SUBARU CORPORATION
Financial Results for the 1st Quarter of FYE 2024
Analyst Briefing Q&A

Financial Results for the 1st Quarter of FYE 2024
Analyst Briefing Q&A
August 2, 2023
SUBARU CORPORATION

Ｑ : What is your assessment of first quarter results? What are the risks and opportunities for the
full-year plan?
Ａ : There were few special factors at work overall, and this result was fairly close to what we canactually achieve. The current full-year plan has been left unchanged because of the wide
fluctuations in forex that we have seen recently and the difficulty of reading such fluctuations
going forward, and also because the production was in line with initial plans. Still, evenexcluding forex, I think there are opportunities to increase profits. If production increases due
to improvements in semiconductor supply and this leads to higher shipments to the highly
profitable U.S. market, it will contribute to increased profits. While we need to take thecompetitive environment into account, we are also considering revising prices further
depending on circumstances. Taking a long-term view that includes the current fiscal year andbeyond, based on the idea of costs settling at a more reasonable level due to falling commodity
prices and the stabilization of production, I think there is room for some improvement in
profitability. On the other hand, the risks would be semiconductor supply, which has not been
completely resolved, and logistics constraints.
Ｑ : I would like your thoughts on demand trends in the Japanese and U.S. markets.
Ａ : We struggled a little in the Japanese market in July despite beginning sales of the new Imprezaand Crosstrek, but we plan to add a new model going forward and we will work to recover thesituation. Demand remains strong in the U.S. market; if we can deliver the cars, they will sell.
However, for the market as a whole, the level of inventories is rising and competition isintensifying, so we are watching the situation closely.
Ｑ : Why did you choose this point in time to shift your focus towards BEVs?
Ａ : The decision to shift our focus towards BEVs at this time was the result of a comprehensive
assessment that took into account the speed of the move towards BEVs in the U.S., which isour most important market, environmental regulations, moves being made by othermanufacturers, and of course the most important issue, which is acceptance of BEVs among ourcustomers and trends in market development. Based on this, we concluded that we should begin
production of BEVs in the U.S. as well, which led to a significant change in objectives for 2030.

1SUBARU CORPORATION
Financial Results for the 1st Quarter of FYE 2024
Analyst Briefing Q&AＱ : Previously you said you would first start production of BEVs in Japan and then transfer theknow-how thus accumulated to the U.S., but it seems the production launch in the U.S. has
been accelerated. Is it feasible?
Ａ : As for BEV production in the U.S., we are considering the details, including location, based on
a comprehensive investigation into the supply chain, battery supply, and other issues. Once we
get a grasp on the differences between Japan and the U.S. in terms of quality, cost, productivity,and other factors, we believe that it is probably possible to start production of BEVs in the U.S.
by carefully transferring Monozukuri (Manufacturing) Innovation and Value Creation, and to
do this as an initiative implemented in parallel with the construction work being undertaken
in Japan to launch a dedicated BEV factory.
Ｑ : Is the production capacity figure of 1.2 million units an ideal that has been established to target
growth? Or is this a figure that has been temporarily inflated during the transition period, with
the number of models and capacity to be reduced to improve profitability once BEVs become
mainstream within the business?
Ａ : We have no intention of pointlessly pursuing volume, and our basic approach is qualitative
growth. We are considering the level of 1.2 million units strictly in terms of our production
capacity. Because there are many uncertain elements, including trends in environmental
regulations and the degree to which acceptance of BEVs has developed, we want this level ofproduction capacity available during the transition period to enable a smooth switchover. Inaddition, as we move forward with Monozukuri Innovation, we aim to further increase volumes
by raising production capacity per line. It was based on these factors that we set the level of 1.2
million units.
Ｑ : What is the “Retaining Value” concept?
Ａ : There is a strong trend for SUBARU customers, primarily in the U.S., to use our vehicles withaffection over long periods of time, and many people feel that driving the same vehicle for a longtime is good for the environment. The concept of “Retaining Value” was born from the idea ofwanting our customers to enjoy driving the vehicle for a long period of time by utilizing
technology and services to maintain and add value even after purchase. As software will becomecentral to the value provided by cars in the future, we are also working to maintain and increasevalue through the use of OTA updates, among other initiatives. In the Japanese market, as partof after-sales services we offer a program of paid updates to customers of the Levorg STI Sportequipped with an electronically controlled suspension. This has been extremely well received
by customers, who say it creates new value by broadening the specification of the suspension,and we will use cases like this as reference points for our initiatives going forward.

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SUBARU CORPORATION
Financial Results for the 1st Quarter of FYE 2024
Analyst Briefing Q&A

Ｑ : Specifically, what do you mean when you say that cutting the number of processes in half andthe number of parts in half is something that is achievable because of the size of SUBARU?
Ａ : The details are still under consideration, but we need to make Manufacturing simpler. To that
end, we go back to the planning and design stage to rigorously discuss the kind of vehicle wewant to build, the structure it will have, and the production method we will use. Then we will
move ahead with cutting the numbers of processes and parts in half to realize a highly profitable
BEV. For that to happen, we need design, development, manufacturing, and other divisions towork as one with the supply chain to forge ahead with Monozukuri Innovation. I believe this is
only achievable because we are a relatively small company, and it will also serve as one of ourstrengths.
Ｑ : As you move forward to introduce a considerable volume of electrified products, what are yourthoughts on partnerships?
Ａ : There has been no change in our approach of strengthening the alliance relationship with Toyota.
Both companies agree to continue sharing insights in areas where we can collaborate. As forbatteries, in addition to using the alliance for procurement, we plan to set up our own uniqueprocurement network under a medium- to long-term partnership with Panasonic Energy, which
was announced the other day. Our alliance with Toyota is based on the idea that sharing
common batteries, with each company working on its own to expand the range of technologies,
contributes to the growth of both companies, so we would like this to be seen as an evolution ofcollaboration.
Ｑ : What kind of external environment are you assuming when you talk about U.S. sales of 400
thousand BEVs in 2028?
Ａ : We think we will have the capacity to serve a market of 700 thousand to 800 thousand units in2028. We believe that if we can sell up to 400 thousand BEVs, which is slightly more than halfof that, we will be able to meet environmental regulations in the U.S. While there is still
uncertainty around how the BEV market will develop, we have started development andpreparations for production with the determination to create products that can achieve sales of
400 thousand units, and products that customers will want to choose, through our “Monozukuri
Innovation” and “Value Creation” initiatives.
Ｑ : What made you choose cylindrical lithium-ion batteries out of all the various types of battery?
Ａ : Different batteries have different advantages and disadvantages, but the merit of the cylindricaltype is that it is easy to adapt to the low-center-of-gravity, low-floor approach that is SUBARU’s
strength. In addition to technological advances going forward, we also considered theperspective of who would be a reliable partner to struggle together with us on development,
preparations for production, launching production, and raising and stabilizing yields.

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SUBARU CORPORATION
Financial Results for the 1st Quarter of FYE 2024
Analyst Briefing Q&A

Ｑ : If you average the ¥1.5 trillion in investments for electrification up to around 2030, it comes toapproximately ¥200 billion annually. This year you are planning ¥300 billion in capex and R&D
expenditures. Will this level rise further in the future?
Ａ : By squeezing down capex in traditional areas as much as we possibly can, we aim to make it sothat investments in BEVs are not just an add-on. On the other hand, previously we had
maintained R&D expenditures at a level of around ¥120 billion annually, and we assume thatwill rise slightly going forward.
Ｑ : What are your expectations for profit margins over the long term to 2030?
Ａ : There is a view that the cost of batteries, which significantly affects the profitability of BEVs,
will change in an innovative way along with the times, but at the same time we will take steps
to improve profitability by reducing manufacturing costs through “Monozukuri Innovation”,
and combine this with “Value Creation” that will leave customers satisfied even if we raise theprice slightly , and thus achieve industry-leading profit margins in 2030. Because we expect theperiod through to 2030 to be one of violent change, we set this as a goal to be accomplished when
we have achieved the initiatives outlined today.
Ｑ : Will you be able to increase net cash towards 2030?
Ａ : With regard to maintaining a net cash position, previously we had set two months’ worth ofrevenue as a lower limit, but we will change the net cash level going forward, as required by
the timing. While we are currently in the phase of accumulating net cash for growthinvestments, going forward we do not expect it to keep growing.
Ｑ : Have there been any changes in the shareholder returns policy?
Ａ : Basically there have been no major changes. Going forward, we will pay stable and continuous
dividends, and implement share buybacks after taking into account the share price, ROE, andcash flow, with the aim of delivering a total return ratio of 30-50%. We will also be making major
investments going forward, but I hope you will understand this as a message that we willcontinue to generate shareholder returns in accordance with cash flow.

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