Automotive Division | Sojitz Corporation

Automotive Division – Main Businesses & Vision –

Business Overview

Main businesses include completely built-up (CBU) vehicle export and wholesale, assembly and wholesale, dealership businesses and component businesses in the ASEAN region, Russia & NIS, Central and South America, and other markets where rapid economic growth is driving expansion of demand for automobiles.

【Main Businesses】

●	Completely built-up (CBU) vehicle export; local vehicle assembly, manufacturing and sales; wholesale and retail; automobile and motorcycle components; Quality Assurance Business, Retail Financing

Automotive

●	[Major Business Activities] Subaru Vehicles Imported and Sold in Russia
●	[Major Business Activities] Sojitz Active in Hyundai Assembly and Wholesale Business in Thailand
●	[Major Business Activities] Imports and Sale of Hyundai Vehicles in Latin America

Business Overview and Vision

Aiming to create advanced functions and added value in the global automotive value chain

▶ This division conducts various businesses in the United States and other developed countries, as well as in the ASEAN region, Russia & NIS, Central and South America, and other fast-growing markets where expansion of demand for automobiles is projected to continue.
▶ In assembly/wholesale, one of the division’s core businesses, we work to secure stable profits by making maximum use of our knowledge in sharing roles with auto manufacturers and local business partners around the world.
▶ In the dealership businesses in the United States and Brazil and the after-market business, we are adapting to the attributes of each region and aim to increase investment and expand further.
▶ In the component business, we provide optimal solutions tailored to diverse customer needs and market characteristics.

Strengths That Drive Value Creation

▶ Track record in business operations and pool of management talent established through 30 operating companies worldwide with approximately 3,000 employees (including those at equity-method associates), primarily in emerging countries with good growth prospects
▶ Specialized know-how and market insight in the assembly/wholesale and dealership businesses
▶ System for continuous development of highly experienced and capable management talent through a model of “managing operating companies of a significant scale in each region worldwide, and growing together with employees hired and developed locally, and aiming for growth that is shared with and rooted in the area”

Strategies and Initiatives

In the rapidly changing global operating environment, we believe that our traditional business model is insufficient for the division to continue to create value. Therefore, we view Medium-term Management Plan 2017 as a transition toward the next step, and are undertaking business innovations.

In these circumstances, we have mapped out “Three Key Strategies” as our value creation model. The first is the assembly/wholesale business, the division’s core earnings driver, which has the asset of many years of experience in managing operating companies. In addition to generating core earnings, this business also serves the function of developing management talent, a key competitive advantage of the division. We will work to improve and expand that function while enhancing the division’s strengths.

The second strategy is dealership businesses. During the current medium-term management plan, we are focusing on expanding our business scale and earnings through aggressive investment in dealership businesses, including mergers and acquisitions.

The third strategy is future strategies, with a view to the next medium-term management plan. We will invest the appropriate resources in new businesses to build new business models. For example, in the Philippines, where we have a strong business foundation and many years of experience in the assembly/wholesale business, we have launched an auto financing company that works closely with consumers, and will provide high-value added services.

Expansion of the global automotive industry is expected to continue. While there are many business opportunities, competition is fierce, so the challenge is determining how to capitalize on market growth.

Import Motors, Inc.（BMW/MINI dealership）]

The Automotive Division will continue to place top priority on developing the human resources behind its successful track record as it promotes the “Three Key Strategies.” Continuing to foster even more future managers will be the key to value creation in this division. We are implementing unique programs and appointing and assigning people across national borders to speed up human resource development with an eye on the division’s business expansion five and ten years from now. Since “Challenge for Growth” is the theme of Medium-term Management Plan 2017, we are carrying out management training with an emphasis on strategic thinking to put that theme into practice, promoting active communication with younger employees by senior executives and conducting workshops for different age groups to enhance the division’s ability to execute its strategies.

By further strengthening its pool of management talent and establishing new business models, this division aspires to be an earnings driver of the Sojitz Group and contribute to the advancement of the global automotive industry.

Focus Area: Assembly/Wholesale Business

Further refining our strong business model to expand regionally

In addition to steady growth in Puerto Rico and Thailand, the Automotive Division has a solid market presence in Russia, the Philippines and other countries. While we will continue to strengthen business in these regions, we are also developing new markets and new businesses. One such new market is Myanmar, where we have begun sales of automobiles from a Chinese manufacturer. We will continue to pursue expansion in regions with strong growth potential.

Focus Area: Dealership Business

Expanding our high-value-added business in the United States to new regions

In the dealership business, we have a track record of around 30 years in California, where we currently own four BMW and MINI franchises. With a highly profitable business model, these dealerships are distinguished by their pre-owned vehicle sales and after-sales service. In 2015, we acquired a BMW and MINI dealership in Brazil that covers all of Santa Catarina, one of the country’s wealthiest states, targeting the large potential of its high-end automotive demand. Using our U.S. business model, we will focus on expanding earnings as we continue to seek promising investment opportunities and growth in new regions not limited to developed countries.

Opportunities

▶	Increasing sales volume in the assembly/wholesale businesses with the growth of the middle-income population in Asia
▶	Establishment of new wholesale businesses in emerging countries that are making social infrastructure improvements
▶	Operation of retail and component businesses in response to diversifying needs and globalization

Risks

▶	Changes in country risk resulting from political and economic conditions
▶	Impact of changes in the social environment, including more stringent environmental regulations, on automotive demand
▶	Response to changes in the business environment, functions and profitability, such as manufacturers expanding their overseas operations

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