Section 4. Expanding Business in China through Joint Ventures

Item 2. Responses to Rapid Increases in Automobile Production

Development of logistics networks

As joint venture production projects began full-scale operations from the year 2000, and as a result of the rapid growth of the Chinese market, production of Toyota vehicles increased sharply. This caused logistics related issues to become increasingly prominent. FAW Toyota vehicles and Guangzhou Toyota Motor vehicles were distributed through separate networks, and it became necessary to address the declining efficiency, high costs, and long lead times.

To deal with these issues, FAW, GAC, and TMC made joint investments to establish Tong Fang Global Logistics Co., Ltd. (TFGL) in 2007. TFGL was set up to create a state-of-the-art logistics system adapted to local conditions that was centrally managed, highly efficient, based on TMC's production and logistics practices, and drew from FAW and GAC expertise in logistics in China.

In 2003, the Chinese government announced the Automobile Financing Company Management Law to respond to the rapid expansion of the automotive market and as a part of its policies of opening up to foreign capital. In response to this development, TMC obtained approval to establish an automobile financing company in December of that year and established Toyota Motor Finance China Co., Ltd. in Beijing. The company provides automobile sales financing and inventory financing operations for authorized dealers.

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