Minutes of the ESG Conference 2021
November 26, 2021
AISIN CORPORATION
Q1. I think Toyota Motor Corporation and other global OEMs have different approaches toelectrification, but what do you think of the overall electrification strategy based onunderstanding the opinions of both parties?
A1. I might talk about Aisin's approach to carbon neutrality or electrification once again. Customers'
needs for carbon neutrality have become extremely strong in the last year or two. This must bedealt with in terms of both products and production, not only CO2 emissions generated during
driving, but also materials, production, disposal, recycling, and how to produce electricity andenergy. There are some things that cannot be solved by one industry alone, and we have toconsider all of them. In the case of Aisin, we do business in many regions. So, while dealing withthe energy situation and regulations in each region, we have to respond to the needs of Toyota
Motor Corporation, other global OEM customers, and end-user customers.
A troubling aspect, and it was the same when I worked at Toyota, is that it is very difficult to lookahead, especially regarding the areas of energy and regulation, which have not been settled yet,so the future is uncertain. Since the future is uncertain, it is easy to narrow down to focus onsome things in terms of resources, but it is very risky from the viewpoint of business
management. It means that we will not be able to provide products and services to the manycustomers with whom Aisin is associated.
Therefore, I say the same thing every time, but I think we should have a full lineup of electrified
systems, making each one competitive, and realizing flexible and efficient production against
fluctuations in production volume. The key words are high efficiency and miniaturization, whichwere also mentioned in the presentations from the three vice presidents today. This applies not
only to the product aspect, but also to the plant lines and equipment. That is Aisin's strength,
and it is based on Aisin's manufacturing, which has long produced A/T and provided suchproducts to Toyota Motor Corporation and other global OEM customers. Basically, we would liketo utilize this advantage first, and then work together to deal with any shortcomings.
Q2. Given your strengths and weaknesses as an A/T manufacturer, how are you trying toaddress the resources and efficiency issues for producing both A/T and eAxle together?
A2. Aisin's competitiveness lies in high efficiency and miniaturization, and we are going to focus on
these two areas.

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High efficiency and miniaturization will improve electricity costs, reduce battery consumption
and CO2 in production, and lead to resource saving and waste reduction. I think they areindispensable factors for electrified vehicles. For achieving this, Aisin's unique strengths are themany A/T gear and lubrication technologies that we have been produced over 50 years and thathave been bought by many customers. They have much in common with eAxle technologies. In
addition, in 2004 Aisin became the first specialized manufacturer to introduce HEVs. The motor
technologies and cooling technologies that were cultivated through this effort are very
interrelated with the development of eAxle, and we have already accumulated a lot ofknowledge. If these resources and technologies can be used well, it will be very effective interms of development.
In terms of production, by diverting the existing A/T equipment, we will limit the investment
needed and form compact lines. Furthermore, for eAxle, where the needs of the market may
change rapidly in the future, by creating line configurations that allow products incorporating
new technologies to be mixed in various models, we will solidly keep not only development
resources but also investment low to achieve high competitiveness. These are Aisin's strengths,and we are envisioning such an electrification strategy.
I think the cost will basically decrease if the size is reduced, so please look forward to it.
Q3. I have a question about human capital related to the recent business integration.
Regarding the KPI of the employee motivation index disclosed in the Aisin Group Report,
the result was slightly lower than the target value in FY2020. What are your thoughts on
this point? Do you think that there is no problem if you continue to work on job
satisfaction as you explained? Please explain about the enhancement and expansion ofhuman capital.
A3. Regarding the employee motivation index, I was agonized when setting this target value, KPI. I
wondered how to quantify employee motivation and whether to believe only the numbers, but I
am thinking of setting this index as a starting point and linking it to some measures.
About last year's figure, I think we will have to continue our activities based on a longer timeframe, until 2030, without worrying too much about the results of a single year. However, I
believe that the business merger was one of the factors why we could not achieve the target in
the last fiscal year. We announced the merger and started preparations in FY2020, and merged
in FY2021. Even though the two companies were in the same group, two different companies
became one. So, it is a fact that there are some worries, anxieties, and dissatisfaction among
the employees. Regarding this point, both the labor union and us, executives, have listened tovarious opinions from each department and responded in the form of explanations at venues
like “1on1MTG” as explained in the presentation.
In any case, I think we have to keep on making these efforts.

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Q4. Regarding the number of electrified vehicles by 2025, is it correct to assume that thesecond generation will secure the number of vehicles by 2025 and the vehicles will beequipped with DENSO inverters? Based on this, I think the development competition for2025 has started, so please tell us your chances of success. Looking from the outside, it
seems that small rather than medium is more likely to be requested from OEMs to othercompanies. If a certain amount cannot be secured in a place where price competition iswaiting like in China or with Nidec, it will not lead to receiving orders for medium
afterwards. Do I understand correctly that there is a good chance of success if you
promote high efficiency and miniaturization? Please tell us what kind of field you aregoing to approach and how you will grow in the medium- to long-term.
A4. Regarding the eAxle inverter, we are working in collaboration with BluE Nexus, so I hope you will
understand this point.
About the odds of success with an eye on 2025 and beyond, the points of high efficiency andminiaturization that I explained today are very important factors for electrified vehicles. In
addition to the knowledge and technologies that we have cultivated in the past, we intend tooffer competitive products by incorporating challenging new technologies. We are pushing
forward with development looking to the second generation, the third generation, and beyond,and we will direct development resources toward realization. As I explained so far, we would liketo continue to meet the needs of many customers with a full lineup of electrified units, that is, awide range of products, such as small, medium, and large, just like conventional A/T.
Q5. I think that some other eAxle makers will compete on price, and some will add software toshorten the development period and combine with improved electricity costs. Including
the field of small, do you think there is a chance of being competitive?
A5. We will continue to offer a lineup of small, medium and large. Also, we are in charge of the areaof control, and we can make various proposals that suit the needs of our customers, so I think
we can assuredly be competitive.
Whether or not we can offer products in the field of medium will depend on how competitive wecan become as we proceed concretely with the actions I explained today. For example, if a 10%
improvement in electricity costs can be achieved, it means that the battery will be reduced by
10%. This brings a greater advantage to our customers than cost competition. Some people
often say that eAxle equals just cost competition, but I don't think so. I think Aisin’s strengths
include, we can add software and DX to shorten the development period, or, like thedevelopment of conventional A/T, we can work with customers as one group to create products.
Furthermore, since Aisin has various systems, we can propose cooperative effects with othersystems such as brakes, and we can meet a wide range of customer needs. Some customers

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want only the product alone, while others want to work on a large part of a vehicle together. We
will proceed in a way that meets customers’ needs, so please look forward to it.
Q6. Regarding the environment, we received a detailed explanation focusing on theproduction aspect. It is an issue for Aisin as well as for the entire automobile industry,
but the area of SCOPE 3 seems to be very large. I think it is not yet difficult, but if you
have any strengths, weaknesses, challenges, features, etc. for SCOPE 3, I would like tohear your comments.
A6. The area of SCOPE 3 brings very difficult challenges. SCOPE 3 is an area where people fromvarious industries are involved, and their ideas and activity policies vary. There are many things
that are different across countries, and there are many areas that we cannot tackle with our own
way of thinking.
To achieve carbon neutrality, we must cover and combine all technologies in various processes
and fields.
Fortunately, Aisin is involved in a wide variety of products, in addition to general materials andcasting and forging materials. Thanks to this, we possess a large number of elemental
technologies, and we are working on the development of environmental technologies bycombining these various technologies and systematizing them.
Regarding efforts for SCOPE 3, we would like to make solid achievements in the areas ofSCOPE 1 and 2 first and present successful cases to the area of SCOPE 3. In addition, we are
currently making efforts for SCOPE 3 together with activities that will help related companies
understand Aisin's approach.
In any case, policies differ among countries or regions, so we have just started to work on
reducing carbon emissions in SCOPE 3 while providing technologies that match each country orregion.
Q7. Regarding the environmental investment for realization of a carbon-neutral society, you
explained the investment amount of 110 billion yen in production and 270 billion yen inproducts.
Please tell us how and where this investment will be allocated, such as capital
investment, R&D investment, or expenses. If it is a capital investment, I would like toknow whether this investment will be added to the current level, whether it is to replacesome subjects of the investment, or whether it will be generated by improving efficiency.
A7. This environmental investment is basically equivalent to capital investment. Regarding whether
this investment will simply be added, one premise is that conventional investment will shrink.
In addition, from the viewpoint of carbon neutrality, we are thinking of diverting the current
equipment, for example, in the 1/2 production line as explained. And, we are sure that the4/6

investment of 110 billion yen on the production aspect includes a reduction effect until 2025.
Therefore, from a financial point of view, while we currently hold fixed assets of 1.5 trillion yen,
we are gradually working on carbon neutrality and electrification for the time being. Even if they
are added, we are assuming that we will keep the investment at the level of 200 billion yen to250 billion yen a year.
I would like to give you a little additional explanation on high efficiency and miniaturization ofelectrified units in terms of products and various equipment used in production. In parallel withadvancing environmental technologies, we have been performing activities to reduce heatsources, energy sources, and power sources. As a result, production processes of various
products have become considerably shorter. Therefore, the amount of investment required for
new equipment is very small, and most of the existing equipment can be utilized. We will notincrease the conventional investment amount, rather we can reduce it in some areas, so it canbe said that the total amount including for the addition of new technology will not increase somuch.
Q8. Regarding eAxle, the launches of the second and third generations are in 2025 and 2027,
respectively, and the interval is only two years. Is the third generation an extension of thesecond generation? Also, is expanding sales of electrified units to European OEMs thathave transactions of A/T a target of the third generation?
In addition, there was an explanation of alliances with external bodies. Please tell us
whether it means that cooperation with external bodies that complement in thetechnological aspect is necessary.
A8. Regarding the continuity from the second generation to the third generation, of course, they areconnected in terms of the concept of high efficiency and miniaturization. However, you can saythat the technologies to be introduced have a considerable technical step from the secondgeneration to the third generation.
Also, regarding whether we are targeting European OEMs with the third generation, that is not
our intention. Aisin considers the second generation to be the most important, and we will put
our efforts into creating a full lineup of products, including small, medium, and large. And wewould like to connect it to the third generation and beyond.
Finally, concerning alliances, I would like you to see them in a broad sense. For example, thethird generation will be advanced development for Aisin. If there is a lack of technologies inadvancing development, we will work together with suppliers and external research institutes.
You can view alliances as such cooperative relationships or joint development.
I hope you will understand that Aisin aims for growth like hop, step, and jump, from the firstgeneration to the second and third generations.
Q9. Please comment on whether there is a chance of succeeding against emerging players at

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present and how you are analyzing your competitors.
A9. I will not comment on other companies, but Aisin wants to be more competitive and selected bymany OEMs. Putting 200 persons onto the third generation project and introducing resources ofother companies into the development of various new technologies will enable us to make morecompetitive products gradually for the first, second, and third generations. So please lookforward to it.
Q10. Regarding the investment competitiveness, I think that eAxle and HEV are included in
the 4.5 million units in 2025, and I would like to have an explanation on the basic unit thatis the basis of this logic for 4.5 million units, 270 billion yen.
A10. The investment amount presented this time is not limited to 4.5 million electrified units. All
investments related to brakes, electrified devices, cooling systems, etc. are included as strategic
investments until 2025. However, regarding the basic unit, it includes confidential information, soI am not able to talk about it in detail, but presumably, when HEV is compared with A/T, thenumber of parts used in HEV should be smaller, so the investment will decrease to some extent.
When HEV is compared with eAxle, the number of parts used in eAxle will further decrease, so it
can be said that the investment will also go down. I hope you will understand that we canachieve the same capability using low-cost lines without making a large investment. We wouldlike to overcome cost competition through these efforts.
Q11. When conventional parts are replaced with eAxle, some products, such as inverters, will
be supplied by other companies and the added value will decrease as the marginal profit
decreases, I think. But can the total bottom line margin be maintained due to thedecrease in capital investment?
A11. We would like to reach a close line. As the total sales will decrease, the profit amount may
decrease. But, we would like to bring the profit margin to the same level.
Q12. Do I understand correctly that you want to make up the total by adding other electrified
products?
A12. Yes, your understanding is correct.

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