TM Filings — Toyota Motor Corp/

TM Filings — Toyota Motor Corp/ - FilingSpy

3.A [RESERVED] 3.B CAPITALIZATION AND INDEBTEDNESS Not applicable. 3.C REASONS FOR THE OFFER AND USE OF PROCEEDS Not applicable. 3.D RISK FACTORS 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 markets in which it operates. In recent years, competition in the automotive industry has further intensified amidst difficult overall market conditions. In addition, competition is likely to further intensify as technological advances in areas such as Connected, Autonomous / Automated, Shared, and Electric (“CASE”) technologies progress in the worldwide automotive industry, possibly resulting in industry reorganizations. Factors affecting competition include product quality and features, safety, reliability, fuel economy, the amount of time required for innovation and development, pricing, customer service, financing terms and tax credits or other government policies in various countries. Increased competition may lead to lower vehicle unit sales, which may result in a further downward price pressure and adversely affect Toyota’s financial condition, results of operations, cash flows and prospects. Toyota’s ability to adequately respond to the recent rapid changes in the automotive market, particularly shifts in consumer preferences to electrified vehicles, and to maintain its competitiveness will be fundamental to its future success in existing and new markets and to maintain 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 economic, social and political 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. Changes in demand for automobiles are continuing, and it is unclear how this situation will transition in the future. Toyota’s financial condition, results of operations, cash flows and prospects may be adversely affected if the changes in demand for automobiles continue or progress further beyond Toyota’s expectations. In addition, demand has been affected, and may in the future be affected by, factors directly impacting vehicle price or the 1 Table of Contents 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, which may result in downward price pressure and adversely affect Toyota’s financial condition, results of operations, cash flows and prospects. Toyota’s future success depends on its ability to offer new, innovative and competitively priced products that meet customer demand on a timely basis. Meeting customer demand by introducing attractive new vehicles and reducing the amount of time required for product development are critical to automotive manufacturers. In particular, it is critical to meet customer demand with respect to quality, safety, reliability and sustainability. The timely introduction of new vehicle models and vehicle features, at competitive prices, meeting rapidly changing customer preferences and demand is more fundamental to Toyota’s success than ever, as the automotive market is rapidly transforming in light of the changing global economy and technological advances. There is no assurance, however, that Toyota will adequately and appropriately respond to changing customer preferences and demand with respect to quality, safety, reliability, styling, sustainability and other features in a timely manner. Even if Toyota succeeds in perceiving customer preferences and demand, 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, including cost reduction capacity. Further, there is no assurance that Toyota will be able to offer new products or implement capital expenditures at the level and times planned by management, including as described in targets or goals that we have disclosed publicly. Toyota’s inability to develop and offer products that meet customers’ preferences and demand with respect to quality, safety, reliability, styling, sustainability and other features 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, results of operations, cash flows and prospects. Toyota’s ability to market and distribute effectively 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. 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 geopolitical and regulatory environment in the major markets in which it operates. Toyota’s inability to maintain well-developed sales techniques and distribution networks may result in decreased sales and market share and may adversely affect its financial condition, results of operations, cash flows and prospects. Toyota’s success is significantly impacted by its ability to maintain and develop its brand image and reputation. In the highly competitive automotive industry, it is critical to maintain and develop a brand image and reputation. In order to do so, it is necessary to further increase stakeholders’ confidence by ensuring that Toyota, the Toyota Group and their suppliers thoroughly comply with laws and regulations, provide safe, high-quality products that meet customer preferences and demand, as well as timely and appropriately disseminate information to stakeholders. It is also becoming increasingly important for companies to contribute to sustainability. However, the Toyota Group cannot ensure that it or its suppliers do so in all cases. For instance, at the consolidated subsidiary level, Hino and Daihatsu announced vehicle model certification issues in March 2022 and in April 2023, respectively. In addition, Toyota Motor Corporation investigated certain of its model certification applications as per instructions from the Ministry of Land, Infrastructure, Transport and Tourism of Japan (“MLIT”) on January 26, 2024. Toyota Motor Corporation has confirmed that since 2014 seven models, including some that have already been discontinued, were tested as part of such applications using methods that differed from government standards, and it reported this to the MLIT on May 31, 2024. In July 2024, Toyota Motor Corporation received a correction order from the MLIT regarding its model certification applications. 2 Table of Contents Following on-site investigations, the MLIT indicated eight new cases involving seven vehicles that did not comply with the standards. In August 2024, Toyota Motor Corporation submitted a report on measures to prevent recurrence of such conduct to the MLIT. See “Item 4. Information on the Company — 4.B Business Overview — Legal Proceedings” for further discussion of these and related matters. In addition, actual or perceived failures on the part of Toyota or its suppliers to contribute to sustainability or to meet certain sustainability-related goals or objectives, including those relating to climate change or the protection of human rights in Toyota’s supply chain, may also harm Toyota’s reputation. Any insufficient measures taken by Toyota, the Toyota Group or their suppliers to maintain and develop Toyota’s brand image and reputation may have an adverse effect on Toyota’s financial condition, results of operations, cash flows and prospects. Toyota relies on suppliers for the provision of certain supplies including parts, components and raw materials. Toyota purchases supplies including parts, components and raw materials from a number of external suppliers located around the world. For some supplies, Toyota relies on a single supplier or a limited number of suppliers, whose replacement with another supplier may be difficult. Inability to obtain supplies from a single or limited source supplier may result in difficulty obtaining supplies and may restrict Toyota’s ability to produce vehicles. Furthermore, even if Toyota were to rely on a large number of suppliers, first-tier suppliers with whom Toyota directly transacts may in turn rely on a single second-tier supplier or limited second-tier suppliers. Irrespective of the number of suppliers, Toyota’s ability to continue to obtain supplies from its suppliers in a timely and cost-effective manner is subject to a number of factors, some of which are not within Toyota’s control. These factors include the ability of Toyota’s suppliers to provide a continued source of supply, and Toyota’s ability to effectively compete and obtain competitive prices from suppliers. Circumstances that may adversely affect such abilities include geopolitical tensions as well as related governmental actions such as economic sanctions and export controls that may be relevant to certain suppliers. A loss of any single or limited source supplier, or inability to obtain supplies from suppliers in a timely and cost-effective manner, could lead to increased costs or delays or suspensions in Toyota’s production and deliveries, which could have an adverse effect on Toyota’s financial condition, results of operations, cash flows and prospects. The worldwide financial services industry is highly competitive. The worldwide financial services industry is highly competitive. Increased competition in automobile financing may lead to decreased margins. A decline in Toyota’s vehicle unit sales, an increase in residual value risk due to lower used vehicle prices, an increase in the ratio of credit losses and increased funding costs are additional factors which may impact Toyota’s financial services operations. If Toyota is unable to adequately respond to the changes and competition in automobile financing, Toyota’s financial services operations may adversely affect its financial condition, results of operations, cash flows and prospects. Toyota’s operations and vehicles rely on various digital and information technologies, as well as information security, which are subject to frequent attack. Toyota depends on various information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, including sensitive data, and to manage or support a variety of business processes and activities, including manufacturing, research and development, supply chain management, sales and accounting. In addition, Toyota vehicles may rely on various digital and information technologies, including information service and driving assistance functions. Despite security measures, Toyota’s digital and information technology networks and systems may be vulnerable to damage, disruptions, shutdowns due to unauthorized access or attacks by hackers, computer 3 Table of Contents viruses, breaches due to unauthorized use, errors or malfeasance by employees and others who have or gain access to the networks and systems Toyota depends on or otherwise uses, service failures or bankruptcy of third parties such as software development or cloud computing vendors, power shortages and outages, and utility failures or other catastrophic events like natural disasters. In particular, cyberattacks or other intentional malfeasance are increasing in terms of intensity, sophistication and frequency, and Toyota has been and expects to continue to be the subject of such attacks. Such attacks have, in some cases, and could again disrupt critical operations, disclose sensitive data, interfere with information services and driving assistance functions in Toyota’s vehicles, and/or give rise to legal claims or proceedings, liability or regulatory penalties under applicable laws, which could have an adverse effect on Toyota’s brand image and its financial condition, results of operations, cash flows and prospects. Moreover, similar attacks on Toyota’s suppliers and business partners have had, and may in the future have, a similar negative impact on Toyota. Toyota is exposed to risks associated with climate change, including the physical risks of climate change and risks from the transition to a lower-carbon economy. Risks associated with climate change are subject to increasing societal and political, including regulatory, focus in Japan and globally. These risks include the physical risks of climate change and risks from the transition to a lower-carbon economy. The physical risks of climate change include both acute, event-driven risks such as those relating to hurricanes, floods, tornadoes, drought, and wildfires as well as longer-term weather patterns and related effects, such as sustained higher temperatures and sea level rise. While Toyota has a Business Continuity Plan (“BCP”), in addition to large-scale disasters due to extreme weather conditions, the increase and intensification of severe weather events such as heat waves is expected to increase the risk of heat stroke and water shortages due to drought. Such severe weather events and other natural conditions have in the past harmed, and may in the future again harm, Toyota’s employees or its facilities and other assets, as well as those of Toyota’s suppliers and other business partners, thereby adversely affecting Toyota’s production, sales or other operational capacities. Large-scale disasters and other events may also adversely affect the financial condition of Toyota’s customers, and thereby demand for its products and services. Transition risks are those attributable to regulatory, technological and market changes to address the mitigation of, or adaptation to, climate-related risks. For example, Toyota is subject to the risk of changes in customer demand for vehicles due to such factors as changes in laws, regulations and government policies relating to climate change, technological innovation to address climate change, and new entrants into the automobile industry that seek to capitalize on changing market dynamics. Changes in customer demand may pose ancillary risks and challenges, such as Toyota’s having to establish new, or enhance existing, supply networks in order to source the raw materials, parts and components necessary for it to manufacture the products then in demand at desired volumes and at competitive costs. Toyota may incur significant costs and expenses as a result of the materialization of such risks, or in its efforts to mitigate or adapt to such risks. Toyota’s inability to develop and offer products that meet customers’ preferences and demand in a timely manner could result in a lower market share and reduced sales revenues and margins, and may adversely affect Toyota’s financial condition, results of operations cash flows and prospects. Furthermore, Toyota has published disclosures on climate-change related matters relating to its business and its partners. Such disclosures include forward-looking statements based on Toyota’s expectations and assumptions, involving substantial discretion and forecasts about costs and future circumstances, which may prove to be incorrect. In addition, Toyota’s initiatives relating to climate change may not have the intended results, and estimates concerning the timing and cost of implementing, and ability to meet, stated goals are subject to risks and uncertainties. As a result, Toyota may not be able to meet its goals, including those set forth in this report, on expected timing or within expected costs. In particular, progress toward achieving Toyota’s climate-related targets requires significant investment of resources and management time, as well as further improvement of compliance and risk management systems, 4 Table of Contents internal controls and other internal procedures. Toyota’s ability to achieve its climate-related goals, which are to be pursued over the long-term and are inherently aspirational, is subject to numerous risks and uncertainties, many of which are outside of Toyota’s control, such as changes in environmental and energy regulation and policy, the pace of technological change and innovation, and the actions of Toyota’s customers and competitors. Any failure, or perceived failure, by Toyota to achieve its climate-change related goals, including those set forth in this report, could adversely impact its reputation, financial condition, results of operations, cash flows and prospects. For a further discussion of risks associated with climate change, see “Item 4. Information on the Company — 4.B Business Overview — Climate Change-related Disclosures.” Toyota’s operations are dependent on securing, retaining and developing talented, diverse employees. Given in particular the rapid changes in its business environment and its efforts to transform into a mobility company, Toyota’s success depends on its ability to continue to recruit, retain and develop talented and diverse employees. However, competition for such employees is intense and if Toyota cannot recruit and retain diverse employees with a high level of expertise and extensive experience as planned, or it is unable to provide its employees with the opportunities, training and resources they need to develop themselves further, it may reduce Toyota’s competitiveness, and its financial condition, results of operations, cash flows and prospects could be adversely affected. Financial Market and Economic Risks Toyota’s operations are subject to currency and interest rate fluctuations. Toyota is sensitive to fluctuations in foreign currency exchange rates and is principally exposed to fluctuations in the value of the Japanese yen, the U.S. dollar and the euro and, to a lesser extent, the Australian dollar, the Canadian dollar and the British pound. Toyota’s consolidated financial statements, which are presented in Japanese yen, are affected by foreign currency exchange fluctuations through translation risk, and changes in foreign currency exchange rates may also affect the price of products sold and materials purchased by Toyota in foreign currencies through transaction risk. In particular, strengthening of the Japanese yen against the U.S. dollar can have an adverse effect on Toyota’s operating results. Toyota believes that its use of certain derivative financial instruments including foreign exchange forward contracts and interest rate swaps and increased localized production of its products have reduced, but not eliminated, the effects of interest rate and foreign currency exchange rate fluctuations. Nonetheless, a negative impact resulting from fluctuations in foreign currency exchange rates and changes in interest rates may adversely affect Toyota’s financial condition, results of operations, cash flows and prospects. For a further discussion of currency and interest rate fluctuations and the use of derivative financial instruments, see “Item 5. Operating and Financial Review and Prospects — 5.A Operating Results — Overview — Currency Fluctuations,” “Item 11. Quantitative and Qualitative Disclosures About Market Risk,” and notes 9 and 20 to Toyota’s consolidated financial statements. High prices of raw materials and strong pressure on Toyota’s suppliers has and could continue to negatively impact Toyota’s profitability. Increases in raw materials prices that Toyota and Toyota’s suppliers use in manufacturing their products or parts and components such as steel, precious metals, non-ferrous alloys including aluminum, and plastic parts, may lead to higher production costs for parts and components. This could, in turn, negatively impact Toyota’s profitability if Toyota is not able to pass all those costs on to its customers. A downturn in the financial markets could adversely affect Toyota’s ability to raise capital. Should the world economy suddenly deteriorate, a number of financial institutions and investors will face difficulties in providing capital to the financial markets at levels corresponding to their own financial capacity, 5 Table of Contents and, as a result, there is a risk that companies may not be able to raise capital under terms that they would expect to receive with their creditworthiness. If Toyota is unable to raise the necessary capital under appropriate conditions on a timely basis, Toyota’s financial condition, results of operations, cash flows and prospects may be adversely affected. Regulatory, Legal, Political and Other Risks The automotive industry is subject to various laws, regulations and governmental actions. The worldwide automotive industry is subject to various laws and regulations. Toyota has incurred significant costs as a result of laws, regulations and governmental actions or in response thereto, and expects to incur such costs in the future. Furthermore, new legislation or regulations or changes in existing legislation or regulations may also subject Toyota to additional costs in the future. If Toyota incurs significant costs related to laws, regulations and governmental actions, Toyota’s financial condition, results of operations, cash flows and prospects may be materially and adversely affected. Such laws, regulations and governmental actions may also limit or restrict Toyota’s businesses or operations, which may also materially and adversely affect its financial condition, results of operations, cash flows and prospects. For example, Toyota is subject to various laws and regulations related to vehicle safety and environmental matters such as emission levels, fuel economy, noise and pollution. In particular, automotive manufacturers such as Toyota are required to implement safety measures such as recalls for vehicles that do not or may not comply with the safety standards prescribed in laws and regulations. In addition, Toyota may, in order to reassure its customers of the safety of Toyota’s vehicles, decide to voluntarily implement sales suspensions, recalls or other safety measures even if the vehicle complies with the safety standards of relevant laws and regulations. If Toyota launches products that result in safety measures such as recalls (including where parts related to recalls or other measures were procured by Toyota from a third party), Toyota may incur various costs including significant costs for free repairs. The failure to comply with such regulations could result in legal proceedings, recalls, negotiated remedial actions, fines, corrective orders, revocations of government approvals and the imposition of other government sanctions, restricted product offerings, compensatory payments or adverse consequences. Similarly, many governments also impose tariffs and other trade barriers, taxes and levies, or enact export, price or exchange controls. For example, in 2025, a significant increase in tariffs on exports to the United States, including tariffs specifically related to the automotive industry, were announced. Such elevated tariff rates remain in effect as of the date of this report. We cannot predict the timing, duration, scope or extent of any future changes to such tariffs and trade policies, or of other tariffs or trade-related actions. In addition, export controls governing components incorporated into certain vehicles also have been enacted. The recently announced tariffs and trade actions have increased the cost of our products and may cause stagnation in demand for them in the future. They have also adversely affected our supply chains and distribution networks, which negatively impacts our production and sales. The effects described above are primarily focused in the United States, but they are not limited to the United States, given our cross-border operations. Should the current situation continue for an extended period, it could potentially negatively impact not only us but other participants in the entire automotive industry as well as related industries, which could in turn further adversely affect our financial condition, results of operations, cash flows and prospects. Furthermore, our efforts to mitigate the impact of such tariffs or trade-related actions may themselves require us to incur costs and dedicate management attention. Toyota may become subject to various legal proceedings. Toyota may become subject to legal proceedings in respect of various issues, including issues relating to the topics discussed in “— The automotive industry is subject to various laws, regulations and governmental actions,” as well as product liability and infringement of intellectual property. Toyota may also be subject to legal proceedings brought by its shareholders and governmental proceedings and investigations. Toyota is in fact currently subject to a number of pending legal proceedings and government investigations. A negative outcome 6 Table of Contents in one or more of these pending legal proceedings could adversely affect Toyota’s reputation, brand image, financial condition, results of operations, cash flows and prospects. For a further discussion of governmental regulations, see “Item 4. Information on the Company — 4.B Business Overview — Governmental Regulation, Environmental and Safety Standards” and for legal proceedings, please see “Item 4. Information on the Company — 4.B Business Overview — Legal Proceedings.” Toyota may be adversely affected by natural calamities, epidemics, political and economic instability, fuel shortages or interruptions in social infrastructure, wars, terrorism and labor strikes. Toyota is subject to various risks associated with conducting business worldwide. These risks include natural calamities; epidemics; political and economic instability; fuel shortages; interruption in social infrastructure including energy supply, transportation systems, gas, water, or communication systems resulting from natural hazards or technological hazards; wars; terrorism; labor strikes and work stoppages. Disruptions, delays and other adverse changes in the operations of Toyota’s business have ensued from such risks materializing in the past. Should the major markets in which Toyota purchases materials, parts and components and supplies for the manufacture of Toyota products or in which Toyota’s products are produced, distributed or sold be affected by any of these events, it may result in future disruptions, delays and other adverse changes in the operations of Toyota’s business.

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4.A HISTORY AND DEVELOPMENT OF THE COMPANY Toyota Motor Corporation is a joint-stock company with limited liability incorporated under the Commercial Code of Japan and continues to exist under the Companies Act of Japan (the “Companies Act”). Toyota commenced operations in 1933 as the automobile division of Toyota Industries (formerly Toyoda Automatic Loom Works, Ltd.). Toyota was incorporated as a separate company in August 1937. In 1982, the Toyota Motor Company and Toyota Motor Sales merged to form the present Toyota Motor Corporation. As of March 31, 2026, Toyota operates through 602 consolidated subsidiaries (including structured entities) and 159 associates and joint ventures accounted for by the equity method. See “Item 4. Information on the Company — 4.B Business Overview — Capital Expenditures and Divestitures” for a description of Toyota’s principal capital expenditures and divestitures between April 1, 2023 and March 31, 2026 and information on Toyota’s principal capital expenditures and divestitures currently in progress. Toyota’s principal executive offices are located at 1 Toyota-cho, Toyota City, Aichi Prefecture 471-8571, Japan. Toyota’s telephone number in Japan is +81-565-28-2121. The SEC maintains a website (https://www.sec.gov/) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Toyota also maintains a website (https://global.toyota/en/) through which its annual reports on Form 20-F and certain of its other SEC filings may be accessed. Information contained on or accessible through Toyota’s website is not part of this annual report on Form 20-F. 4.B BUSINESS OVERVIEW Toyota primarily conducts business in the automotive industry. Toyota also conducts business in the financial services and other industries. Toyota sold 9,595 thousand vehicles in fiscal 2026 on a consolidated basis. Toyota had sales revenues of ¥50,684.9 billion and net income attributable to Toyota Motor Corporation of ¥3,848.0 billion in fiscal 2026. 7 Table of Contents Toyota’s business segments are automotive operations, financial services operations and all other operations. The following table sets forth Toyota’s sales to external customers in each of its business segments for each of the past three fiscal years. Yen in millions Year Ended March 31, 2024 2025 2026 Automotive 41,080,731 42,996,299 45,201,924 Financial Services 3,447,195 4,437,827 4,819,003 All Other 567,399 602,578 664,026 Toyota’s automotive operations include the design, manufacture, assembly and sale of passenger vehicles, minivans and commercial vehicles such as trucks and related parts and accessories. Toyota’s financial services business consists primarily of providing financing to dealers and their customers for the purchase or lease of Toyota vehicles. Toyota’s financial services business also provides mainly retail installment credit and leasing through the purchase of installment and lease contracts originated by Toyota dealers. Related to Toyota’s automotive operations, Toyota is working towards having all of its vehicles become connected vehicles, creating new value and reforming businesses by utilizing big data obtained from those connected vehicles, and establishing new mobility services. Toyota’s all other operations business segment includes the information technology related businesses including a web portal for automobile information called GAZOO.com. Toyota sells its vehicles in approximately 200 countries and regions. Toyota’s primary markets for its automobiles are Japan, North America, Europe and Asia. The following table sets forth Toyota’s sales to external customers in each of its geographical markets for each of the past three fiscal years. Yen in millions Year Ended March 31, 2024 2025 2026 Japan 10,193,556 10,719,120 10,985,614 North America 17,624,268 18,930,253 20,661,490 Europe 5,503,738 6,110,052 6,464,911 Asia 7,604,269 7,903,360 7,966,455 Other* 4,169,494 4,373,919 4,606,482 * “Other” consists of Central and South America, Oceania, Africa and the Middle East. During fiscal 2026, 21.7% of Toyota’s automobile unit sales on a consolidated basis were in Japan, 30.6% were in North America, 12.3% were in Europe and 18.3% were in Asia. The remaining 17.1% of consolidated unit sales were in other markets. The Worldwide Automotive Market Toyota estimates that annual worldwide vehicle sales totaled approximately 92 million units in 2025. Automobile sales are affected by a number of factors including: • social, political and economic conditions; • introduction of new vehicles and technologies; • vehicle prices, costs incurred by customers to purchase and operate automobiles; and • Supply chain disruptions arising from geopolitical risks 8 Table of Contents These factors can cause consumer demand to vary substantially from year to year in different geographic markets and in individual categories of automobiles. Looking at the global economy in fiscal 2026, the U.S. economy remained resilient, supported principally by stable personal consumption. In China, fiscal policy measures, including economic stimulus packages, provided underlying support. As a result, according to our research, the global economy maintained a growth rate of around 3%. Meanwhile, in the automotive market, government policies and consumer stimulus measures across various countries bolstered demand, and the market continued to expand at a steady pace. Looking at the economies of major countries, in the United States, despite adverse conditions such as shifts in trade policy, the economy maintained solid performance, supported by resilient personal consumption. The Chinese economy maintained year-over-year growth, supported by resilient exports and fiscal policy measures; however, underlying domestic demand lacked momentum. In Europe, the economy accelerated from the previous year. Against a backdrop of moderated inflation and a stable employment environment, personal consumption served as the primary driver of growth. In Japan, the economy shifted from negative growth in the previous year to positive growth in 2025. Amid this environment, the global automotive market maintained a pace of expansion in 2025, with a year-on-year increase of 3%. In North America, new vehicle sales were approximately 19.90 million units, an increase from the previous year. In Europe, new vehicle sales increased from the previous year to approximately 18.60 million units. New vehicle sales in the Chinese market totaled approximately 26.60 million units, remaining largely flat compared to the previous year. Emerging markets also continued on an upward trend. In India, in addition to underlying market strength, the revised Goods and Services Tax enacted in the second half of 2025 boosted automobile demand. The share of each market across the globe, which Toyota estimates based on the available automobile sales data in each country and region information, was 29% for China, 22% for North America (including Mexico and Puerto Rico), 20% for Europe, 4% for Asia (excluding Japan, South Korea and China), and 10% for India and the Middle East. In the medium- to long-term, Toyota expects the automotive market to continue growing driven principally by growth in China and other emerging countries. However, global competition is expected to be severe, as various regulations aimed at carbon neutrality have been strengthened and the pace of technological advancement and development of new products, particularly related to electrification, quickens further. The worldwide automotive industry is affected significantly by government regulations aimed at reducing harmful effects on the environment, enhancing vehicle safety and improving fuel economy. These regulations have added to the cost of manufacturing vehicles. Many governments also mandate local procurement of parts and components and impose tariffs and other trade barriers, as well as price or exchange controls as a means of creating jobs, protecting domestic producers or influencing their balance of payments. Changes in regulatory requirements and other government-imposed restrictions can limit or otherwise burden an automaker’s operations. Government laws and regulations can also make it difficult to repatriate profits to an automaker’s home country. The development of the worldwide automotive market includes the continuing globalization of automotive operations. Manufacturers seek to achieve globalization by localizing the design and manufacture of automobiles and their parts and components in the markets in which they are sold. By expanding production capabilities beyond their home markets, automotive manufacturers are able to reduce their exposure to fluctuations in foreign exchange rates, as well as to trade restrictions and tariffs. 9 Table of Contents Over the years, there have been many global business alliances and investments entered into between manufacturers in the global automotive industry. There are various reasons behind these transactions including the need to address excessive global capacity in the production of automobiles, and the need to reduce costs and improve efficiency by increasing the number of automobiles produced using common vehicle platforms and by sharing research and development expenses for environmental and other technology, the desire to expand a company’s global presence through increased size; and the desire to expand into particular segments or geographic markets. Toyota believes that its research and development initiatives, particularly the development of environmentally friendly new vehicle technologies, vehicle safety and information technology, provide it with a strategic advantage. Toyota Philosophy The automotive industry is experiencing a once-in-a-century transformation. We are now striving to transform ourselves into a mobility company. In an era which it is hard to predict the future, Toyota has reflected on the path it has taken thus far and has formulated the “Toyota Philosophy” as a roadmap for the future. Toyota’s mission is “Producing Happiness for All” by expanding the possibilities of people, companies and communities through addressing the challenges of mobility as a mobility company. In order to do so, Toyota will continue to create new and unique value with various partners by relentlessly committing towards monozukuri (manufacturing), and by fostering imagination for people and society. MISSION Producing Happiness for All Using our technology, we work towards a future of convenience and happiness, available to all VISION Creating Mobility for All Toyota strives to raise the quality and availability of mobility so that individuals, businesses, municipalities and communities can do more, while achieving a sustainable relationship with our planet VALUE We unite our three strengths (Software, Hardware and Partnerships) to create new and unique value that comes from the Toyota Way Toyota Production System (“TPS”) TPS is imbued with the desire of Sakichi Toyoda, the founder of the Toyota Group, and Kiichiro Toyoda, the founder, “to make someone’s work easier.” TPS was established based on two concepts: Jidoka, which can be loosely translated as “automation with a human touch,” — an idea of stopping equipment immediately when a problem occurs, in order to prevent defective products from being produced — and “Just in Time” (“JIT”), a concept based on the idea that “each 10 Table of Contents process produces only what is needed for the next process in a continuous flow.” Based on the basic philosophies of jidoka and JIT, through TPS, Toyota aims to efficiently and quickly produce vehicles of sound quality, one at a time, to fully satisfy customer requirements. Toyota believes that improving upon TPS is essential to its future survival. Toyota has introduced TPS into development departments and administrative departments. Toyota applies TPS to its development departments not only to shorten development times and reduce costs, but also to develop our human resources, thus leading to the manufacturing of ever-better cars that customers will love. Toyota Group Vision Chairman Akio Toyoda unveiled the Toyota Group Vision in January 2024. By outlining the direction the Toyota Group should take and putting forth a vision and set of values to which all Toyota Group members can refer, we aim to empower everyone at the genba (front lines) to engage in autonomous action that is consistent with the common vector defined for the Group. Since announcing the vision, we have been advancing numerous initiatives to entrench this vision and the associated values throughout the organization. At the Groupwide level, Chairman Toyoda met with frontline leaders at Group companies to take part in frank discussions and provide advice. He also attended meetings of Daihatsu dealer representatives to gather input from dealers and customers so as to better understand actual conditions and issues on a genchi genbutsu (on-site, hands-on experience) basis. At Toyota Motor Corporation, meanwhile, steps have been taken to share our vision and values among members of management and frontline staff through the ongoing issuance of messages from then-President Koji Sato to employees, labor-management discussions, and regular visits to frontline organizations by management. Through these concerted efforts, we seek to foster an appropriate workplace environment. The Group Vision represents the direction the Toyota Group should take and the vision and values to which all Toyota Group members can return. “Inventing our path forward, together.” Sakichi Toyoda, the founder of the Toyota Group, invented the Toyoda wooden hand loom with the desire to make life a little easier for his struggling mother. Kiichiro Toyoda invented the domestically produced passenger car with the idea that the automobile industry must be developed by the knowledge and skills of Japanese people. Thinking of others, learning, honing skills, making things, and bringing smiles to people’s faces — that passion and attitude toward invention are truly the starting point of the Toyota Group. 11 Table of Contents In a time when there is no right answer, we will build a corporate culture in which we can say “thank you” to each other and aim to be a Toyota Group that is needed in the future, where diverse human resources can play an active role. Product-centered Management The challenges our industry faces — carbon neutrality, connected mobility, and AI — cannot be solved by a single company acting alone. True breakthroughs emerge from synergies created when diverse people with varying perspectives collaborate and engage in lively discussion. We believe that co-creating in this manner is key to shaping the future. A good example is our recent collaboration on battery technology. Through continued development efforts, Toyota has successfully reduced the size of its all-solid-state batteries by one-third compared with conventional batteries while maintaining performance. These batteries are compact and lightweight, offering both short charging times and exceptional durability, and are targeted for commercialization between 2027 and 2028. This battery technology will enhance the flexibility of battery electric vehicles (“BEV”) proportions and packaging, enabling designs that strike a better balance between aesthetics and performance. BEVs are just one pillar of Toyota’s multi-pathway strategy for becoming carbon neutral. We are working with our partners on the development of carbon-neutral fuels such as biofuels and synthetic fuels, striving to lower the CO2 emissions of our existing vehicles. We also see great potential in hydrogen. For commercial vehicles, we are collaborating with Daimler Truck Holding AG, and for passenger vehicles, we are working with BMW, as well as the governments in Fukushima and Tokyo, to expand the use of hydrogen in both markets. In Japan, with the support of the government, we have begun introducing light-duty fuel-cell trucks for logistics in regions such as Fukushima and Tokyo. By promoting the wider adoption of hydrogen in commercial vehicles, which consume large amounts of fuel, we aim to accelerate infrastructure development to help contribute to the realization of a hydrogen society wherein hydrogen fuel can be stable and reliable. Furthermore, we are expanding the possibilities of mobility across land, sea, air, and space. Our collaboration with Joby Aviation, Inc. (“Joby”) on Joby’s electric vertical take-off and landing aircraft (eVTOL) 12 Table of Contents has the potential to transform people’s sense of distance and time, and we are working with them to steadily progress to open up a new dimension of mobility. Furthermore, we are venturing into the satellite and rocket fields with Interstellar Technologies Inc. and are also working to provide solutions to terrestrial issues through satellite communication. The ultimate goal of automated driving and Software Defined Vehicles (“SDV”) is to realize a world with zero traffic accidents. Driving assist technologies and automated driving are expected to further reduce the number of accidents, but responding to unpredictable situations such as sudden obstacles emerging from blind spots requires information from the infrastructure side. We are building a system that integrates vehicles, people, and infrastructure, enabling the prediction and prevention of accidents before they occur. Demonstrations are already underway in Japan and China, and we are working steadily toward realizing a safe and secure mobility society in collaboration with many partners. In addition, Toyota Research Institute, Inc. (“TRI”) is taking on the challenge of developing AI robots that work and grow together with humans as partners, rather than simply replacing them. To accelerate demonstrations and the advancement of these technologies, we are leveraging Woven City, a mobility test course. Woven City, which held its grand opening in 2025, brings together partners, universities, start-ups, research institutions, and other diverse partners to turn innovative ideas into reality. From here, Woven City will pave the way toward the next generation of mobility. Today, Toyota has outstanding partners who share our vision and are committed to creating the future together. They are likeminded allies who share a long-term perspective and the belief that collaboration accelerates progress. Together with these partners, we will realize the future of mobility and the sustainable growth of society. Region-centered Management The foundation of Toyota’s region-centered management is the concept of “best in town.” This concept does not aim to maximize global sales volume or market share. Instead, it reflects our commitment to remain the company that stays closest to customers’ daily lives and earns their trust in each community. Mobility is an integral part of everyday life. By continuing to address the unique challenges and expectations of each region, we believe we can achieve sustainable, long-term growth. Being recognized globally and being needed locally are not always the same. Toyota has achieved the former by steadily accumulating the latter. “Best in town” expresses this management approach. “Best in town” does not simply mean providing high-quality products. It means understanding customers’ lifestyles, culture, road conditions, climate, and values and providing mobility that best fits each region. Even the same vehicle may be used differently depending on the environment. Cold climates, deserts, urban areas, and rural communities require different performance and value. For this reason, rather than applying uniform global strategies, we emphasize systems that allow decisions and actions to be made locally. This philosophy extends beyond product planning and design to sales and after-sales services. Dealers around the world serve not only as sales locations but also as our closest points of contact with customers. Feedback gathered through daily dialogue serves as the starting point for product improvements and new initiatives. For Toyota, volume and share ultimately represent the trust we build with customers. The accumulation of this trust has supported our business over the long term. Toyota operates by dividing the world into eight major regions and managing each business based on the characteristics of those regions. Economic conditions, social issues, and levels of market maturity vary significantly from one region to another. For this reason, we have established a structure that enables each region to assess its own circumstances and customer needs and to make decisions and execute initiatives locally. The cornerstone of this approach is our commitment to stay close to people’s lives and contribute to local communities through mobility. While the best solutions may differ by region, our overall direction remains the 13 Table of Contents same. This approach remains consistent across both emerging and developed markets. Guided by our belief that “no one should be left behind,” Toyota has continued to offer a full global lineup. Leaders in each of the eight regions work closely with customers and local communities to deliver vehicles that best meet the needs of their respective markets. As a result, we deliver vehicles to customers globally on the basis of a well-balanced business foundation, without depending too heavily on any particular region or market. Energy conditions differ by region, and the pace of electrification and vehicle usage also varies widely. The powertrains required in each market therefore differ as well. To ensure that customer choice is never limited, Toyota continues to enhance the appeal and competitiveness of all powertrains, including BEVs. In an uncertain environment, rather than trying to predict the future, we prepare a range of options to respond quickly to change. Initiatives that begin in a single town and with a single customer are carried out by thousands of dealers around the world. By working together, Toyota has become a company chosen by customers globally. In addition to delivering high-quality products, Toyota is supported by the people who bring those products to customers in each region and build lasting relationships. Partnerships grounded in trust, credibility, and mutual understanding create value rooted in local communities and foster loyalty across generations. Guided by our aim to be “best in town” and the mantra of “making ever-better cars,” we continue to evolve our vehicles by responding to the unique characteristics of each market and the needs of customers in every region. By maintaining a full global lineup and continuously evolving our vehicles to meet the needs of different eras and regions, we have produced many long-selling models, such as the Corolla and the Land Cruiser, that are loved by customers worldwide. Going forward, under its “best in town” philosophy, Toyota will remain deeply rooted in local communities, stay close to customers’ lives, and continue delivering products that are loved for generations as a mobility company. Five-brands Strategy At the Japan Mobility Show held in October 2025, we announced the launch of Century as a new brand alongside our Toyota, Lexus, Daihatsu, and GR brands. In particular, the “Century” brand’s goal is to share the pride of Japan with the world. Its name reflects the aspiration to shape the next 100 years, and through the creation of new value originating in Japan, Toyota aims to contribute to the realization of a sustainable and peaceful society. We also introduced “TO YOU” as a brand concept in 2025 to represent the Toyota brand. Additionally, the IMV Origin, which we unveiled at Japan Mobility Show 2025, is deliberately shipped from the factory in an unfinished state, with final assembly carried out locally. This approach creates new jobs in vehicle assembly within the community and contributes to the development of employment opportunities and skills. In addition, by allowing flexible customization to suit a wide range of lifestyles and work needs, the IMV Origin aims to deliver mobility that best fits the unique conditions of each region. By assuming roles that are both more clearly defined and complementary to one another, the Toyota Group’s brands will comprise a product lineup suitably diverse to meet the needs of each customer and offer them a wider range of options. Continuous Improvement in Break-even Volume In 2024 and 2025, we faced certification issues and a lack of capacity head-on and reinforced our operational foundations. As a result, we have rigorously enhanced safety standards and quality requirements and secured additional capacity, which has stabilized production. On the other hand, we have recently seen a significant rise in our break-even volume due to a combination of increases in investments in human resources and future-oriented investments and the impact of U.S. tariffs. 14 Table of Contents Therefore, we have initiated undertaking company-wide measures. First, we will increase earnings by reviewing fixed costs, achieving cost improvements, and initiating sales initiatives in all regions, groups, and in-house companies. Additionally, to boost productivity even further, we will encourage employees to reexamine their ways of working and pursue efficient, value-added work. For instance, we will step up our utilization of AI for routine tasks and low-value-added work so that personnel can focus on tasks only humans can perform, thereby heightening the “rate of value-added work.” In advancing the aforementioned measures, we will focus on improving our break-even volume by ensuring that the benefits of reinforcing our operational foundations are steadily reflected in our earnings power. Toyota needs a management structure that reliably generates earnings in both favorable and challenging operating conditions and thereby enables Toyota to continue pursuing joint growth initiatives with its stakeholders. In our transformation into a mobility company, value chain businesses will play a crucial role. Providing continuous value to customers throughout the long ownership period after the sale of a new car, these businesses have steadily grown. This growth is thanks to the many different products we offer. Supported by strong brands forged through product- and region-centered management, our diverse product lineup has enabled us to have 150 million units in operation worldwide. The growth of our value chain businesses is also attributable to the strength of our products, including their ease of repair and our ability to supply parts for them, as well as to the efforts of frontline personnel engaged in services, sales finance, used car sales, and insurance to fully utilize the high residual value of each product. Going forward, in addition to the virtuous cycle of new cars and value chain businesses, we will further strengthen our earnings base by promoting the creation of new forms of value through software and diverse mobility services. Across Toyota’s workplaces, starting with production sites, employees continue to tackle numerous challenges while striving every day to make “ever-better cars.” To translate these efforts into tangible results, management and the front lines (genba) will work together to create an environment that enables workplaces across Toyota, starting with production sites, to fully demonstrate their capabilities. Automotive Operations Toyota’s sales revenues from its automotive operations were ¥45,417.7 billion in fiscal 2026, ¥43,199.8 billion in fiscal 2025, and ¥41,266.2 billion in fiscal 2024. Toyota produces and sells passenger vehicles, minivans and commercial vehicles such as trucks. Toyota Motor Corporation’s subsidiary, Daihatsu, produces and sells mini-vehicles and compact cars. Hino, which ceased to be a consolidated subsidiary of TMC effective April 1, 2026, produces and sells commercial vehicles such as trucks and buses. Toyota also manufactures automotive parts, components and accessories for its own use and for sale to others. Vehicle Models and Product Development Toyota’s vehicles (produced by Toyota, Daihatsu and Hino) can be classified largely into electrified vehicles and conventional engine vehicles. Toyota’s product line-up includes subcompact and compact cars, mini-vehicles, mid-size, luxury, sports and specialty cars, recreational and sport-utility vehicles, pickup trucks, minivans, trucks and buses. Toyota’s luxury cars are sold in North America, Europe, Japan and other regions, primarily under the Lexus brand name. In fiscal 2024, Toyota launched the all-new Alphard and Vellfire, which were developed from a concept of “the joy of comfortable mobility” to create a space where everyone can share consideration and appreciation in all kinds of situations. To further contribute toward carbon neutrality, Toyota plans to introduce new plug-in hybrid electric vehicles (“PHEV”) in the future. Moreover, a new model has been added to the Century series, which has been sold for more than half a century as one of Japan’s representative chauffeur-driven vehicles. The new model is a next-generation chauffeur-driven vehicle that inherits Japanese aesthetics, quietness and 15 Table of Contents hospitality, combines a human-centered approach, and dramatically evolves the rear-seat space to allow true comfort and elegant entry and exit. In Thailand, Toyota launched the Hilux Champ IMV 0, a new model of the IMV series. The pickup truck is regarded as a local favorite and integral to daily life in Thailand. Toyota decided to return to its origins and create an IMV pickup truck that meets the needs of customers. In addition, Toyota launched the all-new Lexus LBX. Redefining luxury with a stylishly compact size, it provides an engaging driving experience that instills a lasting desire to continue exploring the road ahead. In fiscal 2025, Toyota launched the new Land Cruiser 250 Series. The 250 Series is a core Land Cruiser model that returns to the car’s origin, a vehicle that is simple and sturdy, and helps fulfill both customers’ lifestyle choices and practical needs. By pursuing dynamic styling and functionality so drivers can enjoy an active lifestyle, Toyota also created Crown Estate as a vehicle that embodies both the dignity and functionality of the Crown, what we call a mature active cabin. The Camry, with its distinctive exterior, quality, and reliability, has remained a leading sedan in the U.S. for over 20 years according to our estimates. For the Lexus brand, alongside master driver Akio Toyoda, Toyota developed the LBX MORIZO PR as a high-performance model that delivers the refined signature LEXUS driving quality and sophisticated design, enhancing the dialogue between driver and car, evokes spontaneous smiles, and provides an exhilarating out-of-the-ordinary experience. In fiscal 2026, Toyota launched the all-new 6th generation RAV4, which is an SUV built on the idea that “Life is an Adventure,” embodying a go-anywhere, do-anything spirit. While maintaining the RAV4’s signature solid and powerful design and packaging, it has been developed around the keywords Diversification, Electrification, and Intelligence. Arene, the software development platform, was leveraged for crucial UI (user interface) software, such as the cockpit. The Lexus brand unveiled the all-new 8th-generation ES as a forerunner in LEXUS’s next-generation electrification lineup. This model aspires to deliver a refined driving experience across every scene — further enhancing quietness and ride comfort while staying in tune with customer needs. In pursuit of carbon neutrality through a multi-pathway approach, both hybrid electric vehicles (“HEV”) and BEV powertrains are offered to meet a diverse range of mobility demands. Markets, Sales and Competition Toyota’s primary markets are Japan, North America, Europe and Asia. The following table sets forth Toyota’s consolidated vehicle unit sales by geographic market for the periods shown. The vehicle unit sales below reflect vehicle sales made by Toyota to unconsolidated entities (recognized as sales under Toyota’s revenue recognition policy), including sales to unconsolidated distributors and dealers. Vehicles sold by Daihatsu and Hino are included in the vehicle unit sales figures set forth below. Thousands of Units Year Ended March 31, 2024 2025 2026 Units % Units % Units % Japan 1,993 21.1 % 1,991 21.3 % 2,082 21.7 % North America 2,816 29.8 2,703 28.9 2,934 30.6 Europe 1,192 12.6 1,172 12.5 1,183 12.3 Asia 1,804 19.1 1,838 19.6 1,759 18.3 Other* 1,638 17.4 1,659 17.7 1,637 17.1 Total 9,443 100.0 % 9,362 100.0 % 9,595 100.0 % * “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc. The following table sets forth Toyota’s vehicle unit sales and market share in Japan, North America, Europe and Asia on a retail basis for the periods shown. Each market’s total sales and Toyota’s sales represent new vehicle registrations in the relevant year (except for the Asia market where vehicle registration does not 16 Table of Contents necessarily apply). All information on Japan excludes mini-vehicles. The sales information contained below excludes unit sales by Daihatsu and Hino, each a consolidated subsidiary of Toyota as of March 31, 2026. Vehicle unit sales in North America represents the combined total for the United States and Canada. Vehicle unit sales in Asia do not include sales in China. Thousands of Units Year Ended March 31, 2024 2025 2026 Japan: Total market sales (excluding mini-vehicles) 2,906 2,951 2,848 Toyota sales (retail basis, excluding mini-vehicles) 1,506 1,487 1,450 Toyota market share 51.8 % 50.4 % 50.9 % Thousands of Units Year Ended December 31, 2023 2024 2025 North America: Total market sales 17,306 17,827 18,273 Toyota sales (retail basis) 2,475 2,572 2,767 Toyota market share 14.3 % 14.4 % 15.1 % Europe: Total market sales 17,439 17,807 18,552 Toyota sales (retail basis) 1,174 1,217 1,229 Toyota market share 6.7 % 6.8 % 6.6 % Asia (excluding China): Total market sales 11,024 10,928 11,556 Toyota sales (retail basis) 1,407 1,434 1,500 Toyota market share 12.8 % 13.1 % 13.0 % Japan Japan is one of the leading countries with respect to technological innovation and improvements in the automotive industry and will continue to demonstrate such strength. Toyota strives to earn customer satisfaction by introducing products distinctive of Japan’s manufacturing ability, through the full lineup of Toyota brand vehicles, including not only passenger cars but also commercial and mini vehicles, as well as the advanced, premium Lexus brand. Furthermore, by advancing electrification centered on a multi-pathway strategy encompassing BEVs, PHEVs, fuel cell electric vehicles (“FCEV”), and HEVs, dealers and manufacturers will work together to realize a carbon-neutral society. Toyota endeavors to secure and maintain its significant share of and position atop the Japanese market. Toyota held a domestic market share (excluding mini-vehicles) on a retail basis of 51.8% in fiscal 2024, 50.4% in fiscal 2025, and 50.9% in fiscal 2026. Although Toyota’s principle is to conduct production in regions where it enjoys true competitiveness, it considers Japan to be the source of its good manufacturing practices. Having 16 production sites in Japan, Toyota supports its operations worldwide through measures such as the development of new technologies and products, low-volume vehicles to complement local production, production of global vehicle models which straddle multiple regions and supporting overseas factories. North America The North American region is one of Toyota’s most significant markets. The United States, in particular, is the largest market in the North American region, accounting for 86% of Toyota’s retail sales in the region. In the region, Toyota has in recent years reorganized its production structure and made improvements to its product lineup. In addition, Toyota has a wide product lineup in every segment (excluding large trucks and buses). 17 Table of Contents Toyota’s North American production capacities include the production of vehicle models such as the RAV4, Camry, Tacoma and Highlander through 14 manufacturing entities. In 2025, Toyota Battery Manufacturing, North Carolina (“TBMNC”) began supplying batteries. TBMNC is Toyota’s eleventh U.S. plant and the company’s first and only battery plant outside of Japan. Batteries assembled at TBMNC are set to power the Camry HEV, Corolla Cross HEV, RAV4 HEV, and a yet-to-be-announced all-electric 3-row BEV. When the facility reaches full production, it will have 14 production lines supporting battery production for HEV, BEV and PHEV. Toyota has five research and development centers in North America. As for vehicle development, the Toyota Technical Center spearheads the design, planning, and evaluation of vehicles and parts as to their ability to meet customer needs. Europe Toyota’s principal European markets are Germany, France, the United Kingdom, Italy and Spain. In the European markets, as a full-lineup car manufacturer, Toyota aims to increase its global vehicle sales with a focus on electrified vehicles (HEVs, PHEVs, FCEVs and BEVs) that suit the needs of customers and the circumstances of each region. In terms of production, to strengthen its business setup so that it is less likely to be affected by exchange rates, Toyota produces models such as the Corolla, Yaris and C-HR locally through six entities in Europe. In addition, Toyota is actively promoting production and sales measures that meet local demand by strengthening its value chain including used car dealerships, after-sales services and finance and insurance services. Asia Toyota’s principal Asian markets are Thailand, India, Indonesia and Taiwan. In light of the importance of the Asian market that is further 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. Toyota has responded to increasing competition in Asia by making strategic investments in the market and developing relationships with local suppliers. Toyota believes that its existing local presence in the market provides it with an advantage over new entrants to the market and expects to be able to promptly respond to demand for vehicles in the region. In terms of production, Toyota manufactures models such as the Hilux, Hiace, Corolla, Camry and Vios through 15 entities. Toyota’s plants in Thailand not only meet domestic demand, but also serve as a production base for locations inside and outside of the ASEAN region. China Toyota has been conducting operations in China in large part 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 of promoting further growth and increasing profitability through further development of its sales and service network and expansion of its product lineup. In terms of production, Toyota has been conducting a significant portion of its China business, including in relation to the production and sales of vehicles, through joint ventures. Toyota has two major joint venture partners in China, namely, China FAW Group Corporation and Guangzhou Automobile Group Co., Ltd. The joint venture with China FAW Group manufactures models such as the Avalon, Corolla, RAV4 and bZ3 and the joint venture with Guangzhou Automobile Group Co., Ltd. manufactures models such as the Camry, Frontlander, Highlander, Wildlander, and bZ3X. 18 Table of Contents Total vehicle unit sales in the Chinese market reached 27.73 million vehicles in 2025, representing 105.5% of that of 2024, and 26.28 million vehicles in 2024, representing 101.1% of that of 2023. In this market, Toyota’s new vehicle sales were 1.78 million vehicles in 2025, accounting for 100.4% of that of 2024, and 1.77 million vehicles in 2024, accounting for 93.1% of that of 2023. In 2025, the domestically produced passenger vehicle market in mainland China (24.02 million vehicles), Toyota had a 7.4% market share. Toyota has been expanding the distribution network for locally produced vehicles in cooperation with China FAW Group and Guangzhou Automobile Group under the names Tianjin FAW Toyota Motor Co., Ltd. and Guanqi Toyota Motor Co., Ltd., respectively, and for imported vehicles, Toyota has also been expanding primarily the Lexus brand sales network. Toyota seeks to increase sales by expanding the number of dealers and its product lineup. In addition, as the market in China develops and becomes more sophisticated, Toyota plans to promote so-called “Value Chain” businesses, such as used car sales, services, financing and insurance, so as to contribute to the development of a mobility society. South and Central America, Oceania, Africa and the Middle East Toyota’s principal markets in South and Central America, Oceania, Africa and the Middle East (collectively, the “Four Regions”) are Brazil and Argentina in South and Central America, Australia in Oceania, South Africa in Africa and Saudi Arabia in the Middle East. The core models in the Four Regions are global models such as the Corolla, IMV (the Hilux) and Camry. Toyota has seven production bases in the Four Regions. In these regions, which are expected to become increasingly important to Toyota’s business strategy, Toyota aims to continue developing new products which meet the specific demands of each region, increasing production and promoting sales. Production As of March 31, 2026, Toyota and its affiliated companies produce automobiles and related components through more than 50 overseas manufacturing organizations in 27 countries and regions aside from Japan. Facilities are located principally in Japan, the United States, Canada, the United Kingdom, France, Turkey, Czech Republic, Poland, Thailand, China, Taiwan, India, Indonesia, South Africa, Argentina and Brazil. See “Item 4. Information on the Company — 4.D Property, Plants and Equipment” for a description of Toyota’s principal production facilities. In promoting a sustainable growth strategy, establishing a system capable of providing optimal supply of products in the global market is integral to Toyota’s strategy. In line with its basic policy of manufacturing in countries or regions where there is demand and where Toyota is truly competitive, Toyota will make efficient use of and maximize capacity utilization at its existing plants to respond to the expanding market and will continue to focus on making efficient capital investments as necessary. Furthermore, Toyota will continue to place top priority on safety and quality in strengthening true competitiveness with the aim of achieving sustainable growth. 19 Table of Contents The following table shows Toyota’s worldwide vehicle unit production by geographic market for the periods shown. These production figures do not include vehicles produced by Toyota’s unconsolidated affiliated companies. The sales unit information elsewhere in this annual report includes sales of vehicle units produced by these affiliated companies. Vehicle units produced by Daihatsu and Hino are included in the vehicle unit production figures set forth below. Thousands of Units Year Ended March 31, 2024 2025 2026 Japan 4,042 4,000 4,149 North America 1,976 1,958 2,050 Europe 846 811 815 Asia. 1,876 1,790 1,802 Other* 523 491 477 Total 9,263 9,049 9,293 * “Other” consists of Central and South America and Africa. Toyota closely monitors its actual units of sale, market share and units of production data and uses this information to allocate resources to existing manufacturing facilities and to plan for future expansions. See “Item 4. Information on the Company — 4.B Business Overview — Capital Expenditures and Divestitures” for a description of Toyota’s recent investments in completed plant constructions and for a description of Toyota’s current investments in ongoing plant constructions. Distribution Toyota’s automotive sales distribution network is the largest in Japan. As of March 31, 2026, this network consisted of 226 dealers employing approximately 100 thousand personnel and operating approximately 4.2 thousand sales and service outlets. TOYOTA Mobility Tokyo Inc. is the only dealer owned by Toyota and the rest are independent. Toyota believes that this extensive sales network of independent local interests has been an important factor in its success in the Japanese market. A large number of the cars sold in Japan are purchased from salespersons who visit customers in their homes or offices. In recent years, however, the traditional method of sales through home visits is being replaced by showroom sales, and the percentage of automobile purchases through showrooms has been gradually increasing. Toyota expects this trend to continue, and accordingly is working to improve its sales activities such as customer reception and meticulous service at showrooms, as well as online sales, to increase customer satisfaction. Sales of Toyota vehicles in Japan had been conducted through four sales channels until April 2020, but from May 2020 shifted to a framework where all of its Japanese-market vehicle models are made available through all sales outlets in Japan. In addition, Toyota introduced the Lexus brand to the Japanese market in August 2005, and currently distributes the Lexus brand vehicles through a network of 191 new-vehicle sales outlets dedicated to the Lexus brand in order to enhance its competitiveness in the domestic luxury automotive market. The following table provides information on the dealer network as of March 31, 2026. Dealers Channel Toyota Owned Independent Outlets Toyota brand 1 company 225 companies 4,245 outlets Lexus brand 23 outlets 168 outlets 191 outlets 20 Table of Contents Outside Japan, Toyota vehicles are sold through approximately 168 distributors in approximately 204 countries and regions. Through these distributors, Toyota maintains networks of dealers. The chart below shows the number of Toyota distributors as of March 31, 2026 by country and region: Country/Region Number of Countries Number of Distributors North America 4 5 Europe 55 29 China 1 4 Asia (excluding China) 20 20 Oceania 15 15 Middle East 16 14 Africa 54 48 Central and South America 39 40 Multi-pathway Strategy — Overview The push for carbon neutrality is a matter of urgency if cars are to remain a necessary part of society. Providing our customers around the world with options for mobility under our multi-pathway strategy while also promoting the decarbonization of our monozukuri (manufacturing) and supply chains serves as the core of our activities. Considering ways in which mobility takes into account the future of energy is important. The strategy’s basic premise is that we need to move away from fossil fuels from the perspective of the global environment and sustainability. Furthermore, over the medium- to long- term, renewable energy sources will continue to proliferate, with electricity and hydrogen emerging as the primary energy sources sustaining society. In the short term, however, it is critical to acknowledge global realities and implement changes in practical ways that maintain energy security. This is precisely why we are committed to providing mobility options that are in tune with a diverse range of energy situations and customer needs, while also keeping an eye on the future of electricity and hydrogen. In short, the underlying concept of our multi-pathway strategy is to focus on promoting practical transition even as we pursue carbon neutrality. BEV Strategies Next-generation BEVs Through our next-generation BEVs, we seek to change the future of cars. This will entail evolving the products we provide to customers. Through the integration of next-generation batteries and sonic technology, we aim to achieve a game-changing BEV driving range of 1,000 km. Our next step will be to capture customers’ hearts with stylish designs. AI will be used to help ensure excellent aerodynamic performance, doubling the time that designers can devote to creating attractive cars. Our BEVs will also offer a customizable ride feel. The Arene software platform and a full over-the-air system, which provides vehicle software updates via wireless transmission, will greatly expand the possibilities for enjoying cars. Moreover, Toyota will deliver exciting surprises and fun, like the manual electric vehicle, to its customers with technologies that only an automobile manufacturer can create. Automobile bodies will be constructed in a new modular structure consisting of three main components. The finished automobiles are then assembled after each of the three modules is completed. This structure allows each module to be evolved separately, expediting action, particularly important in the race to develop better batteries. Furthermore, the use of giga casting will allow significant component integration, contributing to the reduction of vehicle development costs and plant investment. 21 Table of Contents The new modular structure and self-propelling production and other automation technologies will halve the number of processes required. Self-propelling production will be key to building next-generation BEVs. By greatly reducing the time and cost, as well as efforts on the part of production and technical staff required to modify plants and expand buildings whenever a new model is introduced, this technology will accelerate the launch of new products to market. Such new approaches to manufacturing, combined with the use of digital twin technology, are expected to halve production lead times. We are advancing the integrated planning of our full global lineup of next-generation BEVs. In addition to efforts to increase product appeal, we will transform our manufacturing approaches to eliminate processes as well as reduce investment and lead times while securing earnings and increasing sales volume. Toyota is targeting global BEV sales of 3.5 million units by 2030. This figure is shaped by customer demand and represents the base unit amount based on which supply systems will be prepared together with suppliers and dealers. However, we will adopt a flexible approach toward sales in recognition of the fact that it is customers who will ultimately decide what they purchase. BEV Battery Development The battery is the heart of the BEV. Just as the heart pumps blood through the body, the battery transfers electricity to the vehicle. As Toyota advances its efforts toward introducing next-generation BEVs, it is also evolving batteries with new technologies to meet customer expectations. The earnings of Toyota’s next-generation BEVs will be driven by our next-generation batteries, which will be developed with a focus on achieving world-leading levels of efficiency. Our development approach entails viewing batteries and vehicles as a set, and this approach is the starting point for the development of BEVs. Toyota’s development of both batteries and vehicles in-house provides an advantage in this area. The resources afforded by this advantage will be used to improve our product appeal to exceed customer expectations and secure earnings. Liquid lithium-ion batteries, which are currently the mainstream, will gain enhanced performance through improvement to the energy density of prismatic batteries, an area in which Toyota has longstanding expertise. In addition, by using the bipolar battery structure developed for HEVs in BEVs, we will expand our lineup to provide customers with a variety of options, from low-cost batteries for popularization to batteries optimized for maximum performance. Furthermore, all-solid-state batteries, which are highly anticipated as game-changers, are finally approaching the phase of practical application for use in BEVs. Our full lineup of competitive batteries will support the evolution of Toyota’s BEVs in the future. Notes: 1. The performance version of next-generation batteries are being developed with Prime Planet Energy & Solutions Inc., while the popularization and high-performance versions of next-generation batteries and the all-solid-state battery for BEVs are being developed with Toyota Industries, combining the knowledge of the Toyota Group. 2. The bZ4X referenced in this report refers to the 2022 model. The bZ4X underwent a partial update in October 2025. Liquid Lithium-ion Battery Development 1. Next-generation Batteries: Performance Version The next-generation BEVs will have a cruising range of 1,000 km.* For such cars, we are developing a performance-oriented rectangular battery to expand the degree of freedom in vehicle design. While increasing the 22 Table of Contents energy density of the battery, we also aim to extend cruising range by improving vehicle efficiencies, such as aerodynamics and weight reduction, while at the same time reducing costs by 20% compared with the earlier bZ4X and achieving a quick charge time of 20 minutes or less (state-of-charge (“SOC”) =10–80%). 2. Next-generation Batteries: Popularization Version Toyota is also developing good, low-cost liquid lithium batteries that will contribute to the widespread use of BEVs to provide customers with a variety of battery options. Bipolar structure batteries, which have been used in the Aqua and Crown hybrid vehicles, are now being applied to BEVs. These batteries use inexpensive lithium iron phosphate (LFP) and are expected to be commercialized. We are aiming for a 20% increase in cruising range* and 40% reduction in cost compared with the earlier bZ4X, as well as quick recharging in 30 minutes or less (SOC=10–80%). We are also considering installing these batteries in BEVs in the popularization price range. In a regular battery, individual current collectors are coated on both sides with either an anode or cathode, then paired to make a set. In contrast, every current collector in a bipolar configuration is coated with an anode on one side and a cathode on the other, making for a simpler structure that requires only one-third as many components. At the same time, material costs can be reduced by using LFP for the cathode in place of rare metals, such as nickel and cobalt. However, to make these batteries a reality, Toyota must overcome three difficulties: applying the material evenly, doing so at high speeds, and simultaneously sealing all the cells. Furthermore, all this needs to be achieved in batteries large enough to power a car. In tackling these challenges, Toyota is drawing on approximately 30 years of battery production technologies honed through its HEVs along with bipolar nickel-metal hydride battery technology and expertise, precision coating used for FCEVs, and various digital technologies. Using all of these together, we are advancing development toward mass production. 3. Bipolar Lithium-ion Battery: High-performance Version The high-performance version of the battery combines the best aspects of both the performance and popularization versions. This battery combines a bipolar structure with a high-nickel cathode to achieve further advances. We expect an even greater performance than the performance version of the prismatic battery will be achieved along with a 10% increase in cruising range* and a 10% reduction in cost, as well as a quick charge time of 20 minutes or less (SOC=10–80%). We aim to commercialize this battery in 2027-2028. (*Including vehicle efficiency improvements such as aerodynamics and weight reduction.) Development of All-solid-state Batteries All-solid-state batteries have a solid electrolyte, allowing faster movement of ions and greater tolerance of high voltages and temperatures. It is hoped that this technology will result in increased power output, longer cruising range, and shorter charging times. The tradeoff, meanwhile, is thought to be a shorter battery life. Solid electrolytes repeatedly expand and contract as the battery charges and discharges, which can create cracks in the electrodes that inhibit the 23 Table of Contents movement of ions between the cathode and anode. Toyota has discovered a new technology that overcomes this issue. Aiming for commercialization in 2027–2028, Toyota continues to advance product development and the development of mass production methods. In October 2023, Toyota announced a partnership with Idemitsu Kosan Co., Ltd. (“Idemitsu”) to work toward the mass production of all-solid-state batteries for BEVs. Through the integration of materials development technologies of both companies, including Idemitsu’s materials manufacturing technologies and Toyota’s battery processing and assembly technologies honed in on electrified vehicle development, we both aim to realize the mass production of solid electrolytes and all-solid-state batteries that will be widely used by consumers. In October 2025, we announced a collaboration with Sumitomo Metal Mining Co., Ltd. (“Sumitomo Metal Mining”) aimed at mass production of cathode materials. Leveraging the company’s proprietary powder synthesis technology, we jointly developed a new cathode material with superior durability suited for all-solid-state batteries. Going forward, we will continue to draw on Sumitomo Metal Mining’s expertise accumulated over two decades of supplying cathode materials, as we work toward the supply and subsequent mass production of this newly developed material. Establishment of a New Company On February 5, 2025, Toyota announced that it will sign a comprehensive partnership agreement with the Shanghai municipal government in China regarding carbon neutrality. In addition, Toyota established Lexus (Shanghai) New Energy Co., Ltd., a new wholly owned company in Jinshan District in southwest Shanghai, to develop and produce BEVs and batteries. Under this partnership with the Shanghai municipal government, Toyota hopes to contribute to the Chinese government’s goal of achieving carbon neutrality by 2060 in fields such as hydrogen energy, automated driving technology, and battery recycling and reuse. To drive the initiative forward, Toyota will establish a new company based on the belief that quicker supply of products that meet customers’ needs is important in China, where there is a high demand for new energy vehicles. The newly formed company will develop a new BEV under the Lexus brand, with production scheduled to begin from 2027 onward. The initial production capacity will be around 100,000 units per year, and 1,000 new jobs are planned for the start-up phase. Toyota has been working with partners such as China FAW Group Co., Ltd. and Guangzhou Automobile Group Co., Ltd. to bring smiles to customers in China. Going forward, Toyota will continue working together with all its partners to be a “best-in-town” company to achieve its goal of “producing happiness for all.” In doing so, we will forge ahead with our mission of transforming cars, monozukuri (manufacturing), and work to change the future with BEVs. Hydrogen Business Strategies We have seen significant global developments in the area of hydrogen business in recent years, with countries introducing policies and taking active steps with an eye toward 2030. To anticipate these rapid changes and respond to customer needs, we established in July 2023 a new business unit called Hydrogen Factory, which is able to make rapid decisions under one leader, from sales to development and production, all at once. The Hydrogen Factory is advancing business activities based on three key axes. The first is localizing R&D and production in countries within the major markets. We are working to accelerate our efforts by establishing local bases, mainly in Europe and China. In Europe, Toyota Motor Europe NV/SA is engaged in the development of hydrogen fuel-cell systems and carries out production and external 24 Table of Contents sales. In China, we have already established a development and production base in collaboration with Beijing SinoHytec Co., Ltd. This base began production of fuel cells in August 2024. Toyota began offering the fuel-cell unit installed in the Mirai passenger vehicle as a modular product to partners aiming to realize a hydrogen society. In recent years, as demand for commercial applications has expanded across various countries, sales of fuel-cell units have continued to grow year by year, reaching a global cumulative total of more than 3,000 units as of December 2025. The second is strengthening alliances with leading partners. Hydrogen has been positioned as an important energy source in Toyota’s CO2 emissions reduction efforts in its quest to achieve carbon neutrality. To create a hydrogen-powered society, we are promoting the widespread adoption of fuel-cell products, including passenger and commercial fuel-cell electric vehicles as well as fuel-cell stationary generators. Through such initiatives, we are working with various industry partners in the areas of producing, transporting, and using hydrogen. In Europe, Toyota announced a partnership with Daimler Truck Holding AG in May 2023. The scope of this partnership includes collaboration on hydrogen-related development. Furthermore, in September 2024, we unveiled plans to bolster coordination with BMW in the field of hydrogen, pursuing joint development and standardization of components to drive cost reductions. These components are also being considered for use in Toyota models going forward. In China, we entered into a partnership in November 2024 with GLP Investment (Shanghai) Co., Ltd. (GLP China) in the field of high-value-added green trunk-line logistics. In collaboration with leading domestic logistics companies For-U Smart Freight and Shenzhen Dekun Logistics Co., Ltd., we began operating 50 heavy-duty fuel-cell trucks in 2025. In Japan, in February 2024, we agreed with Chiyoda Corporation to jointly develop a large-scale water electrolysis system that produces hydrogen from water and electricity by applying the fuel-cell technology used in the Mirai. Preparations are underway for demonstrations to begin in 2026. The third is enhancement of competitiveness and technologies. The next-generation (third-generation) fuel-cell unit currently under development aims to offer durability equivalent to twice that of the current generation and is designed to be virtually maintenance-free even under commercial vehicle operating conditions. Fuel efficiency and driving range have been improved by 20%, enabling travel between Tokyo and Osaka without refueling. We are developing dedicated units for both passenger and commercial applications, while standardizing cells to achieve lower costs. Our plan is to roll out this next-generation fuel-cell unit, capable of meeting a wide range of use cases, from passenger cars to commercial vehicles, starting in fiscal 2027. At the same time, hydrogen remains a costly energy source. To expand its utilization, reducing its price is essential. To this end, Toyota is working with partners on technology for hydrogen production. In 2023, DENSO Fukushima Co., Ltd. introduced an electrolysis system at its production plant. The system leverages fuel-cell technology from the Mirai and has a capacity of approximately 0.4 megawatts. Since April 2024, it has been supplying hydrogen to combustion furnaces within the plant and continues to be used. The hydrogen production market is expected to grow rapidly both in Japan and overseas. To enhance scalability of hydrogen production equipment, Toyota is combining Chiyoda Corporation’s processing plant design expertise and large-scale plant construction technologies to develop large-scale electrolysis systems in the 5 megawatt to 20 megawatt range. In 2026, Toyota plans to build a facility called Hydrogen Park at its Honsha Plant and begin large-scale demonstration testing. Going forward, we will continue accelerating efforts toward commercialization. Commercial Sector Initiatives In Japan, Toyota established Commercial Japan Partnership Technologies Corporation (“CJPT”) in 2021 together with Isuzu Motors Limited, Hino, Suzuki Motor Corporation, and Daihatsu with the aim of contributing to the resolution of issues in the transportation industry and helping realize a carbon-neutral society. 25 Table of Contents We are working with shippers and logistics companies in Fukushima and Tokyo on the social implementation of electrification that utilizes heavy- and light-duty fuel-cell electric trucks and light-duty BEV trucks. As of the end of December 2025, approximately 200 fuel-cell electric trucks have hit the roads, supporting the daily lives of local people not only as general delivery vehicles but also as waste collection vehicles and school lunch delivery vehicles. In addition, around 180 fuel-cell electric buses are operating across Japan and are beginning to take root as part of local transportation infrastructure. From fiscal 2027, we will begin production of a new model, further promoting the utilization of hydrogen. At the same time, the widespread adoption of fuel-cell commercial vehicles faces challenges, including reductions in vehicle costs, the expansion of hydrogen refueling infrastructure, and the lowering of hydrogen costs. To address these challenges, efforts are being undertaken through close collaboration between the public and private sectors. In May 2025, the Ministry of Economy, Trade and Industry of Japan selected Fukushima, Tokyo, Kanagawa, Aichi, and Hyogo as priority regions for promoting the deployment of fuel-cell commercial vehicles. In response, Toyota and CJPT have started work on the following initiatives, aiming to ultimately roll them out nationwide. • Creation of massive hydrogen demand and new hydrogen utilization models through the deployment of heavy-duty fuel-cell electric trucks • Establishment of sales and operating environments in newly designated priority regions • Expansion of the lineup of fuel-cell commercial vehicles • Support for businesses working to reduce hydrogen costs Development of Hydrogen Internal Combustion Engines In 2025, Toyota’s efforts to race a Corolla equipped with one of its hydrogen engines currently in development entered their fifth year. Hydrogen engines work like modified versions of conventional gasoline engines powered by burning hydrogen directly as fuel. The fuel is 100% pure hydrogen, unmixed with gasoline. As no fossil fuels are burned, hydrogen-engine vehicles emit almost no CO2 when in operation — only that from the combustion of minute amounts of engine oil. The hydrogen engine is thus one option that offers great potential to contribute to carbon neutrality while making use of technologies for internal combustion engines built up over the decades and protecting engine-related jobs in the automotive industry. In 2024, we took another step forward in the evolution of our hydrogen engines by increasing the durability of pumps, which had needed to be replaced numerous times in prior races; extending driving ranges by modifying tank shapes; automating the processes of switching CO2 collection units; and implementing other substantial improvements. This cemented the achievement of our target driving range of 30 consecutive laps. In 2025, we conducted test drives of vehicles with small, highly efficient superconducting motors within their fuel tanks, improving tank capacity over 1.3 times. Going forward, this will lead to further improvements in cruising range and driving performance and a reduction in the volume of boil-off gas. We are striving to practically implement superconductivity technology with the aim of further developing liquid hydrogen technology. Toyota could not have taken on this initiative with liquid hydrogen alone. A portion of the liquid hydrogen used in the hydrogen engine-equipped Corolla in the 2023 Fuji 24 Hours Race was lignite-derived hydrogen produced and transported from Australia in the Suiso Frontier liquid hydrogen carrier built by Kawasaki Heavy Industries, Ltd. as part of the HySTRA project. In addition, the mobile liquid hydrogen station used at the circuit was jointly developed by Iwatani Corporation and Toyota. Moreover, the switch to liquid hydrogen fuel required 26 Table of Contents the modification of many parts. In 2024, Toyota partnered with Japan Metals & Chemicals Co., Ltd. to develop an electricity supply system that used hydrogen storage alloy in order to address the boil-off gas* issues faced with prior liquid hydrogen fueling systems. A concept model of an engine that reused boil-off gas produced during driving as fuel or for generating electricity was displayed at the final race of the Super Taikyu Fuji Final 4 Hour Race, attracting individuals with similar ambitions to join us in the development process. Through cooperation with our numerous partners, the liquid hydrogen-fueled Corolla successfully completed the race, and, as a result of such efforts, our number of partners has grown from eight companies in May 2021 to 60 companies by the end of the 2025 season. * Vaporized hydrogen produced due to the evaporation of liquid hydrogen fuel contained within tanks as a result of natural influx of outside heat The scope of hydrogen engine development is expanding beyond motorsports. For example, a verification test of a hydrogen-powered Hiace was conducted on public roads in Australia from the end of 2023. In addition, Japan’s first verification test of a mobile liquid hydrogen fueling system was carried out at the Iwatani Hydrogen Station in Kariya City, Aichi Prefecture, in 2024. Toyota will continue in its efforts to expand the possibilities of hydrogen engines. Aiming to contribute to the realization of a carbon-neutral society, we will continue to evolve alongside our partners in line with the principle of “making ever-better cars from a starting point in motorsports” and our multi-pathway strategy. Efforts in Realizing a Safe Mobility Society Toyota’s ultimate goal is to achieve zero casualties from traffic accidents, and ultimately, a society with zero traffic accidents. Additionally, to achieve a safe mobility society, we believe it will be important to adopt an integrated three-pronged approach involving people, vehicles, and the traffic environment. It will also be vital for us to pursue real-world safety by learning from actual accidents and incorporating that knowledge into vehicle development. Toyota has defined its “Integrated Safety Management Concept” as the basic philosophy behind its technologies for eliminating traffic accident casualties and is moving forward with the development of technologies based on this concept. Toyota provides optimized driver support for safety at every stage of driving, from parking to normal operation, the moment before a collision, during a collision, and post-collision emergency response. We also aim to enhance safety by reinforcing links between vehicle safety systems, rather than thinking about each system as a separate component. These are the approaches behind our Integrated Safety Management Concept. We introduced the Toyota Safety Sense system, which packages multiple preventive safety functions that help reduce serious traffic accidents with the potential to cause death or injury, to the market in 2015. These functions include avoiding and mitigating damage from collisions with cars in front of a vehicle or with pedestrians, preventing accidents caused by a vehicle leaving its current lane, and ensuring optimal forward visibility during nighttime driving. Toyota Safety Sense has now been installed in more than 61 million vehicles globally (as of March 2026). Toyota Safety Sense is now available on nearly all passenger car models (as standard or option) in the Japanese, U.S., and European markets. It has also been introduced in a total of 144 countries and regions, including such key markets as China, other select Asian countries, the Middle East, and Australia. Software Defined Vehicles (SDVs) SDVs are playing a leading role in the transformation of mobility. Toyota’s main aspiration in working with SDVs is a society with zero traffic accidents. Through SDVs, we aim to realize safer, more reliable, and more fun mobility. However, realizing such a society is difficult with just the technological innovation of cars. It requires 27 Table of Contents an integrated three-pronged approach involving cars, people, and infrastructure. For example, this includes coordination with road infrastructure that utilizes data from built-in sensors to address blind spots — an issue that evolution of vehicles cannot overcome alone — and AI agents that autonomously support drivers (people). An environment with uninterrupted communication and the development of infrastructure such as data centers are key to linking cars with society. Accordingly, we worked together with NTT, Inc. (formerly Nippon Telegraph and Telephone Corporation) in 2024 to begin creating appropriate infrastructure. Toyota places strong emphasis and priority on safety and security. At the same time, we have an opportunity to leverage the strength of having 150 million private vehicles in operation to help identify the diverse values of SDVs, including the use of things such as AI agents that grow alongside customers and cars that may one day be capable of reproducing more professional or proficient driving styles. We aim to continue to provide customers with safe, reliable, high-quality software through innovative digital platforms that are the foundation of software development and our Arene software creation platform. We will accelerate the development of an SDV infrastructure unique to Toyota through cooperation with our partners across industries. Arene The structural components supporting SDVs include applications, software, and electronic platforms. To enhance the scalability as it relates to cars, we have encouraged co-creation with partner companies and have renewed our electronic platforms, including improving chip performance. Furthermore, supporting the software development is Arene, introduced with the new RAV4. Arene is a software development platform through which we will mass-produce safe, reliable, and high-quality software, which will help accelerate the development of SDVs by applying the knowledge and technologies from the monozukuri that Toyota has cultivated to date. There are three components of the Arene platform. 1. Arene SDK Arene SDK is a modular development kit for developers, enabling the rapid development of high-quality software and easy deployment of developed software across multiple vehicles. 2. Arene Tools Arene Tools are tools for verifying and evaluating software in a virtual environment, reducing physical inspections of actual cars and enabling the creation of functions at an even earlier stage. The Arene SDK and Arene Tools shorten the development period for software, contributing to the quick provision of better software to customers. 3. Arene Data Arene Data is the component referring to the collection and analysis of data that will contribute to providing a personalized driving experience tailored to each customer by continuously improving the car’s functions as the owner drives it. By adopting Arene in the RAV4, a popular Toyota model loved by countless customers across regions, we can collect various data from customers around the world and continue evolving cars. Looking ahead, we expect this approach to expand and will consider cross-domain development. As the first step in mass production of Toyota RAV4 SDVs, we will make ever-better cars in line with regional needs through Arene, contributing to the future realization of a society with zero traffic accidents. Toyota Woven City Toyota aspires to transform into a mobility company. On our road toward accomplishing this goal, Toyota Woven City will function as a “mobility test course” for creating new products and services. Toyota and its group 28 Table of Contents company Woven by Toyota are advancing the Woven City project. Woven City saw its official launch on September 25, 2025, with companies and individuals commencing demonstrations of various products and services, and some residents have begun moving in. Access to this facility will not be limited to the Toyota Group. Rather, we hope to make Woven City a place where external stakeholders who share our desire to act “for others” can also use the environment, in which people actually live, to create new values to help shape a better future and enhance well-being for all. The companies and individuals who utilize Woven City to develop and demonstrate new products and services are called “Inventors.” By combining Toyota’s manufacturing expertise, Woven by Toyota’s advanced software capabilities, and the unique strengths of each Inventor, Woven City seeks to foster kakezan, a Japanese concept of “multiplication,” where new innovation and societal value emerge from the convergence of different ideas and capabilities. The people who live in and visit Woven City, called “Weavers,” also participate in inventions through kakezan. Weavers test the products and services developed by Inventors, sharing their comments on usability and opinions as feedback that Inventors will incorporate into their inventions. The Weavers and Inventors who gather at Woven City aim to work together to produce well-being for all under Toyota’s goal of working for others. Inventors are Toyota Group companies as well as like-minded outside companies and other organizations who have joined this quest for expanding mobility. Toyota and Woven by Toyota will also take advantage of Woven City to conduct tests as Inventors. Additionally, Toyota hosted an accelerator program attended by start-up companies, entrepreneurs, universities, and research institutions. The selected winners are expected to join the Inventors. The addition of start-up companies to the Inventors, which have primarily consisted of large corporations, is expected to further accelerate innovation through kakezan. Co-creation Themes by Investors Inventor Theme Daikin Industries, Ltd. Testing “pollen-less spaces” and “personalized functional environments” DyDo DRINCO, INC. Creating new value through innovative vending machine concepts NISSIN FOOD PRODUCTS CO., LTD. Creating and evaluating food environments to inspire new “food cultures” UCC Japan Co., Ltd. Conducting a proof-of-concept study to demonstrate the effect of coffee on creativity and productivity Zoshinkai Holdings Inc. Leveraging data to realize innovative educational methods and new learning environments Interstellar Technologies Inc. Developing a robust rocket production system* Kyoritsu Seiyaku Corporation Finding new ways to enhance human-pet coexistence Naoto Inti Raymi Developing future-oriented soundscapes AI Robot Association (AIRoA) Exploring the practical deployment of robots through real-world challenge identification and feedback cycles DAIICHIKOSHO CO., LTD. Creating more flexible karaoke experiences through real-world demonstration experiments Joby Aviation, Inc. Exploration of an air mobility ecosystem 29 Table of Contents Toyota Financial Services Corporation Developing new sales and financing models based on verified, real-world mobility usage data * Interstellar Technologies Inc. will conduct its work outside Woven City, with development support provided by Toyota and Woven by Toyota in the form of engineering know-how and technical staff. The products and services developed by Inventors will be tested by Weavers (residents and visitors). These individuals are indispensable to the testing processes or co-creation activities and will serve a similar function to the test drivers who take part in the automobile development process. Their contributions to tests will come in the form of the feedback they provide with regard to the products and services being tested. Following the official launch of Woven City, in September 2025, residents — primarily Toyota and Woven by Toyota staff and their families — have resided in Woven City as Weavers. The community will then gradually expand to include external Inventors and their families. Under Phase 1, the total population of Woven City is expected to reach approximately 300 in the future. Initially, visitors will be limited to related parties, with plans to welcome the general public to participate as Weavers in co-creation activities starting in fiscal 2026 and beyond. Woven City is a test course for mobility that demonstrates mobility infrastructure via a three-pronged approach of people, mobility, and infrastructure. The goal of this approach is to help realize the safe and secure mobility society that Toyota envisions. Up until now, Toyota has pursued this vision by focusing on the development of automobiles and working to make ever-better cars on dedicated automobile test courses. However, realizing a truly safe and secure mobility society requires that we expand our focus beyond automobiles and other forms of mobility to also consider the people who use these mobility options and the infrastructure that supports mobility. Woven City functions as a test course for implementing such demonstration testing. Under Phase 1, which has been officially launched, we have included the following features. In April 2026, the Woven City Inventor Garage (the “Inventor Garage”) began operations as a facility designed to further accelerate kakezan of Inventors. The Inventor Garage is located in the former stamping facility of Toyota Motor East Japan, Inc.’s Higashi-Fuji plant, which supported passenger vehicle production for more than 50 years, and was renovated to serve as a co-creation hub. As a real-world test course, Woven City supports agile development and validation through three environments: the Inventor Garage, which serves as a hub for development of products and services, the “Woven City Inventor Field,” in which performance and safety tests are conducted in an environment without residents, and the “Phase 1 Residential Area,” which enables testing in a living environment currently home to approximately 100 Weavers. Woven City is intended to continue expanding as an “ever-evolving city,” and by providing a test course where safety and security are maintained at every stage, it aims to further support kakezan. Woven City has officially launched, but this is just the starting point. We will work through trial and error together with Inventors and Weavers, while improving Woven City’s performance as a test course, to create products and services that will become the future fabric of life. 30 Table of Contents Mobility is not just the physical movement from point A to point B. It is also about being able to “move” people’s hearts and creating excitement. Moving toward inventions that will become the future fabric of life and expanding people’s potential: this is our vision for expanding mobility and for Woven City itself. Together with allies who share our vision, we will leverage Woven City to further our transformation into a mobility company that will help weave the future. Financial Services Toyota’s financial services include loan programs and leasing programs for customers and dealers. Toyota believes that its ability to provide financing to its customers is an important value-added service. In July 2000, Toyota established a wholly-owned subsidiary, Toyota Financial Services Corporation, to oversee the management of Toyota’s finance companies worldwide, through which Toyota aims to strengthen the overall competitiveness of its financial business, improve risk management and streamline decision-making processes. Toyota has expanded its network of financial services, in accordance with its strategy of developing auto-related financing businesses in significant markets. Accordingly, Toyota currently operates financial services companies in 42 countries and regions, which support its automotive operations globally. Toyota’s sales revenues from its financial services operations were ¥4,857.1 billion in fiscal 2026, ¥4,481.1 billion in fiscal 2025, and ¥3,484.1 billion in fiscal 2024. In fiscal 2026, Toyota’s business saw solid growth mainly due to an accumulated balance of earning assets resulting from new car sales support for Toyota and Lexus vehicles. Under such circumstances, as a result of Toyota’s continued collaboration with dealers in various countries and regions and efforts to expand products and services that meet customer needs, Toyota’s share of financing provided for new car sales of Toyota and Lexus vehicles in regions where Toyota Financial Services Corporation operates reached approximately 30%, and the balance of earning assets continued to steadily increase. In addition, to fund the growing asset base, Toyota is making efforts to provide both its customers and dealers with stable financial services by diversifying its funding methods by deposit-based funding in addition to using already existing means as commercial paper, corporate bonds, bank borrowings, and asset securitization. As a result of ongoing monitoring of bad debt and diligent, detailed collection efforts, the percentage of credit losses remained at stable levels of 0.43% in fiscal 2026 and 0.46% in fiscal 2025. Toyota continues to work towards improving its management measures in connection with residual value risks in leasing. Toyota Motor Credit Corporation is Toyota’s principal financial services subsidiary in the United States and provides financial services, including retail financing, retail leasing, wholesale financing, and insurance services. Toyota also provides financial services in 42 other countries and regions through various financial services subsidiaries, including: • Toyota Finance Corporation in Japan; • Toyota Credit Canada Inc. in Canada; • Toyota Finance Australia Ltd. in Australia; • Toyota Kreditbank GmbH in Germany; • Toyota Financial Services (UK) PLC in the United Kingdom; • Toyota Leasing (Thailand) Co., Ltd. in Thailand; and • Toyota Motor Finance (China) Co., Ltd. in China. KINTO, which started in Japan in 2019 in response to the shift from “owning” cars to “using” cars, has been steadily enhancing its service lineup and gaining brand awareness. This service is also being made available in Europe and other regions. Furthermore, Toyota developed and provides customers with the payment application “TOYOTA Wallet” as a platform that contributes to improving the convenience of customers’ daily payments and creating a foundation for a mobility society. 31 Table of Contents A large portion of Toyota’s financial services is related to the sale of Toyota vehicles. Finance receivables for all of Toyota’s dealer and customer financing operations were ¥38,966.6 billion as of March 31, 2026, representing an increase of 15.9% compared to the previous year. As of March 31, 2026, 52.2% of Toyota’s finance receivables were attributable to North America, 15.4% from Europe, 11.4% from Asia, 10.0% from Japan and 11.0% from other areas. Approximately 40% of Toyota’s unit sales in the United States during fiscal 2026 included a finance or lease arrangement with Toyota. The worldwide financial services market is highly competitive. Toyota’s competitors in retail financing and retail leasing include commercial banks, credit unions and other finance companies. Commercial banks and other automobile finance subsidiary companies serving their parent automobile companies are competitors of Toyota’s wholesale financing activities. Competitors in Toyota’s insurance operations are primarily national and regional insurance companies. For information on Toyota’s finance receivables and operating leases, please see “Item 5. Operating and Financial Review and Prospects — 5.A Operating Results — Financial Services Operations.” Retail Financing Toyota’s finance subsidiaries acquire new and used vehicle installment contracts primarily from Toyota dealers. Installment contracts acquired must first meet specified credit standards. Thereafter, the finance company retains responsibility for installment payment collections and administration. Toyota’s finance subsidiaries acquire security interests in the vehicles financed and can generally repossess vehicles if customers fail to meet their contractual obligations. Almost all retail financings are non-recourse, which relieves the dealers from financial responsibility in the event of repossession. In most cases, Toyota’s finance subsidiaries require their retail financing customers to carry automobile insurance on financed vehicles covering the interests of both the finance company and the customer. Toyota has historically sponsored, and continues to sponsor, special lease and retail programs by subsidizing below market lease and retail contract rates. Retail Leasing In the area of retail leasing, Toyota’s finance subsidiaries acquire new vehicle lease contracts originated primarily through Toyota dealers. Lease contracts acquired must first meet specified credit standards after which the finance company assumes ownership of the leased vehicle. The finance company is generally permitted to take possession of the vehicle upon a default by the lessee. Toyota’s finance subsidiaries are responsible for contract collection and administration during the lease period. The residual value is normally estimated at the time the vehicle is first leased. Vehicles returned to the finance subsidiaries at the end of their leases are sold by auction. For example, in the United States, vehicles are sold through a network of auction sites, as well as through the Internet. In most cases, Toyota’s finance subsidiaries require lessees to carry automobile insurance on leased vehicles covering the interests of both the finance company and the lessee. Wholesale Financing Toyota’s finance subsidiaries also provide wholesale financing primarily to qualified Toyota dealers to finance inventories of new Toyota vehicles and used vehicles of Toyota and others. The finance companies acquire security interests in vehicles financed at wholesale. In cases where additional security interests would be required, the finance companies take dealership assets or personal assets, or both, as additional security. If a dealer defaults, the finance companies have the right to liquidate any assets acquired and seek legal remedies. 32 Table of Contents Toyota’s finance subsidiaries also make term loans to dealers for facilities refurbishment, real estate purchases and working capital requirements. These loans are typically secured with liens on real estate, other dealership assets and/or personal assets of the dealers. Insurance Toyota provides insurance services in the United States through Toyota Motor Credit Corporation’s wholly owned subsidiary, Toyota Motor Insurance Services, Inc. (“TMIS”) and its wholly owned insurance company subsidiaries. Their principal activities include marketing, underwriting and claims administration. TMIS also provides coverage related to vehicle service agreements through Toyota dealers to customers. In addition, TMIS also provides coverage and related administrative services to affiliated companies of Toyota Motor Credit Corporation. Toyota dealers in Japan and in other countries and regions also engage in vehicle insurance sales. Other Financial Services Toyota Finance Corporation launched its credit card business in April 2001 and began issuing Lexus credit cards in 2005 when the Lexus brand was introduced in Japan. As of March 31, 2026, Toyota Finance Corporation has 15.7 million card holders (including Lexus credit card holders). All Other Operations In addition to its automotive operations and financial services operations, Toyota is involved in a number of other non-automotive business activities. Sales revenues for these activities totaled ¥1,651.4 billion in fiscal 2026, ¥1,447.1 billion in fiscal 2025, and ¥1,368.1 billion in fiscal 2024. Governmental Regulation, Environmental and Safety Standards Toyota’s products must comply with government regulations governing, among many other things, their emissions, fuel economy, noise and safety. In addition, Toyota is subject to laws regulating pollutants generated by its manufacturing operations. Toyota has incurred significant costs in complying with these laws and regulations and expects to incur significant compliance costs in the future. Toyota’s management views leadership in environmental protection as an important competitive factor in the marketplace. The following is a summary of the more significant existing environmental and safety standards that apply to our products. International Harmonization of Vehicle Regulations The World Forum for Harmonization of Vehicle Regulations (“WP.29”) of the United Nations Economic Commission for Europe has been working to promote international harmonization of the technical prescriptions for the construction and approval of wheeled vehicles. Towards that end, it has developed certain international rules and regulations such as the UN Regulations (“UNR”) under the 1958 Agreement and the Global Technical Regulations (“GTR”) under the 1998 Agreement. The UNR has been adopted in jurisdictions such as Japan, EU and Russia, and each participating party’s type approvals are mutually recognized under the 1958 Agreement. The parties to the 1998 Agreement include the U.S., China and India in addition to Japan, the EU and Russia, and 25 Global Technical Regulations have been established to date. Progress in international harmonization of technical prescriptions is expected to reduce country to country variations in product specifications and to lead to greater efficiency in Toyota’s product development. 33 Table of Contents Vehicle Emissions Japanese Standards The Air Pollution Control Act of Japan and the Road Transport Vehicle Act and the Act Concerning Special Measures for Total Emission Reduction of Nitrogen Oxides and Particulate Matter from Automobiles in Specified Areas regulate vehicle emissions in Japan. In recent years, more stringent regulations have been introduced to match the European Union Standards, as can be seen from, among other things, the strengthened regulations on particulate matters emitted from gasoline-fueled vehicles, the adoption of the Worldwide Harmonized Light Vehicles Test Cycle (“WLTC”) driving cycles and the introduction of the Real Driving Emission (“RDE”). UN-R154 has also been adopted. The Noise Regulation Act and the Road Transport Vehicle Act provide for noise reduction standards on automobiles in Japan. U.S. Federal Standards The federal Clean Air Act directs the Environmental Protection Agency (“EPA”) to establish and enforce air quality standards, including emission control standards on passenger vehicles, light-duty trucks and heavy-duty vehicles (with such classifications based on gross vehicle weight ratings). Manufacturers are not permitted to sell vehicles in the United States that do not meet the standards. In 2014, EPA finalized new “Tier 3” tailpipe emission and evaporative emission standards for passenger vehicles, light-duty trucks, medium-duty passenger vehicles and some heavy-duty vehicles. Under that rule, tailpipe emission standards for non-methane organic gases, nitrogen oxides, and particulate matter, as well as standards for evaporative emissions and guaranteed useful life (which relates to a vehicle’s ability to meet emission limits over time), became increasingly stringent in phases from model years 2017 to 2025. It also required reductions in gasoline’s sulfur content beginning in model year 2017, which was expected to improve the performance of emission control systems. With the Tier 3 rule, EPA brought federal requirements in line with California’s more stringent emission standards (discussed below). In March 2024, the EPA announced a final rule for Tier 4 emission standards for passenger vehicles, light-duty trucks, medium-duty passenger vehicles and some heavy-duty vehicles from model year 2027 through 2032. The rule tightened criteria pollutant limits, requiring reductions in non-methane organic gases and nitrogen oxides emissions and a particulate matter cap, fully phased in by model year 2031. Under the current Trump administration, however, the EPA has initiated steps to roll back these standards, framing them as an overreach that effectively mandates electric vehicle adoption. This deregulation effort is expected to face legal challenges from environmental groups and states, potentially delaying or altering the implementation of the original rules. California Standards The federal Clean Air Act generally prohibits states from enacting their own emission standards for new motor vehicles and engines. However, California is allowed to establish its own more stringent vehicle emission control standards if it receives a waiver of preemption from EPA. Other states then may decide to adopt the California standards that are allowed under the waiver. Over the years, EPA has granted many such preemption waivers to California. Among those was a January 2013 waiver in support of California’s Advanced Clean Cars (“ACC”) program. The California Air Resources Board (“CARB”) had adopted the ACC program in coordination with the EPA and the federal National Highway Traffic Safety Administration (“NHTSA”). It included the Low-Emission Vehicle III (“LEV III”) regulations, which set progressively stringent standards to reduce emissions of volatile organic compounds, carbon monoxide, nitrogen oxides, particulate matter and greenhouse gases (“GHG”). The regulations also addressed standards for evaporative emissions and extended vehicle useful life requirements. Another part of the ACC program was a “zero-emission vehicles” (“ZEV”) mandate requiring manufacturers to sell a specified percentage of ZEVs—including BEVs, FCEVs and certain advanced technology 34 Table of Contents vehicles such as PHEVs that meet “partial zero-emission vehicles requirements”. Toyota’s MIRAI, an FCEV, is one example of a vehicle that qualifies as a zero-emission vehicle. Toyota intends to continue to develop additional advanced technologies and alternative fuel technologies that will allow other vehicles to qualify as zero-emission vehicles or partial zero-emission vehicles. In 2022, CARB finalized the Advanced Clean Cars II (“ACC II”) regulations, which include updated LEV IV exhaust emissions standards and an expanded ZEV sales mandate applicable to model years 2026 through 2035. LEV IV standards further tighten criteria pollutant limits for light- and medium-duty vehicles, while the ZEV mandate requires 100% of new passenger vehicles sold in California to be ZEVs by 2035, consistent with California Governor Newsom’s Order of 2020 (N 79 20). Legal challenges to the ACC II program have been filed, including suits over CARB’s authority and the waiver granted by the EPA under the Clean Air Act, particularly as federal policy on vehicle electrification has shifted under the second Trump administration. For example, the US Congress passed joint resolutions in May 2025 under the Congressional Review Act that disapproved EPA waivers for several California vehicle emission programs, including the ACC II rules; President Trump signed these resolutions into law on June 12, 2025. Developments such as these with their associated legal battles create significant uncertainty around future emissions standards under the Clean Air Act. Aside from its emission standards, California has adopted regulations that require On-Board Diagnostics (“OBD”) systems to be incorporated into the computers of vehicles sold in California. OBD systems monitor components that can affect the emission performance of a vehicle and, if a problem with a component is detected, illuminates a warning light on the vehicle’s instrument panel. The systems also store the malfunction information in the computer to facilitate repairs. California’s OBD regulations are the most stringent in the world. Other States’ Standards Under Section 177 of the Clean Air Act, states can adopt California’s vehicle emissions standards and opt-in to that more stringent program. Approximately seventeen other states, for example, have adopted regulations substantially similar to California’s LEV standards. At least fifteen of those (Colorado, Connecticut, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia and Washington) have adopted California’s ZEV program. Delaware and Pennsylvania have implemented the LEV standards but not the ZEV standards. Approximately eleven states (in addition to California) and the District of Columbia have adopted California’s ACC II regulations, mandating that 100% of new light-duty vehicle sales be ZEVs by 2035. Some of these state measures have faced reversal due to such concerns as the effect and cost of the mandates on consumers. Canadian Standards Canada finalized vehicle emission standards equivalent to federal standards in the United States in October 2014, responding to the strengthening of U.S. standards for model years 2017 to 2025; however, while the U.S. EPA published even stronger standards in March 2024 to drive significant ZEV penetration through 2032, it officially rescinded its Greenhouse Gas Endangerment Finding and repealed all federal GHG standards on February 12, 2026, leaving Tier 4 regulations on hold. Although Canada typically aligns with the most stringent North American performance standards via “incorporation by reference,” U.S. regulatory reversals and legal threats have created uncertainty for Canada’s post-2026 emissions framework. Further, in February 2026 the federal government announced a significant policy redirection by announcing it will repeal its ZEV Mandate (Electric Vehicle Availability Standard) and replace it with more stringent, Canada-unique fleet-average GHG emission standards for model years 2027–2032, with an eventual goal of 75% EV sales by 2035 and 90% by 2040 to be achieved via GHG emissions standards. 35 Table of Contents Despite this federal uncertainty, provinces of British Columbia and Quebec maintain their own ZEV mandates. In March 2026, British Columbia announced that it will modify its ZEV mandate to require manufacturers to reach 75% ZEV sales in model year 2035 (down from 100%). Quebec announced in 2025 that it would lift its 2035 ban on new gasoline-powered vehicles, set a new 2035 target of 90% ZEV sales — combining both BEVs and PHEVs, and provide some credit for hybrid vehicles within its ZEV mandate, with draft regulation reflecting these changes expected by the end of 2026. To support these transitions, Canada provides a federal incentive through the Electric Vehicle Affordability Program (EVAP), which can often be combined with active provincial programs, though availability varies as several other regional programs have recently closed or paused. Furthermore, Canada remains committed to its 2017 fuel regulations, which limit sulfur concentration to 10mg/kg. European Union Standards In 2007, the European Parliament and the Council of the EU adopted the Vehicles Emissions Regulation (Regulation (EC) No 715/2007), which introduced more stringent emission standards for passenger vehicles and light commercial vehicles. The effective date for phasing in these stricter standards for passenger vehicles was September 2014 for Euro 6. For light commercial vehicles, the effective date was September 2015. The primary focus of Euro 6 is to limit further emissions of diesel-powered vehicles and bring them down to a level equivalent to gasoline-powered vehicles. The EU implements RDE regulations, which require manufacturers to conduct on-road emissions tests using portable emissions testers to demonstrate compliance. Since September 2017, manufacturers have been required to reduce the divergence between the regulatory limit tested in laboratory conditions and the values of RDE tests, and this divergence factor was made more stringent for all new vehicles effective January 2021. The EU also implements the Worldwide harmonized Light vehicles Test Procedure (“WLTP”), which was introduced on September 1, 2017. The OBD regulations have also been tightened in terms of both subject parts and regulatory values. On January 1, 2019, an improved WLTP that purports to eliminate test flexibilities and introduces on-board fuel and energy consumption monitoring devices took effect. In March 2023, further regulations came into effect to harmonize requirements with UNR, tighten the divergence factor on RDE, and tighten the method for calculating CO2 emissions for PHEVs. On May 28, 2024, Euro 7 (Regulation (EU) 2024/1257), which further strengthens Euro 6, came into effect. The dates of application of the Euro 7 regulation depend on vehicle type. They will apply to new types of passenger vehicles and light commercial vehicles from November 29, 2026, to new passenger vehicles and light commercial vehicles from November 29, 2027, to new types of buses and lorries from May 29, 2028, and to new buses and lorries from May 29, 2029. The Euro 7 regulation maintains the Euro 6 exhaust emission limits for passenger vehicles and light commercial vehicles (except the particle number limit), tightens exhaust emission limits for buses and lorries (e.g., introducing new in-scope pollutants such as N2O), establishes rules for other types of emissions such as brake particle emissions and tire abrasion, and introduces minimum performance requirements for battery durability in electric and plug-in hybrid vehicles (BEVs/PHEVs). Euro 7 also introduces on-board monitoring (OBM) systems, which monitor real-time exhaust emissions using on-board sensors and transmits the monitored data over the air from vehicles to manufacturers’ servers. Chinese Standards The next-generation emissions regulations for passenger vehicles, or Level 6 Emissions Regulations (China 6), were issued as GB18352.6-2016 at the end of 2016, pursuant to which tighter requirements will be implemented in two steps, depending on the regulated subjects and the implementation timing. Specifically, China 6a will apply to all models to be sold or registered in July 2020 and beyond, and China 6b will apply to all models to be sold or registered in July 2023 and beyond. China 6b will also introduce the RDE Regulations adopted under Euro 6. The OBD regulations have also been tightened in terms of both subject parts and regulatory values. With respect to fuels in the market, the quality standards and the implementation from 36 Table of Contents January 2019 for China 6 gasoline fuel and China 6 diesel fuel have been provided in GB17930-2016 and GB19147-2016 so as to keep up with the implementation timing of China 6 emissions regulations. Discussions are currently underway for Level 7 Emissions Regulations (“China 7”), which will be more stringent than the China 6 Emissions Regulations. Potential regulations for particulate matter emitted from brake pads and tire wear and the expansion of regulations to make BEVs/FCEVs subject to the OBD regulations are being considered. For heavy-duty diesel-powered commercial vehicles, pursuant to GB17691-2005, the China V Emissions Regulations are being implemented from July 2017. With the establishment of GB17691-2018, which provides next-level China VI Emissions Regulations (“China VI”), it has been decided that China VIa will be implemented from July 2021 and China VIb from July 2023 (these regulations will apply to gas-fueled vehicles and public vehicles for urban areas earlier than those dates). For heavy-duty gasoline-powered commercial vehicles, pursuant to GB14762-2008, Level IV Emissions Regulations (“China IV”) apply to new models after July 2012. In parallel with China VII for passenger vehicles, tightening of the next-generation emissions regulations (China VII) is currently considered for heavy-duty gasoline-powered commercial vehicles. Standards of Other Countries or Regions At present, certain countries such as India, Thailand, Taiwan, Australia, New Zealand, Chile and Peru have also decided to introduce regulations equivalent to Euro 6. Vehicle Fuel Economy Japanese Standards The Act on Rationalizing Energy Use and Shifting to Non-fossil Energy requires automobile manufacturers to improve their vehicles to meet specified fuel economy standards. Fuel economy standards are established according to the types of vehicles, and are required to be met by either fiscal 2011 (April 2010-March 2011), fiscal 2016 (April 2015-March 2016), fiscal 2021 (April 2020-March 2021), fiscal 2023 (April 2022-March 2023), fiscal 2026 (April 2025-March 2026) or fiscal 2031 (April 2030-March 2031). From 2020, if the WLTC mode is applied as a vehicle emissions test cycle, fuel economy test must be also conducted based on the WLTC mode. U.S. Standards Since 1975 when Congress passed the Energy Policy and Conservation Act, each automobile manufacturer must comply with corporate average fuel economy (“CAFE”) standards across its fleet of new cars and trucks. A manufacturer is subject to substantial civil penalties if, in any model year, its vehicles do not meet the CAFE standards. Manufacturers that exceed the CAFE standards earn credits determined by the difference between the average fuel economy performance of their vehicles and the CAFE standards. Credits may be used for the three years preceding the model year in which they were earned and the five years after. An original goal of the CAFE Program was fuel efficiency. But the program also provided the means for EPA to address GHG emissions from vehicles. The two are linked since carbon dioxide emissions are directly proportional to fuel consumed. In 2012, for example, NHTSA and EPA issued a joint rule for passenger cars, light-duty trucks and medium-duty passenger vehicles for model years 2017 through 2025. NHTSA focused on fuel efficiency. It required passenger vehicles and light-duty trucks to meet an industry average fuel economy level of 49.7 miles per gallon in model year 2025. EPA, on the other hand, required an estimated combined average emission level of 163 grams of carbon dioxide per mile in model year 2025, which would be equivalent to 54.5 miles per gallon if met solely through improvements in fuel economy (without using any available credits for reducing air conditioning leakage). 37 Table of Contents Under the first Trump administration, in 2018, EPA and NHTSA proposed more relaxed GHG emission standards and CAFE standards. EPA also withdrew the preemption waiver allowing California to issue its own more stringent GHG emission standards under the ACC program. The Biden administration, however, moved to tighten the fuel economy program. EPA and NHTSA withdrew the prior Trump administration’s proposed GHG emission standards and CAFE standards. In 2021 the Biden EPA issued a final rule revising passenger car and light-duty truck GHG emissions standards for model years 2023 through 2026. That rule projected reductions in GHG emissions, year-over-year, by 9.8% for model year 2023, 5.1% for 2024, 6.6% for 2025, and 10.3% for 2026. Based on these reductions, the industry-wide average emission targets for passenger cars and light-duty trucks were projected by the EPA to be 161 grams of carbon dioxide per mile in model year 2026. In 2022, NHTSA followed with a final rule revising passenger car and light-duty truck fuel economy standards for model years 2024 through 2026. That rule set a fleet-wide standard of approximately 49 mpg for passenger cars and light duty trucks in model year 2026. This was to be achieved by increasing fuel efficiency, year-over-year, by 8% for model year 2024, 8% for 2025, and 10% for 2026. Also in 2022, EPA reinstated California’s authority to enforce its own GHG emissions standards for vehicles. In March 2024, EPA issued a final rule setting GHG emissions standards for light-duty and medium-duty vehicles from model years 2027 to 2032, projecting an industry-wide average target of 85 grams of carbon dioxide per mile by model year 2032. This represented an almost 50% reduction and was expected to accelerate the market shift towards electrification. However, with the second Trump administration, NHTSA decided to review and reconsider fuel economy standards applicable to vehicles from model year 2022. In support of that effort, NHTSA issued an interpretive rule addressing the extent of its legal authority for the CAFE program. It was followed by a December 2025 proposed rule to amend the fuel economy standards for light duty vehicles for model years 2022 to 2026 and 2027 to 2031. In 2026, moreover, the Trump EPA rescinded the 2009 endangerment finding that provided the basis for its regulation of GHG emissions from new motor vehicles and new motor vehicle engines. Environmental stakeholders filed to start litigation on this decision, leading to uncertainty regarding such regulation. Both the CAFE and GHG emissions standards are expected to remain dynamic in response to shifting federal policy priorities, technological developments, and market trends. A return of a Democratic administration, for example, could result in a tightening of such standards beyond model year 2032. Whatever the standards, legal and political challenges are likely. As such, the regulatory landscape is likely to evolve, with periodic rulemakings, midterm reviews and potential litigation shaping the trajectory of U.S. vehicle GHG emissions and fuel economy standards in the coming years. European Union Standards In April 2019, the European Parliament and the Council of the EU adopted the EU Emissions Performance Regulation (Regulation (EU) 2019/631), which introduced new carbon dioxide standards for vehicles and light commercial vehicles. Under these standards, average emissions of the EU fleet of new vehicles and light commercial vehicles were set to be reduced by 15% lower than 2021 levels by 2025 and, by 2030, emissions were set to a further 37.5% and 31% reduction of 2021 levels for vehicles and light commercial vehicles, respectively. As such, the 2020 to 2024 EU-fleet wide average carbon dioxide emissions target for light commercial vehicles was 147 grams per kilometer, and for passenger vehicles, 95 grams per kilometer. Since 2021, these emissions targets have been tested using the WLTP. 38 Table of Contents As part of its “Fit for 55” package, on April 19, 2023, the European Parliament and the Council of the EU adopted an amendment to the EU Emissions Performance Regulation (Regulation (EU) 2023/851), which introduced more stringent carbon dioxide emission standards for vehicles and light commercial vehicles. The new standards strengthen the 2030 targets from 37.5% to a 55% reduction for new passenger cars and from 31% to a 50% reduction for new light commercial vehicles, both relative to the 2021 baseline discussed above. In addition, the new standards introduce a new 2035 carbon dioxide target set at a 100% reduction for new vehicles and light commercial vehicles, again relative to the 2021 baseline. Since 2019, manufacturers failing to meet their targets have incurred penalties, which are currently set at €95 per vehicle from the first gram of target exceedance onwards. On July 9, 2025, the European Parliament and the Council of the EU adopted an amendment to the EU Emissions Performance Regulation (Regulation (EU) 2025/1214), which introduced a one-time flexibility measure allowing manufacturers to meet 2025–2027 carbon dioxide targets over a three-year average rather than annually. This exemption was implemented as part of the Industrial Action Plan for the automotive sector, which aims to support investment in the clean transition while preserving overall climate ambition. Furthermore, since 2025, a zero- and low-emission vehicles (“ZLEV”) crediting system has been introduced to relax a manufacturer’s specific carbon dioxide emissions targets where the manufacturer produces numbers of ZLEV above specified benchmarks. In December 2025, the European Commission published an “Automotive Package” comprising proposed amendments to Regulation (EU) 2023/851 (the amended CO2 fleet-wide performance standards for cars and vans), a proposed Directive on clean corporate vehicle fleets, a proposed Automotive Omnibus Regulation on the simplification of type-approval and market surveillance requirements, and a Battery Booster investment program. The proposed amendments to Regulation (EU) 2023/851 would replace the 100% tailpipe emissions reduction target for new cars and vans by 2035 with a 90% target, with the remaining 10% to be compensated through the use of low-carbon steel produced in the EU, e-fuels or biofuels. The proposals also introduce additional compliance flexibilities, including “super credits” for small affordable electric vehicles manufactured in the EU, a “banking and borrowing” mechanism for the 2030–2032 period, and a reduction of the 2030 CO2 target for vans from 50% to 40%. The proposed Directive on clean corporate vehicle fleets would require Member States to set mandatory targets for the uptake of zero- and low-emission vehicles by large companies and to make zero- or low-emission status and EU origin prerequisites for vehicles benefiting from public financial support. The proposed Automotive Omnibus Regulation is expected to streamline type-approval testing procedures, reduce the volume of delegated and implementing acts to be adopted under the General Safety Regulation (Regulation (EU) 2019/2144) and Euro 7 (Regulation (EU) 2024/1257), and introduce a new vehicle category for small affordable electric cars of up to 4.2 meters in length. The Battery Booster investment program allocates €1.8 billion, including €1.5 billion in interest-free loans for European battery cell producers, to support the development of a fully EU-based battery value chain. These proposals remain subject to adoption by the European Parliament and the Council of the EU, and their final form may differ from the European Commission’s proposals. Also adopted as part of the “Fit for 55” package, the recast Renewable Energy Directive (Directive (EU) 2023/2413) enables Member States to require that renewable energy accounts for at least 29% of final energy consumption in transport by 2030, including a combined sub-target of 5.5% for advanced biofuels and renewable fuels of non-biological origin (“RFNBOs”) such as green hydrogen and e-fuels, of which at least 1% must come from RFNBOs. The Alternative Fuels Infrastructure Regulation (Regulation (EU) 2023/1804), also part of the “Fit for 55” package, mandates the deployment of publicly accessible electric vehicle charging infrastructure along TEN-T (Trans-European Transport Network) core and comprehensive network corridors and hydrogen refueling stations along TEN-T core corridors. 39 Table of Contents Chinese Standards Fuel consumption regulations are being implemented pursuant to the Chinese National Standards (“GB”), and the manufacture and sale of vehicle models not meeting these regulations are prohibited. For light-duty passenger vehicles, GB27999-2011 was issued. In these Level 3 Fuel Consumption Regulations for passenger vehicles, the regulation framework was substantially revised, such as the introduction of new regulations requiring automobile manufacturers to meet standards of corporate average fuel consumption across models in addition to existing regulations requiring each model to meet consumption standards. Furthermore, in order to achieve the national target for average fuel efficiency for 2020, the following more stringent fuel consumption regulations have been enforced. First, GB19578-2014, which has been enacted to strengthen regulations for each model, is being applied to new models after January 2016. Second, GB27999-2014, which has been enacted as Level 4 Fuel Consumption Regulations for passenger vehicles to strengthen corporate average regulations, has been in effect since 2016. In 2021, the fuel economy test mode was changed from NEDC to WLTC, and the Level 5 Fuel Consumption Regulations for passenger vehicles to achieve the average fuel efficiency target by 2025, GB19578-2021 and GB27999-2019, have been in effect since 2021. As a further enhancement of fuel consumption regulations, GB19578-2024 and GB27999-2025, which are the Level 6 Fuel Consumption Regulations for passenger vehicles, have been enacted and took effect in 2026. In addition, GB36980.1-2025, which regulates smaller electric vehicles (BEVs) by model, was enacted and has been applied to all new vehicles from January 2026. For light commercial vehicles, GB20997-2015 was enacted, based on which Level 3 Fuel Consumption Regulations have been applied to all new vehicles from January 2018. As a further enhancement of fuel consumption regulations, GB20997-2024, which are the Level 4 Fuel Consumption Regulations for light commercial vehicles, were enacted and applied to new vehicles from January 2026. Moreover, the implementation of the Life Cycle Assessment, which comprehensively regulates the amount of carbon dioxide emitted during the vehicle manufacturing, use, and disposal processes, among others, is being considered earlier than in the rest of the world. With respect to large commercial vehicles, pursuant to GB30510-2018, Level 3 Fuel Consumption Regulations apply to new vehicles from July 2019 and are currently being enforced. In addition, in an effort to further strengthen fuel consumption regulations for the next generation, GB30510-2024, which is the Level 4 Fuel Consumption Regulations, have been enacted and applied to new vehicles from July 2025. Standards of Other Countries or Regions India, Saudi Arabia, Brazil, Chile, Mexico, Australia, New Zealand, South Korea and Taiwan have imposed regulations that require automobile manufacturers and dealers to reduce fuel consumption and carbon dioxide emissions. Vehicle Safety Japanese Standards Japan has been participating in the 1958 Agreement of the UN and has a number of technical standards that are harmonized with the UNRs described below. OBD testing to verify compliance with safety standards during vehicle inspections became mandatory for domestic vehicles starting October 2024 for imported vehicles starting October 2025. From 2025 onwards, new UNRs have been adopted, including the pedal misapplication acceleration control system (UN-R175) and the emergency lane keeping system (UN-R178), among others. Based on the outcomes of deliberations by the public–private council, Japan has implemented a harmonization of domestic effective dates. For standards for which application dates have already been determined, effective dates will be consolidated on an annual basis in September. For standards to be newly introduced going forward, effective dates will be unified to either September or March each year. 40 Table of Contents In addition, pursuant to the agreement between Japan and the United States concerning tariffs, a new certification scheme for U.S.-manufactured passenger vehicles has been established. By utilizing this scheme, passenger vehicles manufactured in the United States and compliant with U.S. regulatory standards may be accepted for sale in Japan without the need for additional testing within Japan. U.S. Standards In November 2021, the Bipartisan Infrastructure Bill was signed into law by President Biden. It requires the NHTSA to create regulations that cover a wide range of vehicle safety matters, including advanced driver assistance technologies, driver monitoring systems, headlamps, connected vehicles technologies, event data recording, and impaired driving prevention technologies. In response to these mandates, the NHTSA has so far completed several key rulemakings. A final rule permitting Adaptive Driving Beam headlamps was issued in 2022, a final rule mandating Automatic Emergency Braking Systems (“AEBS”) was issued in 2024, and a notice of proposed rulemaking for enhanced seatback strength was issued in 2025. In the area of automated vehicles (“AV”), while the federal government has not issued binding AV regulations beyond the policy-level AV 4.0 guidance released in 2020, recent federal actions indicate a possible shift. In April 2025, the Trump administration proposed easing AV deployment restrictions while maintaining incident reporting for higher-level automated systems. Meanwhile, California and other states continue to advance AV oversight in the absence of comprehensive federal standards, with California recently proposing to lift its ban on autonomous heavy-duty truck testing. European Union Standards In December 2019, the EU issued the revised General Safety Regulation (Regulation (EU) 2019/2144) to tighten the requirements concerning safety and the protection of vehicle occupants and vulnerable road users. This revised General Safety Regulation (which came into effect in July 2022) made certain vehicle safety equipment mandatory in a phased approach, including: automated emergency braking, emergency lane keeping systems, driver drowsiness and attention warning, intelligent speed assistance, reversing detection systems, tire pressure monitoring systems, and data recorders in case of an accident (“event data recorders”). In October 2024, Regulation (EU) 2024/2220 was published specifying the specific test procedures and technical requirements for event data recorders for heavy vehicles. In relation to this, various UNRs were developed (as detailed further below). The General Safety Regulation has been updated regularly to reflect new UNRs. For the equipment for which UNRs have not been developed, such as automated driving systems for automated vehicles, the EU has established its own technical standards. In order to adapt to new telecommunication technologies in the EU, Regulation (EU) 2024/1180 was adopted in April 2024, amending Regulation (EU) 2015/758 which governs a 112-based eCall in-vehicle system. Detailed requirements and test procedures for the approval of eCall systems are currently being revised to align with the new regulations, and are expected to be issued shortly. United Nations Standards The United Nations Economic Commission for Europe Working Party on Automated/Autonomous and Connected Vehicles (“GRVA”) has been continuing to advance global regulatory frameworks on automated driving systems (“ADS”). Amendments to UNR No. 157 on Automated Lane Keeping Systems (“ALKS”) have increased the permissible operating speed for ALKS from 60 km/h to 130 km/h and introduced provisions for automated lane change functions. 41 Table of Contents GRVA has been actively developing a new UNR/GTR on ADSs, with contributions from Canada, China, the EU, Japan, the UK and the US. Those new regulations aim to establish harmonized international technical requirements for ADS, encompassing functional safety, cybersecurity, software updates, and DSSAD (Data Storage System for Automated Driving) requirements. In parallel, amendments of all relevant UN GTRs and UNs for considering ADS fitness are being coordinated toward voting at WP.29 in June 2026. WP.29 has endorsed “Considerations on Artificial Intelligence in the context of road vehicles” in June 2024. GRVA is exploring regulatory measures addressing artificial intelligence (“AI”). Now WP.29 will be exploring some instruments addressing AI used in vehicles. In addition to automated driving, WP.29 is also engaged in the development of other new regulations. In March 2026, it adopted regulations requiring the issuance of warnings to drivers in cases of driver distraction or reduced alertness. Furthermore, other subsidiary working parties under WP.29 are progressing the development of regulations concerning, among other matters, the safety of children left in vehicles, awareness of vulnerable road users proximity, and ensuring ease of door opening in emergency situations such as vehicle fires or vehicle submersion. Chinese Standards Vehicle safety regulations in China were in general established having regard to the UNRs. However, China is adding its own requirements in consideration of the Chinese market and traffic environment, and establishing its own standards to improve the technological capabilities of its industries and to ensure international competitiveness. This is especially true in the area of “electrification,” or new energy vehicles (“NEVs”), which China is strongly promoting, and China’s own national technical standards on functions such as batteries, motors, and the charging and remote surveillance of NEVs have been made mandatory. Fuel-cell vehicles are subject to the supervising regulations on the safety of high-pressure gas in addition to the vehicle type approval requirement. Moreover, in accordance with the Made in China 2025 policy, the country considers “intelligentization” to be the next core technological area, and more than 100 standards for intelligent connected vehicles are being developed (including automation, telecommunication and security). As is the case in the field of electrification, it is anticipated that more of China’s own standards will become mandatory in a short period in the future. In particular, in recent years, from the perspective of ensuring data security against the backdrop of the U.S.-China trade friction and other factors, China has been vigorously and rapidly promoting legislation to strictly control the extraterrestrial transfer of data acquired within China, and the automotive sector is no exception to this. Although the authorities have already mandated to obtain clearance for personal information and important data to be transferred outside of China through security review, there is a risk that Toyota will need a major review of the necessity for further development of new technologies or of the technology development system, including technology transfer to China, depending on the terms of future laws and regulations. Furthermore, with the rapid expansion of the commercialization of advanced driver assistance technologies by local IT companies and OEMs, the development of related standards is also progressing at a fast pace. Accidents occurring during the use of these functions have become a social issue, and there is a shift toward only permitting technologies that provide support even in complex driving scenarios, by establishing performance requirements that significantly exceed those of UNRs. In addition, with a growing movement to prohibit features that have become widespread in NEVs, such as retractable door handles and one-pedal driving modes, regulatory developments specific to China are accelerating. Environmental Matters Japanese Standards Automotive operations in Japan are subject to substantial environmental regulation under laws such as the Air Pollution Control Act, the Water Pollution Prevention Act, the Noise Regulation Act and the Vibration Control Act. Under these laws, if a business entity establishes or alters any facility that is regulated by these laws, 42 Table of Contents the business entity is required to give prior notice to regulators, and if a business entity uses, discharges, or stores substances that are environmental burdens or causes noise or vibration from such facility, the business entity is also required to comply with the applicable standards. Toyota has established and complies with environmental standards that exceed applicable statutory and regulatory requirements, based on agreements reached with relevant local administrative authorities. Under the Waste Management and Public Cleansing Act, producers of industrial waste must dispose of industrial waste in the manner prescribed in the same act. The Soil Contamination Countermeasures Act of Japan requires that landowners conduct contamination testing and submit a report at the time they cease to use hazardous substances, such as in connection with the sale of a former factory, or if there is a possibility of health hazards due to land contamination. If it is found that land contamination exceeds a certain level, the relevant prefectural authority designates the area as considered to be contaminated, orders the landowner to submit a plan for decontamination (such plan must describe the measures to be taken in the area, the reasons therefor, and the deadline for implementing such measures, etc.), and has the landowner take such measures in accordance with such plan. In addition, under the Act on Recycling, etc. of End-of-Life Vehicles, vehicle manufacturers are required to take back and recycle specified materials (automotive shredder residues, air bags and fluorocarbons) of end-of-life vehicles and the provisions concerning such obligations of vehicle manufacturers became effective in January 2005. Toyota has coordinated with relevant parties to establish a vehicle take-back and recycle system throughout Japan. As a result, in fiscal 2025, Toyota achieved a recycling/recovery rate of 97% for automobile shredder residue (the legal requirement being 70% or higher) and 97% for air bags (the legal requirement being 85% or higher) and reached the targets set forth in this law. U.S. Standards The federal environmental statutes applicable in the United States include, among others, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act (which governs wastes), and the Toxic Substances Control Act. Toyota also is subject to a variety of state laws that parallel, and in some cases are more stringent than, federal requirements. Pursuant to the Clean Air Act, the EPA has promulgated National Ambient Air Quality Standards (“NAAQS”) for six “criteria” pollutants (carbon monoxide, lead, nitrogen dioxide, ozone, sulfur dioxide and particulate matter). Every five years EPA must review and possibly revise these NAAQS. In March 2024, the EPA announced a final rule, effective May 2024, lowering the primary (health-based) annual standard for particulate matter with diameters less than 2.5 micrometers (“PM2.5”) (the fine inhalable particles) from 12.0 to 9.0 micrograms per cubic meter (“µg/m3”). This revised standard, as well as any future NAAQS revisions for other criteria pollutants, could lead to additional pollution control requirements for stationary sources of air emissions, including Toyota’s U.S. manufacturing facilities. The rule has faced legal challenges from several states, including Louisiana and Texas, as well as industry groups. Arguing that EPA’s action was procedurally improper and failed to adequately consider economic impacts, they filed petitions for judicial review in the D.C. Circuit Court of Appeals. In March 2025, EPA Administrator Lee Zeldin announced a formal reconsideration of the PM2.5 NAAQS, citing concerns about the previous administration’s standards and their potential impact on permitting processes. The legal challenges remain pending. European Union Standards In the EU, the Ambient Air Quality and Clearer Air for Europe Directive (Directive 2008/50/EC) sets the environmental standards for air quality. A revised Ambient Air Quality and Clearer Air for Europe Directive (Directive (EU) 2024/2881) entered into force on December 10, 2024, aligning 2030 EU air quality standards more closely with the World Health Organization recommendations. In particular, the new Directive cuts the allowed annual limit value for the main air pollutant, fine particulate matter (PM2.5), by more than half. It also 43 Table of Contents updates the air quality standards by lowering the permissible levels for twelve air pollutants. In relation to these Directives, environmental regulations, such as the National Emissions Ceilings Directive, or NEC Directive (2016/2284/EU), the Industrial Emissions Directive, or IED Directive (2010/75/EU) (as amended by Directive (EU) 2024/1785), and the Motor Vehicle Regulation (Regulation (EU) 2018/858), which is intended to control on-road emission sources, have been established, and emissions are managed under these directives based on their source. A review of the EU Directive on End-of-Life Vehicles (Directive 2000/53/EC) was launched in 2021, resulting in a proposal for a new regulation in July 2023. The new proposed regulation would improve the quality of end-of-life treatment, incentivize reuse of recycled materials to enable more resource-efficient use of materials, recover more and better-quality raw materials (e.g., CRMs, plastics, steel and aluminum), and strengthen responsibility and cooperation between producers. Toyota strives to ensure that its operations comply with environmental regulatory requirements concerning its facilities and products in each of the markets in which it operates. Toyota continuously monitors these requirements and takes necessary operational measures in an effort to remain in material compliance with all of these requirements. However, in light of the net zero transition, compliance with environmental regulations and standards has increased costs and is expected to lead to higher costs in the future. Therefore, Toyota recognizes that effective environmental cost management will become increasingly important. Moreover, innovation and leadership in the area of environmental protection are becoming increasingly important to remain competitive in the market. As a result, Toyota has proceeded with the development and production of environmentally friendly technologies, such as HEVs, PHEVs, FCEVs, BEVs and high fuel efficiency, low emission engines. Beyond the product and facility-level environmental regulations described above, the European operations of automotive manufacturers are also potentially subject to a growing body of EU corporate sustainability and supply chain legislation. For instance, the Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464) requires large undertakings operating in the EU to report detailed sustainability information in accordance with European Sustainability Reporting Standards. In addition, the Corporate Sustainability Due Diligence Directive (Directive (EU) 2024/1760) requires in-scope companies to conduct environmental and human rights due diligence. These Directives may apply to the EU subsidiaries of automotive manufacturers that meet the applicable size thresholds, and may also apply at group level under the Directives’ relevant third-country parent provisions, depending on the consolidated EU net turnover of such manufacturers. Finally, the EU Deforestation Regulation (Regulation (EU) 2023/1115), which prohibits the placing on the EU market of specified commodities, including natural rubber, unless they are verified as deforestation-free and legally produced, has applied to large operators from December 30, 2025. This may be relevant to Toyota’s tire and rubber supply chain. In addressing environmental issues, based on an assessment of the environmental impact of its products through their entire life cycles, from production through sales, disposal and recycling, Toyota, as a manufacturer, strives to take all possible measures from development stage and continues to work towards technological innovations to make efficient use of resources and to reduce the burden on the environment. Toyota’s Approach to and Initiatives Towards Sustainability The following is a discussion of Toyota’s approach to and initiatives towards sustainability. It contains forward-looking statements that are based upon the current judgment, assumptions and beliefs of Toyota’s management. See “Cautionary Statement With Respect To Forward-Looking Statements.” Actual business, financial and operational results may vary significantly from those described below as a result of unanticipated changes in various factors, including those described in “Risk Factors.” 44 Table of Contents Approach Towards Sustainability We believe that Toyota should conduct business for the public good and serve people’s happiness and social development. This strong conviction is inherited from the belief, “always be faithful to your duties, thereby contributing to the company and to the overall good,” which is part of the Toyoda Principles, the roots of the Toyota Group. In 2020, we revisited our roots and developed the Toyota Philosophy, which established “Producing Happiness for All” as our corporate mission. This mission expresses our commitment to sustainable development for society and business to bring more happiness to our customers and other stakeholders around the world. This is our commitment to sustainable business. Through business based on the Toyoda Principles and Toyota Philosophy, Toyota established a product/business-driven operational base, with a company-wide emphasis on three values that make us Toyota: “making ever-better cars,” “best-in-town carmaker,” and “for someone other than oneself.” We are now building on this legacy. Our next step is to evolve our growth strategy and business vision with a greater commitment to sustainability and to formulate concrete action plans to fulfill the mission of “Producing Happiness for All.” To fulfill this mission, Toyota aims to transform into a mobility company that provides freedom of mobility for all without leaving anyone behind. To put our mission into action, we assessed the materiality of our impacts as well as risks and opportunities, which incorporated a comprehensive range of stakeholder perspectives — customers, community/business partners, and employees. The materiality assessment resulted in the identification of six key themes with the greatest priority: “expanding the value of mobility,” “safety & reliability,” “co-existence of humanity and the earth,” “supporting the community and employment,” “Active Contribution by All” and “strong production and business operation.” At the heart of our key themes is our aspiration for making cars, which is expressed through our motto, “Let’s change the future of cars.” We will continue to evolve our business from auto manufacturing to mobility, so that cars will be useful to society and bring smiles to customers for years to come. In pursuit of this goal, we must maximize cars’ positive impacts, focusing on enhancing user-friendliness, comfort, and emotional value and making them fun to drive. Simultaneously, we are dedicated to minimizing negative impacts such as traffic accidents, congestion, and environmental burdens. For Toyota, transformation into a mobility company means creating a new industrial structure that benefits the development of a mobility society through the evolution of the automobile. We will lead the transformative journey to shape the future with a sense of mission, working together with business partners who share the purpose. We are now in an era in which it is hard to predict the future. That is why we believe that persistent and purposeful action makes a difference. In the spirit of hyaku-setsu futo (indefatigability), one of the cherished phrases of our founder Sakichi Toyoda, we will live up to our convictions and challenge ourselves to change the future of cars. Toyota’s Origins and Materiality (Key Issues) 45 Table of Contents Governance In order to grasp changes in the external environment and societal demands, and to prioritize issues of greater importance and urgency, we continuously strive to promote and improve environmental, social, and governance sustainability activities while working closely with the relevant groups under the promotion system illustrated below and under the supervision and decision-making of the Board of Directors. To deliberate on key, multidisciplinary sustainability issues related to management, we have established the Sustainability Meeting chaired by the CEO, which mainly deals with themes associated with Environment and Social, and the Governance Risk Compliance Meeting chaired by the Chief Risk Officer (“CRO”), which deals with themes associated with Governance. In addition, we have established a framework in which meetings attended by the heads of the relevant divisions and the Carbon Neutral (CN) Strategy Subcommittee deliberate on individual issues and themes that are closer to actual practice. <Sustainability Governance Structure> 46 Table of Contents Sustainability Meeting Governance Risk Compliance Meeting CN Strategy Subcommittee Chairperson President CRO/CCO* President, Carbon-Neutral Engineering Development Center Members Vice Chairman of the Board of Directors (1); Executive vice presidents (2); outside member of the Board of Directors (1); outside Audit and Supervisory Committee members (2); CRO/CCO (1), others (3) Executive vice presidents (2); outside member of the Board of Directors (1); outside Audit and Supervisory Committee members (3); Audit and Supervisory Committee member (1); others (4) Executive vice presidents (2); operating officers (4), others (10) Number of times held in fiscal year 2026 4 4 3 Timing of reports to the Board of Directors When an important matter arises When an important matter arises When an important matter arises Duties Contribution to increases in corporate value by deliberating, making decisions, and promoting activities for important sustainability-related issues Making proposals and deliberation on important matters relating to governance, risk, and compliance, in particular matters requiring strategic direction at the management level Cultivation of shared understanding regarding important global trends pertaining to carbon neutrality and environmental issues Reporting and deliberation on targets, key performance indicators, and other important management provisions related to above duties * CRO: Chief Risk Officer CCO: Chief Compliance Officer Risk Management Toyota will further strengthen risk management in response to uncertainties amid our constantly needing to rise to new challenges in the era of major changes in the circumstances surrounding, and in the values of, the automobile industry, such as carbon neutrality, expanding value of mobility (electrification, intelligent technologies, diversification), and other factors. In order for each region, function, and in-house company to cooperate and support each other and prevent, mitigate, reduce, and appropriately control risks arising in business activities from a global perspective, Toyota has appointed a CRO and Deputy CRO in charge of risk management, as well as the head of risk management in each region. Toyota has also established the Governance Risk Compliance Meeting under the CRO’s supervision to identify, take action against, and monitor material risks from a company-wide perspective. In addition, as a risk management system framework, we regularly identify, evaluate, consolidate, implement measures against, and monitor risks based on the Toyota Global Risk Management Standard (“TGRS”), a company-wide risk management framework established by referencing frameworks such as the ISO (International Organization for Standardization) and COSO (Committee for Sponsoring Organizations of the Treadway Commission). The identified risks that are deemed significant to Toyota are deliberated by the Governance Risk Compliance Meeting, chaired by the CRO, and are referred to the Board of Directors and other relevant governing bodies, as appropriate, to promote the execution of business operations. 47 Table of Contents Approach to and Initiatives Towards Human Resources Based on the philosophy that “monozukuri (manufacturing) depends on human resource development,” Toyota believes that its greatest asset is its people, and Toyota has been focusing on human resource development since its foundation. The common foundation of our human resource development consists of three pillars: Toyota’s “philosophy” (Toyota Philosophy), “skills” (Toyota Production System, or TPS), and “behavior” (Toyota Way 2020). We cultivate talent whom, under our “philosophy” of “working for the sake of others,” acquire the “skills” of TPS—which seeks to thoroughly eliminate waste and shorten lead times—and put our “philosophy” into practice through their own actions, that is, their “behavior.” We believe that the ability of such individuals to think and act autonomously in their fields strengthens our capacity to respond to changes in the operating environment. 1. Governance Toyota places importance on dialogue with employees in order to accurately identify issues related to human capital. In particular, the president, executive vice presidents, and other members who also serve on the Sustainability Meeting participate in the Labor-Management Council and the Joint Labor-Management Round Table Conference, which serve as opportunities to understand the voices of employees and to identify the direction for addressing human capital-related issues. Among the issues identified, those that are deemed particularly material or that require cross-functional responses are referred to the Sustainability Meeting described in “Item 4. Information on the Company — 4.B Business Overview — Toyota’s Approach to and Initiatives Towards Sustainability — Governance” where such matters are deliberated and determined to promote “priority sustainability initiatives” relating to human capital. Reference: Number of times held in fiscal 2026 Sustainability Meeting: 4 Labor-Management Council: 4 Joint Labor-Management Round Table Conference: 2 48 Table of Contents 2. Strategy In advancing our transformation into a mobility company, we have identified six materiality topics (key issues) based on the perspectives of our stakeholders, including customers, local communities, business partners, and employees. Among these, under “Active Contribution by All” and “Supporting the Community & Employment,” we have identified six priority action items related to human capital. Materiality Aim Active Contribution by All Human Resource Development Acquire and develop human resources who “continuously think and act for the benefit of others” based on the Toyota Philosophy Dialogue with employees Translate dialogue between the company and employees of mutual trust/responsibility into action DE&I Create corporate culture where all people working for Toyota feel respected, and can demonstrate their uniqueness, strength, and abilities, while embracing their diverse talents and values Labor Practices Contribute to the peace of mind of employees and the sustainable growth of local communities through stable employment and maintaining/improving labor conditions Health and Safety Eliminate all kinds of unsafety by fostering company-wide safety culture, while protecting the good health and well-being of employees and their families Supporting the Community & Employment Respect for Human Rights Respect the human rights of all people involved in our business activities We believe that advancing initiatives in these priority action items is essential to developing the talent that will drive our future. 3. Risk Management We identify risks related to human capital through ongoing monitoring of workplace conditions via multiple communication channels—including dialogue with employees, engagement surveys, and consultation services—as well as through information gathering and benchmarking that take into account revisions to applicable laws and regulations and changes in the external environment. Among the risks identified through these efforts, those deemed material from a company-wide perspective are escalated to management for decision-making and the consideration of responsive measures, in accordance with the process described in “Toyota’s Approach to and Initiatives Towards Sustainability—Risk Management.” 4. Metrics and Targets In connection with the priority initiative of “Promoting Active Participation of Diverse Talent,” the table below sets forth representative metrics for TMC on an unconsolidated basis, together with the corresponding targets and results for fiscal 2026. 49 Table of Contents Metrics Target Result (Fiscal 2026) Number of women in managerial positions (unconsolidated) By 2030, increase to five times the target set in 2014 455 (4.5 times the target set in 2014) (Note 1) Ratio of eligible male employees taking childcare leave (unconsolidated) Achieve an average ratio of employees taking childcare leave of 85% or above during the period from April 1, 2025 through March 31, 2030 79.0% (Note 2) Note 1 As of March 31, 2026 Note 2 The ratio of eligible employees taking childcare leave is calculated based on the ratio of employees taking childcare leave under Article 71-6, Item 1 of the Ordinance for Enforcement of the Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members (Ministry of Labour Ordinance No. 25 of 1991), in accordance with the provisions of the Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members (Act No. 76 of 1991). Climate Change-related Disclosures Toyota aims to establish a sustainable society in harmony with nature through contributions to the goal of carbon neutrality. Toyota addresses climate change-related impacts, risks, and opportunities guided by the principles of the “Toyota Earth Charter” and “Toyota Environmental Challenge 2050,” intending to fully concentrate on achieving carbon neutrality by 2050 across the entire vehicle life cycle. Toyota intends to reduce GHG emissions through multiple approaches, including the multi-pathway strategy, driven by the principles of “leaving no one behind” and “delivering freedom of movement to all.” 1. Governance The Oversight of Climate change-related Issues by the Board of Directors Toyota positions the Board of Directors as its ultimate supervisory, decision-making authority for climate change-related issues, including risks and opportunities. In order to effectively plan and execute strategies in response to social trends, we bring important climate change-related issues before the Board of Directors as they arise. Responses to climate change-related issues (including risk and opportunity assessments and management implemented more than once a year) are addressed primarily by the CN Strategy Subcommittee, with oversight by the Board of Directors. The Board of Directors makes decisions based on the deliberations of each committee, including trade-offs between sustainability and climate change-related issues. The CN Strategy Subcommittee approves the formulation, review and monitoring of progress of climate change-related targets under the oversight of the Board of Directors, following deliberation by the Environmental Product Design Assessment Committee and the Consolidated Environment Committee. For details of the overall process, see “Item 4. Information on the Company — 4.B Business Overview — Toyota’s Approach to and Initiatives Towards Sustainability — Governance”. Examples of decisions made by the Board of Directors in 2025 include the approval to execute a comprehensive partnership agreement with the municipal government of Shanghai and the establishment of Lexus (Shanghai) New Energy Co., Ltd., which develops and manufactures BEVs and batteries, aimed at contributing to the realization of carbon neutrality in China. The new company will develop Lexus-branded BEVs, with mass production to launch in 2027 or later. 50 Table of Contents 2. Strategy (a) Toyota’s Strategies (Fundamental approach of Toyota’s multi-pathway strategy) Carbon neutrality is an urgent issue for cars to remain an essential part of society. Toyota is making efforts to provide our customers around the world with options for mobility under our multi-pathway strategy, while promoting the decarbonization of manufacturing and supply chains. It is important to consider the ways in which mobility takes into account the future of energy. The strategy’s basic premise is that we need to reduce dependence on fossil fuels from the perspective of the global environment and sustainability. Furthermore, over the medium- to long-term, renewable energy sources will continue to proliferate, with electricity and hydrogen emerging as the primary energy sources sustaining society. In the short term, however, it is critical to acknowledge global realities and implement changes in practical ways that maintain energy security. This is precisely why we are committed to providing mobility options that are aligned with a diverse range of energy situations and customer needs, while also keeping an eye on the future of electricity and hydrogen. The underlying concept of our multi-pathway strategy is to achieve carbon neutrality through practical transition. (b) Identification and Assessment of Climate Change-Related Impacts, Risks, and Opportunities Overview of Impacts, Risks, and Opportunities Toyota identifies factors that may impact the future based on the identified Impacts, Risks, and Opportunities (“IROs”). Toyota responds appropriately under Toyota’s strategies and transition plans. The overview of climate change-related IROs are as follows. • Impacts: Effects that a company has on the environment and society as a result of its activities or business transactions. • Risks • Transition risk: Negative impact on the company arising from the transition to a low-carbon society, such as the introduction or strengthening of climate change-related policies and the advancement of low-carbon technologies. • Physical risk: Negative impact on the company arising from physical climate events caused by climate change. • Opportunities: Positive impact for the company arising from responses to market changes and technological innovation, driven by the transition to a low-carbon society and the progression of climate change. We established a process to identify and assess climate change-related risks and opportunities using scenario analysis. We also incorporated financial impact assessments into the process to enhance the accuracy of IRO materiality. Time horizon for IRO assessment 51 Table of Contents Process of Identifying and Assessing Climate Change-Related Impacts We analyze activities across Toyota and our value chain to identify potential environmental and social impacts. We conduct assessments on identified impacts based on severity (scale and scope of impact) and likelihood of occurrence. Scope 3 emissions account for a significant portion of Toyota’s total emissions, with category 11 representing a substantial share thereof. As they contribute significantly to climate change, reduction efforts across the entire value chain are essential. However, Scopes 1 and 2 emissions, while accounting for a small percentage, fall within the company’s direct control. This makes them important for Toyota, which has set a target under the Life Cycle Zero CO2 Emissions Challenge. For details of the Life Cycle Zero CO2 Emissions Challenge, see “Item 4. Information on the Company — 4B. Business Overview — Toyota’s Approach to and Initiatives Towards Sustainability — Climate Change-related Disclosures — 2. Strategy — (c) Resilience Analysis.” Processes for Identifying and Assessing Climate Change-related Risks and Opportunities Toyota identifies and assesses climate change-related risks and opportunities and evaluates the resilience of its strategies by having an internal team of climate change experts and external specialists conduct scenario analysis based on various future society projections. Identification and Assessment of Risks and Opportunities Toyota identifies primary factors (risk drivers) for climate change-related risks and opportunities based on anticipated future social conditions from the perspectives of transition risks (policy/legislation, markets, technology, reputation) and physical risks (acute, chronic). Toyota identifies risks and opportunities by analyzing driving factors and incorporates disclosure topics defined in ISSB* industry-based guidance, as well as climate change-related risks identified through TGRS, Toyota’s cross-functional risk management system, and climate change-related risks and opportunities specified by referencing external information into risks and opportunities identified through driver analysis. Toyota examines how the likelihood and impact of risks and opportunities differ in each scenario based on the identified risk drivers. The overall materiality of each risk and opportunity is 52 Table of Contents determined based on a quantitative assessment of likelihood and impact as well as a qualitative assessment that takes into account factors such as corporate social responsibility and Toyota’s key issues. * International Sustainability Standards Board Scenario Analysis Overview Scenario analysis is conducted in accordance with the processes outlined in guidance provided by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (“TCFD”) and the Ministry of the Environment, Japan. Toyota conducts 1.5°C scenario analysis to assess transition risks and opportunities as well as a 4°C scenario analysis to assess physical risks based on climate hazards. • Scope Transition risks and opportunities: Automotive business and value chains in Toyota Motor Corporation and its consolidated subsidiaries Physical risks: Toyota Motor Corporation, consolidated subsidiaries, and unconsolidated vehicle manufacturing subsidiaries • Impact assessment period Transition risks and opportunities: Up to 2035 Physical risks: Up to the late 21st century 1.5°C Scenario Analysis Selection of 1.5°C Scenarios Toyota uses multiple published scenarios as reference for analysis, such as the scenarios from IEA*1 and IPCC*2 AR6*3 WG3 report. Toyota envisions society’s future energy landscape as converging on electricity and hydrogen with the widespread introduction of renewable energy, and recognizes that the transition speed varies by region depending on energy conditions. Against the backdrop of recent global developments, discussions have begun on balancing environmental issues with economic security. There are also observable phenomena such as a slowdown in renewable energy investments due to international inflation and a stagnation in the growth trend of BEV sales in Europe and the U.S. At international forums such as the Conference of the Parties (“COP”) to the United Nations Framework Convention on Climate Change, discussions are progressing on transitional measures extending into the future. There is a growing recognition of the importance of introducing diverse decarbonization methods tailored to conditions in each country and region. In recognition of these backgrounds, our multi-pathway strategy offers mobility options tailored to energy situations in each country/region and the diverse needs of customers through a practical transition in the short term with a view toward a future in which electricity and hydrogen serve as primary energy sources underpinning society in the long term. The 1.5°C scenario analysis for passenger vehicles considers both the IEA NZE scenario,*4 which highlights the introduction of BEVs and PHEVs as key decarbonization measures, and other 1.5°C scenarios that incorporate regional characteristics and an increased range of mitigation measures (such as CO2 removal (CDR*5), carbon capture and storage (CCS), and carbon-neutral fuels) to assess corporate strategic resilience. The assumptions and global circumstances of each scenario are organized as follows: According to the IEA NZE Scenario (IEA World Energy Outlook 2025), reducing GHG emissions from the power generation sector may decrease emissions from other sectors. GHG emissions may be reduced by the 53 Table of Contents widespread adoption of BEVs in the road transport field of the transportation sector, where electrification is relatively easier. In reality, the speed of progress and timeframe of these initiatives may be delayed depending on energy conditions and policy developments in each country and region. In such cases, CDR technologies will become essential. In other 1.5°C scenarios, concerns over energy and economic security and a decline in industrial competitiveness will cause delays in the progress of mitigation measures driven by energy conditions and policy developments in each country and region to spread globally. Furthermore, the introduction of decarbonization technologies to the market requires substantial investment in the initial stages, and differences in investment levels may lead to disparities in progress. While decarbonization technologies beyond electrification may be utilized with low-emission power, the expansion of biofuel usage in road transport could be limited by the food-versus-fuel dilemma and variations in supply volume caused by land-use restrictions to protect the environment. A slower pace of reduction for GHG emissions will inevitably lead to an overshoot in temperature rise, making it necessary to assume the later large-scale and extensive deployment of CDR technologies compared to the NZE scenario. *1 International Energy Agency *2 Intergovernmental Panel on Climate Change *3 Sixth Assessment Report *4 Net Zero Emissions by 2050 Scenario *5 Carbon Dioxide Removal Study on the IEA NZE Scenario The IEA reports that the following is required to accomplish the NZE scenario. The shift of passenger vehicles to BEVs will progress as electricity is decarbonized with the active introduction of renewable energy, leading to a sharp reduction in GHG emissions after 2030 and the achievement of net zero emissions, including emissions from owned vehicles by 2050. To achieve this goal, it is assumed that governments around the world will introduce ambitious climate policies such as carbon pricing, tighter fuel efficiency standards, and bans on the sale of vehicles with internal combustion engines, along with expanded incentives to support the growth of BEVs. BEVs will become more widely accepted in the market as consumer awareness of the environment grows and stronger policies are put in place, along with technological advancements in vehicle electrification, development of innovative batteries, and energy management systems powered by renewable power. The societal shift towards electrification and renewable energy will suppress energy consumption with improvements in efficiency. For fossil fuels in hard-to-electrify sectors and delays in transitioning to electrification and renewable energy, carbon removal from the atmosphere via CDR technology is necessary. In the IEA World Energy Outlook prior to 2023, the use of CDR technology was not assumed in the NZE scenario. However, the 2024 edition reports that it will be necessary, and the 2025 edition indicates even greater use is required. The transition risks and societal challenges associated with the achievement of this scenario are as set forth below. Transition risks associated with this scenario: • Fines or other penalties imposed for non-compliance with fuel efficiency, GHG, or ZEV regulations. • Ramp-down of production and decrease in units sold caused by sudden product changes to comply with regulations. • Increase in R&D costs in response to developments in powertrain technology. • Supply shortages and rising procurement costs due to increased demand for feedstocks related to BEVs. • Increase in manufacturing costs due to the surge in renewable electricity prices. 54 Table of Contents The following challenges must be addressed to accomplish this scenario: • Formulation of government policies and active investment to promote the introduction of renewable energy. • Creation of social systems to secure the supply of battery feedstocks and development of recycling technologies. • Innovating and reducing the costs of decarbonization technologies that use electricity and hydrogen. • Development of charging infrastructure accompanying the widespread adoption of electric vehicles. • An increase of cost burdens associated with the introduction of decarbonization and CDR technologies Studies on Other 1.5°C Scenarios In addition to the IEA NZE scenario, multiple 1.5ºC scenarios published by the IPCC and various research institutions are compared and examined in detail to analyze differences in energy conditions and policy developments across countries and regions. The pathway toward achieving the 1.5°C target set out in the Paris Agreement is as follows. • Energy sector: Introduction of various technologies, such as CCS, in addition to the use of renewable energy and the adoption of low-carbon and carbon-neutral fuels, such as biofuels and synthetic fuels. • Transportation sector: In addition to vehicle electrification, efforts also include the use of fuel-efficient vehicles and the adoption of low-carbon and carbon-neutral fuels such as biofuels and synthetic fuels. • Differences between countries and regions: Renewable energy sources, such as biomass, are utilized to their fullest extent depending on conditions in each country and region. During the transition period, the aim is to balance economic development and carbon-neutral by also using fossil fuel combined with CCUS* technologies. With the advancement of diverse energy infrastructure such as low-carbon fuels and carbon-neutral fuels, various energy sources and powertrains are selected based on their respective convenience. * Carbon Capture, Utilization and Storage Transition Risks Associated with the Aforementioned Scenarios: • Transition risks associated with the enhancement of BEVs are similar to those stated in the IEA NZE scenario; however, their impact on Toyota’s strategy and finances will be relatively small, considering the current track record of BEV adoption in each country and region and reviews of their policies. • Delays in the adoption of low-carbon fuels and carbon-neutral fuels such as biofuels and synthetic fuels. • Increase in R&D costs associated with the diversification of automotive fuels. • Increase in energy procurement costs due to the decarbonization of energy sources such as gas and liquid fuels, in addition to electricity. Social Challenges Toward Achieving Scenarios are More Diverse Compared to the IEA NZE Scenario: • Developing technologies for low-carbon and carbon-neutral fuels, such as hydrogen, biofuels, and synthetic fuels, adapted to each country and region, and support in the early stage of introduction 55 Table of Contents • Solving issues such as the food versus fuel dilemma related to biofuels and curbing the rise in fuel prices • Ensuring the supply of low-carbon fuels and carbon-neutral fuels through collaboration with other sectors • Development of infrastructure and aid policies to ensure a stable supply of energy Risks and Opportunity Trade-Offs in the 1.5°C Scenario While electrification presents opportunities in relation to sales, it also brings risks such as increased R&D expenses and higher raw material procurement costs. 4°C Scenario Analysis Selection of 4°C Scenarios We selected IPCC AR6 WG1 SSP5-8.5 as the reference scenario for the 4°C scenario analysis. The IPCC SSP5-8.5 is the highest emission scenario that represents a fossil fuel-dependent economic development path without the implementation of climate policies, resulting in the occurrence of extremely frequent and severe physical climate events. We assessed the resilience of our business activities by conducting analyses under this scenario. Studies on the 4°C Scenario We consider that major physical risks under this scenario include the following: • Suspended production and sales resulting from supply chain disruptions caused by more frequent and severe natural disasters. • Impacts on production caused by water shortage and higher water costs. We conducted the below screenings of high-risk sites: • Screened high-risk sites for flooding hazards, such as river flooding, inland flooding, and storm surges, using geographical coordinates for 137 business locations in Japan and 73 locations overseas. • Identified sites in and outside of Japan where future hazard grades have been changed as a result of climate change and are evaluated as hazard grade B or higher, requiring attention to risks. As a result of our risk analysis, we confirmed that some business sites are at risk for river flooding, inland flooding, and storm surges, but the impact is slight. Definition of Hazard Grade 56 Table of Contents Results of Physical Risk Screening Efforts to Minimize Risk To minimize physical risks, Toyota is undertaking various initiatives, including selection of locations for new plants, taking water risk into account, taking measures based on the results of water risk assessments, continuous revisions of BCP*1 based on experience from past disasters as well as the initiatives related to BCM*2, including the supply chain. *1 Business Continuity Plan. A plan for companies to minimize damage and ensure business continuity and recovery when emergencies such as disasters occur *2 Business Continuity Management. A framework for operational management that ensures each countermeasure plan defined in the BCP functions can be executed Financial Impact Assessments Toyota analyzes causal links between identified risks and opportunities and their financial impacts. Toyota assesses relationships with management themes, such as mobility concepts related to identified risks and opportunities and priority sustainability initiatives, to confirm the materiality of these risks and opportunities. In addition, Toyota assesses the financial impacts of identified high-priority risks and opportunities in light of the assumptions of each scenario. 57 Table of Contents 58 Table of Contents (c) Resilience Analysis Strategies and Business Models for Addressing Material IROs We recognized that the material IROs specified through the aforementioned process assessment have a significant impact on Toyota. Under the multi-pathway strategy, we incorporate measures to address these IROs into the transition plan and others, and secure resources to address these responses. Transition Plan We announced the “Toyota Environmental Challenge 2050” in October 2015, prior to the Paris Agreement. We established the “Life Cycle Zero CO2 Emissions Challenge,” “New Vehicle Zero CO2 Emissions Challenge,” and “Plant Zero CO2 Emissions Challenge” to clarify our long-term climate change objectives. The “8th Toyota Environmental Action Plan” sets specific reduction targets for each emission scope in the medium term. We have set our reduction targets for Scope 1, Scope 2, and Scope 3 category 11 with reference to and in line with criteria established by SBTi*1; however, such targets are not set forth in this annual report based upon the authority of or in reliance upon SBTi as experts with respect to such targets. We support the Paris Agreement and under these GHG reduction targets, we intend to fully concentrate on achieving the 2050 Carbon Neutrality by advancing a multi-pathway strategy. We formulated a transition plan that organizes reduction initiatives and other measures aimed at achieving targets. This plan is recognized as crucial for Toyota to address climate change-related risks and opportunities, and is integrated into management plans such as sales plans and the midterm business plan. The transition plan is developed around key emission scopes and includes initiatives Toyota considers important for contributing to carbon neutrality. We set primary reduction initiatives as reduction levers for each emissions scope. Under these levers, we implement specific emission reduction measures and manage the progress of our efforts. The transition plan considers the assumptions of the 1.5°C scenario referenced in the scenario analysis. *1 Science Based Targets initiative. An initiative established by the CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) 59 Table of Contents Resilience Analysis The strategic resilience of the multi-pathway strategy is verified through scenario analysis. 1.5°C Scenario Analysis Results The scenario analysis has revealed a variety of pathways to achieve the 1.5°C target aligned with the Paris Agreement, each accompanied by specific conditions and social challenges. With our global reach, we have reaffirmed the validity of focusing on our multi-pathway strategy, which includes various measures and technologies capable of addressing uncertainties to respond to global market and stakeholder demands, rather than specializing in or adhering to a single policy or technology. 4°C Scenario Analysis Results Through the scenario analysis, some domestic and overseas sites are facing risks for river flooding, inland flooding, and storm surges, but the impact is estimated to be slight. Disaster drills and other means for improvements through PDCA cycles have proven to enhance the effectiveness of BCP and accelerate the speed of recovery after a disaster. We have positioned these activities as BCM and are promoting it as a collaborative framework between employees and their families, the Toyota Group and suppliers, and Toyota Motor Corporation. Results from Resilience Analysis Guided by the philosophy of being the “best-in-town,” we will continue to provide a lineup of vehicles that are well-received by customers and adaptable to different economic and energy situations in order to contribute to the development of each country and region. We will strive to reduce GHG emissions by utilizing existing infrastructure and assets. Toyota’s multi-pathway strategy has proven to be highly resilient in all of the scenarios presented. As indicated in the IPCC assessment reports and other publications, there are multiple paths available to achieve the 1.5°C target as set out in the Paris Agreement. These paths can vary depending on local energy conditions and government policy, requiring the involvement of various industries and making collaboration with partners, including encouraging the use of carbon-neutral fuels, crucial. We stand with the Paris Agreement and take action to achieve its goals. We prioritize alignment with the Paris Agreement and work with our partners to promote the development of vehicles and social infrastructure based on our mobility concept, intending to fully concentrate on achieving carbon neutrality by 2050. As the landscape changes, we will continue to conduct scenario analyses to reassess risks and opportunities, and reflect the responses to them into our strategies to further strengthen our resilience. 3. Risk Management Links Between Company-Wide Risk Management and Climate Change-Related Risk Management Processes Recognizing that the risks and opportunities present in climate change are key management concerns, we conduct scenario analyses based on the TCFD recommendations to identify risks and opportunities and assess the resilience of our business activities. Utilizing tools such as the TGRS, a company-wide risk management system designed by Toyota based on ISO standards and the COSO framework, we identify a broad range of risks related to our global business activities. When necessary, we establish cross-company task forces to promote risk management while monitoring the progress of countermeasures. Risks are assessed based on the magnitude of impact and vulnerabilities. By setting a specific time horizon, we can clarify actual and strategic impacts on our businesses. The magnitude of impact is rated on a five-grade scale for each of the following factors: finance, reputation, violation of laws and regulations, and business continuity. Vulnerability is assessed based on the current status of 60 Table of Contents countermeasures and probability of occurrence. Risk owners are assigned for the key risks assessed by region, function (such as production and sales) and product based on the above perspectives. Chief Officers of divisions and in-house company presidents oversee initiatives, while at the working level, relevant measures are implemented and monitored under the instructions of divisional General Managers. In addition to the aforementioned TGRS, climate change-related risks and opportunities are reviewed by relevant executives and divisions in charge, and the status of the response is monitored and reviewed. Toyota actively works to identify a wide range of risks and opportunities stemming from environmental issues, regularly reviews the validity of strategies such as the “Toyota Environmental Challenge 2050” and promotes activities to boost competitiveness. Current and future GHG emissions from vehicles, production and sales operations, and supply chains are calculated and assessed in line with relevant science-based emission reduction pathways. Important risks and opportunities that require prompt responses are deliberated at the Governance Risk Compliance Meeting and reported to the Board of Directors to determine the course of action. 4. Metrics and Targets Medium- and Long-Term Target Structure Toyota has systematically formulated its vision and targets for the environmental issues in order to realize its mission of coexistence of humanity and the earth as well as the mass production of happiness. We share and collaboratively promote “Toyota Environmental Challenge 2050” as our long-term vision, and the “8th Toyota Environmental Action Plan” as our medium-term target, with Carbon Neutrality (CN), Circular Economy (CE), and Nature Positive (NP) prioritized as our major pillars. For details on the transition plan, including medium- and long-term targets, please refer to “Item 4. Information on the Company — 4B. Business Overview — Toyota’s Approach to and Initiatives Towards Sustainability — Climate Change-related Disclosures — 2. Strategy — (c) Resilience Analysis” Review of the “7th Toyota Environmental Action Plan (2025 Target)” Toyota promoted the “7th Toyota Environmental Action Plan (2025 Target)”, a five-year action plan to achieve the “Toyota Environmental Challenge 2050.” 61 Table of Contents 62 Table of Contents The “8th Toyota Environmental Action Plan (2030 Target)” Toward the realization of “Toyota Environmental Challenge 2050,” we have formulated the “8th Toyota Environmental Action Plan (2030 target),” a new five-year action plan, and begun its implementation in April 2026. Based on the three pillars that Toyota has long prioritized—Carbon Neutrality (CN), Circular Economy (CE), and Nature Positive (NP)—we have developed specific targets for 17 categories. In 10 overseas countries and regions (North America, Europe, China, Asia, India, South America, South Africa, Australia, New Zealand, and South Korea), regional 2030 targets have been formulated in line with this. Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934 None. Research and Development The overriding goals of Toyota’s technology and product development activities are to minimize the negative aspects of vehicles, such as traffic accidents and impact on the environment, and maximize the positive aspects, such as driving pleasure, comfort and convenience. By achieving these sometimes-conflicting goals to a high degree, Toyota seeks to open the door to the automobile society of the future. To ensure efficient progress in research and development activities, Toyota coordinates and integrates all research and development phases, from basic research and advanced research to forward-looking technology and product development. With respect to long-term basic research in areas such as energy, the environment, information technology, telecommunications and materials, projects are regularly reviewed and evaluated in consultation with outside experts to achieve research and development cost control. With respect to forward-looking, leading-edge technology and product development, Toyota establishes cost-performance benchmarks on a project-by-project basis to ensure efficient development investment. 63 Table of Contents The chart below provides an overview of Toyota’s R&D at each phase. Basic research Phase to discover development theme Research on basic vehicle-related technology Forward-looking and leading-edge technology development Phase requiring technological breakthroughs such as components and systems Development of leading-edge components and systems that are more advanced than those of competitors Product development Phase mainly for development of new models Development of all-new models and existing-model upgrades With a focus on environmentally friendly, carbon-neutral and safe-vehicle technology, Toyota is promoting research and development into the early commercialization of next generation environmentally friendly, energy- efficient and safe-vehicle technology. Toyota is also moving forward with the development of innovative technologies such as electrification, connected vehicles and automated driving so as to realize a mobility society of the future that enables everyone to enjoy freedom of movement beyond the conventional concept of vehicles. To this end, Toyota is focusing on the following areas: • further improvements in hybrid technologies, including in functions and cost, and contributions to the environment through advancements; • improvement in internal combustion engine fuel economy technology as well as improvement in technology in connection with more stringent emission standards; • development of BEVs, FCEVs and other alternative fuel vehicles; • development of advanced safety technology designed to promote driving and vehicle safety; • development of automated driving technologies; • connected car technologies; and • development of technology to bring about more comfortable movement. For a detailed discussion of our research and development infrastructure, see “Item 5. Operating and Financial Review and Prospects — 5.C Research and Development, Patents and Licenses.” Components and Parts, Raw Materials and Sources of Supply Toyota purchases parts, components, raw materials, equipment and other supplies from multiple competing suppliers located around the world. Toyota works closely with its suppliers to pursue optimal procurement. Toyota believes that this policy encourages technological innovation, cost reduction and other measures to strengthen its vehicle competitiveness. Although there are supply restrictions with respect to the procurement of certain parts and components, Toyota plans to continue purchases based on the same principle. Because Toyota had more than 50 overseas operations in 27 countries and regions as of March 31, 2026, procurement of parts and components is being carried out not only locally in the country of the production site but also from third countries. As a result, the distribution network has become increasingly complex. In order to realize timely and efficient distribution while minimizing costs, Toyota is promoting efforts to optimize each stage of the supply chain. To this end, Toyota has developed a standardized system of global distribution and is supporting the operation of the system at each production base. The use of the global distribution system aims at implementing parts procurement that meets changes in vehicle production in a timely manner. These varying efforts, combined together, have led to maximized customer satisfaction, as well as to building a good working relationship with Toyota’s suppliers. Toyota aims to share information and collaborate among the procurement divisions in each of the regions throughout the world in order to procure parts and materials from the most competitive suppliers among Toyota 64 Table of Contents factories located in various areas worldwide. At the same time, Toyota carries out streamlining efforts together with suppliers in each country in order to achieve sustainable growth. Toyota has been working on cost reduction measures, referred to as RR-CI (ryohin-renka, or cost innovation) and VA (value analysis) activities, which aims to eliminate waste in all processes from design to production while ensuring the reliability and safety of each part. Through these activities, Toyota focuses on “developing a real cost-competitive structure” by working together with suppliers. In response to a significant upward trend in materials costs, including related logistics and other costs, since fiscal 2022, Toyota is accelerating initiatives such as the replacement of raw materials with those that are less subject to price pressure and reduction of raw material usage. Intellectual Property Through its ongoing challenge to be one step ahead in conducting new research and development, Toyota has enhanced its product appeal and technological prowess, which have been serving as the source of the company’s competitiveness. At the core of Toyota’s products created through this research and development always lies intellectual property, including invention, know-how and brands. This intellectual property functions as Toyota’s important management resources. By protecting and utilizing our intellectual property in an appropriate manner, we will continue to contribute to society. Toward the realization of a future mobility society, Toyota is carrying out intellectual property activities in line with management priorities. For example, we are focusing resources on such areas as carbon neutrality, including the development of electrified vehicles and batteries, and on software and connected initiatives, including connected and automated driving technologies. We are also reinforcing efforts to obtain and utilize intellectual property licenses in such areas to strengthen our future competitiveness. As for the intellectual property activities framework, having established intellectual property functions at the R&D centers in Japan, the United States, Europe and China, Toyota supports technology development globally by securing organic, systematic coordination between R&D activities and intellectual property activities. Working in concert with approximately 110 law firms around the world, we also collect intellectual property information and take measures suitable for any intellectual property disputes that may arise in specific countries or regions. To enhance activities that incorporate management, R&D and intellectual property in one, Toyota has an Intellectual Property Management Committee. The members of the Committee discuss and make decisions concerning obtaining and utilizing important intellectual property conducive to management and for responding to management risks related to intellectual property. In 2025, Toyota filed approximately 19,000 patent applications domestically and internationally. In Japan, based on the ranking published by IP Force, Toyota was ranked 1st among companies and 1st among automobile manufacturers that year in terms of the number of patent registrations as of December 31, 2025. In the United States, based on the ranking published by IFI CLAIMS, Toyota was ranked 8th among companies and 1st among automobile manufacturers that year in terms of the number of patent registrations as of December 31, 2025. 65 Table of Contents Capital Expenditures and Divestitures Set forth below is a chart of Toyota’s principal capital expenditures between April 1, 2023 and March 31, 2026, the approximate total costs of such activity, as well as the location and method of financing of such activity, presented on a “by subsidiary” basis and as reported in Toyota’s annual Japanese securities report filed with the director of the Kanto Local Finance Bureau. Description of Activity Total Cost (Yen in billions) Location Primary Method of Financing Japan Investment primarily in technology and products by Toyota Motor Corporation 1,915.2 Japan Internal funds, financing from issuance of bonds, etc. Investment primarily in technology and products by Prime Planet Energy & Solutions, Inc. 168.5 Japan Borrowing Investment primarily in technology and products by Toyota Auto Body Co., Ltd. 102.8 Japan Internal funds Investment primarily in technology and products by Toyota Motor Kyushu, Inc. 86.5 Japan Internal funds Outside of Japan Investment primarily to promote localization by Toyota Battery Manufacturing, Inc. 730.6 United States Internal funds Investment primarily to promote localization by Toyota Motor Thailand Co., Ltd. 290.1 Thailand Internal funds Investment primarily to promote localization by Toyota Motor Manufacturing, Kentucky, Inc. 221.4 United States Internal funds Investment primarily to promote localization by Toyota Motor Manufacturing, Indiana, Inc. 184.0 United States Internal funds Investment primarily to promote localization by Toyota Motor Manufacturing Canada, Inc. 170.9 Canada Internal funds Investment primarily to promote localization by Toyota Motor Manufacturing De Guanajuato, S.A. de C.V. 152.6 Mexico Internal funds Investment primarily to promote localization by Toyota do Brazil LTDA. 130.6 Brazil Internal funds Investment primarily to promote localization by Toyota Motor Technical Center (China) Co., Ltd. 113.0 China Internal funds Investment primarily to promote localization by Toyota Motor Manufacturing, Texas, Inc. 102.9 United States Internal funds Investment primarily to promote localization by Toyota Motor Europe NV/SA. 96.4 Belgium Internal funds Investment primarily in leased automobiles by Toyota Motor Credit Corporation 7,032.5 United States Internal funds, financing from issuance of bonds, etc. 66 Table of Contents Set forth below is information with respect to Toyota’s material plans to construct, expand or improve its facilities between April 2026 and March 2027, presented on a “by subsidiary” basis and as reported in Toyota’s annual Japanese securities report filed with the director of the Kanto Local Finance Bureau. Description of Activity Total Cost (Yen in billions) Location Primary Method of Financing Japan Investment primarily in manufacturing facilities by Toyota Motor Corporation 850.0 Japan Internal funds Outside of Japan Investment primarily in manufacturing facilities by Toyota Motor Manufacturing, Kentucky, Inc 260.9 United States Internal funds Investment primarily in manufacturing facilities by Toyota Kirloskar Motor Private Ltd. 128.9 India Internal funds Investment primarily in manufacturing facilities by Toyota Motor Manufacturing, Indiana, Inc. 119.1 United States Internal funds Investment primarily in manufacturing facilities by Toyota Motor Europe NV/SA 107.5 Belgium Internal funds Investment primarily in manufacturing facilities by Toyota Motor Manufacturing Canada Inc. 70.8 Canada Internal funds Toyota does not collect information on the amount of expenditures already paid for each plant under construction because Toyota believes that it is difficult and it would require unreasonable effort or expense to identify and categorize each expenditure item with reasonable accuracy as past and future expenditures. Toyota’s construction projects consist of numerous expenditures, each of which is continually being adjusted and incurred in variable and constantly changing amounts as part of the overall work-in-progress. Seasonality Toyota does not consider its seasonality material in the sense of significantly higher sales during any certain period of the year as compared to other periods of the year. Legal Proceedings Toyota and other automakers are subject to certain class actions relating to Takata airbag issues. The actions against Toyota are being litigated in Brazil and Argentina. Toyota is named as a defendant in an economic loss class action lawsuit in Australia in which damages are claimed on the basis that diesel particulate filters in certain vehicle models are defective. On April 7, 2022, March 27, 2023, and November 6, 2024, Toyota received unfavorable judgments in the court of first instance, the Federal Court of Australia, and the High Court of Australia, respectively. The judgments included a finding that there was a perceived reduction in vehicle value of certain vehicle models. However, the High Court remanded the case to the court of first instance for further proceedings to determine the specific calculation of the reduction in vehicle value. Other claims of economic loss in this class action lawsuit continue to be litigated at the court of first instance. In calculating the provision we should record in the consolidated financial statements as a result of the aforementioned judgments, Toyota has considered various factors including the legal and factual circumstances of the case, the contents of the judgment of the court of first instance and the Federal Court of Australia, and the views of legal counsel. The currently estimated probable economic outflow related to the class action is immaterial to Toyota’s consolidated financial position, results of operations and cash flows. At this stage, however, the final outcome and therefore ultimate financial liability for Toyota on account of this matter cannot be predicted with certainty. 67 Table of Contents In April 2020, Toyota reported possible anti-bribery violations related to a Thai subsidiary to the SEC and the U.S. Department of Justice (“DOJ”) and cooperated with these investigations. In June 2025, the DOJ and SEC informed Toyota that they had closed their investigations into the matter. On March 4, 2022, Hino, a Japanese company that produces and sells commercial trucks and buses, and of which Toyota owns 66.16% of the voting interests as of March 31, 2026, disclosed that it had voluntarily commenced an investigation into potential issues regarding emissions performance and certification in the North American and Japanese markets, and that it has reported such issues to and is cooperating with the relevant authorities. Hino announced that, through such investigation, it identified past misconduct in relation to its applications for certification concerning the emissions and the fuel economy performance of certain of its engines for the Japanese market. In Japan, Hino was subject to an on-site inspection from the MLIT, and received a corrective action order from it. From October 7, 2022 to May 22, 2024, Hino submitted recurrence prevention reports to the MLIT. The MLIT has also revoked certain of the “type approvals” (that is, approvals that exempt new vehicles or vehicles with certain equipment from individual testing by government inspectors prior to sale) and the fuel consumption ratings relating to certain engine models. Hino has also further agreed to compensate certain of its customers in Japan for certain additional motor vehicle taxes that have become payable on account of the misconduct, as well as in connection with vehicles with engines with respect to which there were fuel efficiency problems. The investigation by Hino’s special investigation committee for engines for the Japanese market has been completed; however, some verification, investigations and communications with related parties are still ongoing. In Canada, Hino and certain of its subsidiaries were sued in a putative class action in the Supreme Court of British Columbia, Canada, on October 19, 2023, and a similar lawsuit was filed in the Superior Court of Quebec, Canada. Hino entered into a settlement agreement with the plaintiffs on November 13, 2024, and received final approval of the Supreme Court of British Columbia on May 6, 2025 (local time), as well as final approval of the Superior Court of Quebec on June 2, 2025 (local time). With respect to the United States, a lawsuit naming Hino and certain of its subsidiaries as defendants in a putative class action lawsuit was filed at the U.S. District Court for the Southern District of Florida claiming damages related to Hino’s vehicles sold in the U.S. from 2004 to 2021, was filed at the U.S. District Court for the Southern District of Florida on August 5, 2022 (local time). Hino entered into a settlement agreement with the plaintiff on October 25, 2023 and received final approval of the court on April 1, 2024 (local time). In addition, the DOJ and other U.S. agencies commenced an investigation with respect to potential violations of relevant laws and regulations regarding the certification of certain of Hino’s engines for the U.S. market. On January 16, 2025, Hino reached an agreement with the DOJ to resolve its criminal investigation into engine emissions certification testing and performance issues in the U.S. market, which became effective on March 19, 2025. Hino and its U.S. subsidiaries also reached a consolidated civil resolution with U.S. federal and California government authorities to resolve their civil investigations into the issues, which became effective on May 21, 2025. In these resolutions, Hino agreed to the payment of criminal and civil penalties. In addition, Hino has started the implementation of measures for the engines in the market and a project for reducing environmental burdens. Furthermore, Hino has extended warranties for vehicles in the wake of the settlement in the class action lawsuit filed in the U.S., the civil settlement with the U.S. authorities, and the settlement in the class action lawsuit filed in Canada. In addition, on April 17, 2023, a lawsuit against Hino and its subsidiaries as defendants in a representative action lawsuit has also been filed in Australia as a class action lawsuit. In the lawsuit, the plaintiffs claimed that they had suffered loss and damage resulting from alleged misleading or deceptive conduct in relation to non-compliance of the affected vehicles with emissions standards and fuel efficiency standards. Hino entered into a settlement agreement with the plaintiff on February 14, 2025, and received final approval of the court on July 18, 2025. 68 Table of Contents In New Zealand, Hino and local distributors which have no capital ties with Hino were sued in a class action in the High Court of New Zealand on March 3, 2025 (local time). Hino entered into a settlement agreement with the plaintiffs on February 9, 2026. For the year ended March 31, 2025, Toyota recorded ¥281,140 million in costs and expenses related to the Hino certification issues described above. This amount covers costs associated with the aforementioned resolutions with the U.S. authorities, the settlement of the class action litigation in Canada, and the legal settlement in Australia, to the extent that Toyota can reasonably estimate them based on available information. Hino ceased to be a consolidated subsidiary of Toyota as a result of its business integration with Mitsubishi Fuso Truck and Bus Corporation (“MFTBC”) effective April 1, 2026. Similar lawsuits have been filed, and may be filed in the future. Investigations by governmental authorities, as well as civil litigation, related to these matters could result in the imposition of further civil or criminal penalties, fines or other sanctions, damages awards, or other consequences. Except as stated above, Toyota cannot predict the scope, duration, or outcome of these matters described above at this time. Toyota also has various other pending legal actions and claims, including without limitation personal injury and wrongful death lawsuits and claims in the United States, as well as intellectual property litigation, and is subject to government investigations from time to time. Beyond the amounts accrued with respect to all aforementioned matters, Toyota is unable to estimate a range of reasonably possible loss, if any, for the pending legal matters because (i) many of the proceedings are in evidence gathering stages, (ii) significant factual issues need to be resolved, (iii) the legal theory or nature of the claims is unclear, (iv) the outcome of future motions or appeals is unknown and/or (v) the outcomes of other matters of these types vary widely and do not appear sufficiently similar to offer meaningful guidance. Therefore, for all of the aforementioned matters, which Toyota is in discussions to resolve, any losses that are beyond the amounts accrued could have an adverse effect on Toyota’s financial position, results of operations or cash flows. 4.C ORGANIZATIONAL STRUCTURE As of March 31, 2026, Toyota Motor Corporation had 216 domestic subsidiaries and 386 foreign subsidiaries. The following table sets forth for each of Toyota Motor Corporation’s principal subsidiaries, the country of incorporation and the percentage ownership interest and the voting interest held by Toyota Motor Corporation. Name of Subsidiary Country of Incorporation Percentage Ownership Interest Percentage Voting Interest % % Hino Motors, Ltd.*1 Japan 71.92 66.16 Prime Planet Energy & Solutions, Inc. Japan 51.00 51.00 Toyota Financial Services Corporation Japan 100.00 100.00 Daihatsu Motor Co., Ltd. Japan 100.00 100.00 Toyota Finance Corporation Japan 100.00 100.00 Toyota Auto Body Co., Ltd. Japan 100.00 100.00 Toyota Motor Kyushu, Inc. Japan 100.00 100.00 Toyota Motor East Japan, Inc. Japan 100.00 100.00 Woven by Toyota, Inc. Japan 100.00 100.00 Toyota Motor Engineering & Manufacturing North America, Inc. United States 100.00 100.00 Toyota Motor Manufacturing, Kentucky, Inc. United States 100.00 100.00 Toyota Motor North America, Inc. United States 100.00 100.00 Toyota Motor Credit Corporation United States 100.00 100.00 Toyota Motor Manufacturing, Indiana, Inc. United States 100.00 100.00 69 Table of Contents Name of Subsidiary Country of Incorporation Percentage Ownership Interest Percentage Voting Interest % % Woven Capital, L.P. United States 100.00 100.00 Toyota Motor Manufacturing, Texas, Inc. United States 100.00 100.00 Toyota Motor Sales, U.S.A., Inc. United States 100.00 100.00 Toyota Battery Manufacturing, Inc. United States 90.00 90.00 Toyota Motor Manufacturing Canada Inc. Canada 100.00 100.00 Toyota Motor Europe NV/SA Belgium 100.00 100.00 Toyota Motor Finance (Netherlands) B.V. Netherlands 100.00 100.00 Toyota Motor Manufacturing (UK) Ltd. United Kingdom 100.00 100.00 Toyota Motor Manufacturing Turkey Inc. Turkey 90.00 90.00 Guangqi Toyota Engine Co., Ltd. China 70.00 70.00 Toyota Motor (China) Investment Co., Ltd. China 100.00 100.00 Toyota Motor Finance (China) Co., Ltd. China 100.00 100.00 Lexus Electrified Shanghai Co., Ltd. China 100.00 100.00 Toyota Motor Asia (Singapore) Pte. Ltd. Singapore 100.00 100.00 Toyota Leasing (Thailand) Co., Ltd. Thailand 90.00 90.00 Toyota Motor Thailand Co., Ltd. Thailand 86.43 86.43 Toyota Motor Asia (Thailand) Co., Ltd. Thailand 100.00 100.00 Toyota Motor Corporation Australia Ltd. Australia 100.00 100.00 Toyota Finance Australia Ltd. Australia 100.00 100.00 Toyota do Brasil Ltda. Brazil 100.00 100.00 *1 Hino ceased to be a consolidated subsidiary of Toyota as a result of its business integration with MFTBC effective April 1, 2026. 4.D PROPERTY, PLANTS AND EQUIPMENT As of March 31, 2026, Toyota and its affiliated companies produced automobiles and related components through more than 50 overseas manufacturing organizations in 27 countries and regions besides Japan. The facilities are located principally in Japan, the United States, Canada, the United Kingdom, France, Turkey, Czech Republic, Poland, Thailand, China, Taiwan, India, Indonesia, South Africa, Argentina and Brazil. In addition to its manufacturing facilities, Toyota’s properties include sales offices and other sales facilities in major cities, repair service facilities and research and development facilities. The following table sets forth information, as of March 31, 2026, with respect to Toyota’s principal properties and facilities that are owned by Toyota Motor Corporation or its subsidiaries. However, small portions, all under approximately 20%, of some facilities are on leased premises. Facility or Subsidiary Name Location Land Area (thousands of square meters) Number of Employees Principal Products or Functions Japan (Toyota Motor Corporation) Toyota Technical Center Shimoyama Toyota City, Aichi Pref. 5,947 1,941 Research and Development Tahara Plant Tahara City, Aichi Pref. 4,029 6,564 Automobiles Toyota Head Office and Technical Center Toyota City, Aichi Pref. 2,725 23,479 Research and Development Higashi-Fuji Technical Center Susono City, Shizuoka Pref 2,719 2,516 Research and Development Motomachi Plant Toyota City, Aichi Pref. 1,575 8,035 Automobiles Takaoka Plant Toyota City, Aichi Pref. 1,305 4,337 Automobiles 70 Table of Contents Facility or Subsidiary Name Location Land Area (thousands of square meters) Number of Employees Principal Products or Functions Honsha Plant Toyota City, Aichi Pref. 623 1,893 Automobile parts Myochi Plant Miyoshi City, Aichi Pref. 555 1,443 Automobile parts Shimoyama Plant Miyoshi City, Aichi Pref. 474 814 Automobile parts Toyota Woven City Susono City, Shizuoka 263 8 Research and Development Japan (Subsidiaries) Daihatsu Motor Co., Ltd. Ikeda City, Osaka, etc. 7,721 11,143 Automobiles Hino Motors, Ltd.*1 Hino City, Tokyo, etc. 5,795 11,622 Automobiles Toyota Auto Body Co., Ltd. Kariya City, Aichi Pref., etc. 2,118 11,915 Automobiles TOYOTA Mobility Tokyo Inc. Minato-ku, Tokyo, etc. 403 6,391 Sales facilities Prime Planet Energy & Solutions, Inc. Chuo-ku, Tokyo, etc. 300 4,299 Automobiles Outside Japan (Subsidiaries) Toyota Battery Manufacturing, Inc. North Carolina, U.S.A. 7,400 2,675 Automobiles Toyota Motor Manufacturing, De Guanajuato, S.A. de C.V. Guanajuato, Mexico 6,091 2,823 Automobiles Toyota Motor Manufacturing, Kentucky, Inc. Kentucky, U.S.A. 5,161 9,636 Automobiles Toyota Motor Manufacturing Canada, Inc. Ontario, Canada 4,752 8,298 Automobiles Toyota Motor Thailand Co., Ltd. Samutprakarn, Thailand 4,414 7,463 Automobiles *1 Hino ceased to be a consolidated subsidiary of Toyota as a result of the business integration with MFTBC effective April 1, 2026. Toyota is constantly engaged in upgrading, modernizing and revamping the operations of its manufacturing facilities based on its assessment of market needs and prospects. To respond flexibly to fluctuations in demand in each of its production operations throughout the world, Toyota continually reviews and implements appropriate production measures such as revising take time and adjusting days of operation. As a result, Toyota believes it would require unreasonable effort to track the exact productive capacity and the extent of utilization of each of its manufacturing facilities with a reasonable degree of accuracy. As of March 31, 2026, property, plant and equipment having a net book value of approximately ¥1,926.7 billion was pledged as collateral securing indebtedness incurred by Toyota Motor Corporation’s consolidated subsidiaries. Toyota believes that there does not exist any material environmental issues that may affect the company’s utilization of its assets. Toyota considers all its principal manufacturing facilities and other significant properties to be in good condition and adequate to meet the needs of its operations. See “Item 4. Information on the Company — 4.B Business Overview — Capital Expenditures and Divestitures” for a description of Toyota’s material plans to construct, expand or improve facilities.

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Management's Discussion and Analysis

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.

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