Annual 14

8/18/2019 Annual 14

1/48

Annua l Report 2014

Disclaimer

Thi s ann ual r epo rt co nta ins fo rw ard -lo okin g stat eme nts re gar din g futu re

plans, strategies, and operating performance forec asts and estimates

for Daihatsu and its subsidiaries and affi l iated companie s. Statements

that are not historical facts are exp ectations derived from manage ment’s

assumptions and opinions based on its judgment of information available as

of the date of this report. Such statements contain risks and uncertainties

that include but are not l imited to economic fluctuations, seve re competition

in automobile markets, market demand, exchange rates, ta xation systems

and changes in various other systems. Consequently, the reader should

understand that actual performance may differ from forecast results.

01 About Daihatsu

14 Corporate Governance /Corporate Social Responsibility

04 Close-Up I – Daihats u’s Advantage

46 Corporate Data

02 Business Overview

16 Consolidated Financial Information

06 Close-UpII – Strengthening our Business Base

12 Consigned Production and OEM Business

13 Production and Sales Data

Click each title to go to that page.

Contents

http://xn--cc_ar14_e_0926_%28%29nb-pz5rxr656j6hhoqogylm926b.pdf/http://xn--cc_ar14_e_0926_%28%29nb-pz5rxr656j6hhoqogylm926b.pdf/http://xn--cc_ar14_e_0926_%28%29nb-pz5rxr656j6hhoqogylm926b.pdf/

8/18/2019 Annual 14

2/48

Daihatsu Motor Co., Ltd. (hereafter, “the Company”) was established in 1907 through a consortium of industry and academia to

develop a domestically manufactured internal combustion engine. Since then, the Company has considered that its mission is to

“make compact cars that appeal to consumers all over the world” and it has thus developed its bus iness. In 1998, Toyota Motor

Corpora tion (hereaf ter, “Toyota”) acquired a majori ty of Daihatsu stock and became our parent company. Today, as a member of

the Toyota Group, Daihatsu makes fuel efficient, affordable cars and value-added cars in its three business division – domestic

business, overseas business, and consigned production and OEM business.

This business is respons iblefor localized production andmarketing in Indonesia andMalaysia and is working to builda stronger business foundation.

Overseas Business

¥ 1,913.2billion

Sales

20%

As a member of the ToyotaGroup, we are engagedin consigned production, joint development and OEMsupply (products under

a customer company’sbrand).

Consigned Production and OEM

30%

This business chiefl yhandles development,manufacture andmarketing of compactcars, among which minivehicles are our mainstayproduct.

Domestic Business

50%

Strengths of DaihatsuSales Breakdown (fiscal year ended March 31, 2014)

30.9%

Eight Consecutive Years Eight Consecutive Years

In the year ended March 31, 2014(April 1, 2013 to March 31, 2014), minivehicles accounted for about 40% ofthe Japanese automotive market. Inthe mini vehicle market, we have hadthe top share for eight consecutiveyears. A major reason for this is ourproprietary e:S Technology, whichenables low fuel consumption at anaffordable price.

Mini Vehicle Sales Sharein Japan

Production Sharein the Indonesian Market

Sales Sharein Malaysia

(Years ended March 31, 2007 – 2014) (2006 – 2013*)

*Daihatsu research

43.6%

Year ended March 31, 2014

Including consigned production,Daihatsu’s Indonesian plantsproduced 550,000 units, makingus the automaker with the highestproduction share. At our plant thatbegan operation in October 2012,we established an R&D center for thepurpose of local development that isequipped with Indonesia’s first testcourse.

29.9%

Perodua Manufacturing Sdn. Bhd., a joint venture betwe en the Malaysia ngovernment and Daihatsu that producesthe “Perodua” national car is growingsteadily and has achieved the top marketshare in Malaysia for eight consecutiveyears. To strengthen internationalcompetitiveness, we continue to reinforcethe company’s structure and reduce costs.*Perodua’s fiscal year: January – December

About Daihatsu 01

8/18/2019 Annual 14

3/48

In the year under review (ended March 31, 2014), in the mini vehicles

market in Japan, even though the sales environment was harsh

with each company rolling out new products, new record highs

were achieved due to the industry’s revitalization and last-minute

demand before the consumption tax increase. Following the fuel-

efficient and affordable Mira e:S, the Company announced the Move,

which focuses on core and advanced performance at low cost. The

Company’s domestic sales during the year were, just like the market,

record breaking. We also maintained our top market share thanks to

the successful model change of the Tanto, a car that provides added

value tailored to vehicle characteristics.

The Indonesian automotive market, a major business for the

Company, continues to grow in step with the country’s economic

growth. In the fiscal year ended March 31, 2014, although the rupiah,

Making Cars with the Goal

of Becoming the Leading

Compact Car Company

Chairman

Koichi InaPresident

Masanori Mitsui

the local currency, continued to depreciate, the market recorded

record-breaking demand. Sales of PT Astra Daihatsu Motor (hereafter,

“ADM”), a consolidated subsidiary, was strong to record historical high

buoyed by the newly launched compact car Ayla.

Amid intensify ing competition as global automakers begin

stepping up their market efforts, ADM has fought to survive, increased

its production capacity, reinforced the production system of its

engine factory, and expanded collaboration with the Toyota Group

by exporting Toyota’s consigned production model with the goal of

creating a strong automotive market,

In Malaysia, another of our overseas markets, a mature

automotive market that differs from Indonesia is taking shape. Perodua

Manufacturing Sdn. Bhd. (hereafter, “Perodua”), a consolidated

subsidiary of Daihatsu, has been conducting business and has

attained the highest market share in a market where sales have been

strong. Taking into account the future liberalization of the Malaysian

market, Perodua is focusing on the reinforcement of its management

structure and cost reduction. In the fiscal year ending March 31, 2015,

a new factory will begin operation and new car models are scheduled

2011

Fuel efficient/ Low cost

Core performance/ Advanced

performance

The ultimate in freespace

The essentialmini vehicle

The standardmini vehicle

The diverse mini vehicle(Added value)2012

2013

Sales andProfits Up

(New record highs)

for production.

In this way, Daihatsu is developing resource-focused

businesses in the three countries of Japan, Indonesia and Malaysia.

In order to deliver appealing products to customers in each country,

we established the Kurume Development Center in the year ended

March 31, 2014 and are working on the development of auto-making

technology, the basis for such products.

Initiatives in the Fiscal Year Ended March 31, 2014 (April 1, 2013 – March 31, 2014)

Augus t 2014

TantoMoveMira e:S

Business Overview

Net salesRecord high for secondconsecutive year

Operatingincome

Record high for fourthconsecutive year

02

8/18/2019 Annual 14

4/48

Daihatsu’s vision is to become the company that is closest to

customers not only as Japan’s leading mini vehicle maker, but as

the world’s leading compact carmaker. As Japan is now in an “era

selected by customers,” a business model that swiftly accommodates

customer preferences is needed.

Daihatsu, perceiving Japan, Indonesia, and Malaysia as a solid

business base, has taken steps to construct such a business model.

The Company will accelerate product and technological development

and strengthen its global competitiveness while promoting the

production of compact cars, primarily mini vehicles, in Japan and

overseas, thereby expanding its business domain.

Medium- to Long-Term Approach

Building a solid foundation for business in Japan, Indonesia and Malaysia

Expansion of business domain with compact car production

Acceleratingproduct andtechnological

development

Working hard

to get closer

to customers

Strengthening

global

competitiveness Please see Close-Up and

on the next page for details.

□ Accelerate and achieve domestic and overseas initiatives

□ Shift resources to foc al themes and treat them as top priority

The market for mini vehicles in Japan in the fiscal year endi ng March31, 2015 is expected to d ecline from the previous year’s record-

breaking performance amid consumer reaction to the consumption

tax increase and last-minute demand prior to the tax hike on mini

vehicles. Despite these conditions, Daihatsu raised its mini vehicle

sales target to 660,000 units due to the launch of six new models. In

June, the Company announced the Copen mini convertible sports

vehicle and began innovating new sales and services.

The Indonesian market, which had record-breaking sale s in

the previous fiscal year, although beset with economic uncertainty

including the ongoing depreciation of the rupiah, competition is

heating up due to the sales of competing models of other automakers,and is thus a difficult market. ADM is conducting sales centered

on Ayla, a compact passenger car, and is increasing the local

procurement of parts, further lowering the cost of production, and

reducing costs. It is moving ahead with the expansion of its engine

production line capacity, which is scheduled to begin operation in

2015. In June, ADM announced that it was increasing the markets to

which it exports Toyota branded consigned production cars.

Although the Malaysian mar ket appears to be strong, we must

keep a close watch on the trend toward membership in the Trans-

Pacific Partnership (TPP). If Malaysia joins the TPP, the competitive

environment will further intensify with the liberalization of theautomotive market. Perodua thus began operating a new plant in mid-

2014 and is enhancing its ability to compete in overseas markets.

It is building a solid foundation by continuing its past structural

improvement efforts, such as the improvement of existing plants

and construction of a new engine production plant, along with cost

reduction activities.

Business Overview

Initiatives in the Fiscal Year Ending March 31, 2015 (April 1, 2014 – March 31, 2015)

03

8/18/2019 Annual 14

5/48

Simple, Slim, and Compact Production System

Conceptual Diagram ofe:S Technology

Production Innovation

Oita (Nakatsu) Plant No. 2 of Daihatsu Motor

Kyushu Co., Ltd. began operating in 2007 and is

the first plant in Japan to specialize in mini vehicle

production that completely simplifies facilities and

consolidates work based on the SSC concept.

While its production capacity is equal to that

of the No. 1 Plant, it occupies nearly half of the

building space and cost about 40% less. In 2008,

we started up an engine plant exclusively for

mini vehicles in Kurume City, Fukuoka Prefecture

and consolidated our production base. By

Returning to the original idea of a mini vehicle

as an everyday car, we tackled the proposition

of creating a fuel efficient, low-cost car – the

essence of a mini vehicle – that is gasoline-

powered. The result was the Mira e:S, a mini

passenger car released in 2011, with both a low

fuel consumption of 30km per liter (in JC08 mode)

and a low price tag of ¥795,000. We changed

every facet of existing technology that is not

dependent on hybrid car or electric car systems,

and came up with our proprietary e:S Technology

e:S Technology is a fuel consumption technology

that came into existence when it was noted that

70% or more of the energy generated at the

time of gasoline engine combustion is lost. e:S

Technology reduces this energy loss because

it focuses on rigorously fine-tuning existing

Reducing costs through production system innovation under the

concept of Simple, Slim and Compact (SSC). Toward resources for new

product and technological development

In 2011, the fuel-efficient, low-cost Mira e:S – the essential mini vehicle –

was released.

Low-fuel Consumption e:S Technology: the Basis of

our Future Car ProductionShiga Head (Ikeda) Plant

Kyoto Plant

Shiga (Ryuo) Plant

Comparison of Oita No. 1 and No. 2 plants

*Production capacity is annual production with two shifts of fixed intervals; figures are estimates.

Production capacity

Capital investmentBuilding area

Reduction

Same

40% (approx)

50% (approx)

Plant No.2

230,000units

¥23.5billion50,000m2

Plant No.1

230,000units

¥40.0billion110,000m2

Overview of Engine Production Plant

* Production capacity is annual production with two shifts of fixed intervals; figures are estimates.

Production capacity (annual)

Capital investment

Building area

Kurume

216,000engines

¥10.0billion

13,000m2

Shiga

1.3million engines

317,000m2

Kurume Plant and Shiga No. 1 PlantComparison with KF-type Engine Line

Total

Processing / assembly

Capital investment

Volume

Line length

Number of processes

Reduction

40％(approx)

60％(approx)

50％(approx)

20％(approx)

Reduced transportation energy

costs by about 75% byconsolidating production base

Reduced to

150min. Oita

Kurume

Oita (Nakatsu) PlantNo.1/No. 2

Kurume engine plant

3 daysby ship from Shiga

Mira e:S Released

Engine that constric ts energy loss to

maximum limit through frictional resistance

Transmission that constricts energy loss to

maximum limit through drive

Body structure that is both light

and manages heat

Aerodynamic technology that

constrains energy loss caused

by air resistance during driving

Uses idling function prior to

stopping

Electrical generation that

constrains energy los s to

maximum limit

consolidating the production base, we achieved a

highly efficient domestic production system with

lower transportation costs and time. The new

production method also saved space and reduced

our environmental impact. These production

innovations have been deployed in each of our

plants in Japan, Indonesia, and Malaysia and the

cost savings are being used in the development of

new products and technologies, which has led to

more appealing products and environmental and

safety technology improvements.

technology in light of modifications made to the

evolution of the power train, car body, and energy

management systems in order to draw out the

maximum potential of gasoline.

that brings back the essential character of the mini

vehicle. This low fuel consumption technology is

the basis of our future fuel-efficient and affordable

car production.

Ⅰ Daihatsu’s AdvantageClose-Up 04

8/18/2019 Annual 14

6/48

Progress and Development of e:S Technology that Aims for Fuel Efficiency and Low Cost

Move, which is based on the Mira e:S with its fuel efficiency and

low cost – the essential characteristic of a mini vehicle – has raised

combustion efficiency and achieved even greater fuel efficiency.

After equipping Move with our collision avoidance support system,

an advanced technology used for the first time in a mini vehicle,we launched it as “the essence of a mini vehicle” and set it at an

affordable price. The Tanto, a completely new model, was released

in 2013 as our first shot at making a mini vehicle that incorporates

the latest e:S Technology from stem to stern and adding mini vehicle

diversity as a value. In addition, thanks of the further evolution of e:S

Technology, the 2014 Mira e:S has lowest-ever fuel consumption for a

gasoline-powered car at 35.2km/L.

With its steady economic growth, Indonesia needs the spread

of fuel-efficient, low-cost cars throughout the country. In 2013, the

Indonesian government announced the Low Cost Green Car (LCGC)policy, and so Daihatsu launched the Ayla, a compact car compliant

with that policy, to gain an advantage on rival automakers’ product

launches. The Ayla is the Indonesian model with a low price tag and

high fuel efficiency that utilizes the same approach as e:S Technology.

2011

30.0km/L*1

Multilayered Fuel Effi ciency in aGasoline-powered Car

Development of e:S Technology

The Mir e:S , the

first model to use

e:S Technology

2014

Further Evolution

2013

Developed with sameapproach as e:S Technology

First time incorporatedoverseas in Indonesian

model Ayla

35.2km/L*5

Mira e:S has the top fuelefficiency for a gasoline-

powered car at

2013

Latest Evolution of e:STechnology

Incorporated in Tanto 2012

Evolution of e:STechnology

Adoption in Move Incorporated in Mira e:S

■ Adheres to more than the Mira e:S a “design

quality improvement” approach that brings out the

maximum potential of the components and offers

low fuel consumption at a low price

・Substantially reduced the number and size of instrument

panel components

・Raised local procurement ratio to 85%

・Uses newly developed 1000cc engine that thoroughly

reduces energy loss and raises combustion efficiency due

to evolution of power train

・Raised fuel economy performance through lighter weight

with streamlined shell body frame

Points (2013/ Ayla )

■ Incorporates all of the latest e:S Technology, giving

it the lowest fuel consumption of mini vehicles

Among the evolution of the power train, the

car body, and energy management of e:S Technology, the car body has evolved the most.Combined with dramatically evolved aerodynamicperformance and other factors, it achieves lowfuel consumption of 28km/L (in JC08 mode).

■ By making the outer panel plastic,integrated molding for the back door andrear spoiler takes advantage of greatermolding freedom and reduces weight andlowers cost

Points (2013/ Tanto )

Other

■ Focusing on evolution of energy management

For thermal management, use of a Continually Variable Transmission (CVT ) thermo-controller forthe first time in a mini vehicle*2, and improvement ofcombustion efficiency through combustion controlusing separate cylinders

■ Evolution of improvements made to the power trainand the car body

Fuel economy reaches 29.0km/L, the top of itsclass, up from the previous 27.0km/L*3

■ First mini vehicle*2 to be equipped with theSmart Assist collision avoidance supportsystem

■ Superior suspension enables stable, quietdriving experience

■ Entry price: ¥1.07 million

Points (2012/Move)

Other

*1 JC08 mode 2WD*2 As of December 2012/Daihatsu research*3 As of December 2010/Daihatsu research*4 As of July 9, 2014

Gasoline-powered cars excluding hybrid vehicles/Daihatsuresearch

*5 JC08 mode fuel consumption for 2WD (Test values fromthe Ministry of Land, Infrastructure, Transport and Tourism)

Ⅰ Daihatsu’s AdvantageClose-Up 05

8/18/2019 Annual 14

7/48

Economic and Market Trends for the fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)

Initiatives in the fiscal year ended March 31, 2014

In the fiscal year ended March 31, 2014, the Japanese economy

was on an upswing with the yen’s depreciation and high stock

prices caused by quantitative monetary easing, the first arrow under

“Abenomics” of the administration of Prime Minister Abe, and notably

active consumer spending in the first half. Nevertheless, as a result ofthe consumption tax law enacted in August 2013, the consumption

tax was raised to 8% in April 2014. The last-minute demand before

the consumption tax increase and consumer reaction to it indicated

concern that the anticipated economic recovery would run out of gas.

In the fiscal 2014 tax amendments, the vehicle excise tax rate was

lowered and eco-car tax cuts were expanded, but the tax on mini

vehicles is to be raised in April 2015.

In this economic environment, due to the release of mini

vehicles with high product appeal by each automaker, as well as last-

minute demand caused by the consumption tax increase, we set a

new record of 2,262,000 (up 15% year on year) vehicles sold, despite

an increasingly harsh sales environment in the fiscal year ended March

31, 2014. In recent years, with mini vehicles becoming increasinglyappealing and compact cars getting smaller in size, the marketability

of mini vehicles has become highly regarded, with mini vehicles sales

now accounting for approximately 40% of automobile sales.

The Tanto is a car model that created a new market in 2003 by

establishing the “more space market” within the mini vehicle market,

with unparalleled space that challenges what was previously thoughtnormal for a mini vehicle. In October 2013, Daihatsu introduced

a brand new model that incorporates the latest e:S Technology

throughout the entire car. Based on the essential characteristics of

a mini vehicle – low fuel consumption and an affordable price – that

were developed in the Mira e:S, we perfected our image that aims for

various open spaces in the mini vehicle by increasing the added value

of the car with unparalleled interior space and insisting on total user-

friendliness. This is the one and only mini vehicle with the easy-to-

use “miracle open door” that we made even more user friendly, and it

Brand Sales (units) Share (%)

Daihatsu 698,840 30.9

Suzuki 646,979 28.6

Honda 434,321 19.2

Nissan 225,638 10.0

Mitsubishi 91,341 4.0

Subaru 57,808 2.6

Mazda 63,116 2.8

Toyota 43,648 1.9

Other 143 0.0

Total 2,261,834 100.0

Source: Japan Mini Vehicles Association

Mini Vehicles Units Sold and Share (fiscal year ended March 31, 2014)

600

400

500

300

200

100

0

(ten thousand of units)

569

226

Automotive market

Mini vehicles

2009 20142013201220112010

(Years ended March 31)

Market/Mini Vehicle Sales (fiscal year ended March 31, 2014)

Tanto’s HistoryTanto undergoes full model change by incorporating the latest e:S Technology Tanto

Market grows as competitors launch new mini vehicles

Establishment of“more space market” Compact car zone

Conventional mini vehicle zone

Vehicle size

Space

is number one*1 in providing a feeling of openness in a mini vehicle, a

point that we took great pains to achieve. Aerodynamic performance

has evolved dramatically with the plastic outer panel and pedestrianprotective performance has improved. Fuel consumption is a low

28.0km/L.

As a result of enhancing the car by incorporating the evolving e:S

Technology in a series of flagship models, Daihatsu sal es, especially

of the Tanto, were strong with 699,000 units sold (up 7%), marking the

eighth consecutive year with the number one market share. The Tanto,

recognized for this high product performance, achieved the highest

sales in the entire market consecutively in April and May 2014.

*1 Daihatsu research

Ⅱ Strengthening our Domestic Business BaseClose-Up 06

8/18/2019 Annual 14

8/48

Even though maintaining high standards, the mini vehicle market is

becoming increasingly harsh due to competition between companies.

As the leading mini vehicle maker, we are enhancing both our product

and sales activities.

There are two points in the area of product appeal. The first

is the focus on low fuel consumption and low price, the essential

elements of a mini vehicle. The power train and platform, which dictate

the core performance of mini vehicles, are becoming increasingly

important as core technologies not only for Japan’s mini vehicles,

but for products aimed at emerging countries. We are pursuing the

development of these core technologies with Japan as our base,

which will contribute to increasing product appeal in each country.

The second is to address the diversifying needs that

accompany the growth of the mini vehicle market. We will provide

new added value through products that closely match specific needs,

such as helping customers select the Tanto best suited for parenting,

an approach that has met with some success. The Copen mini

convertible sports vehicle, our latest model, and the idiosyncratic

Mira Cocoa for individualistic female customers have been very well

received. We will continue to propose new vehicles that meet the

potential needs of the future.

Turning to sales, we took a new approach starting with the

Copen. Up until now, the main point of contact that mini vehicle car

dealers had with customers had been new car sales and vehicle

safety inspections throughout the country. From this point forward,

we will conduct community-based sales activities and improve

communication with customers while reflecting their feedback in our

business. In the Japanese market where change is rapid, we want to

remain a leading company that senses change before it occurs and

initiates change on its own.

The new CopenReleased June 2014

New values achieved with the new Copen

• Exciting driving performance

•

Car that expresses your individuality

Attained with f rameand plastic outerpanel structure

Initiatives in the fiscal year ending March 31, 2015 (April 1, 2014 to March 31, 2015)

Future Direction

In the fiscal year ending March 31, 2015, in the Japanese market we

began our initiatives with the goal of attaining sales of 660,000 units

by launching six new models. The first model to be launched was the

brand new Copen mini convertible sports vehicle in June. The Copen

represents our second attempt at embodying the added value of a

mini vehicle. After much thought we came up with the idea of building

a car that offers exciting driving performance and expresses the

drivers’ individuality.

As a result, we achieved these based on the concept of a

frame with a plastic outer panel structure. The new “D-Frame” frame

structure ensures the high rigidity with only a frame that is desired

in a sports car. The changeable interior and exterior structure called

DRESS-FORMATION overturns the fixed idea that the design of a

car is difficult to change after purchase and enables the design to

be changed according to the customer’s preferences even after

purchase.In July, the Mira e:S was partially upgraded and launched.

e:S Technology has evolved further and achieved even greater fuel

efficiency. With the evolution of the power train, we raised thermal

efficiency by adopting a higher compression ratio, the Atkinson

cycle*1, and dual injectors. With the evolution of energy management,

we increased generated electric power by improving ecological power

generation control and thereby achieved the lowest*2 fuel consumption

of 35.2km/L*3 for a gasoline powered-car.

The Company believes that low fuel consumption and an

affordable price are essential factors required in all mini vehicles and

will aggressively pursue them in the years ahead.

Among the four models schedul ed for release, one model is

based on the DECA DECA, which was exhibited as a demonstration

sample at the 2013 Tokyo Motor Show, and it will meet customer

preferences with a full lineup.

*1 Internal combustion engine that increases the expansion ratio more than the compression ratio, and raisesthermal efficiency.

*2 As of July 9, 2014. Gasoline-powered cars excluding hybrid vehicles (Daihatsu research).*3 JC08 mode fuel consumption for 2WD (Test values from the Ministry of Land, Infrastructure, Transport and

Tourism).

Six new models launched

Promote Innovation in both Sales and Development Fields

Copen Local Base Kamakura

Ⅱ Strengthening our Domestic Business BaseClose-Up

Mira e:S

07

8/18/2019 Annual 14

9/48

The population of Indones ia is 254 million and is increasing yearly

as the economy grows. On the other hand, its economic growth

rate declined from 6.5% in 2011 to 5.8% in 2013. In August 2013,

Indonesia’s financial market was hit by fears of a contraction of the

United State’s quantitative easing policy and the local currency hit

a new low for the first time in four years, reaching the same level it

was directly after the economic downturn precipitated by Lehman

Brothers’ collapse. Therefore, the Indonesian economy is viewed

with uncertainty. However, amid a slowdown in economic growth, the

nominal GDP per capita in 2013 was US$3,500 and generally, when

the nominal GDP surpasses US$3,000, it is considered a time when

people shift to buying four-wheel vehicles, which Indonesia reached in

2011. Automobile demand is a deep-seated trend that is continuing.

(Source: Indonesian government statistics)

A unique characteristic of the market is that the MPV segment,

which is focused on the Daihatsu Xenia and Toyota Avanza, haveformed a volume zone that holds about a 35% share of the total

market. However, with the Indonesian government’s enactment of

the Low Cost Green Car (LCGC) policy in 2013, a city car segment is

expected to gain prominence in the future. The Indonesian market, of

which about 90% is made up of Japanese cars, along with its strong

auto demand became more vigorous thanks to the LCGC policy. As

a result of Japanese automakers’ enhancing their products in each

segment, especially in MPV, and city cars, in the fiscal year ended

March 31, 2014 the market sold a record 1, 241,000 units (up 10%

year on year).

Despite the ongoing depreciation of the rupiah, ADM achieved record

sales of 188,000 units (up 13% year on year) by connecting with the

Indonesian market, which set a new record. Contributing to the record

sales was the Ayla, an LCGC compliant model announced ahead of

competitors in September 2013. The Ayla is based on e:S Technology

developed in Japan’s Mira e:S and is a fuel efficient and affordable car

that fully incorporates the needs of the Indonesian market under a joint

development system with ADM.

Indonesian automotive market is growing as its economy grows

Announcement of Ayla , the first model compliant with the Indonesian government’s LCGC policy

In anticipation of increased production volume, ADM raised its

annual production plant capacity for the Ayla and Xenia in January

2014 from 120,000 units per year (under two shifts of fixed intervals)

to 200,000 units. As a production and export base for the Toyota

Group, we are responsible for OEM supply and consigned production

to Toyota. However, in February, we fulfilled the important role of

beginning exports of the LCGC model AGYA to the Philippines for

OEM supply.

Xenia

Daihatsu’s Progress

Started production on Complete Knock Down (CKD) basis*Export model in which the components of a vehicle are exported to an overseaslocation and then assembled there

1968

Establishment of the vehicle-manufacturing companyPT Astra Daihatsu Motor (ADM), a joint venture with AstraInternational(at present, Daihatsu holds a 61.75% stake)

1992

In line with growing demand, construction of secondassembly line, increasing annual production capacity t o200,000 units (under two-shifts of fixed intervals)

2007

New plant comes on-stream with annual productioncapacity of 120,000 units, increasing overall annualproduction in Indonesia to 430,000 units (under two shiftsof fixed intervals)

2012

Ann ounc ed ex pan sio n of pa sse nge r car e ngin e prod uct ionline (scheduled for operation in summer 2015)

Ann ounc ed th e com pac t pas sen ger ca r Ayla , whic h iscompliant with the LCGC policy

2013

Raised annual production capacity to 530,000 units as awhole (under two shifts of fixed intervals)

2014

120

90

60

30

0

(ten thousand of units)24

18

12

6

0

(%)124.1

15.1%

18.8

■

■

Indonesian market

Daihatsu salesDaihatsu share (right)

2009 20142013201220112010


Market/Daihatsu Sales and Share in Indonesia(fiscal year ended March 31, 2014)

Initiatives in the fiscal year ended March31, 2014 Ayla

Ⅱ Strengthening our Indonesian Business BaseClose-Up

Economic and Market Trends for the fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)

08

8/18/2019 Annual 14

10/48

Initiatives in the fiscal year ending March 31, 2015 (April 1, 2014 to March 31, 2015)

Future Direction

In the fiscal year ending March 31, 2015, the Indonesian market

forecasted 1,300,000 units, a slight increase of 5% year on year.

However, our concerns are more about the effects of the ongoing

depreciation of the rupiah from the previous fiscal year on parts costs.

With competition heating up from the successive release of new

models by every company, we expanded sales focusing on the Ayla

and seek to maintain momentum that will enable us to exceed market

growth with sales of 210,000 units (a 12% increase year on year).

We will also conduct an aggressive sales promotion of the Xenia,

showcasing the advantages of an FR vehicle that make it suitable for

Indonesian weather and climate.

To generate additional profit, we will further raise the current

local procurement ratio of 85% for the Ayla and implement cost

reduction activities for each model.

In June 2014, we added seven countries including Saudi

Arabia, Oman, and Kuwait as destinations for the expor t of the Toyota Avanza in the Middle East. We will mitigate currency exchange risks

that accompany export expansion and also contribute to Indonesian

export industries.

The R&D Center, which partially opened in the new plant in 2012, is

comprised of a design building, a design experimentation building,

and Indonesia’s first test course. The design experimentation building

and the test course’s rough course are scheduled to open in 2014. In

the development of the Ayla, our approach to auto making that insists

on localization in all aspects has gained a favorable reception, but

the R&D Center has enabled product and technology development

that goes a little further in adopting local market needs. Turning this

potential into reality and responding to customer feedback is the next

Expanded cooperation with the Toyota Group, which recognizes ADM’s global quality

Promote localized product and technology development using test course-equipped

R&D center

initiative we will undertake in the Indonesian market. In the summer of

2015, we will expand the capacity of our state-of-the-art production

line at the existing engine factory, raise cost competitiveness and

quality, and further strengthen the Indonesian business.

Turning to exports, ADM is improving its quality in ever y field of

development and production. We want to increase in global quality

which gains Toyota’s acceptance.

R&D Center

New Karawang Assembly Plant

Ⅱ Strengthening our Indonesian Business BaseClose-Up 09

8/18/2019 Annual 14

11/48

Economic and Market Trends for the fiscal year ended March 31, 2014 (January 1, 2013 to December 31, 2013)

Initiatives in the fiscal year ended March 31, 2014

Malaysia has a population of approximately 30 million, of which about

67% are ethnic Malays. The economic growth rate dropped sharply

and was minus in 2009 due to the sudden decrease in exports

following the global financial crisis in 2008. From the second half of

2010, growth was on a slight decelerating trend caused by sluggish

foreign demand, but was 4.7% in 2013. Nominal GDP per capita in

2013 was US$10,548 and exceeded US$10,000 in 2012, high among

ASEAN countries (Sou rce: Malaysian Investment Development

Authority/IMF ).

As an automotive market, the Malaysian market has already

matured, but looking at its GDP per capita, it appears that modest

growth can be expected. Currently, Malaysia continues to debate

participation in the Trans-Pacific Partnership (TPP), so we need to

keep an eye on what impact it has on the automotive industry. In

a market where national cars* had held about a 60% share, it is

acknowledged that a major trend is afoot in this automotive marketwith the emergence of non-national car makers launching low cost

cars and the promotion of energy-efficient vehicles (EEV) through

Malaysia’s national automotive policies. Under these circumstances,

656,000 cars were sold (up 4% year on year) in the Malaysian auto

market in the fiscal year end ed March 31, 2014.

Although Malaysia is not a market with a lot of future growth potential,

it undertook the Economic Transformation Programme in 2010. With

its roadmap to 2020 and specified priority investment fields, Malaysia

is taking steps to achieve its target of joining the industrialized nations,

and therefore it appears that the number of automobiles owned will

continue to increase.

Non-national car makers are also focusing on this market and,

in the fiscal year ended March 31, 2014, released low-cost cars on

the market. However, Perodua sales were solid, growing at the same

*What is the “National Car?” The “National Car” is the fruit of the “Natio nal Car Concept,” initiated by the government of Malaysia topromote national industrialization based on the automotive industry and to expand mobility options forordinary people by providing alternatives to public transport.

Keeping an eye on the Malaysian government’s automotive policies

Began preparation to operate new internationally competitive company and plant

rate as the market, and came in at 196,000 units (up 4% year on year),

marking the eighth consecutive year it has held the top market share.

These strong sales were backed by cost reduction initiatives

that Perodua has carried out at its plant since 2011. By developing

core suppliers, enhancing our competitive edge, and setting out to

discover new suppliers, we reduced costs and the resulting savings

were passed on to the Myvi and Alza.

Daihatsu has decided to operate its new vehicle production

plant as a new company under the name PERODUA GLOBAL

70

40

60

50

30

20

10

0

(ten thousand of units)

35

30

15

10

25

20

5

0

(%)

65.6

29.9%

19.6

■

■

Malaysia market

Perodua salesPerodua share (right)

2009 20142013201220112010


Daihatsu’s Progress in Malaysia

Establishment of “National Car” manufacturer Perodua (withparticipation of Daihatsu)*

Manufacture and marketing of an affordable entry-level carfor ordinary people

1993

Marketing begins of the Myvi “National C ar” developed join tly b y Pero dua a nd Da ihat su

2005

Ann ounc emen t of co nst ruc tion o f new pl ant ( sin gle-shift operation, regular working hours) with productioncapacity of 100,000 units per year (scheduled to beginoperations in mid-2014)

2012

Ann ounc emen t of co nst ruc tion o f new e ngin e prod uct ionplant (scheduled to begin operation in mid-2016)

2014

*Double-holding-company structure comprising a Malaysian government-affiliated investment company andDaihatsu with Japanese trading houses

Market/Perodua Sales and Share(fiscal year January through December)

Myvi

MANUFACTURING SDN. BHD. through Perodua’s holding company,

and it is proceeding with preparations with operation targeted for mid-

2014. As a model plant designed to produce high-quality, low-cost

cars, the new plant is making structural changes. The new company

will build a plant with a production capacity of 100,000 units (single-

shift, regular working hours), press on with the construction of a local

procurement base, and accelerate the improvement of its global

competitiveness.

Ⅱ Strengthening Malaysian Business BaseClose-Up 10

8/18/2019 Annual 14

12/48

Initiatives in the fiscal year ending March 31, 2015 (January 1, 2014 to December 31, 2014)

Future Direction

In the fiscal year ending March 31, 2015, sales of 660,000 cars (up

1% year on year) are expected in the Malaysian market and Perodua

expects to sell 200,000 cars (up 2%), both remaining firm. Although

the debate about Malaysia’s participation in the TPP is not yet over,

if it does participate in the TPP, it is essential that it further stimulate

the country’s competitive environment through market liberalization.

In order to withstand this harsh competitive environment, we decided

to produce a new car at the new plant from the middle of 2014. And

even if market liberalization is carried out, we are preparing to face it

with an unshakable management structure and production system. In

May 2014, we built a new engine production plant, announced that we

will operate under a new company established together with a local

holding company in which Daihatsu has an equity stake, and began

preparations. The new engine plant is scheduled to operate from the

middle of 2016. The entire Perodua Group will press on with structure

changes including vehicles, automatic transmissions, and engines,and will raise its global competitiveness.

Moving forward, we will improve the structure of the existing vehicle

plant by promoting, without easing up, our existing cost reductionactivities. After assessing markets trends in Malaysia, we will

reexamine the appropriate production capacity in conjunction with the

new plant.

Strengthen Perodua’s entire management structure through new plant operation

Implement initiatives to improve customer service to one that is distinctive to mature markets

Perodua

Malaysia, because it is a mature market, requires meticulous

service in the area of sales. Perodua will enhance its sales and servicein order to improve customer service, fortify its sales force and value

chain, listen to the feedback of customers, and move steadily ahead

one step at a time.

Alza

Ⅱ Strengthening Malaysian Business BaseClose-Up 11

8/18/2019 Annual 14

13/48

Consigned Production

Joint Development

OEM Supply

Production at Daihatsu plants of vehicles and engines designed by customer companies for their brands

Joint development by the customer company and Daihatsu (vehicles of customer company brands are of consigned production)

Production and supply of vehicles developed or manufactured by Daihatsu to be sold under other companies’ brands

Production in Japan

Arr ang emen t Bra nd Mod el

Consigned Production Probox / Succeed , SientaJoint Development/

Consigned ProductionToyota Passo, bB

OEM SupplyRush, Pixis Space, Pixis Epoch, Pixis Van / Truck

Subaru (Fuji Heavy) Dias Wagon, Pleo, Pleo Plus, Pleo Van, Lucra, Stella, Sambar Van / Truck

Production Overseas

Arr ang emen t Production Country Brand Production Company Model

Joint Development/ Consigned Production Indonesia Toyota ADM

Avanza

OEM Supply Rush, Townace / Liteace (for export to Japan), Agya / Wigo

Consigned Production (Engines)Engine Type Displacement Brand Models Equipped

KR*1 1000cc gasoline

Toyota

Vitz , Passo, iQ

NR* 1 1300cc gasoline Passo, iQ, Corolla, MF Yaris, Ist , Auris, Porte, Spade, Vitz , Axio

SZ *2 1300, 1500cc gasoline bB, Rush

TR 2700cc gasoline Hiace, Coaster , Land Cruiser Prado

KD 3000cc diesel Land Cruiser Prado, Hiace, Dyna, Toyoace

B 3700, 4100cc diesel Dyna, Coaster

350

300

250

200

150

100

50

0

(Thousands of units)

344

95

249

233

109

125

Domestic consigned production

Domestic OEM vehiclesOverseas consigned production

Overseas OEM vehicles

2009 20142013201220112010


Consigned Production and OEM vehicles/Production(units) (Japan & overseas)

Structure ofBusinesses

ConsignedProduction

and OEM

*1 Built into the Daihatsu Boon*2 Built into the Daihatsu Be-go and FAW Xenia

As a supplier of a wide range of vehicles and engines to Toyota and Fuji Heavy Industries (hereaf ter, “Fuji Heavy”) within the Toyota Group, wehave increased the number of such units sold in the Japanese and overseas markets to an annual total of some 580,000. Since beginning

consigned production of Toyota cars in 1969, we have expanded business to include OEM supply to Toyota, and from 2009, OEM supply to Fuji

Heavy. Total consigned and OEM production in Japan is now approximately 230,000 units per year. In overseas markets, we have increased

consigned production of the Toyota Avanza, marketed under a joint development project in Indonesia, as well as OEM supply to Toyota for the

Agya, which we began in September 2013. We now supply a total of around 340,000 units overseas, an increase of 22% year on year.

In addition to fine-tuning our production system, in years ahead, we believe we can contribute to the development of the Toyota Group

through Group member partnerships and by leveraging our unique creativity.

Initiatives in the fiscal year ended March 31, 2014 (April 1, 2013 to March 31, 2014)

Consigned Production and OEM Business 12

8/18/2019 Annual 14

14/48

,

,

1,200

900

600

300

0

,

933

690

10

233

Mini vehiclesRegistered vehiclesConsigned production and OEM vehicles

2009 20142013201220112010(Years ended March 31)

(Thousands of units),

,

,

, 800

600

400

200

0

60

45

30

15

0

30.9

699

Mini vehicles (left)Share of mini vehicle market (right)


(Thousands of units) (%)

1,600

1,200

800

400

0

,

,

1,696

699

420

344

233

JapanDomestic consigned production and OEM vehiclesOverseasOverseas consigned production and OEM vehicles


(Thousands of units),

,

,

1,200

900

600

300

0

701

405

1,106

Japan

Overseas


(Thousands of units)

1,696,330units

(up 10.9% year on year)

1,106,676units

(up 6.0% year on year)

Production

Sales

Fiscal year endedMarch 31, 2014

Global Production Units

Fiscal year endedMarch 31, 2014

Global Sales Units

Global Production Units

Global Sales Units

Domestic Production Units

Domestic Mini Vehicle Sales Units and Share of Mini Vehicle Market in Japan

Production and Sales Data (fiscal year ended March 31) 13

8/18/2019 Annual 14

15/48

Daihatsu has established the Daihatsu Group Philosophy and the

Daihatsu Group’s Basic CSR Principles in order to pursue its mission

of “making compact cars loved around the world” while achievingglobalization of the Group. Daihatsu also has distributed Daihatsu

Group Action Guidelines. In accordance with our philosophy,

principles, and guidelines, we are striving to enhance our corporate

governance in a manner that satisfies all stakeholders, including our

customers, while maintaining management operations that are fair and

highly trustworthy.

Daihatsu’s Corporate Governance System

Daihatsu has adopted the corporate auditor system. We have 8

directors (as of June 27, 2014), and the Board of Directors (which

meets once a month, in principle) makes decisions on the execution

of important operations and supervises the directors in the execution

of their duties. We also have the vice president’s meeting (which

meets once a week, in principle), with the participation of the directors

and a full-time corporate auditor, which discusses and reports on

management matters of importance. In addition, in order to respond

to the globalization of business areas and also to enhance corporate

governance and strengthen the management structure, we introduced

the executive officer system and the functional business groups

system. We are promoting the realization of “a clear delineation of

responsible parties” and “an organization that follows through on its

missions” by strengthening and speeding up the business execution

function and having each functional business group complete the

process of business execution. We are also striving toward the

strategic use of human resources by binding our organization together.

Current Status of Internal Control System andRisk Management System

Daihatsu’s internal control system reflects its adoption of a corporate

auditor system as stipulated in the Corporate Law of Japan, which

involves the supervision and decision-making on business execution

by the Board of Directors as well as auditing by the corporate

auditors and the Audit Committee. In addition, Daihatsu carries out

auditing through the Internal Auditing Department on a regular basis

to examine and evaluate activities and systems according to the

Company’s management policies from a fair and just position. The

Company is also audited by an accounting auditor, and its corporate

auditors exchange opinions with them as needed.

With the aim of improving the corporate value and assuring

the reliability of financial reports and compliance with laws and

regulations, we established the Internal Control Committee, chaired

by a director whom the president appoints and with chief officersof groups of the Company as committee members. Our Internal

Control Committee adjusts internal control systems based on the

Financial Instruments and Exchange Act and the U.S. Sarbanes-

Oxley Act and seeks to enhance the companywide internal control

system by including personal and other classified information. For

the Company’s subsidiaries and other Group companies, we ensure

the enforcement of internal control activities through the affiliated-

company management system.

For operations that require control, risk management, and

compliance in each division, in addition to the control activities carried

out regularly, we ensure internal audit activities thorough control

by means of supervision by the Export Management Committee,

the Daihatsu Environmental Meeting, the Joint Labor-Management

Conference, and the Functional Labor-Management Coordinating

Committee. For the Company’s subsidiaries and other Group

companies, we ensure the enforcement of internal control activities

through the affiliated-company management system.Daihatsu has published the Employee Action Guidelines

summarizing appropriate conduct as a corporation as well as

the basic attitude and conduct policies of employees concerning

their relationship with society, business partners, and external

organizations.

Our Group-wide e f for ts inc lude the re lease o f Ant i -

Corruption Guidelines and setting up rules for advance reporting

and consultations between the Company, the parent company, and

subsidiaries.

Internal

ControlStructure

関連会社関連会社

Monitor

Policy

Instruct

Instruct

Instruct

H e a r i n g

H e a r i n g

Report

Report

Report

Report

Report

Report

Report

Suggest

Report

CooperateInvestigate

Affiliated Companies

Audit Committee Board of Directors

Employees’ Voice(Helpline System)

Various Committees

Export, Environmental, etc.

Internal Control Committee

■ Chairman: a director whom the president appoints■ Regular committee meetings are held four times a year. Additional meetings

can be held if needed.■ All matters related to internal control are covered.

Strengthen Corporate Governance

to Maintain Fair and Highly Trustworthy Management

Corporate Governance / Corporate Social Responsibility

Each Division of the Company Control Center

(department responsible for controlof each affiliated company)

Corporate Auditors Audit

Audit Division

14

8/18/2019 Annual 14

16/48

On the occasion of establishing the new Group Philosophy,

Daihatsu has published the Daihatsu Group Action Guidelines,

which summarizes appropriate conduct as a corporation as well asthe basic attitude and conduct policies of employees concerning

their relationship with society, business partners, and external

organizations. Through these efforts, we are thoroughly implementing

compliance throughout the Group. In addition, we established the

Employees’ Voice Helpline system, whereby an employee can offer

pertinent information in anonymity, in the event that a threat of

conduct contrary to the law, social ethics, human rights, or internal

company regulations might take place in the workplace or in the case

when such conduct has already occurred. The system enables the

Company to take measures to prevent such occurrences or to take

quick actions in the event of an emergency.

Policies and Measures to Encourage the Active Role of Women

The Company proactively maintains an environment conducive to

both work and raising children in order to encourage the active role of

women. To date, the Company has introduced various programs to

assist female employees. These include the child-rearing leave system

until the age of two (which exceeds legal statutes); the shortened

hours and child-care leave system for female employees with children

up 10 years old; the maternity leave system for pregnant employees;

and the return-to-work system for female employees who must resign

due to a spouse’s job transfer. In addition, we have implemented

measures that promote the role of female employees in manufacturing

facilities, including maintaining production lines comprised entirely of

women.

In 2009, the scope of Crisis Countermeasures Group activities was approvedby the officers’ meeting to include the execution of appropriate crisismanagement in emergency situations, such as fires, accidents or scandals.

The resolution defi nes the role of each depar tment in a crisis situation, allowingappropriate judgment on crisis situations and an integrated response on aworking level as well as on a consolidated basis.

Environmental Accounting

In accordance with the Ministry of the Environment’s Environmental

Accounting Guideline s, Daihatsu maintains an awareness of

environmental-related investments and maintenance costs. In the

year ended March 31, 2014, environmental conservation costs came

to ¥12.1 billion, or 1.0% of nonconsoli dated net sales.

Information Transmission Route During Crises

Department in crisisGroup Heads or Executive Officers

(Factory Heads, Department Heads)

President

In charge of mass media support

In charge ofsupervision

In charge ofpublic relations

Crisis Countermeasures Group

Crisis CountermeasuresChief Officer

(Millions of yen)

Year ended March 31, 2014 Year ended March 31, 2013

Category Investment Cost Investment Cost

1. Business Area Cost 499 2,417 286 2,128

(1) Pollution Prevention Cost 235 1,479 135 1,249

(2) Global Environmental Conservation Cost 205 377 117 342

(3) Resource Recycling Cost 59 561 34 537

2. Upstream/Downstream Cost 0 0 0 0

3. Environmental Conservation Cost, Administrative 21 787 12 7824. Environmental Conservation Cost, R&D 393 8,053 784 6,880

5. Environmental Conservation Cost, Social Activity 0 0 0 0

6. Environmental Remediation Cost 0 3 0 2.3

Subtotal 913 11,259 1,082 9,792

Total 12,173 10,874

In charge of legal affairs,research, and information

collection

In charge of government andindustrial affairs

In charge of victim support

In charge of consumersupport

Environmental Conservation Cost

Corporate Governance / Corporate Social Responsibility

In order to foster the utilization of female employees in the

manufacturing workplace, we are working on a number of initiatives,

including women-only manufacturing lines.

15

8/18/2019 Annual 14

17/48

16Consolidated Financial Information Years ended March 31

(Millions of yen)

2009 2010 2011 2012 2013 2014

Operating performance

Net sales 1,631,395 1,574,727 1,559,412 1,631,320 1,764,976 1,913,259

Operating income 38,191 40,747 103,443 115,462 133,040 146,743

Net income 22,074 21,162 52,555 65,138 81,406 83,698

R&D expenses 44,209 43,734 38,227 33,830 35,701 46,482

Capital investment*1 76,700 36,745 40,614 69,336 73,181 97,339

Depreciation*1 83,654 72,945 63,728 61,072 56,244 59,601

Cash flow

Cash flows from operating activities 76,087 132,011 144,107 205,815 129,788 139,383

Cash flows from investing activities (84,611) (47,234) (42,022) (60,673) (65,125) (125,151)

Cash flows from financing activities 3,157 (37,521) (27,791) (37,831) (38,556) (22,434)

Free cash flow*

2

(8,524) 84,777 102,085 145,142 64,663 14,232

Financial position

Total assets 1,098,368 1,134,105 1,102,981 1,277,415 1,344,542 1,449,542

Total net assets 365,114 396,332 448,332 504,329 591,750 665,617

Financial indicators (%)

Return on equity 6.8 6.4 14.5 16.0 17.5 15.9

Equity ratio 29.2 30.2 34.8 33.7 37.2 38.0

Per share information (¥)

Net income-basic 51.80 49.66 123.34 152.86 191.05 196.41

Cash dividends 12.00 12.00 30.00 45.00 56.00 56.00

Other indicators

Number of employees 39,019 39,985 39,760 40,076 39,862 40,761

*1 Excluding assets for lease.

*2 Free cash flow is the sum of cash flows from operating and investing activities.

C lid d Fi i l I f i

8/18/2019 Annual 14

18/48

17Consolidated Financial Information Years ended March 31

2,000

1,500

1,913.2146.7

.

.

. .

, .

.

.

.

1,000

500

0

160

(Billions of yen) (Billions of yen)

120

80

40

0

,

,

Net sales (left axis)Operating income (right axis)

2009 20142013201220112010


,

,

, ..

97.3

59.6

. .

, .

.

.

.

,

100

80

60

40

20

0

(Billions of yen),

,

2009 20142013201220112010

Capital investmentDepreciation


,

,

, ..

.

.

. .

1,449.5

.

.

.

,

1,600

1,200

800

400

0

(Billions of yen)

2009 20142013201220112010

Total assets


,

,

, ..

.

.

. .

, .

.

665.6

38.0

,

600

450

300

150

0

40

(Billions of yen) (%)

30

20

10

0

,

,

Net assets (left axis)Equity ratio (right axis)

2009 20142013201220112010


,

,

, ..

.

.

83.6 .

, .

15.9

.

.

,

100

60

40

20

0

20

(Billions of yen) ( % )

12

80 16

8

4

0

,

,

Net income (left axis)Return on equity (right axis)

2009 20142013201220112010


,

,

, ..

.

.

. 46.4

, .

.

.

.

,

50

30

40

20

10

0

(Billions of yen)

,

,

R&D expenses

2009 20142013201220112010


C lid t d B l Sh t

8/18/2019 Annual 14

19/48

18Consolidated Balance Sheet March 31, 2014 and 2013

Millions of yen

2014 2013

ASSETS

Current assets:

Cash on hand and in banks ¥ 150,341 ¥ 119,079

Deposits208,316 205,742Trade notes and accounts receivable 309,786 283,550

Electronically recorded monetary claims-operating 6,159 5,272

Merchandise and finished products 30,733 35,069

Work in process 16,489 15,749

Raw materials and supplies 25,564 25,986

Deferred tax assets 28,672 29,420

Others (5) 79,140 75,610

Less allowance for doubtful accounts (1,644) (1,468)

Total current assets 853,559 794,013

Fixed assets:Property, plant and equipment:

Buildings and structures, net (2) (4) 148,168 141,423

Machinery, equipment and vehicles, net (2) (4) 129,153 121,632

Land (2) (4) 129,839 128,561

Construction in progress 30,681 11,958

Others, net (4) 30,149 32,738

Total property, plant and equipment (1) 467,991 436,314

Intangible fixed assets 6,940 7,573

Investments and other assets:Investment securities (2) (3) 96,017 84,494

Long-term loans receivable 845 1,929

Deferred tax assets 18,270 14,474

Net defined benefit asset 452 —

Others 5,726 6,036

Less allowance for doubtful accounts (261) (294)

Total investments and other assets 121,051 106,640

Total fixed assets 595,982 550,528

Total assets ¥1,449,542 ¥1,344,542

9C lid t d B l Sh t

8/18/2019 Annual 14

20/48

19Consolidated Balance Sheet March 31, 2014 and 2013

Millions of yen

2014 2013

LIABILITIES

Current liabilities:

Trade notes and accounts payable ¥ 214,708 ¥ 196,247

Electronically recorded monetary claims 66,493 100,991

Short-term debt (2) 113,901 116,220 Accrued income taxes (5) 22,353 24,087

Accrued expenses 82,616 79,466

Provision for bonuses for directors and corporate auditors 454 419

Provision for product warranties 15,769 12,314

Others 114,752 98,293

Total current liabilities 631,050 628,040

Long-term liabilities:

Long-term debt (2) 59,805 49,089

Deferred tax liabilities 2,532 4,153

Provision for retirement benefits for employees — 64,207

Provision for retirement benefits for directors and corporate auditors 1,650 1,540Net defined benefit liability 83,265 —

Others 5,620 5,760

Total long-term liabilities 152,873 124,751

Total liabilities 783,924 752,791

NET ASSETS

Shareholders’ equity:

Common stock 28,404 28,404

Additional paid-in capital 10,949 10,896

Retained earnings 514,793 454,978

Treasury stock, at cost (610) (667)

Total shareholders’ equity 553,536 493,611

Accumulated other comprehensive income

Net unrealized holding gain (loss) on securities 18,382 15,390

Deferred gain (loss) on hedges (14) (71)

Foreign currency translation adjustments (7,521) (8,280)

Remeasurements of defined benefit plans (13,342) —

Total accumulated other comprehensive income (2,496) 7,038

Minority interests 114,577 91,099

Total net assets 665,617 591,750

Total liabilities and net assets ¥1,449,542 ¥1,344,542

20C lid t d St t m t f I m

8/18/2019 Annual 14

21/48

20Consolidated Statements of Income March 31, 2014 and 2013

Millions of yen

2014 2013

Net sales ¥1,913,259 ¥1,764,976

Cost of sales (1) 1,481,630 1,367,910

Gross profit 431,628 397,065

Selling, general and administrative expenses:

Sales incentive 23,268 25,857

Packing and transportation expenses 12,257 10,719

Advertising expenses 27,436 24,502

Provision for product warranties 12,800 10,100

Other selling expenses 48,936 36,237

Salaries and bonuses 81,969 78,602

Legal and employee benefits expenses 15,793 15,233

Retirement benefit expenses 3,961 3,741

Depreciation 15,586 14,284

Provision of allowance for doubtful accounts 669 311

Others 42,205 44,435

Total selling, general and administrative expenses (1) 284,885 264,025

Operating income 146,743 133,040

Other income:

Interest income 6,254 4,171

Dividend income 939 879

Gain on sales of fixed assets 469 249

Equity in earnings of affiliates 6,429 5,812

Foreign exchange gains 3,022 2,887

Miscellaneous income 4,891 6,472

Total other income 22,006 20,473

Other expenses:

Interest expenses 1,671 1,514

Loss on sales and disposals of fixed assets 1,696 1,612

Miscellaneous expenses 1,888 2,213

Total other income 5,256 5,340

Ordinary income 163,494 148,173

Extraordinary income:

Subsidy for facilities (2) 523 96

Total extraordinary income 523 96

21Consolidated Statements of Income

8/18/2019 Annual 14

22/48

21Consolidated Statements of Income March 31, 2014 and 2013

Millions of yen

2014 2013

Extraordinary loss:

Impairment loss (3) 1,793 379

Loss on reduction of fixed assets (4) 523 96

Total extraordinary loss 2,316 476

Income before income taxes and minority interests 161,701 147,793

Income taxes:

Current 52,319 50,578

Deferred 384 (4,206)

Total income taxes 52,704 46,372

Income before minority interests 108,996 101,421

Minority interests in net income of consolidated subsidiaries 25,298 20,014

Net income ¥ 83,698 ¥ 81,406

22Consolidated Statements of Comprehensive Income M h 31 2014 d 2013

8/18/2019 Annual 14

23/48

22Consolidated Statements of Comprehensive Income March 31, 2014 and 2013

Millions of yen

2014 2013

Income before minority interests ¥108,996 ¥101,421

Other comprehensive income

Net unrealized holding gain (loss) on securities 3,024 4,678

Deferred gain (loss) on hedges 48 (69)Foreign currency translation adjustments 3,373 13,179

Share of other comprehensive income of equity method affiliates 2,426 2,049

Total other comprehensive income (1) 8,873 19,838

Comprehensive income 117,869 121,259

Comprehensive income attributable to

Comprehensive income attributable to owners of the parent 87,506 93,409

Comprehensive income attributable to minority interests 30,363 27,850

23Consolidated Statements of Changes in Net Assets M h 31 2014 d 2013

8/18/2019 Annual 14

24/48

23Consolidated Statements of Changes in Net Assets March 31, 2014 and 2013

Millions of yen

Shareholders’ equity Accumulated other comprehensive income

Common

stock

Additional

paid-in

capital

Retained

earnings

Treasury

stock, at

cost

Total share-

holders’

equity

Net unreal-

ized holding

gain (loss) on

securities

Deferred

gain (loss) on

hedges

Foreign

currency

translation

adjustments

Remeasurements

of defined

benefit plans

Total

accumulated

other

comprehen-

sive income

Minority

interests

Total

net assets

Balance at April 1, 2012 ¥28,404 ¥10,896 ¥396,602 ¥(658) ¥435,244 ¥10,641 ¥ (7) ¥(15,598) ¥ — ¥ (4,964) ¥ 74,049 ¥504,329

Changes during the year

Dividends from retained earnings (23,030) (23,030) (23,030)

Net income 81,406 81,406 81,406

Acquisition of treasury stock (8) (8) (8)

Disposal of treasury stock — —

Net change in items other than

shareholders’ equity during

the year 4,749 (63) 7,317 — 12,003 17,050 29,053

Total changes during the year — — 58,375 (8) 58,367 4,749 (63) 7,317 — 12,003 17,050 87,420

Balance at April 1, 2013 ¥28,404 ¥10,896 ¥454,978 ¥(667) ¥493,611 ¥15,390 ¥(71) ¥ (8,280) ¥ — ¥ 7,038 ¥ 91,099 ¥591,750

Changes during the year

Dividends from retained earnings (23,882) (23,882) (23,882)

Net income 83,698 83,698 83,698

Acquisition of treasury stock (7) (7) (7)

Disposal of treasury stock 52 64 116 116

Net change in items other than

shareholders’ equity during

the year 2,992 56 759 (13,342) (9,535) 23,477 13,942

Total changes during the year — 52 59,815 56 59,924 2,992 56 759 (13,342) (9,535) 23,477 73,867

Balance at March 31, 2014 ¥28,404 ¥10,949 ¥514,793 ¥(610) ¥553,536 ¥18,382 ¥(14) ¥ (7,521) ¥(13,342) ¥ (2,496) ¥114,577 ¥665,617

24Consolidated Statements of Cash Flows March 31 2014 and 2013

8/18/2019 Annual 14

25/48

24Consolidated Statements of Cash Flows March 31, 2014 and 2013

Millions of yen

2014 2013

Cash flows from operating activities

Income before income taxes and minority interests ¥161,701 ¥147,793

Depreciation 66,747 62,927

Increase (decrease) in provision for retirement benefits for employees — 3,758Increase (decrease) in net defined benefit liability 19,967 —

Increase (decrease) in provision for retirement benefits for directors and corporate auditors 110 (114)

Increase (decrease) in allowance for doubtful accounts 141 97

Interest and dividend income (7,193) (5,051)

Interest expenses 1,671 1,514

Foreign exchange losses (gains) (492) (1,010)

Equity in (earnings) loss of affiliates (6,429) (5,812)

Loss (gain) on sales of property, plant and equipment (469) (249)

Loss on disposal of property, plant and equipment 1,696 1,612

Loss (gain) on sales of short-term and long-term investment securities (22) (779)

Loss (gain) on valuation of short-term and long-term investment securities 4 19

Decrease (increase) in notes and accounts receivable (25,978) 23,723

Decrease (increase) in inventories 3,390 (1,411)

Increase (decrease) in notes and accounts payable (16,071) (44,227)

Increase (decrease) in consumption taxes payable 58 (1,255)

Others (13,127) (5,311)

Subtotal 185,704 176,223

Interest and dividends received 9,120 6,476

Interest paid (1,691) (1,546)

Income taxes paid (53,966) (51,536)

Income taxes refunded 217 172Net cash provided by operating activities 139,383 129,788

25Consolidated Statements of Cash Flows March 31 2014 and 2013

8/18/2019 Annual 14

26/48

25Consolidated Statements of Cash Flows March 31, 2014 and 2013

Millions of yen

2014 2013

Cash flows from investing activities

Payments into time deposits (131) (129)

Proceeds from refund of time deposits 127 136

Payments into deposits (37,000) —Payments for acquisition of property, plant and equipment (90,257) (64,145)

Proceeds from sales of property, plant and equipment 2,375 1,751

Payments for acquisition of investment securities (87) (1,148)

Proceeds from sales of investment securities 36 757

Purchase of investments in subsidiaries (0) (982)

Proceeds from purchase of investment in a subsidiary resulting in change in scope of consolidation — (971)

Decrease (increase) in short-term loans receivable (1,264) (2,723)

Payments for long-term loans receivable (379) (488)

Proceeds from collection of long-term loans receivable 1,429 2,818

Net cash used in investing activities (125,151) (65,125)

Cash flows from financing activities

Net increase (decrease) in short-term debt 2,582 1,617

Proceeds from long-term debt 33,532 26,812

Repayments of long-term debt (28,107) (31,900)

Payments for acquisition of treasury stock (5) (5)

Dividends paid (23,882) (23,030)

Dividends paid to minority interests in consolidated subsidiaries (9,451) (9,392)

Proceeds from minority interests 2,985 —

Repayments of lease obligations (87) (2,657)

Net cash provided by financing activities (22,434) (38,556)

Effect of exchange rate changes 5,034 7,103

Net decrease in cash and cash equivalents (3,168) 33,209

Cash and cash equivalents at beginning of year 324,692 291,482

Cash and cash equivalents at end of year (1) ¥321,524 ¥324,692

26Notes to Consolidated Financial Statements Year ended March 31 2014

8/18/2019 Annual 14

27/48

26Notes to Consolidated Financial Statements Year ended March 31, 2014

Significant Accounting Policies Forming the Basis of Presentation of

the Consolidated Financial Statements

1. Scope of consolidation

(Consolidated subsidiaries: 56) All subsidiaries are included in the scope of consolidation.

Perodua Global Manufacturing Sdn. Bhd. was newly incorporated during the fiscal year

under review and was included in the scope of consolidation. Daihatsu Holland B.V., Daihatsu

Belgium N.V. and DMCA Inc., which were consolidated subsidiaries in and before the previous

fiscal year, were liquidated and excluded from the scope of consolidation.

2. Equity method

(a) Affiliates accounted for by the equity method: 18

Major affiliates accounted for by the equity method are Daihatsu Diesel Mfg. Co., Ltd.,

Metalart Corporation and OSAKA DAIHATSU CORPORATION.KAWAMURA-KAKO CO., LTD. was newly incorporated during the fiscal year under

review and was included in the scope of affiliates accounted for by the equity method. Briggs

& Stratton Daihatsu LLC was liquidated and excluded from the scope of affiliates accounted

for by the equity method.

(b) Affiliated companies not accounted for by the equity method (a total of three companies,

including Tono Daihatsu Co., Ltd.) are excluded because they do not have a material impact

on consolidated net income, retained earnings and others individually or in the aggregate.

(c) As for affiliates accounted for by the equity method, when their fiscal year-end is different

from the Company’s fiscal year-end, their financial statements as of their fiscal year-end are

used.

3. Fiscal year of consolidated subsidiaries

The fiscal year-end for the following six consolidated subsidiaries is December 31: Perodua

Auto Corporation Sdn. Bhd., Perodua Manufacturing Sdn. Bhd., Perodua Engine Manufacturing

Sdn. Bhd., Perodua Global Manufacturing Sdn. Bhd., Tianjin Daihatsu Precision Machinery Co.,

Ltd., and Daihatsu (Shanghai) Co., Ltd.

For these subsidiaries, their financial statements as of December 31 are used in the prepa-

ration of the Company’s consolidated financial statements. When significant transactions occur

at those subsidiaries between their fiscal year-end and the Company’s fiscal year-end, these

transactions are included in the consolidated financial statements as necessary.

4. Accounting policies

(a) Fair values of marketable securities and investment securities

Other securities

With market quotations

Stated at the market price on March 31, 2014 (with any unrealized valuation differ-

ence regarded under net assets, and with cost computed using the moving-average

method)

Without market quotations

Stated at cost, cost being determined by the moving-average method

(b) Inventory valuation standards and methods

Finished products (manufactured vehicles)

Mainly stated at cost as determined by the cost average method (method of reducing

book value in line with decreases in profitability)

Merchandise (parts/components)



Merchandise (purchased vehicles)

Mainly stated at cost as determined by the identified cost method (method of reducing


Raw materials and supplies



Work in process




8/18/2019 Annual 14

28/48


(c) Depreciation methods for significant depreciable assets

Property, plant and equipment (excluding lease assets)

Depreciation is principal ly computed using the declining balance method.

However, the depreciation of buildings (excluding attached facilities) acquired on or after

April 1, 1998, is computed using the straight line method.

Furthermore, acquisitions made by the Company and its domestic consolidated subsid-

iaries on or before March 31, 2007, that have been depreciated down to their final deprecia-

tion limit are depreciated in equal amounts of the difference between 5% of their acquisition

price and their memorandum value over a five-year period from the fiscal year after the fiscal

year in which their depreciation limit reached zero.

Intangible fixed assets

Depreciated principally using the straight line method

Lease assets

Lease assets related to finance lease transactions that do not transfer ownership are depre-

ciated using the straight line method over lease period, which corresponds to the number of

years of useful life, with a residual value of zero.

Of finance lease transactions other than those recognized as transferring ownership of the

leased properties to the borrower, transactions that commenced before March 31, 2008, are

treated for accounting purposes as operating lease transactions.

(d) Policy for significant reserve allowances

Allowance for doubtful accounts

An allowance against losses caused by doubtful receivables and other bad debts is made

based on historical credit loss ratios. With specific claims where there is an identified credit

risk, an allowance is made for estimated uncollectible amounts based on assessment of the

recoverability of individual receivables.

Provision for bonuses for directors and corporate auditors

To provide for the payment of bonuses for directors and corporate auditors, the shares of

estimated bonuses to be paid to directors and corporate auditors for the fiscal year ended

March 31, 2014 are accrued.

Provision for retirement benefits for directors and corporate auditors

To prepare for the payment of retirement benefits to directors, executive officers and cor-porate auditors, a necessary amount determined in accordance with the internal rules is

accrued at the end of the fiscal year.

Provision for product warranties

To provide for expenses for after-sales service based on warranty certificates, service

expenses in the amount estimated to be incurred over the warranty period are accrued.

(e) Accounting method for retirement benefits

(Method of attributing benefits to period of service)

As a method of attributing benefits to period up to the end of the fiscal year under review, thestraight line method is used to calculate retirement benefit obligations.

(Accounting method for actuarial differences and past service costs)

Past service costs are amortized chiefly on a straight line method over the average estimated

remaining service period of employees (18 years) at the time of occurrence. Actuarial differ-

ences are amortized ratably from the following fiscal year, chiefly on a straight line method

over the average estimated remaining service period of employees (18 years) at the time of

occurrence in each fiscal year.

(Adoption of a simplified method at small companies, etc.)

Certain consolidated subsidiaries adopt a simplified method of using amounts payable for vol-

untary retirement associated with retirement benefits at the end of the fiscal year as retirement

benefit obligations to calculate net defined benefit liability and retirement benefit expenses.

Certain consolidated subsidiaries adopt a multi-employer pension plan and record as net

defined benefit liability the difference between the amount equivalent to retirement benefit

obligations and the amount equivalent to pension plan assets based on the balance of the

minimum funding standard in the calculation of pension financing.


8/18/2019 Annual 14

29/48


(f) Goodwill amortization and amortization periods

Goodwill is recognized as a loss or a gain as incurred, due to immateriality.

(g) Cash and cash equivalents

In the consolidated statements of cash flows, cash and cash equivalents are composed ofcash on hand, deposits that may be withdrawn on demand and highly liquid investments

purchased with original maturities of three months or less and that present a low risk of

fluctuation in value.

(h) Accounting procedure of consumption tax

The tax-excluded method is adopted.

(Changes in accounting policies)

(Change in the method used for the conversion of the revenue and costs of foreign subsidiaries, etc.)

In the past, the revenue and costs of foreign subsidiaries, etc. were converted into yen using theforeign exchange rate on the date of closing of the relevant foreign subsidiary, etc. However,

due to an increase in the importance of the revenue and costs of foreign subsidiaries, etc.,

the above method was changed to a method of conversion into yen using the average foreign

exchange rate for the fiscal year to properly reflect profits and losses accruing throughout

the fiscal year in the consolidated financial statements from the fiscal year under review. The

amount of the effect of this on profit and loss and information per share for the previous fiscal

year, as well as the accumulated amount of the effect of this to the beginning of the previous

fiscal year, are negligible.

(Application of the Accounting Standard for Retirement Benefits, etc.)

From the end of the fiscal year under review, the Accounting Standard for Retirement Benefits

(ASBJ Statement No. 26, issued on May 17, 2012; hereinafter the “Retirement Benefits

Accounting Standard”) and the Guidance on Accounting Standard for Retirement Benefits

(ASBJ Guidance No. 25, issued on May 17, 2012; hereinafter the “Guidance on Retirement

Benefits Accounting Standard”) are applied (excluding the provisions set forth in the text of

Paragraph 35 of the Retirement Benefits Accounting Standard and Paragraph 67 of the

Guidance on Retirement Benefits Accounting Standard).

We have changed the accounting method so that the amount obtained by subtracting pen-

sion plan assets from retirement benefit obligations will be recorded as net defined benefit liabil-

ity, and unrecognized actuarial differences and unrecognized past service costs were recorded

as net defined benefit liability.

As the application of the Retirement Benefits Accounting Standard, etc. follows the tran-sitional treatment as provided for in Paragraph 37 of the Retirement Benefits Accounting

Standard, we have made an adjustment for the amount affected by the change to the remea-

surements of defined benefit plans in accumulated other comprehensive income in the fiscal

year under review.

As a result, ¥83,265 million of net defined benefit liability was recorded at the end of the fiscal

year under review, and accumulated other comprehensive income decreased ¥13,342 million.

Net assets per share for the fiscal year under review declined ¥31.31.

(Accounting Standards, etc. yet to be applied)

• Accounting Standard for Retirement Benefits (ASBJ Statement No. 26; May 17, 2012)• Guidance on Accounting Standard for Retirem

Annual 14

Documents