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A New Year's Greeting from Toyota President Katsuaki Watanabe

Toyota President Katsuaki Watanabe

Tokyo January 1, 2008; First of all, allow me to wish everyone a Happy New Year.

I would like to mention some of our resolutions and initiatives for 2008.

The business environment has undergone major changes in the past few years. The biggest of these changes has been the increasing demand for corporate social responsibility as the result of global warming, resource depletion and other environmental issues. Environmental issues are attracting worldwide attention, an example of this being the Toyako Summit to be hosted in Japan during July of this year at which concrete discussions are to be held on the post-Kyoto Protocol framework. In the automobile industry, as well, achieving harmony with society and the earth has become a top-priority issue.

Against this backdrop, last year we announced that we would pursue three areas of sustainability as a part of our efforts to contribute to the sustainable development of society and the earth in the future. The three areas are research and development, manufacturing and social contribution. This year, we will continuously tackle measures addressing environmental issues with a focus on these three areas of sustainability.

Firstly, research and development refers to the pursuit of sustainable mobility, and we believe that it is hybrid technologies that will play a central role in achieving this. Toyota has made considerable efforts to promote the use of hybrid vehicles since the launch of the Prius in 1997. To date, we have achieved global cumulative sales of 1.25 million hybrid vehicles (as of November 2007). We estimate that the resulting reduction effect in CO2 emissions is 5 million tons. Our current goal is to achieve hybrid vehicle sales of 1 million units annually as soon as possible in the early 2010s, and, beyond that, we are committed to having a hybrid model in all Toyota vehicle series. Furthermore, we are now conducting verification tests of a plug-in hybrid vehicle in Japan, the United States and Europe and as such, are making steady progress toward commercialization.

A critical component of hybrid technology is the battery. In addition to the nickel-metal hydride batteries used in the Prius and other hybrid vehicles, we are working steadily toward the development and production of lithium-ion batteries, which offer the advantages of greater energy and output densities. In the area of energy research, we have also begun development of cellulosic ethanol using our specialized biotechnologies.

In this way, Toyota is pursuing the ideal in sustainable mobility from a comprehensive perspective that is not limited to vehicles, but also includes infrastructure and energy.

Next, in the area of sustainability in manufacturing, we are currently implementing our sustainable plant activities, which emphasize the role of nature in creating production sites that are in harmony with their natural surroundings. The Tsutsumi Plant in Japan where the Prius is manufactured has been positioned as a model plant and these activities are being conducted there.

The main feature of the sustainable plant concept is plant development from the following three perspectives: achieving groundbreaking environmental performance by introducing innovative technology and kaizen (improvement) activities; using renewable energy, including biomass and natural energy sources, such as solar power and wind power; contributing to the local community and conserving the environment by planting trees in and around plants. We recently selected model plants in various regions to expand these activities globally. In the Americas, we have designated our Mississippi plant, currently under construction, as a model plant. In Europe, the Toyota plants in the United Kingdom and France, respectively, and in Asia, the Ban Pho Plant in Thailand, have also been designated as model plants.

With respect to our social contribution activities that are designed to achieve a sustainable society, we have emphasized hands-on environmental education at the Forest of Toyota that puts participants in touch with nature, with approximately 25,000 children having participated over these past 10 years. We are also conducting vigorous afforestation activities overseas in countries such as China and the Philippines.

The various activities designed to achieve sustainability as we envision it have been entitled the Toyota Tomorrow Project. The Toyota Tomorrow Project incorporates the sentiment of making every possible effort as a company to achieve the prosperous global society of tomorrow. In the name of this vision, we hope to further enhance our activities.

We are currently very much aware that the automobile industry has reached a turning point in many senses. For example, we must respond to the expansion of markets in countries with energy resources and exhibiting significant economic growth, such as Brazil, Russia, India and China, as well as to environmental and energy issues on a global scale, including moves to strengthen regulations, such as the recently passed Corporate Average Fuel Economy bill in the United States and planned new CO2 regulations in Europe. When responding to these changes in circumstances, we recognize that it will be extremely important to make individual decisions concerning those things that must be changed and those that must be kept the same. I am always saying that "without improving quality, Toyota cannot expect to grow", and I believe that quantitative growth is the result of improved quality. For this, we understand well that corporate management must achieve growth that maintains a balance between corporate activities and environmental preservation, as well as between volume and quality.