Federal Reserve Bank of Cleveland Symposium on Inflation

1. Federal Reserve Bank of ClevelandSymposium on Inflation Chuck Brown Vice President - Accounting & Finance Toyota Motor Engineering & Manufacturing North America May 30th, 2014

2. What “pricing” means for Toyota • How do we create competitive prices which: • Reflect the consumer’s idea of value and are based on marketplace demand • Support Toyota’s sales goal (volume, product mix, etc.) • Provide profitability for dealers, sales & marketing companies, and manufacturing companies & TMC • Help us to maintain long-term prosperity for all of our stakeholders • Are fair to the marketplace and society

3. Pricing Philosophy Factors Manufacturers Consumers Society

4. Pricing from the Consumer Point of View • Tangible Value • Basic Performance (Horse power, fuel economy, etc..) • Standard Specifications and Options (A/C, audio, etc..) • Size, Utility • Intangible Value • Brand (Lexus vs. Toyota) • Status (S Class vs. E Class) • Environment (Hybrid, Diesel, etc..)

5. Price, Profit, & Cost • Formulas for Profit Generation: #1: Cost ＋ Profit ＝ Price (Actual cost） （Required profit） （Expected Price) #2: Price － Cost ＝ Profit (Market price） （Actual cost） 　 （Profit as a result） #3: Price － Profit ＝ Cost （Market price） （Required profit） （Target cost）

6. Price, Profit, & Cost • Formulas for Profit Generation: #1: Cost ＋ Profit ＝ Price (Actual cost） （Required profit） （Expected Price) #2: Price － Cost ＝ Profit (Market price） （Actual cost） 　 （Profit as a result） #3: Price － Profit ＝ Cost （Market price） （Required profit） （Target cost）

7. General Price Changes Automotive companies consider many factors when pricing their product, but the Market provides very clear feedback on appropriate pricing levels. Price change vs. previous period

8. Average Transactional Price Source: PIN

9. Capacity Utilization

10. Annual Sales Volume & Leasing Trend