Bangalore-Chennai Corridor Development

Slide 1:Bangalore-Chennai Corridor Development Toyota Kirloskar Motor Private Ltd.

Slide 2:To begin with, let me briefly introduce you to Toyota�s business in India. Toyota actually started local production in 1980�s. After establishing Toyota Kirloskar Motors with our local Indian partner, the Kirloskar Group in 1998, we entered into full-scale local production. Toyota Kirloskar Motor began manufacturing the Qualis, a SUV developed specifically for the Indian market in1999, followed by the Corolla in 2003. Since 2005 Toyota, has been producing the Innova minivan which succeeded the Qualis. Currently, Toyota Kirloskar Motor has production capacity of 63,000 vehicles per year, and 62 sales outlets in 20 cities throughout India. ??????????????????????????????? ????????????????????1980?????????????????????1998??????????????????????? ????????????????1999??????????????????????2003????????????2005??????????????????????????????????????? ???TKM??????63,000??20???62??????????????To begin with, let me briefly introduce you to Toyota�s business in India. Toyota actually started local production in 1980�s. After establishing Toyota Kirloskar Motors with our local Indian partner, the Kirloskar Group in 1998, we entered into full-scale local production. Toyota Kirloskar Motor began manufacturing the Qualis, a SUV developed specifically for the Indian market in1999, followed by the Corolla in 2003. Since 2005 Toyota, has been producing the Innova minivan which succeeded the Qualis. Currently, Toyota Kirloskar Motor has production capacity of 63,000 vehicles per year, and 62 sales outlets in 20 cities throughout India. ??????????????????????????????? ????????????????????1980?????????????????????1998??????????????????????? ????????????????1999??????????????????????2003????????????2005??????????????????????????????????????? ???TKM??????63,000??20???62??????????????

Slide 3:In 2002, to strengthen local production operations, Toyota set up Toyota Kirloskar Auto Parts. Currently, Toyota Kirloskar Auto Parts produces transmissions, axles, propeller shafts and other components. A significant proportion of this auto parts production is exported to Toyota manufacturing plants in Thailand and other ASEAN countries, as well as South Africa and Latin America. ???2002??????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????In 2002, to strengthen local production operations, Toyota set up Toyota Kirloskar Auto Parts. Currently, Toyota Kirloskar Auto Parts produces transmissions, axles, propeller shafts and other components. A significant proportion of this auto parts production is exported to Toyota manufacturing plants in Thailand and other ASEAN countries, as well as South Africa and Latin America. ???2002??????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????

Slide 4:Toyota�s Business in IndiaMeeting growing demand in the auto industry Products to meet customer demands Quality backed by Distribution Logistics Looking to the future, to meet existing and future demand we will expand our model line-up and local production of vehicles in India. At Toyota, we aim to build vehicles that satisfy our �Customer First� approach to business, through the pursuit of �Quality� at every step. We bring this same Toyota �Value� to every market in the world in which we operate, including here in India, where we aim to meet the future expectations of increasingly sophisticated consumers. Our �Quality� and �Value� is a direct result of the Toyota Production System and Toyota Way, backed by Distribution Logistics that support our �Just in time� production system. Looking to the future, to meet existing and future demand we will expand our model line-up and local production of vehicles in India. At Toyota, we aim to build vehicles that satisfy our �Customer First� approach to business, through the pursuit of �Quality� at every step. We bring this same Toyota �Value� to every market in the world in which we operate, including here in India, where we aim to meet the future expectations of increasingly sophisticated consumers.

Slide 5:Toyota�s Business in IndiaContribution to Society At Toyota, we firmly believe our company can only grow when it is harmony with the local community. To achieve this, Toyota actively engages in a diverse range of activities as a corporate citizen here in India. They include the Toyota Technical Training Institute, a technical training school in Bangalore which each year gives approximately 60 Indian youths who don�t have the chance to go to high school, the opportunity to learn specialized manufacturing skills. The three-year curriculum includes engineering theory as well as practical training at TKM. All students live in a dormitoryon-site and all tuition is free. At Toyota, we firmly believe our company can only grow when it is harmony with the local community. To achieve this, Toyota actively engages in a diverse range of activities as a corporate citizen here in India. They include the Toyota Technical Training Institute, a technical training school in Bangalore which each year gives approximately 60 Indian youths who don�t have the chance to go to high school, the opportunity to learn specialized manufacturing skills. The three-year curriculum includes engineering theory as well as practical training at TKM. All students live in a dormitoryon-site and all tuition is free.

Slide 6:Toyota�s Business in IndiaContribution to Society Toyota is a supporter of a safety education programme launched in July 2007 by the Transport Minister of Karnataka State. In the first two months alone, the programme visited 5 schools and was given to 5400 children. Toyota supports primary education through the provision of books and bags. Started in 2003, every year ten schools are added in to the scheme. Every year, Toyota also helps to build environmental awareness among school children through special activities. In the 2007, activities included a drawing competition, environmental quiz, and visit to a manufacturing plant. Toyota also contributed to the local community, with the construction of storage tanks for drinking water. Toyota is a supporter of a safety education programme launched in July 2007 by the Transport Minister of Karnataka State. In the first two months alone, the programme visited 5 schools and was given to 5400 children. Toyota supports primary education through the provision of books and bags. Started in 2003, every year ten schools are added in to the scheme. Every year, Toyota also helps to build environmental awareness among school children through special activities. In the 2007, activities included a drawing competition, environmental quiz, and visit to a manufacturing plant. Toyota also contributed to the local community, with the construction of storage tanks for drinking water.

Slide 7:Now I would like to move on to the business environment in which we operate here in India. By way of introduction, this chart shows the industrial structure of several countries. While the Indian economy has developed in step with service industries, growth in China has been driven by the manufacturing sector. Growth in developed countries in the past has mainly been generated by manufacturing industries, which created the base for the growth of service industries, and steady growth in GDP. To facilitate overall economic growth, it is important to accelerate growth of the manufacturing sector. To achieve this, the development of the logistics infrastructure is critical. A robust logistics infrastructure not only facilitates growth in manufacturing, but also accelerates agriculture by enhancing the farming logistics and distribution. �??????????? �????????????????????????????????????GDP???? �???????????????????????????????????????????????????????? �????????????????????????????????????????????????? (*IT??????????????????????????????????) Now I would like to move on to the business environment in which we operate here in India. By way of introduction, this chart shows the industrial structure of several countries. While the Indian economy has developed in step with service industries, growth in China has been driven by the manufacturing sector. Growth in developed countries in the past has mainly been generated by manufacturing industries, which created the base for the growth of service industries, and steady growth in GDP. To facilitate overall economic growth, it is important to accelerate growth of the manufacturing sector. To achieve this, the development of the logistics infrastructure is critical. A robust logistics infrastructure not only facilitates growth in manufacturing, but also accelerates agriculture by enhancing the farming logistics and distribution. �??????????? �????????????????????????????????????GDP???? �???????????????????????????????????????????????????????? �????????????????????????????????????????????????? (*IT??????????????????????????????????)

Slide 8:Next, let�s take a look at the economic power of Karnataka and Tamil Nadu. The charts shows the nominal Net State Domestic Product of major states in India. In 2004, the Tamil Nadu economy generated 1.7 trillion rupees, and Karnataka 1.3 trillion rupees. There is a gap between these two states and Maharashtra, which ranked 1st with 3.3 trillion rupees. However, compared with other states, Karnataka and Tamil Nadu have an equal or larger economy, particularly if we combine them together. In this light, their economic impact is on a par with the Delhi-Mumbai industrial zone. (??) ?????????????? ????? 1,165????(?6?)????�???? 1,510????(?3?)(2004??) ????? ????? 6,956 (?7?)????�???? 19,550 (?1?)(2002??) ?. ??????????�???????????(3)???????????;??????????IT?????????????�????????? ????:????????????????????????????IT?????????????????????????????????????? ?????????????????????????????????????????1990????????IT????????????????(???????????)??????????????38%????????20%????????????????????? ?????????�??????????????(Indian Space Research Organization?National Aerospace Laboratories?)? ?. ??????????�???????????(4)???�??????????;??????????????????????????? ????:?????????????????????????IT?????????? ???????????????????????�?????????????????????????????????????????????????????????????(?????????)??????????????????????????? ???IT??????????????????????????????????????2???Next, let�s take a look at the economic power of Karnataka and Tamil Nadu. The charts shows the nominal Net State Domestic Product of major states in India. In 2004, the Tamil Nadu economy generated 1.7 trillion rupees, and Karnataka 1.3 trillion rupees. There is a gap between these two states and Maharashtra, which ranked 1st with 3.3 trillion rupees. However, compared with other states, Karnataka and Tamil Nadu have an equal or larger economy, particularly if we combine them together. In this light, their economic impact is on a par with the Delhi-Mumbai industrial zone. (??) ?????????????? ????? 1,165????(?6?)????�???? 1,510????(?3?)(2004??) ????? ????? 6,956 (?7?)????�???? 19,550 (?1?)(2002??) ?. ??????????�???????????(3)???????????;??????????IT?????????????�????????? ????:????????????????????????????IT?????????????????????????????????????? ?????????????????????????????????????????1990????????IT????????????????(???????????)??????????????38%????????20%????????????????????? ?????????�??????????????(Indian Space Research Organization?National Aerospace Laboratories?)? ?. ??????????�???????????(4)???�??????????;??????????????????????????? ????:?????????????????????????IT?????????? ???????????????????????�?????????????????????????????????????????????????????????????(?????????)??????????????????????????? ???IT??????????????????????????????????????2???

Slide 9:Major Japanese companies have begun to set up in Karnataka and/or Tamil Nadu. There are 26 Japanese companies in Tamil Nadu, second in number only to Delhi. And 21 Japanese companies have set up in Karnataka. ???=??????????????? ???�???? 26? =???????(??2?) ????? 21?(?5?) ?????? ????? ?????????????????????????????????????????? ???�???? ????(????????;???????????;????)???????????????????????(?????????)???�???????(IT????????) Major Japanese companies have begun to set up in Karnataka and/or Tamil Nadu. There are 26 Japanese companies in Tamil Nadu, second in number only to Delhi. And 21 Japanese companies have set up in Karnataka. ???=??????????????? ???�???? 26? =???????(??2?) ????? 21?(?5?) ?????? ????? ?????????????????????????????????????????? ???�???? ????(????????;???????????;????)???????????????????????(?????????)???�???????(IT????????)

Slide 10:Here you can see growing importance of the automobile industry in Karnataka & Tamil Nadu, in the aggregate revenue figures for the auto parts industry in India in 2004. As you can see, Tamil Nadu ranked 1st and Karnataka ranked 5th, highlighting the fact that the Bangalore-Chennai industrial zone is on a par with the Delhi-Mumbai industrial zone, as a key region for the automobile industry. Tamil Nadu ???=?????????????????Here you can see growing importance of the automobile industry in Karnataka & Tamil Nadu, in the aggregate revenue figures for the auto parts industry in India in 2004. As you can see, Tamil Nadu ranked 1st and Karnataka ranked 5th, highlighting the fact that the Bangalore-Chennai industrial zone is on a par with the Delhi-Mumbai industrial zone, as a key region for the automobile industry. Tamil Nadu ???=?????????????????

Slide 11:Auto Manufacturing Karnataka & Tamil Nadu According to the Japanese economic and industry press, this zone will see investment in additional projected production capacity equivalent to 1 million vehicles or more by the year 2010. This is the result of automobile makers including TOYOTA investing in and strengthening the operations within the Bangalore-Chennai zone. It is also clear that these investments by automakers require improvements in the infrastructure to enable them to realise their projects in this region. According to the Japanese economic and industry press, this zone will see investment in additional projected production capacity equivalent to 1 million vehicles or more by the year 2010. This is the result of automobile makers including TOYOTA investing in and strengthening the operations within the Bangalore-Chennai zone. It is also clear that these investments by automakers require improvements in the infrastructure to enable them to realise their projects in this region.

Slide 12:Characteristics of the auto industryMajor investments - significant growth benefits Production operations require huge investments Operations to generate economies of scale with related companies and supplier industries Major contributor to economic growth & employment opportunities in the region and the country I would briefly like to explain the characteristics of the automobile industry. Setting up a vehicle manufacturing plant requires a huge investment. At the same time, the whole industry requires and creates wider partnerships with related suppliers and manufacturing companies for materials, auto parts and components, to create economies of scale. As a result, the automotive industry is a major contributor to the economy including related local manufacturing industries, as well as generating a large number of employment opportunities for skilled and unskilled labour, in both direct and indirect industries. I would briefly like to explain the characteristics of the automobile industry. Setting up a vehicle manufacturing plant requires a huge investment. At the same time, the whole industry requires and creates wider partnerships with related suppliers and manufacturing companies for materials, auto parts and components, to create economies of scale. As a result, the automotive industry is a major contributor to the economy including related local manufacturing industries, as well as generating a large number of employment opportunities for skilled and unskilled labour, in both direct and indirect industries.

Slide 13:Strengthening transport infrastructure: Importance of Distribution Logistics Karnataka & Tamil Nadu Because we in the automotive industry are committed to this area that comprises Karnataka & Tamil Nadu, I would like to refer to the importance of infrastructure, that is Distribution Logistics. First, the transport infrastructure, in terms of sea and air, as well as on land including roads, must be improved. An optimal transport infrastructure enables the manufacturing industry to realise optimal distribution logistics for production, sales and marketing through supply and trading chains in the region. Creating the optimal infrastructure in this part of India will further boost trade with ASEAN, making Karnataka & Tamil Nadu an emerging industrial destination in the region, attracting more investment from overseas, further leveraging the international competitiveness of the region. Because we in the automotive industry are committed to this area that comprises Karnataka & Tamil Nadu, I would like to refer to the importance of infrastructure, that is Distribution Logistics. First, the transport infrastructure, in terms of sea and air, as well as on land including roads, must be improved. An optimal transport infrastructure enables the manufacturing industry to realise optimal distribution logistics for production, sales and marketing through supply and trading chains in the region. Creating the optimal infrastructure in this part of India will further boost trade with ASEAN, making Karnataka & Tamil Nadu an emerging industrial destination in the region, attracting more investment from overseas, further leveraging the international competitiveness of the region.

Slide 14:At Toyota,we regard Chennai as an important gateway to the ASEAN region and beyond. This map shows how our Toyota operations in the region work. As you can see, in addition to ASEAN countries, we are shipping auto parts to Central/South America and even South Africa through Chennai Port. At the same, we are aware of the increased demand and needs of other automakers positioning Chennai as a strategic location in India, now and in the future. ???????ASEAN???????????? ASEAN??????????????????(????)?? ?????????????????????? At Toyota,we regard Chennai as an important gateway to the ASEAN region and beyond. This map shows how our Toyota operations in the region work. As you can see, in addition to ASEAN countries, we are shipping auto parts to Central/South America and even South Africa through Chennai Port. At the same, we are aware of the increased demand and needs of other automakers positioning Chennai as a strategic location in India, now and in the future. ???????ASEAN???????????? ASEAN??????????????????(????)?? ??????????????????????

Slide 15:Now, I would like to review the infrastructure in Kartanaka & Tamil Nadu. Looking at the road conditions, we understand they are improving. But the need for more roads and demands to keep them in good shape is growing stronger, and we look forward to Karnataka and Tamil Nadu making progress at the same pace as the north of India. As a note, unpaved roads sometimes cause critical problems for us in the manufacturing industry, in regard to maintaining quality. I will explain this more fully later. ????????????????????????????? ??????=???????????????????????????????????????? ????????? ???�?????16.6?km (??5?) ??????15.3?km (??7?) ??????????? ???�?????12.6?km (??3?) ??????10.4?km (??6?)Now, I would like to review the infrastructure in Kartanaka & Tamil Nadu. Looking at the road conditions, we understand they are improving. But the need for more roads and demands to keep them in good shape is growing stronger, and we look forward to Karnataka and Tamil Nadu making progress at the same pace as the north of India. As a note, unpaved roads sometimes cause critical problems for us in the manufacturing industry, in regard to maintaining quality. I will explain this more fully later. ????????????????????????????? ??????=???????????????????????????????????????? ????????? ???�?????16.6?km (??5?) ??????15.3?km (??7?) ??????????? ???�?????12.6?km (??3?) ??????10.4?km (??6?)

Slide 16:Moving on to railway systems and transportation volumes in the south, they are considerably lower than those in the north and west of India. While it is desirable to have a good railway system in the south, we believe roads have a more important role in the support of manufacturing industry. ??????????????? ?????????????????????????????????????????????????Moving on to railway systems and transportation volumes in the south, they are considerably lower than those in the north and west of India. While it is desirable to have a good railway system in the south, we believe roads have a more important role in the support of manufacturing industry. ??????????????? ?????????????????????????????????????????????????

Slide 17:Finally, I would like to share the specific issues with you that affect our distribution and logistics. We are concerned about both the conditions and congestion at Chennai Port. Our concerns relate both to current operations, and to planning to determine our future production volumes. (?) ?????4???????? Finally, I would like to share the specific issues with you that affect our distribution and logistics. We are concerned about both the conditions and congestion at Chennai Port. Our concerns relate both to current operations, and to planning to determine our future production volumes. (?) ?????4????????

Slide 18:Most of our distribution logistics issues regarding road conditions, are centered in the vicinity of Chennai port and the roads leading to and from the end of the highway. Again, roads are congested and poorly maintained. We are seriously concerned that carrying loads over roads in bad conditions is causing damage in transit, and will impact on the quality of our products. (?) ?????3???????? Most of our distribution logistics issues regarding road conditions, are centered in the vicinity of Chennai port and the roads leading to and from the end of the highway. Again, roads are congested and poorly maintained. We are seriously concerned that carrying loads over roads in bad conditions is causing damage in transit, and will impact on the quality of our products. (?) ?????3????????

Slide 19:Distribution Logistics IssuesScene: KD-IMV engine export to India I would like to briefly show you some of the additional measures we need to take to cope with these road conditions. For example, as a result of consistent damage, for transport to India we wrap and cover all engines with plastic sheets. We also attach plastic cables one at a time to hold levers in place, so that engines do not slide or move in transit. These extra packing measures are applied to all exports to India, requiring extra time and distribution costs. I would like to briefly show you some of the additional measures we need to take to cope with these road conditions. For example, as a result of consistent damage, for transport to India we wrap and cover all engines with plastic sheets. We also attach plastic cables one at a time to hold levers in place, so that engines do not slide or move in transit. These extra packing measures are applied to all exports to India, requiring extra time and distribution costs.

Slide 20:Distribution Logistics IssuesScene: ER/SMOQR Corolla We have also experienced considerable damage that requires us to apply special measures to be able to maintain our Toyota �Quality�. These slides show internal reports on damage to Corolla vehicles. Please note that the special measures we use for transport to and in India, are not normally required in other markets. We have also experienced considerable damage that requires us to apply special measures to be able to maintain our Toyota �Quality�. These slides show internal reports on damage to Corolla vehicles. Please note that the special measures we use for transport to and in India, are not normally required in other markets.

Slide 21:Distribution Logistics IssuesScene: ER/SMOQR Corolla Here are some more damage reports.. Here are some more damage reports..

Slide 22:And, some more damage reports.. And, some more damage reports..

Slide 23:Thank you. In closing, I look forward to working with you to help resolve these problems. In this way, we at Toyota can contribute to the growth of this area, and the benefits of rapid growth that a strong infrastructure can provide the people of Karnataka and Tamil Nadu. Thank you for your attention. In closing, I look forward to working with you to help resolve these problems. In this way, we at Toyota can contribute to the growth of this area, and the benefits of rapid growth that a strong infrastructure can provide the people of Karnataka and Tamil Nadu. Thank you for your attention.