New Medium-Term Business Plan

Mid-Term ’21 Plan
(FY2021 - FY2025)
February 25, 2021

New Medium-Term Business Plan
“Mid-Term ’21 Plan”
The TOYO TIRE Philosophy
Goals Under Mid-Term ’21 Plan
The Mid-Term ‘17 Plan in Review
The Business Environment

Basic Policy for Mid-Term ’21 Plan
Growth Strategy
Capital and Business Alliance with
Mitsubishi Corporation
Creating Management Foundation to
Support Sustainable Growth
Investment Plan and Shareholder Return

The TOYO TIRE Philosophy

Our Philosophy (Re-established in January 2017）
Company Philosophy
We will endeavor to continuously improve our products, and create value for everyone who we work with.

Our Mission
To create excitement and surprise with our products that exceed customer expectations and enriches society.

Our Vision
Our goal is to be a company that:- Stays one step ahead of the future through constant technological innovation;- Drives entrepreneurial and creative spirit through a progressive culture; and- Shares in the enjoyment felt by everyone involved in our activities.

Our Fundamental Values: “The TOYO WAY”
Fairness
Pride
Initiative
Appreciation
Solidarity

Be fair and selfless in your actions, and benefit society.
Take pride in yourself, your work and company, and persevere.
Show initiative in all matters and take ownership of your actions.
Demonstrate compassion and appreciation for people and society.
Continuously create and innovate by working together to mobilize our corporate
knowledge and capabilities.

2/31

Goals Under Mid-Term ’21 Plan
Bolstering Ability To Promptly And Flexibly Respond Through Global Collaboration
Promoting sales of priority products

Globally unified supply-demand
management for lower logistic costs

Efficient production madepossible by local production
for local consumption

HQ
EuropeProducts, sales

NA
Japan
Asia

R&D Global Tripolar System
Enhancing competitive edgeof differentiated products
Japan-R&D

Europe-R&D
Materials
technology

Physical
distribution

Production

Quality assurance by process
for higher CS
Quality

NA-R&D

Ability torespond tochanges

Analysistechnology

Possessing all R&D functions
Developing
products for NA

Developing
cutting-edge technology

R&D

Customersatisfaction

Service

Quality assurance,
environment & safety

Data-driven management for
optimal efficiency/profitability
Visualization

Unifiedmanagement

Cost

Progressive managementfoundation supporting
sustainable growth

Analysis

DigitalCorporate
3/31

1. The Mid-Term ‘17 Plan
in Review

The Mid-Term ’17 Plan in Review
Net Sales & Operating Income(100M yen)

(100M yen)

4,800

5,000

4,050
4,000

3,932

800

3,775
600

3,438
600
12.5%

3,000
453
11.2%

400

424
10.8%

2,000

384
10.2%

363

Each bar broken down by: net sales, operating income,and operating profit margin (from top)
Tire net sales (left axis)
DiverTech net sales (left axis)

10.6%

Operating income (right axis)
200

1,000

0
USD
Euro

Tire operating income
460

469

414

383

560

-7

-45

-29

-20

40

FY17
¥112
¥126

FY18
¥110
¥131

FY19

FY20

FY20 target

¥109
¥123

¥107
¥122

¥110
¥115

Reasons for discrepancies against targets

DiverTech operating income0

Remedial action

Tire Business

Sales shortfall due to deferred production expansion
Appreciation of Yen against key currencies

New Serbian plant
Improved market/product mix

DiverTechBusiness

Lower profits due to divestment of industrial chemical
product & rigid polyurethane foam businesses
Profit erosion on automobile parts

Leveraged links to tire business
Reduced costs by shifting production
centers

5/31

The Mid-Term ‘17 Plan in Review
Technology & Product Strategies

Expand and Develop Products That Combine
Foundational Design & Elemental Technology
noair Non-Pneumatic
Concept Tire

Mobility & Aerodynamic
Technologies

Evolution of nano-balance technology
Rolling resistance

Estimating characteristic
valuesOptimizing materials

2018

2017

PROXES SPORTNANOENERGY
M675

2019

OPEN COUNTRY
R/T White Letter

M646

2020

CELSIUSOPEN COUNTRY
A/TⅢ

OBSERVE GIZ2
6/31

The Mid-Term ’17 Plan in Review
Brand Strategy

Adopted New Brand Statement To Globally Promote A Unique World View
Asia Cross Country Rally

Best in the Desert Vegas to Reno

5thstraight
win*1

2nd
straight
win*3

FIA Intercontinental Drifting Cup

SCORE BAJA 1000

3rd

straight
win*2*1

ESSEN MOTOR SHOWTOKYO AUTO SALONSEMA SHOW*2*3

Vehicle equipped with Toyo Tires won fivestraight years through ‘19
Two consecutive years in ‘18 and ‘19
Three consecutive years up to ‘19
7/31

The Mid-Term ’17 Plan in Review
Sales and Market Strategy

Refine Uniqueness Through Steady Implementation of Measures in Each Market
North American Market

Japanese Market

Market share increased to 5.3%

Steadily captured growing demand for
SUV tires- 7th position in NA (as of 2019)- Released high-value-added off-road tires- Stimulated demand through strategic
partnership

U.S. Plant: Phase V Expansion- 1st step: Production started (Jan. ‘20)
- 2nd step: Operational (Jan. ‘21)

Restructured sales system- Launched special project to strengthen thecommercial tire service structure’16: 36%’16: 45%’20: 41%’20: 54%

European Market

NA’20: 38%

Malaysian Plant: Phase II Expansion- Gained a foothold to build a more flexible global
production system(Operational in Apr. ‘20)

- Strengthened fundamental technologies for
cutting-edge materials and high-performancetires(in value)
(45%)

(57%)

Asia Market

Decision to establish new plant in Serbia

Established R&D center in Germany’16: 36%

Shored up distributors and sales channels

OE Segment Strategy
Continued with order taking strategy that
helped to build on our strengths
8/31

The Mid-Term ‘17 Plan in Review
Supply Strategy

Increased Production Capacity After Carefully Evaluating Likelihood of SuccessCompetitive products tobe supplied to the U.S.

Serbian Plant

U.S. Plant
Phase V Expansion:
Production started

Passenger Car& Light Truck Tires
Decision on new plant
5M units (Apr. ‘22～)

Chinese Plant
Truck and Bus Tires
Increased capacity
70K units (Nov. ‘19～）
For sale in China & Japan

1st step: 1.2M units* (Apr. ‘19～)
2nd step: 0.55M units** (Jan. ‘21～)*Quantity based upon Passenger/Light Truck tires produced**Quantity based upon WLTR tires produced

Increased supply from Japan and Malaysia tocapture robust demand in the U.S.

Malaysian Plant

Japanese Plant
Truck and Bus Tires
Increased capacity
0.2M units (Sept. ‘20～)

Phase II Expansion: Production started
1st step: 2.4M units* (Oct. ‘19～)*Quantity based upon Passenger/Light Truck tires produced

9/31

The Mid-Term ‘17 Plan in Review
DiverTech Business; Corporate Infrastructure
Focused on the automotive
components business

DiverTech Business

Strategic order taking
linked to tire business

Establishedframework for growth ofmobility and otherbusinesses

Chemical Industrial
Products Business[Divested]
Rigid Polyurethane
Foam Business[Divested]

Flexible Polyurethane
Foam Business[Divested]

2017

2018

Air Springs for Truck
and Bus Business[Divested]

2019

2020

Corporate Infrastructure
Introduced function-basedorganizational structure
Strengthened quality ofmanagement foundation- Implemented measures to promulgate new Company Philosophy acrossGroup, stimulated cross-sectional internal communication- Strengthened corporate governance through organizational changes,
establishment of Special Committee, personnel from MC

10/31

2. The Business Environment

Macro Trends Amidst a Period ofUnprecedented Turbulence
Significant changes in consumer behavior in the
post-COVID-19 era
MindsetBehavior

Home bound, budget-minded, avoiding
person-to-person contact
EC/cashless purchases, changes inrequested services

Increase in geopolitical risks••

Decoupling trend continued, including competition forleadership between U.S. and China
Economic disparities widening due to COVID-19 also
aggravate populism

Aligning of social & environmental interests witheconomic interests accelerated

Evolution and accelerated introduction of laborsaving technology• Prioritization of employee/customer satisfaction increased• Accelerated trend to align public interest with economic
interests through customer-producer collaboration••

Digital investment accelerated to make up for slow
growth in worker headcount
Advanced roles for humans as quality/quantity of data
increased

The global economic outlook remains uncertain, as nations struggle to reopen. Any recovery
could be intermittent and uneven across the world.
U.S.

Japan
Democratic control of gov’t should result in further
pump-priming. Eyeing interest-rate movements

Difficulty with COVID-19 counter-measuresand reviving economy

Demand has not returned to pre-COVID-19 levels
Shift to EVs accelerated. Demand for SUVs andpick-up trucks growing due to the popularity ofoutdoor leisure activities

Accelerating measures to reduce greenhousegas emissions to virtually zero→ All new cars
will be EVs* in the 2030s
Shrinking/aging population, younger
generation turning away from cars
→ Demand declining gradually, “The strong
always win in the end”
⇔ “Kei” cars and minivan sales strong, SUVs
increasing

Punitive duties on Chinese imports maintained
Anti-dumping tax imposed on imports from four
Asian countries

Abnormal weather patterns raising interest in
performance of cars
Outdoor activities remain popular, “Dressingup” trend increasing

Return to the Paris Accord on Climate Change.
Investing in the environment/infrastructure whiletightening environmental regulations

EuropeEyeing where “EU without the U.K.” will head interms of politics, economy, and society
Tightening regulations and pursuit of Green Deal
investments leading to a circular economy
The ratio of EVs increasing with government
subsidies. Development of new technology andnext-generation vehicles continue
Decreasing demand stemming from pandemic⇔ Supply impacted by plant shutdown, etc*EVs (electric vehicles): HV (hybrid), PHEV (plug-in hybrid), EV (electric), FCV (fuel cell), LSEV (low-speed)

12/31Market Trends in Automotive & Tire Business(Company survey)

Vehicleregistration
forecast

U.S.

Japan

CAGR expected to be +0.7%
between ‘18 and ‘25

Trending between slight decrease and flat

2018

2020

Passenger
乗用車 cars
SUVs
SUV

2025

MPVs*
MPV
Sports
スポーツ

Pickuptrucks
ピックアップ
Vans
バン

2018

2020

Passenger
MPV
MPVs
乗用車
cars

43%

50%

20%

2025

SUV
SUVs

Sports
スポーツ

Vans
バン

% of EVs in new
car sales% of EVs in new
car sales

Production
forecast by
Vehicle type

Europe41%

Possibly decrease due to tighter CO2
emissions regulations after ‘25

2018

Passenger
乗用車
cars

2025

SUVs
SUV

Sports
スポーツ

Vans
バン

42%

32%

43%

27%

22%

2020

MPVs
MPV

2025

% of EVs in new
car sales

6%

2%

2018

2020

2018

2020

2025

2018

2020

2025

*MPVs：Multi Purpose Vehicles.

Tire demand
forecast

Supply growing tighter due to anti-dumping
duties on certain Asian imports
2018

2020

2025

Trending between slight decrease and flat

2018

2020

2025

Will depend on when COVID-19 is contained

2018

2020

2025

13/31

3. Basic Policy for Mid-Term ’21 PlanMid-Term ‘21 Plan Inherits from Mid-Term ’17 Plan
The New Toyo Tire: Maximizing Enterprise Value
through New Global Strategy[R&D]
Building a foundation for advancing global technological competitiveness[Production]
Established Serbian Plant / Building a balanced global supply foundationNew
corporate
stage[Sales]Increased potential customer contact / Improved unique presence in the market[Corporate]
Realized effective coordination among Production, R&D, Sales
Established management foundation that drives the growth strategy
and strengthens human resources
Previous
corporate
stage(conventional
initiatives)<Corporate>
Strengthened business administration
foundation & support functions
Transformed corporate governance& compliance structures<R&D, Production, Sales>
Strengthening areas of expertise
Demonstrating uniqueness
Shifting to a function-based organization
15/31

Mid-Term ‘21 Plan Key Performance Indicators
Established Financial Indicators Emphasizing Efficiency
Adopted Financial Policy Balancing Growth And Return
Financial indicators

Consolidated
OP margin

14% or over

% of sales from priority
products*

Consolidated
operating income

Breakdown

55% or over
Mid-Term ‘21 forex assumptions

Consolidated operating income
FY20

ROE

12% or overduring Mid-Term ’21 Plan

* Tire product categories that embody Toyo Tire’s “strengths”. E.g., newproducts, core products, and differentiated products. These are essential toachieving operating income (value and %) targets

USD= JPY 103Euro

= JPY 123

Tires

60.0
Automotive
components

In black

FY21

FY

25

Target weight of NA region against total
FY20
results

38%
Unit sales

FY25
plan

41%

% of sales
among
priority
products

53%

57%% of sales

58%

Financial policy

Capex plan

5-year total: 194.0 billion yen (maintenance/replacement of equipment + growth investment)

Shareholder return

Maintaining dividend payout ratio of 30%+; subject to achieving the target ROE

58%

16/31

4. Growth Strategy
R&D
Regions (NA, Europe, Japan, Asia)

Original Equipment Tires
Production and Supply
Our Initiatives for the Solutions
Business

Growth Strategy: R&D
Offer “differentiated products” by strengthening unique technology developed
through collaboration between the 3 R&D centers in Japan, the U.S., and Europe
Advanced Design

Customer-oriented
product development

Next-generation
Technology

Achieving multiple performancerequirements at a high level

Identifying customer needs fortimely product development

Building unique next-generation
mobility technology*1*2

Refining ability to design tire
structures and mix materials

Understanding customer expectations
to create products they desire

Developing/finding new materials withlower environmental impact

Establish technology that allows forvisualization of tires behavior

Timely commercialization through theuse of modules

Establishing unique solutions
business*1 Simcenter™, STAR-CCM+™, Software STAR-CCM+, and STAR-CD are trademarks or registered trademarks of Siemens Industry Software Computational Dynamics Ltd. All other trademarks and registered trademarks or service marks belong torespective holders.

*2 For calculation, Dassault Systèms K.K.’s Abaqus was used.

18/31

Growth Strategy: R&D
Offer early adopters our “differentiated products”
that incorporate advanced next-generation mobility solutions
In response to rapid rise of EVs

Blending eco-friendly technologies andsophisticated featuresdevelop applicable technologies
Characteristics of EVs

Our goals for EVs

Environmental
impactGas-powered carsMore Efficient

Lower Noise

Lower
Tread wear

Joy of driving
Heavier bodymass

Quiet Ride

DesignHigher torque19/31

Growth Strategy: North America
Continuous Focus On Introducing Differentiated Products With Enhanced Strengths

N. American sales
Challenge for

U.S. Plant
Capacity
Increase

5th place(7th in 2020)

Sendai Plant
Exports

Maintaining a dominantposition in wide light truck
tire segment

Product
planning

Marketing

R&D

Holdingcompany

Sales

Timely introduction of highvalue-added products
Kuwana Plant
Capacity
Increase

Truck and Bus Tires

Increased Share

Production

Serbian Plant
Exports
All-season tires

Sales surging

20/31

Growth Strategy: Europe, Japan, Asia
Introducing Pinnacle
technology (Europe)

Discovering & tapping into
customer preferences (Japan)

Customer input
Strengthen Ties

“Bold hardware reorganization” x“Revolutionary Digitization”

R&D for positive
differentiation

Focus onpriority
products

Fast decision-making,flexible strategies

Competitive
production/
supply system

Increase market

presence

Sharpen performance / Enhance branding
Consolidate
corporatefunctions
Digitalize
sales
activities

24 Hours Nürburgring
2020

Dakar Rally 2019

Optimally realignsales network

Catering to regional preferences toboost sales (Asia excluding Japan)

Expandingsales network
Connecting OE
Tires to aftermarket
sales

Making fulluse of local
production

Strengthening
development ofregion-specificproducts

Focusing on digital marketing

Optimizing
logistics
systemInnovating
sales
foundation

Focus on priority productsthat meet customer expectations

21/31

Growth Strategy: Original Equipment Tires
Contributing To Progress in Mobility Through A
Combination Of Tires and Automotive Components

Link between tires andautomotive components

Advanceddevelopment

Technology
exchange

OE
information[Making an impact on the mobility industry]
Highertechnologicalprowess

Ripple effect for theaftermarket tire business
Brand recognition

New saleschannels“Return to OE
brand”
demandSeizing demand foraftermarket tires

Trends inautomotive
technology

Strive for cutting-edge
automotive technology
Establishing acompetitive advantage
as supplierStrengthening approach to strategic
models such as SUVs, EVs, and next-

generation mobility

Technological breakthroughs driven by progress insimulation/evaluation technologies that enhancemobility
22/31

Growth Strategy: Production and Supply
Building A Base For Stable Supply of Tires for the U.S. Market
北米市場向け安定供給基盤を構築し、セルビア工場を最強のコスト競争力を有す拠点へ
Serbian Plant as Most Cost-competitive Production Center[Capturing robust demand]

Supplying 2M units to the
U.S.

[Local production for local
consumption]

Serbian
Plant

Supplying 3M units to

New plant starts
production

Europe(Apr. ’22～)

U.S. Plant

5M units for passenger cars
and SUVs

Phase V Expansion:
Increased output

to be closed (June ‘21)

30% lower costs

2nd step: 0.55M units* (Jan., ’21～)

Wide light truck tires
Further bolstering supply
capacity*Converted to the number of
WLTR tires

Silverstone plant

Japanese
Plant
Shift to high valueadded products as the
key production base of theGroup

Passenger car tires: -3M units(vs. Sendai Plant)

Malaysian
Plant
Concentrating resources in Malaysia
Enhancing its function as a global
supply hub

Establishing an efficient production system byvisualizing/analyzing cross-sectional production/quality data

ChinesePlant
Ramping up capacity forpriority products to meetdemand in China and Japan

23/31

Solutions Business Initiatives
Developing a Solutions Business to Offer New Value
Using Our Proprietary Sensing Technology
Data from the vehicles

Tire condition

Unique products & services【Gathering】【Predicting】【Providing】
Uniqueproducts

Predictive
technology oftread life

Wear
prediction
model

Developing the model

RetreadFleet
management

Accumulated field test

（Cooperation with MC affiliates)
Select compound

Tire force
detection
model

Analysistechnology ofdriving data

Tirecustomization

Grip ⇔ Lower fuel consumption

Select design
Aggressive ⇔ Quiet

Build the platform
2021～

2022

2023

2024

2025
24/31

5. Capital and Business
Alliance with
Mitsubishi CorporationEffect of the Capital & Business Alliancewith Mitsubishi Corporation

All numbers represent an increase fromcorresponding numbers in FY18
on a consolidated operating income basis

Shared Mission: Increasing Toyo Tire’s Enterprise Value→ Cooperation to Maximize Toyo Tire’s Profitability～FY2020～FY2025

FY2021～2023

China

Delivering SUV tires as original equipment
Expanding sales channels for service tires(retail, etc.)

Europe[Logistics] Further reduced costs byreorganizing sales/logistics
sites in Japan

Asia

owned Toyo subsidiaries• Reduced insurance
premiums, etc.

Japan

• Eliminated MC’s
export commission• Dissolved all sales
JVs; make them wholly-

promotion of industrial tires,etc. to MC’s customers

The Middle East

[Sales] Full-scale sales+1.4B yen

Nextgeneration
R&D

The alliance will prioritize
markets where we can best
promote and achieve a highreturn for our differentiatedproducts+10.0B yen

Impact

+6.0B yen
Focusing on projects that could
drive growth, such as EV-related
technology and digital solutions

Kuwana Plant: Ramping up capacity for truck/bus tires(Started production in Sept. ‘20 → Full-operation in Jan. ‘21)

U.S. Plant: Phase V Step 2(Started production in Jan. ‘21 → Full-operation in Sep. ‘21)
Serbian Plant: New facility to start operation in Apr. ‘22(Full-operation in 4Q/23)

Accelerating Implementation Of Key Projects; Solidifying Management Foundation
Personnel from the Two Companies Working Together

Effect on value

Impact

+4.0B yen

Strengthen corporate
governance+ more26/31

6. Creating Management Foundation to
Support Sustainable GrowthCreating Management Foundation
to Support Sustainable GrowthPursuing our Philosophy; Towards Strengthening our Business Management Infrastructure

Realizing value creation and sustainable growthby offering solutions to social issues
GlobalReconfiguring digital/ICT infrastructure
Strengthening the foundation for
Digital Innovation◼ Developing a digital foundation toachieve higher profitability- Upgrading ERP, accelerating the
PDCA cycle◼ Strengthening data governance◼ Realizing diverse work styles

Shoring up thefinancialfoundation

Long-term
perspective

Integrated withbusiness

Shifting to sustainability management
Creating social value throughbusiness‘21～

Redefining materiality and raising
our awarenessEstablished the Sustainability
Committee

Integrating business managementwith sustainability‘25～

Creating social value with businessstrategies

Enhancing our efficiency and resilience
to changes in the business environment• Improving asset efficiency through careful evaluation of businessassets and investments• Achieving and maintaining a healthy level of financial leverage

Rebuilding the organization, system
and infrastructure
Programs for the organization and
Human Resources◼ Revitalizing the organization with new HR
systems- Diverse staff collaborating organically- Programs for higher job satisfaction andempowerment(“function-based recruitment”, Diversity, 360degree evaluation)◼ Training system focused on individuality,
quality, and competencies

Emphasis on cash flows• Managing funds globally• Generating more cash and speeding up the
cash cycle
28/31

Role of Digital Transformation (DX)to Streamline the Management Foundation
Supporting Change to the Corporate Culture and Realizing Steady Growth
Growth strategies
Technology

Regions

Production/Supply

3. Increasing value

DX

Products, innovative
services, and offered
value

Manufacturing
Customer-oriented
products

Enhancedmaintenanceservices

Digital channels,
info content

Creating solutions
service

2. Improving
profitability

Technology /product
development
Maximizing ROIOptimizing supplydemand, inventory,
and mfg.

Improving sales
productivity
Varying the pace

Data-driven
business /profitability mgt.

Mfg./logistic sites,
facility
infrastructure

Integrated
database
Digital foundation

Global operations
Models/rules

Global IT
Tighter governance

Data-driven mgt., higher
operational efficiency

1. Reinforcing mgt.
foundation
Rebuilding systems,
developing digitalfoundation

29/31

7. Investment Plan andShareholder Return

Investment Plan and Shareholder Return
Investment Plan and Capital Allocation

Shareholder Return

Basic Investment Policy and Cash Flow
Allocation of Mid-Term ‘21 Plan
Strategic
allocation
Growthinvestment

50%
Operatingcash flow

Capitalexpenditure

30%
Shareholder
return20%

Investments contribute to growthBasic
policyControl interest-bearing debts

Investments needed to achieve
future growth over the medium
to long term
Digital-related investment
Investment in the markets
R&D investments in new fields

Dividend
policy・ Maintain proper balance between
investments (to promote future growth) andshareholder dividends- Pursue performance-linked, stable returns

Payout ratio: 30% or higher

Investments needed tomaintain competitiveness ofcore businesses
Investments to maintain sustainablegrowth of existing businesses and to
improve productivity

2015：341％
2016： －

30％ or higher

Investments to rebuild
management foundation
Continue stable shareholder
returns linked to annual
performance
Mid-Term ’21 Plan
31/31

Earnings plans, business plans, and otherinformation contained in this material are
based solely on the company’s current
assumptions of the economic environmentand other factors that may occur in the
future. Actual performance, etc. may differ
materially from these statements due tovarious factors. As such, these statements
are not the company’s guarantees of its
future performance.
32/31