will be able to cultivate and
protect its brand image. Toyota’s inability to maintain well developed sales
techniques and distribution networks or a positive brand image may result in
decreased sales and market share and may adversely affect its financial
condition and results of operations.
Factors
Risk
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.
Risk Factors
Management & Corporate Information
TOYOTA MOTOR CORPORATION
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