SUBARU CORPORATION
Financial Results for the 3rd Quarter of FYE 2021
Analyst Briefing Q&A

Financial Results for the 3rd Quarter of FYE 2021
Analyst Briefing Q&AFebruary 5, 2021
SUBARU CORPORATION

Ｑ : What is your evaluation of 3rd quarter (3 months) results?
Ａ : Operating profit was ¥67.6 billion, which was a favorable result. However, the large amount ofshipments to make up for the inventory shortages in the US provided a boost. Although
COVID-19 continues to have a slight impact, expenses related to recalls, service campaigns
and so on came in at the anticipated level of 1.5% of revenue. Additionally, the significant
transient factors such as container delays and semiconductor shortages were not included inthe 3rd quarter results, so there were no major abnormal values to contend with.
Ｑ : Can you tell us about the impact of container delays and semiconductor shortages on thenumber of units produced and sold? Also, what is the current situation with semiconductor
supply, and do you have an idea about future procurement?
Ａ : We revised the full-year production plan downward 58,000 units from the previously
announced 881,000 units to 823,000 units. The November and December container delays
resulted in a roughly 10,000-unit decrease at SIA and we expect the shortage ofsemiconductors starting in January to result in a 48,000-unit decrease for the US and Japancombined. As such, the plan for consolidated unit sales also dropped 42,700 units. The
suspension of operations last spring continued to impact US dealer inventory for a while, andit was difficult to make up for it, but as of the end of January, inventory had recovered to ournormal level of around 45 days’ supply. The supply will be constrained as a result of decreased
production since January, but we will make every effort to ensure that it does not impact retailsales. It is still unclear what will happen with the supply of semiconductors. We have already
put together our production plan for February and March and hope to avoid a further decrease.
We will look into how to recover from the impact while keeping an eye on the situation.
Ｑ : Why is the semiconductor shortage hitting you harder than other companies?
Ａ : Compared to the big players in the industry, the scale of our operations is smaller, and we havenarrowed our models down to SUVs and sports cars in the C and D segments. We also engage
in streamlined development and production while sharing parts, keeping development costs
and overhead down as part of our business model. Furthermore, the burden of diversifying
procurement of parts at our scale of operations is significant, so we believe that the logicalprocurement strategy is to keep investment costs associated with design and quality control
down and maximize the cost reduction effect by concentrating our orders. We try to maintainappropriate inventory levels, taking into account our experience during the Great East Japan
Earthquake, model changes, and fluctuations in the number of units, but we will take anotherlook at the current circumstances, including whether we need to consider future inventory
levels or diversifying procurement.

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SUBARU CORPORATION
Financial Results for the 3rd Quarter of FYE 2021
Analyst Briefing Q&A

Ｑ : What is your forecast for the overall US market in 2021?
Ａ : We expect between 15 and 16 million units. However, the key for us will be the trend in theretail market excluding fleet from total demand. In 2021, we aim to capture a 5% share of theretail market. We expect the retail market to drop below 14 million units this year, so we set atarget for retail sales of 660,000 units in 2021. While keeping an eye on the sales situation, wewill make efforts to increase the number with the lower limit of 660,000 units.
Ｑ : What about your incentive plan in the US?
Ａ : In the 4th quarter plan, we basically hope to achieve the level of $1,300 per vehicle as in the 3rdquarter, but we expect it to be a little higher at $1,600 per vehicle due to various factors. Inparticular, in the 1st half of this year, inventory will basically be on the decline as production
tightens due to COVID-19 or the shortage of semiconductors, so we will control the balancewith costs.
Ｑ : What is the sales situation in Japan?
Ａ : Sales of the new LEVORG are favorable. In addition to the increase in the number of units sold,the higher grades are selling very well. In those sales, more than 90% of vehicles have
EyeSight X installed, and about 60% are graded as STI Sport, so this is in line with our aim ofselling added value. Also, looking at 3rd quarter (3 months) results, sales of passenger vehicles
are up 23% year on year. In Japan, we aim to sell 10,000 units of these vehicles per month, andnext year, we will work on reaching our target.
Ｑ : What is the background behind the revision of full-year operating profit downward by ¥10.0billion? The revenue forecast for the 4th quarter (3 months) is lower. Are there any special
factors involved?
Ａ : The impact of 58,000-unit decrease in full-year production was very big, so the content of theassociated loss of profit has changed significantly, causing us to revise the figure from theprevious plan. The 4th quarter operating profit will be down substantially compared to the 2ndand 3rd quarters, but the main factors behind the decrease are the decreased production
resulting from the semiconductor shortage, the drop in sales, the exchange rate, and theincrease in expenses related to recalls, service campaigns and so on. As for expenses related torecalls, service campaigns and so on, the cumulative total for the first nine months wasrelatively lower, but the timing of recalls is not something that can be controlled. Also, theamount can vary significantly depending on what is affected and how many vehicles aresubject to the recall. After a comprehensive consideration of the current circumstances, we left
the amount at 1.5% of annual revenue, the same level as at normal times and the difference
has been incorporated into the plan for the 4th quarter.
Ｑ : What kind of progress has been made on the ¥300.0 billion target (assuming an exchange rateof 110 yen to the dollar) for operating profit?
Ａ : Based on the current trend in the exchange rate and considering the 3rd quarter (3 months)
operating profit of ¥67.6 billion (105 yen to the dollar) and consolidated unit sales of 270,000
units (1.08 million units annualized), we will need to increase the number of units sold to reach2

SUBARU CORPORATION
Financial Results for the 3rd Quarter of FYE 2021
Analyst Briefing Q&A¥300.0 billion in operating profit. Furthermore, as the environment continues to graduallychange, the price of precious metal and the cost of addressing environmental changes arerising all the more. The circumstances have changed so that hitting the ¥300.0 billion target
for operating profit will not be that easy. On the other hand, we are working on efforts to beable to provide customers with high value-added, quality products and services at low cost as
set forth in our STEP mid-term management vision as we seek to improve profitability.
Ｑ : Discussions are headed in the direction of stricter environmental regulations in the mainmarkets of the US and Japan as well as other regions. Do you have plans to update yourenvironment-related product and technology strategies?
Ａ : We recognize that regulations are being enacted a little earlier than anticipated in each country,
but at this stage, there is no change to what was announced at our technology briefing held inJanuary 2020. As for BEV, which we plan to introduce in the first half of the 2020s, we believethat the tremendous advantage provided by motorization will be a major source ofdifferentiation as it allows faster and more precise transmission of torque to the motor, giving
the four wheels better grip on the ground, which is one of our strengths. We are steadily
moving forward on development of the elemental technologies and are steadily accumulating
technology to be used even further down the road. At the same time, we have to carefully
consider future market trends from the standpoint of business feasibility, so we are unable tocommunicate a more specific time frame for product introduction. We are supported by thecustomers that share the SUBARU value of providing “Enjoyment and Peace of mind”, andthat desire a fulfilling life with various experiences. We continually turn our ears toward
feedback from those customers, but there still does not seem to be that much desire for going
electric. We believe that the trend will continue toward electric, first among distribution andcommercial vehicles and corporate demand, but the situation is likely to change in the near
future. We will respond appropriately at the right time while accurately identifying signs ofchange as we continue conversing with our customers.

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