5.A OPERATING RESULTS Financial information discussed in this section is derived from Toyota’s consolidated financial statements that appear elsewhere in this annual report. The financial statements have been prepared in accordance with IFRS Accounting Standards, as issued by the IASB. The following discussion covers the fiscal years ended March 31, 2025 and 2026. For the discussion covering the fiscal year ended March 31, 2024, refer to “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS” of Toyota’s Form 20-F for the fiscal year ended March 31, 2025 filed with the SEC on June 18, 2025. Overview The business segments of Toyota include automotive operations, financial services operations and all other operations. Automotive operations are Toyota’s most significant business segment, accounting for 87% of Toyota’s total revenues before the elimination of intersegment revenues for fiscal 2026. Toyota’s primary markets based on vehicle unit sales for fiscal 2026 were: Japan (21.7%), North America (30.6%), Europe (12.3%) and Asia (18.3%). 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 conditions; introduction of new vehicles and technologies; and costs incurred by customers to purchase or operate vehicles. These factors can cause consumer demand to vary substantially in different geographic markets and for different types of automobiles. During fiscal 2026, the global economy showed differing trends by region. In the United States, consumption remained resilient even after tariff increases. In China, however, consumer sentiment stayed weak amid a slowdown in the real estate market and employment concerns, and consumption growth remained sluggish due to continued price stagnation and intense price competition. The following table sets forth Toyota’s consolidated vehicle unit sales by geographic market based on location of customers for the past two fiscal years. Thousands of units Year ended March 31, 2025 2026 Japan 1,991 2,082 North America 2,703 2,934 Europe 1,172 1,183 Asia 1,838 1,759 Other* 1,659 1,637 Overseas total 7,372 7,513 Total 9,362 9,595 * “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc. During fiscal 2026, Toyota’s consolidated vehicle unit sales in Japan increased. Overseas consolidated vehicle unit sales increased overall during fiscal 2026 due mainly to increases in North America and Europe, despite decreases in Asia and the Middle East. 72 Table of Contents Toyota’s share of total vehicle unit sales in each market is influenced by the quality, safety, reliability, price, design, performance, economy and utility of Toyota’s vehicles compared with those offered by other manufacturers. The timely introduction of new or redesigned vehicles is also an important factor in satisfying customer needs. Toyota’s ability to satisfy changing customer preferences can affect its revenues and earnings significantly. The profitability of Toyota’s automotive operations is affected 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, • the prices of raw materials, • the ability to control costs, • the efficient use of production capacity, • the adverse effect on production due to such factors as the reliance on various suppliers for the provision of supplies, or the general scarcity of certain supplies, • climate change risk, including both physical risks as well as transition risks, • the adverse effect on market, sales and productions of natural calamities as well as the outbreak and spread of epidemics and interruptions of social infrastructure, and • changes in the value of the Japanese yen and other currencies in which Toyota conducts business. Changes in laws, regulations, policies and other governmental actions can also materially impact the profitability of Toyota’s automotive operations. These laws, regulations and policies include those attributed to environmental matters, vehicle safety, fuel economy and emissions that can add significantly to the cost of the vehicles. Many governments also impose local content requirements, impose tariffs and other trade barriers, and enact price or exchange controls that can limit an automaker’s operations and can make the repatriation of profits unpredictable. Changes in these laws, regulations, policies and other governmental actions may affect the production, licensing, distribution or sale of Toyota’s products, cost of products or applicable tax rates. From time-to-time when potential safety problems arise, Toyota issues vehicle recalls and takes other safety measures including safety campaigns relating to its vehicles. The recalls and other safety measures described above have led to a number of claims and legal proceedings against Toyota. For a more detailed description of these claims and legal proceedings, see “Item 4. Information on the Company — 4.B Business Overview — Legal Proceedings” and notes 24 and 32 to the consolidated financial statements. The worldwide automotive industry is in a period of global competition which may continue for the foreseeable future, and in general the competitive environment in which Toyota operates is likely to intensify. Toyota believes it has the resources, strategies and technologies in place to compete effectively in the industry as an independent company for the foreseeable future. 73 Table of Contents Financial Services Operations Segment Competition in the worldwide automobile financial services industry is intensifying. As competition increases, margins on financing transactions may decrease and market share may also decline as customers obtain financing for Toyota vehicles from alternative sources. Toyota’s financial services operations mainly include loans and leasing programs for customers and dealers. Toyota believes that its ability to provide financing to its customers is an important value added service. Therefore, Toyota has expanded its network of finance subsidiaries in order to offer financial services in many countries. Toyota’s competitors for retail financing and retail leasing include commercial banks, credit unions and other finance companies. Meanwhile, commercial banks and other captive automobile finance companies also compete against Toyota’s wholesale financing activities. Toyota’s total receivables related to financial services increased during fiscal 2026 mainly due to an increase in loan balance. Also, vehicles and equipment on operating leases increased during fiscal 2026 mainly due to the impact of changes in exchange rates. For details on receivables related to financial services and vehicles and equipment on operating leases, see notes 8 and 13 to the consolidated financial statements. Toyota’s receivables related to financial services are subject to collectability risks. These risks include consumer and dealer insolvencies and insufficient collateral values (less costs to sell) to realize the full carrying values of these receivables. See notes 3 and 20 to the consolidated financial statements for additional information. Toyota continues to originate leases to finance new Toyota vehicles. These leasing activities are subject to residual value risk. Residual value losses could be incurred when the lessee of a vehicle does not exercise the option to purchase the vehicle at the end of the lease term. See note 3 to the consolidated financial statements for additional information. Toyota enters into interest rate swap agreements and cross currency interest rate swap agreements to convert its fixed-rate debt to variable-rate functional currency debt. A portion of the derivative instruments are entered into to manage interest rate risk from an economic perspective and are not designated as a hedge of specific assets or liabilities on Toyota’s consolidated statements of financial position and accordingly, unrealized gains or losses related to derivatives that are not designated as a hedge are recognized currently in operations. See the discussion in “Item 11. Quantitative and Qualitative Disclosures about Market Risk” and note 21 to the consolidated financial statements. The fluctuations in funding costs can affect the profitability of Toyota’s financial services operations. Funding costs are affected by a number of factors, some of which are not in Toyota’s control. These factors include general economic conditions, prevailing interest rates and Toyota’s financial strength. Funding costs increased during fiscal 2025 and 2026 mainly as a result of an increase in the balance of financial liabilities. Toyota launched its credit card business in Japan in April 2001. As of March 31, 2025, Toyota had 16.0 million cardholders, a decrease of 0.12 million cardholders compared with March 31, 2024. As of March 31, 2026, Toyota had 16.9 million cardholders, an increase of 0.85 million cardholders compared with March 31, 2025. Credit card receivables as of March 31, 2025 increased by ¥15.7 billion from March 31, 2024 to ¥574.5 billion, and that as of March 31, 2026 decreased by ¥23.0 billion from March 31, 2025 to ¥551.4 billion. 74 Table of Contents Currency Fluctuations Toyota is affected by fluctuations in foreign currency exchange rates. Toyota is exposed to fluctuations in the value of the Japanese yen against the U.S. dollar and the euro as well as the Australian dollar, the Canadian dollar, the British pound and others. Toyota’s consolidated financial statements, which are presented in Japanese yen, are affected by foreign currency exchange fluctuations through both translation risk and transaction risk. Translation risk is the risk that Toyota’s consolidated financial statements for a particular period or for a particular date will be affected by changes in the prevailing exchange rates of the currencies in those countries in which Toyota does business compared with the Japanese yen. Even though the fluctuations of currency exchange rates to the Japanese yen can be substantial, and therefore significantly impact comparisons with prior periods and among the various geographic markets, the translation risk is a reporting consideration and does not reflect Toyota’s underlying results of operations. Toyota does not hedge against translation risk. Transaction risk is the risk that the currency structure of Toyota’s costs and liabilities will deviate from the currency structure of sales proceeds and assets. Transaction risk relates primarily to sales proceeds from Toyota’s non-domestic operations from vehicles produced in Japan. Toyota believes that the location of its production facilities in different parts of the world has significantly reduced the level of transaction risk. As part of its globalization strategy, Toyota has continued to localize production by constructing production facilities in the major markets in which it sells its vehicles. In fiscal 2025 and 2026, Toyota produced 73.5% and 73.9%, respectively, of its non-domestic sales outside Japan. In North America, 76.0% and 74.6% of vehicles sold in fiscal 2025 and 2026, respectively, were produced locally. In Europe, 69.6% and 69.0% of vehicles sold in fiscal 2025 and 2026, respectively, were produced locally. In Asia, 94.6% and 96.4% of vehicles sold in fiscal 2025 and 2026, respectively, were produced locally. Localizing production enables Toyota to locally purchase many of the supplies and resources used in the production process, which allows for a better match of local currency revenues with local currency expenses. Toyota also enters into foreign currency transactions and other hedging instruments to address a portion of its transaction risk. This has reduced, but not eliminated, the effects of foreign currency exchange rate fluctuations, which in some years can be significant. See notes 3 (“Material accounting policies — Financial instruments — (3) Derivative financial instruments”) and 21 to the consolidated financial statements for additional information. Generally, a weakening of the Japanese yen against other currencies has a positive effect on Toyota’s consolidated revenues, operating income and net income attributable to Toyota Motor Corporation. In fiscal 2026, the Japanese yen was on average stronger against the U.S. dollar but weaker against the euro in comparison to fiscal 2025. At the end of fiscal 2026, the Japanese yen was weaker against the U.S. dollar and the euro in comparison to the end of fiscal 2025. See note 20 to the consolidated financial statements for additional information. 75 Table of Contents Operating Performance Sales Revenues Toyota’s sales revenues include sales revenues from sales of products, consisting of sales revenues from automotive operations and all other operations, excluding sales revenues from financial services operations, which increased by 5.2% during fiscal 2026 compared with the prior fiscal year to ¥45,865.9 billion, and sales revenues from financial services operations, which increased by 8.6% during fiscal 2026 compared with the prior fiscal year to ¥4,819.0 billion. See “ — Sales Revenues and Operating Income by Business Segment” and “ — Sales Revenues and Operating Income by Geography” for additional information for the factors affecting changes in sales revenues. Cost of Products Sold Cost of products sold increased by ¥3,631.2 billion, or 10.2%, to ¥39,141.4 billion during fiscal 2026 compared with the prior fiscal year. This increase includes a ¥395.0 billion increase in operating expenses attributable to our efforts to strengthen the foundation of our suppliers and the impact of soaring materials prices. Through continued cost reduction efforts together with our suppliers, this increase was partially offset by a ¥215.0 billion reduction primarily attributable to value engineering activities and other cost reduction efforts concerning design-related costs and a ¥60.0 billion reduction attributable to cost reduction efforts at plants and logistics departments. The cost reduction efforts described above related to ongoing value engineering and value analysis activities, the use of common parts resulting in a reduction of part types and other manufacturing initiatives designed to reduce the costs of vehicle production. The impact of soaring materials prices includes the impact of fluctuation in the price of steel, precious metals, non-ferrous alloys including aluminum, plastic parts and other production materials and parts. Cost of Financial Services Cost of financial services increased by ¥131.2 billion, or 4.5%, to ¥3,079.7 billion during fiscal 2026 compared with the prior fiscal year. This increase was due mainly to the increase in funding costs resulting from an increase in the balance of financial liabilities. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased by ¥84.9 billion, or 1.8%, to ¥4,697.5 billion during fiscal 2026 compared with the prior fiscal year. This decrease was due mainly to the effect of expenses related to Hino’s certification issues recorded in fiscal 2025. 76 Table of Contents Operating Income Yen in millions Year ended March 31, 2026 v. 2025 Change Changes in operating income and loss: Effect of marketing efforts 710,000 Effect of cost reduction efforts (120,000 ) Effect of changes in exchange rates (195,000 ) Increase or decrease in expenses and expense reduction efforts (2,030,000 ) Other 605,700 Total (1,029,300 ) Toyota’s operating income decreased by ¥1,029.3 billion, or 21.5%, to ¥3,766.2 billion during fiscal 2026 compared with the prior fiscal year. This decrease was due to the ¥2,030.0 billion aggregate unfavorable impact of changes in expenses and expense reduction efforts, partially offset by the ¥710.0 billion favorable impact of marketing efforts. The aggregate unfavorable impact of changes in expenses and expense reduction efforts includes the ¥1,380.0 billion impact of U.S. tariffs. The favorable impact of marketing efforts includes the ¥210.0 billion impact of changes in vehicle unit sales and sales mix, as well as the ¥335.0 billion impact of other marketing efforts such as price revisions. Other Income and Expenses Share of profit (loss) of investments accounted for using the equity method during fiscal 2026 decreased by ¥38.4 billion, or 6.5%, to ¥552.7 billion compared with the prior fiscal year. This decrease was due mainly to a decrease during fiscal 2026 in net income attributable to the shareholders of companies accounted for by the equity method. The following table shows the share of profit (loss) of investments accounted for using the equity method by country. Yen in millions Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Japan 407,085 354,234 (52,851 ) (13.0 )% China 106,992 108,299 1,307 1.2 Other 77,143 90,209 13,066 16.9 Total 591,219 552,742 (38,478 ) (6.5 )% Other finance income increased by ¥37.5 billion, or 6.7%, to ¥594.2 billion during fiscal 2026 compared with the prior fiscal year. This increase was due mainly to an increase in gains on sales of securities. Other finance costs decreased by ¥103.9 billion, or 54.5%, to ¥86.7 billion during fiscal 2026 compared with the prior fiscal year. This decrease was due mainly to a decrease in losses on securities revaluation. 77 Table of Contents Foreign exchange gain (loss), net decreased by ¥304.5 billion to ¥400.7 billion during fiscal 2026 compared with the prior fiscal year. Foreign exchange gains and losses include the differences between the value of foreign currency denominated assets and liabilities recognized through transactions in foreign currencies translated at prevailing exchange rates and the value at the date the transaction settled during the fiscal year, including those settled using forward foreign currency exchange contracts, or the value translated by appropriate year-end exchange rates. The ¥304.5 billion decrease in foreign exchange gain (loss), net was due mainly to the reclassification of foreign currency translation adjustments related to foreign operations, which had been recognized in “Other components of equity” in the consolidated statement of financial position, to “Foreign exchange gain (loss), net” in the consolidated statement of income during fiscal 2025 due mainly to the loss of control of certain consolidated subsidiaries. Other income (loss), net decreased by ¥30.7 billion, to ¥74.2 billion in losses during fiscal 2026 compared with the prior fiscal year. Income Taxes The provision for income taxes decreased by ¥457.6 billion, or 28.2%, to ¥1,167.2 billion during fiscal 2026 compared with the prior fiscal year. This decrease was due mainly to the decrease in income before income taxes. The average effective tax rate for fiscal 2026 was 22.7%. See note 16 to the consolidated financial statements for further discussion. Net Income Attributable to Non-controlling Interests Net income attributable to non-controlling interests increased by ¥112.9 billion, or 458.0%, to ¥137.6 billion during fiscal 2026 compared with the prior fiscal year. This increase was due mainly to an increase during fiscal 2026 in net income of consolidated subsidiaries. Net Income Attributable to Toyota Motor Corporation Net income attributable to Toyota Motor Corporation decreased by ¥916.9 billion, or 19.2%, to ¥3,848.0 billion during fiscal 2026 compared with the prior fiscal year. Other Comprehensive Income, Net of Tax Other comprehensive income, net of tax increased by ¥2,275.9 billion to ¥1,529.9 billion for fiscal 2026 compared with the prior fiscal year. This increase resulted mainly from exchange differences on translating foreign operations gains of ¥946.3 billion in fiscal 2026 compared with losses of ¥827.8 billion in the prior fiscal year, due mainly to the weakening of the yen against the U.S. dollar and the euro, and remeasurements of defined benefit plans gains of ¥101.3 billion in fiscal 2026 compared with losses of ¥109.5 billion in the prior fiscal year, due mainly to changes in fair value of plan assets. Operating Performance by Business Segment Segmentation Toyota’s most significant business segment is its automotive operations. Toyota carries out its automotive operations as a global competitor in the worldwide automotive market. Management allocates resources to, and assesses the performance of, its automotive operations as a single business segment on a worldwide basis and assesses financial and non-financial data such as vehicle unit sales, production volume, market share information, vehicle model plans and plant location costs to allocate resources within the automotive operations. Toyota does not manage any subset of its automotive operations, such as domestic or overseas operations or parts, as separate management units. 78 Table of Contents Sales Revenues and Operating Income by Business Segment The tables below show Toyota’s sales revenues and operating income from external customers by business and by product category. For the year ended March 31, 2025 Yen in millions Automotive Financial services All other Inter-segment Elimination/ Unallocated Amount Consolidated Sales revenues Revenues from external customers Vehicles 36,892,232 — — — Parts and components for production 1,606,173 — — — Parts and components for after service 3,423,389 — — — Other 1,074,505 — — — Total revenues from external customers 42,996,299 4,437,827 602,578 — 48,036,704 Inter-segment revenues and transfers 203,566 43,353 844,536 (1,091,455 ) — Total 43,199,865 4,481,180 1,447,114 (1,091,455 ) 48,036,704 Operating expenses 39,259,587 3,797,661 1,265,920 (1,082,050 ) 43,241,118 Operating income 3,940,278 683,519 181,194 (9,405 ) 4,795,586 For the year ended March 31, 2026 Yen in millions Automotive Financial services All other Inter-segment Elimination/ Unallocated Amount Consolidated Sales revenues Revenues from external customers Vehicles 38,847,899 — — — Parts and components for production 1,509,449 — — — Parts and components for after service 3,608,666 — — — Other 1,235,909 — — — Total revenues from external customers 45,201,924 4,819,003 664,026 — 50,684,952 Inter-segment revenues and transfers 215,779 38,112 987,387 (1,241,278 ) — Total 45,417,703 4,857,115 1,651,412 (1,241,278 ) 50,684,952 Operating expenses 42,640,654 4,005,394 1,519,333 (1,246,644 ) 46,918,736 Operating income 2,777,049 851,722 132,079 5,366 3,766,216 79 Table of Contents Automotive Operations Segment The automotive operations segment is Toyota’s largest operating segment by sales revenues. Sales revenues for the automotive segment increased during fiscal 2026 by ¥2,217.8 billion, or 5.1%, to ¥45,417.7 billion compared with the prior fiscal year. The increase mainly reflects the ¥1,900.0 billion favorable impact of changes in vehicle unit sales and sales mix. Operating income from the automotive operations decreased by ¥1,163.2 billion, or 29.5%, to ¥2,777.0 billion during fiscal 2026 compared with the prior fiscal year. This decrease in operating income was due mainly to the ¥2,030.0 billion aggregate unfavorable impact of changes in expenses and expense reduction efforts, partially offset by the ¥710.0 billion favorable impact of marketing efforts. Financial Services Operations Segment Sales revenues for the financial services operations increased during fiscal 2026 by ¥375.9 billion, or 8.4%, to ¥4,857.1 billion compared with the prior fiscal year. This increase was due mainly to the increase in loan balance. Operating income from financial services operations increased by ¥168.2 billion, or 24.6%, to ¥851.7 billion during fiscal 2026 compared with the prior fiscal year. This increase was due mainly to the recording of valuation gains on interest rate swaps in sales finance subsidiaries in the United States. The following table shows the number of financing contracts by geographic region at the end of fiscal 2026 and 2025, respectively. Number of financing contracts in thousands As of March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Japan 2,740 2,652 (88 ) (3.2 )% North America 5,647 5,659 12 0.2 Europe 1,944 2,076 132 6.8 Asia 2,245 2,307 62 2.8 Other* 1,054 1,108 54 5.1 Total 13,630 13,802 172 1.3 % * “Other” consists of Central and South America, Oceania and Africa. All Other Operations Segment Toyota’s other business operations consist of its information technology business and others. Sales revenues for Toyota’s other operations segments increased by ¥204.2 billion, or 14.1%, to ¥1,651.4 billion during fiscal 2026 compared with the prior fiscal year. Operating income from Toyota’s other operations segments decreased by ¥49.1 billion, or 27.1%, to ¥132.0 billion during fiscal 2026 compared with the prior fiscal year. 80 Table of Contents Consolidated Statement of Income on Non-Financial Services Businesses and Financial Services Business Yen in millions Year ended March 31, 2025 Year ended March 31, 2026 (Non-Financial Services Businesses) Sales revenues 43,787,709 46,079,610 Cost of revenues 35,684,332 39,325,176 Selling, general and administrative 3,984,469 3,830,878 Operating income 4,118,908 2,923,556 Other income (loss), net 1,622,539 1,387,992 Income before income taxes 5,741,447 4,311,548 Income tax expense 1,446,627 935,124 Net income 4,294,820 3,376,424 Net income attributable to Toyota Motor Corporation 4,281,231 3,245,638 Non-controlling interests 13,589 130,786 (Financial Services Business) Sales revenues 4,481,180 4,857,115 Cost of revenues 2,960,227 3,101,062 Selling, general and administrative 837,435 904,331 Operating income 683,519 851,722 Other income (loss), net (10,309 ) 5,672 Income before income taxes 673,210 857,393 Income tax expense 178,000 232,086 Net income 495,210 625,307 Net income attributable to Toyota Motor Corporation 484,129 618,430 Non-controlling interests 11,081 6,878 (Elimination) Elimination of net income (274 ) (15,970 ) (Consolidated) Net income 4,789,755 3,985,761 Net income attributable to Toyota Motor Corporation 4,765,086 3,848,098 Non-controlling interests 24,670 137,664 81 Table of Contents Operating Performance by Geography The tables below show Toyota’s sales revenues and operating income from external customers by geography. For the year ended March 31, 2025 Yen in millions Japan North America Europe Asia Other* Inter-segment Elimination/ Unallocated Amount Consolidated Sales revenues Revenues from external customers 10,719,120 18,930,253 6,110,052 7,903,360 4,373,919 — 48,036,704 Inter-segment revenues and transfers 11,139,974 370,074 203,437 1,084,702 147,338 (12,945,525 ) — Total 21,859,094 19,300,327 6,313,489 8,988,062 4,521,257 (12,945,525 ) 48,036,704 Operating expenses 18,707,971 19,191,519 5,897,936 8,091,552 4,268,632 (12,916,492 ) 43,241,118 Operating income 3,151,123 108,808 415,553 896,510 252,626 (29,033 ) 4,795,586 For the year ended March 31, 2026 Yen in millions Japan North America Europe Asia Other* Inter-segment Elimination/ Unallocated Amount Consolidated Sales revenues Revenues from external customers 10,985,614 20,661,490 6,464,911 7,966,455 4,606,482 — 50,684,952 Inter-segment revenues and transfers 11,088,528 418,175 236,280 1,304,921 152,511 (13,200,415 ) — Total 22,074,141 21,079,665 6,701,191 9,271,377 4,758,993 (13,200,415 ) 50,684,952 Operating expenses 19,753,103 21,272,219 6,343,449 8,401,551 4,430,028 (13,281,613 ) 46,918,736 Operating income (loss) 2,321,038 (192,554 ) 357,743 869,826 328,966 81,198 3,766,216 * “Other” consists of Central and South America, Oceania, Africa and the Middle East. 82 Table of Contents Sales Revenues and Operating Income by Geography Japan Thousands of units Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Toyota’s consolidated vehicle unit sales* 3,932 4,083 151 3.8 % * including number of exported vehicle unit sales Yen in millions Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Sales revenues: Sales of products 21,468,488 21,651,881 183,393 0.9 % Financial services 390,606 422,260 31,654 8.1 Total 21,859,094 22,074,141 215,047 1.0 % Operating costs and expenses 18,707,971 19,753,103 1,045,132 5.6 % Operating income 3,151,123 2,321,038 (830,085 ) (26.3 )% Sales revenues in Japan increased due mainly to an increase in vehicle sales of 151 thousand units and the favorable impact of price revisions compared with the prior fiscal year. For fiscal 2025 and 2026, exported vehicle unit sales were 1,941 thousand units and 2,001 thousand units, respectively. Operating income in Japan decreased due mainly to the expenses and others, and the effects of changes in exchange rates compared with the prior fiscal year. North America Thousands of units Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Toyota’s consolidated vehicle unit sales 2,703 2,934 231 8.5 % Yen in millions Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Sales revenues: Sales of products 16,606,446 18,241,546 1,635,100 9.8 % Financial services 2,693,881 2,838,119 144,238 5.4 Total 19,300,327 21,079,665 1,779,338 9.2 % Operating costs and expenses 19,191,519 21,272,219 2,080,700 10.8 % Operating income (loss) 108,808 (192,554 ) (301,362 ) — Sales revenues in North America increased due mainly to an increase in vehicle sales of 231 thousand units and the favorable impact of price revisions compared with the prior fiscal year. Operating income in North America decreased due mainly to the expenses and others, and the impact of U.S. tariffs compared with the prior fiscal year. 83 Table of Contents Europe Thousands of units Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Toyota’s consolidated vehicle unit sales 1,172 1,183 11 1.0 % Yen in millions Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Sales revenues: Sales of products 5,577,646 5,808,718 231,071 4.1 % Financial services 735,843 892,474 156,631 21.3 Total 6,313,489 6,701,191 387,702 6.1 % Operating costs and expenses 5,897,936 6,343,449 445,512 7.6 % Operating income 415,553 357,743 (57,810 ) (13.9 )% Sales revenues in Europe increased due mainly to an increase in vehicle sales of 11 thousand units, and the favorable impacts of changes in exchange rates and price revisions compared with the prior fiscal year. Operating income in Europe decreased due mainly to the effects of changes in exchange rates compared with the prior fiscal year. Asia Thousands of units Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Toyota’s consolidated vehicle unit sales 1,838 1,759 (79 ) (4.3 )% Yen in millions Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Sales revenues: Sales of products 8,701,501 8,963,111 261,609 3.0 % Financial services 286,561 308,266 21,705 7.6 Total 8,988,062 9,271,377 283,315 3.2 % Operating costs and expenses 8,091,552 8,401,551 309,999 3.8 % Operating income 896,510 869,826 (26,684 ) (3.0 )% Sales revenues in Asia increased due mainly to the favorable impact of price revisions compared with the prior fiscal year, despite a decrease in vehicle sales of 79 thousand units. Operating income in Asia decreased due mainly to the effects of changes in exchange rates compared with the prior fiscal year. 84 Table of Contents Other Thousands of units Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Toyota’s consolidated vehicle unit sales 1,659 1,637 (22 ) (1.3 )% Yen in millions Year ended March 31, 2026 v. 2025 Change 2025 2026 Amount Percentage Sales revenues: Sales of products 4,023,077 4,215,127 192,050 4.8 % Financial services 498,180 543,866 45,686 9.2 Total 4,521,257 4,758,993 237,736 5.3 % Operating costs and expenses 4,268,632 4,430,028 161,396 3.8 % Operating income 252,626 328,966 76,340 30.2 % Sales revenues in Other increased due mainly to the favorable impact of changes in exchange rates compared with the prior fiscal year, despite a decrease in vehicle sales of 22 thousand units. Operating income in Other increased due mainly to marketing efforts compared with the prior fiscal year. The following is a description of changes in operating income by geographic location. Yen in millions 2026 v. 2025 Change Japan North America Europe Asia Other Changes in operating income and loss: Effect of marketing efforts 265,000 415,000 (30,000 ) 65,000 45,000 Effect of cost reduction efforts (145,000 ) 25,000 15,000 15,000 (30,000 ) Effect of changes in exchange rates (105,000 ) 25,000 (45,000 ) (75,000 ) 5,000 Increase or decrease in expenses and expense reduction efforts (1,250,000 ) (865,000 ) (30,000 ) (15,000 ) (30,000 ) Other 404,915 98,638 32,190 (16,684 ) 86,340 Total (830,085 ) (301,362 ) (57,810 ) (26,684 ) 76,340 Sales Revenues by Location of External Customers Yen in millions Year ended March 31, 2025 2026 Japan 7,723,171 7,942,616 North America 18,985,399 20,783,571 Europe 5,979,720 6,396,867 Asia 7,944,206 7,894,843 Other* 7,404,208 7,667,056 Total 48,036,704 50,684,952 * “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc. 85 Table of Contents 5.B LIQUIDITY AND CAPITAL RESOURCES Cash Flows Based on its experiences with financial crises and the Great East Japan Earthquake, Toyota seeks to secure a sufficient level of on-hand funds, which has been defined as an amount able to cover both six months of fixed costs in the automotive business and six months of refinancing requirements in the financial services business. With this level of liquidity, we aim to ensure business continuity under any operating conditions. Toyota has funded its cash requirements, including those relating to capital expenditures as well as its research and development activities through cash generated by operations. In fiscal 2027, Toyota expects to sufficiently fund its cash requirements, including those relating to capital expenditures as well as its research and development activities, through cash and cash equivalents on hand, cash generated by operations and debt financing, such as the issuance of corporate bonds and borrowing. Toyota will use its funds to efficiently invest in maintenance and replacement of conventional manufacturing facilities and the introduction of new products and will focus on investment in areas contributing to strengthening competitiveness and future growth for transformation into a mobility company. See “Item 4. Information on the Company — 4.B Business Overview — Capital Expenditures and Divestitures” for information regarding Toyota’s material capital expenditures and divestitures for fiscal 2024, 2025 and 2026, and information concerning Toyota’s principal capital expenditures and divestitures currently in progress. Toyota funds its financing programs for customers and dealers, including loans and leasing programs, through cash generated by operations and debt financing, such as the issuance of corporate bonds and borrowing, all by its sales finance subsidiaries. Toyota seeks to expand its ability to raise funds locally in markets around the world through its network of finance subsidiaries. Net cash provided by operating activities increased by ¥1,775.9 billion to ¥5,472.9 billion for fiscal 2026, compared with ¥3,696.9 billion for fiscal 2025. The increase was primarily attributable to the ¥1,260.7 billion decrease in income taxes paid, net of refunds. Net cash used in investing activities decreased by ¥2,669.4 billion to ¥1,520.3 billion for fiscal 2026, compared with ¥4,189.7 billion for fiscal 2025. The decrease was primarily attributable to the ¥2,064.4 billion increase in proceeds from upon maturity of public and corporate bonds compared to the prior fiscal year. Net cash used in financing activities was ¥536.6 billion for fiscal 2026, compared with net cash provided by financing activities of ¥197.2 billion for fiscal 2025, a ¥733.8 billion change. The change was primarily attributable to the ¥1,084.3 billion increase in payments of long-term debt compared to the prior fiscal year. For a discussion of cash flows for fiscal 2025 as compared to those for fiscal 2024, see “Item 5. Operating and Financial Review and Prospects – 5.B. Liquidity and Capital Resources” of Toyota’s Annual Report on Form 20-F for the fiscal year ended March 31, 2025. Total capital expenditures for property, plant and equipment, including vehicles and equipment on operating leases, were ¥6,059.7 billion in fiscal 2026, remaining largely unchanged from the ¥5,991.2 billion in total capital expenditures in fiscal 2025. Toyota expects investments in property, plant and equipment, excluding vehicles and equipment on operating leases, to be approximately ¥2,300.0 billion during fiscal 2027. 86 Table of Contents Consolidated Statement of Cash Flows on Non-Financial Services Businesses and Financial Services Business Yen in millions Year ended March 31, 2025 Year ended March 31, 2026 (Non-Financial Services Businesses) Cash flows from operating activities Net income 4,294,820 3,376,424 Depreciation and amortization 1,413,066 1,472,087 Share of profit (loss) of investments accounted for using the equity method (579,619 ) (542,072 ) Income tax expense 1,446,627 935,124 Changes in operating assets and liabilities, and other (370,839 ) 744,179 Interest received 363,304 318,422 Dividends received 617,644 424,816 Interest paid (100,770 ) (90,538 ) Income taxes paid, net of refunds (2,347,622 ) (1,159,061 ) Net cash provided by (used in) operating activities 4,736,610 5,479,380 Cash flows from investing activities Additions to fixed assets excluding equipment leased to others (1,878,342 ) (2,119,162 ) Additions to equipment leased to others (24,855 ) (33,176 ) Proceeds from sales of fixed assets excluding equipment leased to others 68,266 28,647 Proceeds from sales of equipment leased to others 6,035 7,997 Additions to intangible assets (341,131 ) (365,834 ) Additions to public and corporate bonds and stocks (3,446,017 ) (3,816,713 ) Proceeds from sales of public and corporate bonds and stocks and upon maturity of public and corporate bonds 3,423,102 5,140,628 Other, net (618,309 ) 1,172,580 Net cash provided by (used in) investing activities (2,811,251 ) 14,967 Cash flows from financing activities Increase (decrease) in short-term debt (116,549 ) 3,307 Proceeds from long-term debt 162,735 540,117 Payments of long-term debt (306,768 ) (939,292 ) Dividends paid to Toyota Motor Corporation common shareholders (1,132,329 ) (1,238,974 ) Dividends paid to non-controlling interests (122,565 ) (120,431 ) Reissuance (repurchase) of treasury stock (1,179,043 ) (39,975 ) Other, net 55,560 34,712 Net cash provided by (used in) financing activities (2,638,959 ) (1,760,535 ) Effect of exchange rate changes on cash and cash equivalents (88,260 ) 176,261 Net increase (decrease) in cash and cash equivalents (801,860 ) 3,910,073 Cash and cash equivalents at beginning of year 6,892,817 6,090,957 Net increase (decrease) in cash and cash equivalents resulting from transfer to assets held for sale — (115,932 ) Cash and cash equivalents at end of year 6,090,957 9,885,097 87 Table of Contents Yen in millions Year ended March 31, 2025 Year ended March 31, 2026 (Financial Services Business) Cash flows from operating activities Net income 495,210 625,307 Depreciation and amortization 838,167 920,432 Interest income and interest costs related to financial services, net (769,800 ) (833,480 ) Share of profit (loss) of investments accounted for using the equity method (11,600 ) (10,669 ) Income tax expense 178,000 232,086 Changes in operating assets and liabilities, and other (2,405,422 ) (1,739,575 ) Interest received 2,332,296 2,468,460 Dividends received 5,651 5,958 Interest paid (1,531,190 ) (1,620,645 ) Income taxes paid, net of refunds (153,692 ) (81,619 ) Net cash provided by (used in) operating activities (1,022,379 ) (33,745 ) Cash flows from investing activities Additions to fixed assets excluding equipment leased to others (28,469 ) (29,030 ) Additions to equipment leased to others (2,972,065 ) (2,733,176 ) Proceeds from sales of fixed assets excluding equipment leased to others 2,555 2,595 Proceeds from sales of equipment leased to others 1,701,864 1,347,608 Additions to intangible assets (13,064 ) (12,970 ) Additions to public and corporate bonds and stocks (519,533 ) (473,958 ) Proceeds from sales of public and corporate bonds and stocks and upon maturity of public and corporate bonds 326,469 376,933 Other, net 89,633 43,662 Net cash provided by (used in) investing activities (1,412,610 ) (1,478,336 ) Cash flows from financing activities Increase (decrease) in short-term debt 229,903 (121,594 ) Proceeds from long-term debt 13,251,352 12,408,438 Payments of long-term debt (10,618,851 ) (11,087,637 ) Dividends paid to non-controlling interests (4,667 ) (4,985 ) Other, net (4,716 ) (0 ) Net cash provided by (used in) financing activities 2,853,022 1,194,223 Effect of exchange rate changes on cash and cash equivalents (45,829 ) 200,936 Net increase (decrease) in cash and cash equivalents 372,203 (116,923 ) Cash and cash equivalents at beginning of year 2,519,244 2,891,447 Net increase (decrease) in cash and cash equivalents resulting from transfer to assets held for sale — — Cash and cash equivalents at end of year 2,891,447 2,774,524 (Consolidated) Effect of exchange rate changes on cash and cash equivalents (134,089 ) 377,197 Net increase (decrease) in cash and cash equivalents (429,656 ) 3,793,150 Cash and cash equivalents at beginning of year 9,412,060 8,982,404 Net increase (decrease) in cash and cash equivalents resulting from transfer to assets held for sale — (115,932 ) Cash and cash equivalents at end of year 8,982,404 12,659,622 88 Table of Contents Financial Position Cash and cash equivalents were ¥12,659.6 billion as of March 31, 2026. Most of Toyota’s cash and cash equivalents are held in Japanese yen or in U.S. dollars. Liquid assets, which Toyota defines as cash and cash equivalents, time deposits, public and corporate bonds and its investment in monetary trust funds were ¥22,117.9 billion as of March 31, 2026. Trade accounts and notes receivable, less allowance for doubtful accounts increased during fiscal 2026 by ¥116.2 billion, or 3.2%, to ¥3,795.9 billion. This increase was due mainly to an increase in the impact of changes in exchange rates. Inventories increased during fiscal 2026 by ¥536.7 billion, or 11.7%, to ¥5,134.9 billion. This increase was due mainly to an increase in the impact of changes in exchange rates. Total finance receivables, net increased during fiscal 2026 by ¥5,341.6 billion, or 15.9%, to ¥38,966.6 billion. This increase was due mainly to an increase in loan balance to customers and dealers. Finance receivables were geographically distributed as follows: in North America 52.2%, in Europe 15.4%, in Asia 11.4%, in Japan 10.0% and in Other 11.0%. Other financial assets decreased during fiscal 2026 by ¥1,700.3 billion, or 10.1%. This decrease was due mainly to a decrease in public and corporate bonds. Property, plant and equipment increased during fiscal 2026 by ¥1,733.6 billion, or 11.3%. This increase was due mainly to capital expenditures. Accounts and notes payable increased during fiscal 2026 by ¥329.5 billion, or 6.0%. This increase was due mainly to an increase in accounts payable associated with parts procurement. Income taxes payable increased during fiscal 2026 by ¥206.1 billion, or 40.8%. This increase was mainly due to a decrease in interim payments of income taxes. Toyota’s total borrowings increased during fiscal 2026 by ¥4,412.5 billion, or 11.4%. Toyota’s short-term borrowings consist of loans with a weighted-average interest rate of 2.51% and commercial paper with a weighted-average interest rate of 3.15%. Short-term borrowings increased during fiscal 2026 by ¥234.6 billion, or 4.3%, to ¥5,699.0 billion. Toyota’s long-term debt mainly consists of unsecured and secured loans, unsecured notes and medium-term notes, and secured notes with weighted-average interest rates ranging from 2.91% to 7.86%, and maturity dates ranging from 2026 to 2048. The current portion of long-term debt increased during fiscal 2026 by ¥1,445.6 billion, or 14.1%, to ¥11,718.5 billion and the non-current portion increased by ¥2,554.6 billion, or 11.3%, to ¥25,076.7 billion. The increase in total borrowings resulted mainly from the increasing demand for financing associated with the increase in the loan balance at financial subsidiaries. As of March 31, 2026, approximately 47% of long-term debt was denominated in U.S. dollars, 14% in euros, 12% in Japanese yen, 5% in Australian dollars, 4% in Canadian dollars, and 18% in other currencies. Toyota hedges interest rate risk exposure of fixed-rate borrowings by entering into interest rate swaps. There are no material seasonal variations in Toyota’s borrowings requirements. As of March 31, 2026, Toyota’s total interest-bearing debt was 108.2% of Toyota Motor Corporation shareholders’ equity, compared with 108.0% as of March 31, 2025. 89 Table of Contents The following table provides information on credit ratings of Toyota’s short-term borrowing and long-term debt from Standard & Poor’s Ratings Group (S&P), Moody’s Ratings (Moody’s), and Rating and Investment Information, Inc. (R&I), as of May 31, 2026. A credit rating is not a recommendation to buy, sell or hold securities. A credit rating may be subject to withdrawal or revision at any time. Each rating should be evaluated separately of any other rating. S&P Moody’s R&I Short-term borrowing A-1+ P-1 — Long-term debt A+ A1 AAA Toyota’s net defined benefit liability (asset) of Japanese plans increased during fiscal 2026 by ¥23.1 billion, or 10.5%, to ¥243.7 billion. The net defined benefit liability (asset) of foreign plans increased during fiscal 2026 by ¥40.2 billion, or 11.5%, to ¥391.0 billion. The amounts of net defined benefit liability (asset) will be funded through future cash contributions by Toyota or in some cases will be settled on the retirement date of each covered employee. The increase in net defined benefit liability (asset) of the Japanese plans reflects mainly a decrease in plan assets that resulted from a partial return from retirement benefit trusts, despite a decrease in defined benefit obligations due to an increased discount rate. See note 23 to the consolidated financial statements for further discussion. Toyota’s treasury policy is to maintain controls on all exposures, to adhere to stringent counterparty credit standards, and to actively monitor marketplace exposures. Toyota remains centralized and is pursuing global efficiency of its financial services operations through Toyota Financial Services Corporation. The key element of Toyota’s financial strategy is maintaining a strong financial position that will allow Toyota to continue its business and fund its research and development initiatives, capital expenditures and financial services operations strategically even if earnings are subject to short-term fluctuations. Toyota believes that it maintains sufficient liquidity for its present cash requirements and that, by maintaining its high credit ratings, it will continue to be able to access funds from external sources in large amounts and at relatively low costs. In order for Toyota to maintain its high credit ratings, a number of conditions must be met, some of which are not within Toyota’s control. Such conditions include the general economic condition in Japan and the other major markets in which Toyota does business. Toyota uses its securitization program as part of its funding through special purpose entities for its financial services operations. Toyota is considered as the primary beneficiary of these special purpose entities and therefore consolidates them. Toyota has not entered into any off-balance sheet securitization transactions during fiscal 2026. For information regarding the amounts of non-derivative financial liabilities and derivative financial liabilities by a remaining contract maturity period, see note 20 to the consolidated financial statements. In addition, as part of Toyota’s normal business practices, Toyota enters into long-term arrangements with suppliers for purchases of certain raw materials, components and services. These arrangements may contain fixed/minimum quantity purchase requirements. Toyota enters into such arrangements to facilitate an adequate supply of these materials and services. 90 Table of Contents The following tables summarize Toyota’s contractual obligations and commercial commitments as of March 31, 2026. Yen in millions Payments Due by Period Total Less than 1 year 1 to 3 years 3 to 5 years 5 years and after Contractual Obligations: Short-term debt 5,699,083 5,699,083 — — — Long-term debt* 37,506,386 11,882,021 14,999,702 8,093,928 2,530,735 Commitments for the purchase of property, plant, other assets and services (note 32) 2,570,912 443,289 518,144 565,469 1,044,010 Total 45,776,381 18,024,393 15,517,846 8,659,397 3,574,745 Commercial Commitments (note 32): Maximum potential exposure to guarantees given in the ordinary course of business 1,553,327 546,125 791,437 135,278 80,487 Total 1,553,327 546,125 791,437 135,278 80,487 * “Long-term debt” represents future principal payments. Toyota expects to contribute ¥34,336 million domestically and ¥18,488 million overseas to its pension plans in fiscal 2027. 91 Table of Contents Consolidated Statement of Financial Position on Non-Financial Services Businesses and Financial Services Business Yen in millions March 31, 2025 March 31, 2026 Assets (Non-Financial Services Businesses) Current assets Cash and cash equivalents 6,090,957 9,885,097 Trade accounts and other receivable 3,689,021 3,835,922 Other financial assets 6,198,376 3,211,041 Inventories 4,588,755 5,120,950 Other current assets 1,034,507 1,288,955 Assets held for sale — 2,016,804 Total current assets 21,601,616 25,358,768 Non-current assets Property, plant and equipment, net 9,134,857 9,584,748 Other 17,556,285 18,451,708 Total non-current assets 26,691,142 28,036,455 Total assets 48,292,758 53,395,223 (Financial Services Business) Current assets Cash and cash equivalents 2,891,447 2,774,524 Trade accounts and other receivable 410,958 454,168 Receivables related to financial services 11,453,249 13,483,501 Other financial assets 1,443,042 1,544,390 Other current assets 414,216 489,695 Total current assets 16,612,912 18,746,278 Non-current assets Receivables related to financial services 22,171,786 25,494,405 Property, plant and equipment, net 6,198,838 7,482,619 Other 1,787,250 2,018,407 Total non-current assets 30,157,874 34,995,431 Total assets 46,770,786 53,741,709 (Elimination) Elimination of assets (1,462,194 ) (1,614,601 ) (Consolidated) Total assets 93,601,350 105,522,331 Note: Assets in non-financial services include unallocated corporate assets. 92 Table of Contents Yen in millions March 31, 2025 March 31, 2026 Liabilities (Non-Financial Services Businesses) Current liabilities Trade accounts and other payables 5,195,204 5,492,355 Short-term and current portion of long-term debt 1,188,430 976,235 Accrued expenses 1,729,279 2,014,207 Income taxes payable 454,252 654,751 Other current liabilities 3,495,075 3,844,179 Liabilities directly associated with assets held for sale — 694,547 Total current liabilities 12,062,240 13,676,274 Non-current liabilities Long-term debt 1,547,461 1,823,843 Retirement benefit liabilities 1,001,227 1,002,213 Other non-current liabilities 2,442,382 2,520,522 Total non-current liabilities 4,991,070 5,346,578 Total liabilities 17,053,309 19,022,852 (Financial Services Business) Current liabilities Trade accounts and other payables 674,347 777,916 Short-term and current portion of long-term debt 15,111,977 17,042,885 Accrued expenses 137,836 142,451 Income taxes payable 51,248 56,924 Other current liabilities 2,535,501 3,193,333 Total current liabilities 18,510,910 21,213,511 Non-current liabilities Long-term debt 21,515,873 23,904,821 Retirement benefit liabilities 18,341 20,271 Other non-current liabilities 1,089,654 1,958,944 Total non-current liabilities 22,623,868 25,884,036 Total liabilities 41,134,778 47,097,547 (Elimination) Elimination of liabilities (1,465,650 ) (1,618,136 ) (Consolidated) Total liabilities 56,722,437 64,502,263 Shareholders’ equity (Consolidated) Total Toyota Motor Corporation shareholders’ equity 35,924,826 39,918,854 (Consolidated) Non-controlling interests 954,088 1,101,214 (Consolidated) Total shareholders’ equity 36,878,913 41,020,068 (Consolidated) Total liabilities and shareholders’ equity 93,601,350 105,522,331 93 Table of Contents Lending Commitments Credit Facilities with Credit Card Holders Toyota’s financial services operations issue credit cards to customers. As customary for credit card businesses, Toyota maintains credit facilities with holders of credit cards issued by Toyota. These facilities are used upon each holder’s requests up to the limits established on an individual holder’s basis. Although loans made to customers through these facilities are not secured, for the purposes of minimizing credit risks and of appropriately establishing credit limits for each individual credit card holder, Toyota employs its own risk management policy which includes an analysis of information provided by financial institutions in alliance with Toyota. Toyota periodically reviews and revises, as appropriate, these credit limits. Outstanding credit facilities with credit card holders were ¥151.6 billion as of March 31, 2026. Credit Facilities with Dealers Toyota’s financial services operations maintain credit facilities with dealers. These credit facilities may be used for business acquisitions, facilities refurbishment, real estate purchases and working capital requirements. These loans are typically collateralized with liens on real estate, vehicle inventory, and/or other dealership assets, as appropriate. Toyota obtains a personal guarantee from the dealer or corporate guarantee from the dealership when deemed prudent. Although the loans are typically collateralized or guaranteed, the value of the underlying collateral or guarantees may not be sufficient to cover Toyota’s exposure under such agreements. Toyota evaluates the credit facilities according to the risks assumed in entering into the credit facility. Toyota’s financial services operations also provide financing to various multi-franchise dealer organizations, referred to as dealer groups, often as part of a lending consortium, for wholesale inventory financing, business acquisitions, facilities refurbishment, real estate purchases and working capital requirements. Toyota’s outstanding credit facilities with dealers totaled ¥2,512.7 billion as of March 31, 2026. Guarantees See note 32 to the consolidated financial statements for further discussion. Related Party Transactions See note 34 to the consolidated financial statements for further discussion. 94 Table of Contents 5.C RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES Toyota’s research and development is dedicated to capturing the increasingly diverse and sophisticated market through the development of attractive, affordable, high-quality products for customers worldwide. The intellectual property that R&D generates is a vital management resource that Toyota utilizes and protects to maximize its corporate value. For a more detailed discussion of our research and development objectives and policies, see “Item 4. Information on the Company — 4.B Business Overview — Research and Development.” Toyota’s research and development expenditures were approximately ¥1,522.8 billion in fiscal 2026, ¥1,326.4 billion in fiscal 2025, and ¥1,202.3 billion in fiscal 2024. Toyota presents research and development expenditures as a supplemental measure that demonstrates the amount of research and development expenditures undertaken during the relevant reporting period. Toyota defines research and development expenditures as research and development cost, plus research and development-related expenditures that were recognized as intangible assets, less amortization expenses for such assets. This measure has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of Toyota’s research and development cost as reported under IFRS Accounting Standards. For details of the research and development cost recorded in the consolidated statement of income, see note 28 to the consolidated financial statements. Toyota operates a global research and development organization with the primary goal of building automobiles that meet the needs of customers in every region of the world. In Japan, research and development operations are led by Toyota and Toyota Central Research & Development Laboratories, Inc., which works closely with Daihatsu, Hino, Toyota Auto Body Co., Ltd., Toyota Motor East Japan, Inc., and many other group companies. Overseas, Toyota has a worldwide network of technical centers as well as design and motorsports research and development centers. Toyota established TRI in January 2016 to accelerate research and development of artificial intelligence technology, which has significant potential to support future industrial technologies. In July 2017, TRI invested $100 million to launch a venture capital fund designed to provide financing to startup companies, and is making investments in newly established promising startup companies in the four areas of artificial intelligence, robotics, autonomous mobility, and data and cloud technology. TRI successively invested another $100 million in May 2019, $150 million in June 2021 and $150 million in April 2024. In addition, in an aim to achieve carbon neutrality, TRI established a $150 million fund in June 2021 and additionally invested $150 million in April 2024. In Japan, Toyota established a new company, Toyota Research Institute — Advanced Development (“TRI-AD”), in March 2018 to further accelerate its efforts in advanced development for automated driving technology and related technologies. Its key objectives include creating a smooth software pipeline from research to commercialization, leveraging data-handling capabilities, strengthening collaboration in development within the Toyota Group, including TRI, to accelerate development, and recruiting and employing top-level engineers globally, while cultivating and coordinating strong talent within the Toyota Group. In January 2021, TRI-AD was reorganized into Woven Planet Group comprising four companies — Woven Planet Holdings, Inc., which is responsible for decision-making for the entire group and creates new business opportunities; Woven Core, Inc., which assumed the business of TRI-AD and is responsible for the development of automated driving technologies; Woven Alpha, Inc., which is responsible for the development of new projects such as Woven City and Arene, a software platform; and Woven Capital, L.P. with a total investment value of $800 million, which invests in growth-stage companies in areas such as autonomous driving mobility, artificial intelligence, and smart city. Moreover, to bolster overseas research and development initiatives related to automated driving technology and software platforms, Toyota established Woven Planet North America (“WPNA”) in the United States and 95 Table of Contents Woven Planet United Kingdom in the United Kingdom, and transferred TRI’s automated driving division to WPNA in May 2022. On April 1, 2023, Woven Planet Holdings, Inc., Woven Core, Inc. and Woven Alpha, Inc. were merged and changed their name to Woven by Toyota, Inc. Toyota also established a technical development center in Otemachi, Tokyo, Japan in October 2018 as a site for development of key IT technologies that collaborates with Woven by Toyota, as well as promotes collaboration with venture companies and creation of new value by utilizing big data. Furthermore, Toyota Technical Center Shimoyama was established in Aichi Prefecture as a new R&D base, with partial operation in April 2019 and full operation in March 2024. Together with Toyota Technical Center, Toyota Technical Center Shimoyama develops vehicles aimed at “making ever-better cars” by bringing together members of all kinds of functions, such as vehicle planning, style, design, and evaluation, and by finding problems in vehicles while running a test course that reproduces a wide variety of severe usage environments around the world, and by repeating improvements. The following table provides information on Toyota’s principal research and development facilities. Facility Principal Activity Japan Toyota Technical Center Product planning, style, design, prototype production and vehicle evaluation Toyota Technical Center Shimoyama Product planning, style, design and vehicle evaluation Higashi-Fuji Technical Center Advanced development and advanced research Tokyo Design Research & Laboratory Advanced styling designs Otemachi Office Development of key IT technologies, creation of new values by utilizing big data and collaboration with venture companies Shibetsu Proving Ground Evaluation Toyota Central R&D Labs., Inc. Basic research Woven by Toyota, Inc. Development of artificial intelligence technology with a focus on automated driving technology Development of Woven City and software platform technologies United States Toyota Motor Engineering and Manufacturing North America, Inc. Product planning, design and evaluation of vehicles manufactured in North America Calty Design Research, Inc. Design Toyota Research Institute of North America (TRI-NA) Advanced research relating to “energy and environment,” “safety” and “mobility infrastructure” Toyota Research Institute, Inc. Research and development of artificial intelligence technology Europe Toyota Motor Europe NV/SA Planning and evaluation of vehicles manufactured in Europe Toyota Europe Design Development S.A.R.L. Design TOYOTA RACING GmbH Development of motor sports vehicles * TOYOTA RACING GmbH renamed from TOYOTA GAZOO Racing Europe GmbH, effective January 7, 2026. 96 Table of Contents Facility Principal Activity TOYOTA GAZOO Racing World Rally Team Oy Development of motor sports vehicles Asia Pacific Toyota Motor Asia (Thailand) Co., Ltd. Planning and evaluation of vehicles manufactured in Australia and Asia China Intelligent Electro Mobility R&D Center by TOYOTA (China) Co., Ltd. Environmental technology design and evaluation in China FAW Toyota Motor Co., Ltd. Research & Development Branch Design, evaluation and certification of vehicles manufactured in China GAC Toyota Motor Co., Ltd. Design, evaluation and certification of vehicles manufactured in China BYD Toyota EV Technology Co., Ltd. Design and evaluation of BEVs Toyota Motor Technical Research and Service (Shanghai) Co., Ltd. Research of new technology, construction and system of automobiles United Fuel Cell System R&D (Beijing) Co., Ltd. Development of FC system for commercial vehicles in China Lexus Electrified Shanghai Co., Ltd. Design and development of Lexus BEVs Toyota carefully analyzes patents and the need for patents in each area of research to formulate more effective research and development strategies. Toyota identifies research and development projects in which it should build a strong global patent portfolio. For a further discussion of Toyota’s intellectual property, see “Item 4. Information on the Company — 4.B Business Overview — Intellectual Property.” 5.D TREND INFORMATION For a discussion of the trends that affect Toyota’s business and operating results, see “Item 5. Operating and Financial Review and Prospects — 5.A Operating Results” and “Item 5. Operating and Financial Review and Prospects — 5.B Liquidity and Capital Resources.” 5.E CRITICAL ACCOUNTING ESTIMATES Not applicable.