{"url_path":"/sec/tm/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-06-10","source_url":"https://www.sec.gov/Archives/edgar/data/1094517/0001193125-26-264811-index.html","accession_number":"0001193125-26-264811","cik":"0001094517","ticker":"TM","issuer_name":"TOYOTA MOTOR CORP/","edgar_url":"https://www.sec.gov/Archives/edgar/data/1094517/0001193125-26-264811-index.html","primary_entity_key":"0001094517","primary_entity_name":"TOYOTA MOTOR CORP/"},"word_count":3968,"has_tables":true,"body_markdown":"ITEM 3. KEY INFORMATION\n\n3.A [RESERVED]\n\n3.B CAPITALIZATION AND INDEBTEDNESS\n\nNot applicable.\n\n3.C REASONS FOR THE OFFER AND USE OF PROCEEDS\n\nNot applicable.\n\n3.D RISK FACTORS\n\nIndustry and Business Risks\n\nThe worldwide automotive market is highly competitive.\n\nThe worldwide automotive market is highly competitive. Toyota faces intense competition from automotive manufacturers in the markets in which it operates. In recent years, competition in the automotive industry has further intensified amidst difficult overall market conditions. In addition, competition is likely to further intensify as technological advances in areas such as Connected, Autonomous / Automated, Shared, and Electric (“CASE”) technologies progress in the worldwide automotive industry, possibly resulting in industry reorganizations. Factors affecting competition include product quality and features, safety, reliability, fuel economy, the amount of time required for innovation and development, pricing, customer service, financing terms and tax credits or other government policies in various countries. Increased competition may lead to lower vehicle unit sales, which may result in a further downward price pressure and adversely affect Toyota’s financial condition, results of operations, cash flows and prospects. Toyota’s ability to adequately respond to the recent rapid changes in the automotive market, particularly shifts in consumer preferences to electrified vehicles, and to maintain its competitiveness will be fundamental to its future success in existing and new markets and to maintain its market share. There can be no assurances that Toyota will be able to compete successfully in the future.\n\nThe worldwide automotive industry is highly volatile.\n\nEach of the markets in which Toyota competes has been subject to considerable volatility in demand. Demand for vehicles depends to a large extent on economic, social and political conditions in a given market and the introduction of new vehicles and technologies. As Toyota’s revenues are derived from sales in markets worldwide, economic conditions in such markets are particularly important to Toyota.\n\nChanges in demand for automobiles are continuing, and it is unclear how this situation will transition in the future. Toyota’s financial condition, results of operations, cash flows and prospects may be adversely affected if the changes in demand for automobiles continue or progress further beyond Toyota’s expectations. In addition, demand has been affected, and may in the future be affected by, factors directly impacting vehicle price or the\n\n \n\n1\n\n##### Table of Contents\n\ncost of purchasing and operating vehicles such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations (including tariffs, import regulation and other taxes). Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect Toyota’s financial condition, results of operations, cash flows and prospects.\n\nToyota’s future success depends on its ability to offer new, innovative and competitively priced products that meet customer demand on a timely basis.\n\nMeeting customer demand by introducing attractive new vehicles and reducing the amount of time required for product development are critical to automotive manufacturers. In particular, it is critical to meet customer demand with respect to quality, safety, reliability and sustainability. The timely introduction of new vehicle models and vehicle features, at competitive prices, meeting rapidly changing customer preferences and demand is more fundamental to Toyota’s success than ever, as the automotive market is rapidly transforming in light of the changing global economy and technological advances. There is no assurance, however, that Toyota will adequately and appropriately respond to changing customer preferences and demand with respect to quality, safety, reliability, styling, sustainability and other features in a timely manner. Even if Toyota succeeds in perceiving customer preferences and demand, there is no assurance that Toyota will be capable of developing and manufacturing new, price competitive products in a timely manner with its available technology, intellectual property, sources of raw materials and parts and components, and production capacity, including cost reduction capacity. Further, there is no assurance that Toyota will be able to offer new products or implement capital expenditures at the level and times planned by management, including as described in targets or goals that we have disclosed publicly. Toyota’s inability to develop and offer products that meet customers’ preferences and demand with respect to quality, safety, reliability, styling, sustainability and other features in a timely manner could result in a lower market share and reduced sales volumes and margins, and may adversely affect Toyota’s financial condition, results of operations, cash flows and prospects.\n\nToyota’s ability to market and distribute effectively is an integral part of Toyota’s successful sales.\n\nToyota’s success in the sale of vehicles depends on its ability to market and distribute effectively based on distribution networks and sales techniques tailored to the needs of its customers. There is no assurance that Toyota will be able to develop sales techniques and distribution networks that effectively adapt to changing customer preferences or changes in the geopolitical and regulatory environment in the major markets in which it operates. Toyota’s inability to maintain well-developed sales techniques and distribution networks may result in decreased sales and market share and may adversely affect its financial condition, results of operations, cash flows and prospects.\n\nToyota’s success is significantly impacted by its ability to maintain and develop its brand image and reputation.\n\nIn the highly competitive automotive industry, it is critical to maintain and develop a brand image and reputation. In order to do so, it is necessary to further increase stakeholders’ confidence by ensuring that Toyota, the Toyota Group and their suppliers thoroughly comply with laws and regulations, provide safe, high-quality products that meet customer preferences and demand, as well as timely and appropriately disseminate information to stakeholders. It is also becoming increasingly important for companies to contribute to sustainability. However, the Toyota Group cannot ensure that it or its suppliers do so in all cases. For instance, at the consolidated subsidiary level, Hino and Daihatsu announced vehicle model certification issues in March 2022 and in April 2023, respectively. In addition, Toyota Motor Corporation investigated certain of its model certification applications as per instructions from the Ministry of Land, Infrastructure, Transport and Tourism of Japan (“MLIT”) on January 26, 2024. Toyota Motor Corporation has confirmed that since 2014 seven models, including some that have already been discontinued, were tested as part of such applications using methods that differed from government standards, and it reported this to the MLIT on May 31, 2024. In July 2024, Toyota Motor Corporation received a correction order from the MLIT regarding its model certification applications.\n\n \n\n2\n\n##### Table of Contents\n\nFollowing on-site investigations, the MLIT indicated eight new cases involving seven vehicles that did not comply with the standards. In August 2024, Toyota Motor Corporation submitted a report on measures to prevent recurrence of such conduct to the MLIT. See “Item 4. Information on the Company — 4.B Business Overview — Legal Proceedings” for further discussion of these and related matters.\n\nIn addition, actual or perceived failures on the part of Toyota or its suppliers to contribute to sustainability or to meet certain sustainability-related goals or objectives, including those relating to climate change or the protection of human rights in Toyota’s supply chain, may also harm Toyota’s reputation. Any insufficient measures taken by Toyota, the Toyota Group or their suppliers to maintain and develop Toyota’s brand image and reputation may have an adverse effect on Toyota’s financial condition, results of operations, cash flows and prospects.\n\nToyota relies on suppliers for the provision of certain supplies including parts, components and raw materials.\n\nToyota purchases supplies including parts, components and raw materials from a number of external suppliers located around the world. For some supplies, Toyota relies on a single supplier or a limited number of suppliers, whose replacement with another supplier may be difficult. Inability to obtain supplies from a single or limited source supplier may result in difficulty obtaining supplies and may restrict Toyota’s ability to produce vehicles. Furthermore, even if Toyota were to rely on a large number of suppliers, first-tier suppliers with whom Toyota directly transacts may in turn rely on a single second-tier supplier or limited second-tier suppliers.\n\nIrrespective of the number of suppliers, Toyota’s ability to continue to obtain supplies from its suppliers in a timely and cost-effective manner is subject to a number of factors, some of which are not within Toyota’s control. These factors include the ability of Toyota’s suppliers to provide a continued source of supply, and Toyota’s ability to effectively compete and obtain competitive prices from suppliers. Circumstances that may adversely affect such abilities include geopolitical tensions as well as related governmental actions such as economic sanctions and export controls that may be relevant to certain suppliers.\n\nA loss of any single or limited source supplier, or inability to obtain supplies from suppliers in a timely and cost-effective manner, could lead to increased costs or delays or suspensions in Toyota’s production and deliveries, which could have an adverse effect on Toyota’s financial condition, results of operations, cash flows and prospects.\n\nThe worldwide financial services industry is highly competitive.\n\nThe worldwide financial services industry is highly competitive. Increased competition in automobile financing may lead to decreased margins. A decline in Toyota’s vehicle unit sales, an increase in residual value risk due to lower used vehicle prices, an increase in the ratio of credit losses and increased funding costs are additional factors which may impact Toyota’s financial services operations. If Toyota is unable to adequately respond to the changes and competition in automobile financing, Toyota’s financial services operations may adversely affect its financial condition, results of operations, cash flows and prospects.\n\nToyota’s operations and vehicles rely on various digital and information technologies, as well as information security, which are subject to frequent attack.\n\nToyota depends on various information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, including sensitive data, and to manage or support a variety of business processes and activities, including manufacturing, research and development, supply chain management, sales and accounting. In addition, Toyota vehicles may rely on various digital and information technologies, including information service and driving assistance functions.\n\nDespite security measures, Toyota’s digital and information technology networks and systems may be vulnerable to damage, disruptions, shutdowns due to unauthorized access or attacks by hackers, computer\n\n \n\n3\n\n##### Table of Contents\n\nviruses, breaches due to unauthorized use, errors or malfeasance by employees and others who have or gain access to the networks and systems Toyota depends on or otherwise uses, service failures or bankruptcy of third parties such as software development or cloud computing vendors, power shortages and outages, and utility failures or other catastrophic events like natural disasters. In particular, cyberattacks or other intentional malfeasance are increasing in terms of intensity, sophistication and frequency, and Toyota has been and expects to continue to be the subject of such attacks. Such attacks have, in some cases, and could again disrupt critical operations, disclose sensitive data, interfere with information services and driving assistance functions in Toyota’s vehicles, and/or give rise to legal claims or proceedings, liability or regulatory penalties under applicable laws, which could have an adverse effect on Toyota’s brand image and its financial condition, results of operations, cash flows and prospects. Moreover, similar attacks on Toyota’s suppliers and business partners have had, and may in the future have, a similar negative impact on Toyota.\n\nToyota is exposed to risks associated with climate change, including the physical risks of climate change and risks from the transition to a lower-carbon economy.\n\nRisks associated with climate change are subject to increasing societal and political, including regulatory, focus in Japan and globally. These risks include the physical risks of climate change and risks from the transition to a lower-carbon economy.\n\nThe physical risks of climate change include both acute, event-driven risks such as those relating to hurricanes, floods, tornadoes, drought, and wildfires as well as longer-term weather patterns and related effects, such as sustained higher temperatures and sea level rise. While Toyota has a Business Continuity Plan (“BCP”), in addition to large-scale disasters due to extreme weather conditions, the increase and intensification of severe weather events such as heat waves is expected to increase the risk of heat stroke and water shortages due to drought. Such severe weather events and other natural conditions have in the past harmed, and may in the future again harm, Toyota’s employees or its facilities and other assets, as well as those of Toyota’s suppliers and other business partners, thereby adversely affecting Toyota’s production, sales or other operational capacities. Large-scale disasters and other events may also adversely affect the financial condition of Toyota’s customers, and thereby demand for its products and services.\n\nTransition risks are those attributable to regulatory, technological and market changes to address the mitigation of, or adaptation to, climate-related risks. For example, Toyota is subject to the risk of changes in customer demand for vehicles due to such factors as changes in laws, regulations and government policies relating to climate change, technological innovation to address climate change, and new entrants into the automobile industry that seek to capitalize on changing market dynamics. Changes in customer demand may pose ancillary risks and challenges, such as Toyota’s having to establish new, or enhance existing, supply networks in order to source the raw materials, parts and components necessary for it to manufacture the products then in demand at desired volumes and at competitive costs. Toyota may incur significant costs and expenses as a result of the materialization of such risks, or in its efforts to mitigate or adapt to such risks. Toyota’s inability to develop and offer products that meet customers’ preferences and demand in a timely manner could result in a lower market share and reduced sales revenues and margins, and may adversely affect Toyota’s financial condition, results of operations cash flows and prospects.\n\nFurthermore, Toyota has published disclosures on climate-change related matters relating to its business and its partners. Such disclosures include forward-looking statements based on Toyota’s expectations and assumptions, involving substantial discretion and forecasts about costs and future circumstances, which may prove to be incorrect. In addition, Toyota’s initiatives relating to climate change may not have the intended results, and estimates concerning the timing and cost of implementing, and ability to meet, stated goals are subject to risks and uncertainties. As a result, Toyota may not be able to meet its goals, including those set forth in this report, on expected timing or within expected costs.\n\nIn particular, progress toward achieving Toyota’s climate-related targets requires significant investment of resources and management time, as well as further improvement of compliance and risk management systems,\n\n \n\n4\n\n##### Table of Contents\n\ninternal controls and other internal procedures. Toyota’s ability to achieve its climate-related goals, which are to be pursued over the long-term and are inherently aspirational, is subject to numerous risks and uncertainties, many of which are outside of Toyota’s control, such as changes in environmental and energy regulation and policy, the pace of technological change and innovation, and the actions of Toyota’s customers and competitors. Any failure, or perceived failure, by Toyota to achieve its climate-change related goals, including those set forth in this report, could adversely impact its reputation, financial condition, results of operations, cash flows and prospects. For a further discussion of risks associated with climate change, see “Item 4. Information on the Company — 4.B Business Overview — Climate Change-related Disclosures.”\n\nToyota’s operations are dependent on securing, retaining and developing talented, diverse employees.\n\nGiven in particular the rapid changes in its business environment and its efforts to transform into a mobility company, Toyota’s success depends on its ability to continue to recruit, retain and develop talented and diverse employees. However, competition for such employees is intense and if Toyota cannot recruit and retain diverse employees with a high level of expertise and extensive experience as planned, or it is unable to provide its employees with the opportunities, training and resources they need to develop themselves further, it may reduce Toyota’s competitiveness, and its financial condition, results of operations, cash flows and prospects could be adversely affected.\n\nFinancial Market and Economic Risks\n\nToyota’s operations are subject to currency and interest rate fluctuations.\n\nToyota is sensitive to fluctuations in foreign currency exchange rates and is principally exposed to fluctuations in the value of the Japanese yen, the U.S. dollar and the euro and, to a lesser extent, the Australian dollar, the Canadian dollar and the British pound. Toyota’s consolidated financial statements, which are presented in Japanese yen, are affected by foreign currency exchange fluctuations through translation risk, and changes in foreign currency exchange rates may also affect the price of products sold and materials purchased by Toyota in foreign currencies through transaction risk. In particular, strengthening of the Japanese yen against the U.S. dollar can have an adverse effect on Toyota’s operating results.\n\nToyota believes that its use of certain derivative financial instruments including foreign exchange forward contracts and interest rate swaps and increased localized production of its products have reduced, but not eliminated, the effects of interest rate and foreign currency exchange rate fluctuations. Nonetheless, a negative impact resulting from fluctuations in foreign currency exchange rates and changes in interest rates may adversely affect Toyota’s financial condition, results of operations, cash flows and prospects. For a further discussion of currency and interest rate fluctuations and the use of derivative financial instruments, see “Item 5. Operating and Financial Review and Prospects — 5.A Operating Results — Overview — Currency Fluctuations,” “Item 11. Quantitative and Qualitative Disclosures About Market Risk,” and notes 9 and 20 to Toyota’s consolidated financial statements.\n\nHigh prices of raw materials and strong pressure on Toyota’s suppliers has and could continue to negatively impact Toyota’s profitability.\n\nIncreases in raw materials prices that Toyota and Toyota’s suppliers use in manufacturing their products or parts and components such as steel, precious metals, non-ferrous alloys including aluminum, and plastic parts, may lead to higher production costs for parts and components. This could, in turn, negatively impact Toyota’s profitability if Toyota is not able to pass all those costs on to its customers.\n\nA downturn in the financial markets could adversely affect Toyota’s ability to raise capital.\n\nShould the world economy suddenly deteriorate, a number of financial institutions and investors will face difficulties in providing capital to the financial markets at levels corresponding to their own financial capacity,\n\n \n\n5\n\n##### Table of Contents\n\nand, as a result, there is a risk that companies may not be able to raise capital under terms that they would expect to receive with their creditworthiness. If Toyota is unable to raise the necessary capital under appropriate conditions on a timely basis, Toyota’s financial condition, results of operations, cash flows and prospects may be adversely affected.\n\nRegulatory, Legal, Political and Other Risks\n\nThe automotive industry is subject to various laws, regulations and governmental actions.\n\nThe worldwide automotive industry is subject to various laws and regulations. Toyota has incurred significant costs as a result of laws, regulations and governmental actions or in response thereto, and expects to incur such costs in the future. Furthermore, new legislation or regulations or changes in existing legislation or regulations may also subject Toyota to additional costs in the future. If Toyota incurs significant costs related to laws, regulations and governmental actions, Toyota’s financial condition, results of operations, cash flows and prospects may be materially and adversely affected. Such laws, regulations and governmental actions may also limit or restrict Toyota’s businesses or operations, which may also materially and adversely affect its financial condition, results of operations, cash flows and prospects.\n\nFor example, Toyota is subject to various laws and regulations related to vehicle safety and environmental matters such as emission levels, fuel economy, noise and pollution. In particular, automotive manufacturers such as Toyota are required to implement safety measures such as recalls for vehicles that do not or may not comply with the safety standards prescribed in laws and regulations. In addition, Toyota may, in order to reassure its customers of the safety of Toyota’s vehicles, decide to voluntarily implement sales suspensions, recalls or other safety measures even if the vehicle complies with the safety standards of relevant laws and regulations. If Toyota launches products that result in safety measures such as recalls (including where parts related to recalls or other measures were procured by Toyota from a third party), Toyota may incur various costs including significant costs for free repairs. The failure to comply with such regulations could result in legal proceedings, recalls, negotiated remedial actions, fines, corrective orders, revocations of government approvals and the imposition of other government sanctions, restricted product offerings, compensatory payments or adverse consequences.\n\nSimilarly, many governments also impose tariffs and other trade barriers, taxes and levies, or enact export, price or exchange controls. For example, in 2025, a significant increase in tariffs on exports to the United States, including tariffs specifically related to the automotive industry, were announced. Such elevated tariff rates remain in effect as of the date of this report. We cannot predict the timing, duration, scope or extent of any future changes to such tariffs and trade policies, or of other tariffs or trade-related actions. In addition, export controls governing components incorporated into certain vehicles also have been enacted. The recently announced tariffs and trade actions have increased the cost of our products and may cause stagnation in demand for them in the future. They have also adversely affected our supply chains and distribution networks, which negatively impacts our production and sales. The effects described above are primarily focused in the United States, but they are not limited to the United States, given our cross-border operations. Should the current situation continue for an extended period, it could potentially negatively impact not only us but other participants in the entire automotive industry as well as related industries, which could in turn further adversely affect our financial condition, results of operations, cash flows and prospects. Furthermore, our efforts to mitigate the impact of such tariffs or trade-related actions may themselves require us to incur costs and dedicate management attention.\n\nToyota may become subject to various legal proceedings.\n\nToyota may become subject to legal proceedings in respect of various issues, including issues relating to the topics discussed in “— The automotive industry is subject to various laws, regulations and governmental actions,” as well as product liability and infringement of intellectual property. Toyota may also be subject to legal proceedings brought by its shareholders and governmental proceedings and investigations. Toyota is in fact currently subject to a number of pending legal proceedings and government investigations. A negative outcome\n\n \n\n6\n\n##### Table of Contents\n\nin one or more of these pending legal proceedings could adversely affect Toyota’s reputation, brand image, financial condition, results of operations, cash flows and prospects. For a further discussion of governmental regulations, see “Item 4. Information on the Company — 4.B Business Overview — Governmental Regulation, Environmental and Safety Standards” and for legal proceedings, please see “Item 4. Information on the Company — 4.B Business Overview — Legal Proceedings.”\n\nToyota may be adversely affected by natural calamities, epidemics, political and economic instability, fuel shortages or interruptions in social infrastructure, wars, terrorism and labor strikes.\n\nToyota is subject to various risks associated with conducting business worldwide. These risks include natural calamities; epidemics; political and economic instability; fuel shortages; interruption in social infrastructure including energy supply, transportation systems, gas, water, or communication systems resulting from natural hazards or technological hazards; wars; terrorism; labor strikes and work stoppages. Disruptions, delays and other adverse changes in the operations of Toyota’s business have ensued from such risks materializing in the past. Should the major markets in which Toyota purchases materials, parts and components and supplies for the manufacture of Toyota products or in which Toyota’s products are produced, distributed or sold be affected by any of these events, it may result in future disruptions, delays and other adverse changes in the operations of Toyota’s business."}