Automotive Systems Business Strategy - Hitachi …

1 Hitachi , Ltd. 2017. All rights 8, 2017 Hitachi IR Day 2017 Automotive Systems Business StrategyPresident & CEOH itachiAutomotiveSystems, Seki Hitachi , Ltd. 2017. All rights Systems Business Strategy [Contents] Hitachi , Ltd. 2017. All rights Business ConceptContribute to Society by Providing New Solutions for Vehicle Manufacturing to Solve Social IssuesMeet the needs of society with an Advanced Vehicle Control system that integrates social infrastructure and services with vehicle environment, safety and information technologiesCorporate CredoWe will contribute to the realization of an affluent society by creating new value-added Systems , products and services through the harmonization of people, vehicles and Automotive SystemsHitachi fields of Automotive device businessSocial InfrastructureServices Accident EliminationTraffic Congestion ReductionComfort ImprovementMobility Support for the ElderlyEnvironmental ConservationEnvironmentAdvanced Vehicle Control SystemSafetyInformation Hitachi , Ltd.

2 2017. All rights Business StructureStructure the Automotive Systems Business segment around Systems and products inenvironmental, safety, and information fields that together form an advanced vehicle control systemPT Combustion Control SystemHybrid/electric Vehicle SystemEngine Management SystemEnvironmental Field: 40%Safety Field: 40%Integrated Chassis Control SystemAll-round External Recognition SystemAdvanced Drive Control SystemCar Information SystemInformation Field, Other: 20%AdvancedHuman-Machine InterfaceTelematics Communication UnitIn-vehicle Information Device SystemElectric Powertrain SystemPTDiv.: Powertrain & ElectronicPowertrain Systems Division, ENDiv.: Engine &Chassis Division, Drive Div.: Drive Control Systems Division, Aftermarket Div.: Aftermarket billion yenOverseas Revenue Ratio60% Hitachi , Ltd. 2017. All rights , + %97%( )100%112%115%( )Influence ofcurrencymarketfluctuations( )+ The deviation factors of the FY 2016 forecast in Hitachi IR Day 2016 and the comparison between the forecast and result excluding currency exchangerateResult( )+ Influence of currency marketfluctuation( )(billion yen)ForecastDeviation factorsEBIT ratioAdjusted operating income ratioRevenues51-3.

3 Summary of FY2016 Capacity utilization rate improved although Business forecast*1was not achieved due to the influence of currency market fluctuations99%FY201682%85%51%60%FY2018F Y2016FY2018To address exchange risks, enhance global procurement and accelerate local production for local consumptionForecast1 trillion billion yenForecast60 billion billion yenForecast59 billion billion yen94%112%ResultvsTargetLocal procurementratePure local rate*2(China)*1: Forecast as of 2016IR Day.*2: The rate at which overseas group companies locally procure both parts and materials that are produced ( ) billion yenDeviation( ) billion yenDeviation+ yenForecastForecastResultResultCapacityU tilizationImprovementInfluence ofcurrencymarketfluctuationsOperatinginc omeAssetsales, factorsDeviation factorsThe forecast ratio exclu. currency market fluctuation The forecast ratio exclu. currency market fluctuation The forecast ratio exclu.

4 Currency market fluctuation Hitachi , Ltd. 2017. All rights ,0001,2001,4001,6001,80002,0004,0006,000 8,00010,00012,00014,00016,00018,000FY201 5(Result)ResultFY2016(Result)FY2017(Fore cast)FY2018(Target)FY2020(Target)+ + ratio of FY 2015 result excluding currency market fluctuation*(*Premising the same overseas sales rate as FY 2016 after FY2017)106%106%115%1, , , , the potential for growth,aiming for a growth rate that substantially exceedsthe market growth rate by FY2020 CAGR: Compound Annual Growth RateRevenuesPowertrain & Electronics Control & Chassis Control Systems Division Car Information Systems (Clarion) Aftermarket Division/Others Adjusted Operating Income(Ratio)EBIT(Margin) Automotive market growth rateSchedule-basedCAGRFY17-20: Overseas revenue ratio for global customer basesRevenues(billion yen)Adjusted Operating Income/EBIT(billion yen)1-4.

5 Business Performance Hitachi , Ltd. 2017. All rights for the ratio in revenues between conventional products and electronics products56%FY2020(Target)Increase the ratio of electronics products while maintaining base in conventional products71-5. Portfolio TrendsFY2016(Result)Electrification and autonomous driving products are the growth drivers to driven more high earnings structure. FY2018(Target)1, yen44%53%47%21%50%50%Electronics ProductsConventional Products1, yen26%Growth yenElectrification and autonomous driving products18%Electrification and Autonomous Driving Products Increase from 20% to 30% Hitachi , Ltd. 2017. All rights Systems Business Strategy [Contents] Hitachi , Ltd. 2017. All rights congestionDriving WorkloadsSafe driving support vehicles becomepopularAccident elimination2-1. Automobile Society Issues and SolutionsSocial trendsSocial needsElectrification SystemKeys to solve issues in automobile society are Electrification, Autonomous Driving, and of ITComfort improvementTraffic controlTraffic congestion reductionPersonal mobility for the elderly people becomes widespreadMobility support for the elderlyAutonomous Driving SystemData centerHitachi Automotive Systemsprovides Systems and devicesthat SupportHitachi Group SolutionsSocial issuesConnected ServicesAdvanced vehicle control systemEnvironmentEnvironmental regulations become strengthenedEnvironmental conservationEnvironmental issuesSafetyInformationTraffic accidentsAgingsocietyElectricDriveSystem Autonomous Driving SystemConnected service Hitachi , Ltd.

6 2017. All rights (Lv4,5)AD(Lv4)PHEVAD(Lv3)AD(Lv4,5 HEV EVAD(Lv3)HEV PHEVAD(Lv3)AD(Lv4,5)HEV PHEV EVAD(Lv4,5)AD(Lv3)HEV PHEV EVHEV PHEV EVAD(Lv3)2-2-1. Market Trends Roadmap of Electric-driven andAutonomous Driving Vehicles201520252030 Autonomous vehicles based on electric-drive cars will be introduced intothe market continuously from around 2020 Automobile manufacturers are accelerating market introduction of electric and autonomous vehiclesPublic Information released by automobile manufacturersSource survey VW GM FordRoadmap of Top 5* Japanese, , and European automobile manufacturers2020 Autonomous vehicles(Highway)Electric-driveAutonomou s vehicles(Highway)Electric-driveAutonomou s vehicles(Highway)Electric-driveAutonomou s vehicles(Highway)Electric-driveAutonomou s vehicles(Highway)Electric-driveSource: Arthur D. Little Japan, Inc.* Based on production volume in FY2016 NissanToyotaHEV: Hybrid Electric Vehicle, EV: Electric Vehicle, PHEV: Plug-in Hybrid Electric Vehicle, AD: Autonomous Driving Present Hitachi , Ltd.)

7 2017. All rights unitsA16%B13%C10%D8%E8%F6%Others39%Chang es in Global Production Volume by Powertrain TypeMarket Shares of Electric-driven Vehicle OEMs in 2030 Global electric vehicle production volume will increase sharply, driven by China, the world s largest automobile market2-2-2. Market Trends-Changes in Production of EVs US Market Shares of OEMs in 2030 China Market Shares of OEMs in 2030 ICEE lectric Vehicle Production Volume Forecasts infthe Two Major Markets38million units28% of thetotal marketInternal combustion engineHEVPHEVEV020406080100120(Million units) unitsIn China, EV production volume will reach around 10 million units in 2030, and in the , production will be more than three times higher than the level in 201738 million times higher than the 2017 level0200400600800100020302017 Source: Arthur D. Little Japan95135108 64 2 Million units 0 24 6810 Million units 20202017201820252030(Year) Hitachi , Ltd.

8 2017. All rights million units5 times higher than the 2017 levelWithout ADASADASAD020406080100120C25%F9%G5%A5%I5 %H4%Others47%2-2-3. Market Trends -Changes in Production of Autonomous VehiclesGlobal production volume of autonomous driving vehicles will expand dramatically, especially in China and the FY2025, production in China and the will be up to speed,and these two major markets will account for half of global unitsAutonomous Driving Vehicle Production Volume Forecasts in the Two Major unitsChanges in Global Production Volume of Autonomous Driving VehiclesMarket Shares of Autonomous Driving Vehicle OEMs in 20302017 US Market Shares of OEMs in 2030 China Market Shares of OEMs in 2030*ADAS: Advanced Driver Assistance SystemSource: Arthur D. Little Japan(Million units)C19%A11%G10%F9%H6%I6%Others39% units31% of thetotal market9513512 108 64 20 24 68 10 12 Million units Million units 20202030201720182025(Year) Hitachi , Ltd.

9 2017. All rights Systems Business Strategy [Contents] Hitachi , Ltd. 2017. All rights the two major markets, strengthen focus on expanding sales to automakers with largemarket shares in electric and autonomous vehicles, and who already hold Hitachi in high of Electric VehicleProductionShare of Autonomous Vehicle Production3-1. Targets in the Two Major Markets14 Share of Autonomous Vehicle Production Customers holding Hitachi Automotive Systems in high regard (automakers that are already supplied with EV/autonomous driving-related products by Hitachi Automotive Systems or that have decided to use Hitachi products)Plot Diagram of Market Shares in Electric and Autonomous Vehicle Production in China and the US in 2030 Customers targeted for sales expansion of electric-drive products Customers targeted for sales expansion of autonomous driving products(customers with production share of 10% or more) Customers targeted for sales expansion of both electric-drive and autonomous driving products Company D(%)Company CCompany GCompany FCompany BCompany BCompany GCompany DCompany F Target of increased sales expansion effortsCompany CChinaUS(%)(%)

10 Seek Business growth by stepping up sales expansion to meet growing megatrend needs in the two major markets Company ACompany ACompany ICompany I Share of Electric VehicleProduction(%) Hitachi , Ltd. 2017. All rights Customers Continuing to Use or Starting to UseElectric-drive andAutonomous Driving Products200520102015 ADAS-ECUS tereo cameraAutomaticparking system2008 2009 MotorInverterLithium-ion batteryCompany Company Autonomous drivingElectrification Timing of decision by auto maker to start using Hitachi Automotive Systems productsCustomers which continue to use or have decided to start using Hitachi Automotive Systems electrification and autonomous driving related products are increasing15 ECU: Electronic Control Unit2005 2006 1999 2009 2000201520172016 Company 20152015 2011 2016 Company 2017 Company 2016 Due to Hitachi Automotive Systems good reputation among customers, the number of automakers that continuing to do Business with Hitachi Automotive Systems and are starting to use Hitachi Automotive Systems products is 2016 HONDAGMGMGMFordFordFordDaimlerSUZUKISUZU KIISUZUISUZUISUZUNISSANNISSANSUBARUP roduct that is essential for the security of connected servicesCentral gatewayAlso already developed remote parkingplan to promote valet parking in the future*The photographs of vehicles of makers currently using Hitachi productsshow the models for which products were first supplied Expected to start supply this fiscal year2005 TOYOTA Hitachi , Ltd.