AICHI CORPORATION

The Group, which holds the top market share in the domestic aerial work platform vehicle market, is exposed to the risk of declining market share and falling sales prices due to intensifying competition with specialty vehicle manufacturers and others. Although the Group is implementing differentiation measures such as activities to maximize the lifetime value of construction machinery and a 24-hour service contact system, changes in the competitive environment may affect business performance and financial condition.

Aerial work platform vehicle-related businesses account for more than 90% of net sales and operating income across all segments, resulting in a high degree of business concentration risk. Since performance is heavily influenced by demand trends in the electrical/telecommunications construction industry and the rental industry, which are major customer bases, a reduction in capital expenditure or an economic downturn in these industries could directly lead to a deterioration in business performance.

Since raw materials and parts are procured from numerous suppliers, sharp price increases or procurement difficulties could lead to higher manufacturing costs. Although the Group makes efforts to pass on cost increases to sales prices, if the full amount of the cost increase cannot be passed on, or if production is curtailed due to supply chain disruptions, this may adversely affect business performance and financial condition.

As the Group provides products aimed at improving the safety and efficiency of infrastructure construction workers, a large-scale recall or a defect leading to product liability could result in substantial costs. Although the Group carries product liability insurance, there is no guarantee that it will fully cover losses such as damages, and a decline in product reliability and reputation could have a material impact on business performance.

If environmental regulations such as exhaust gas standards and restrictions on the use of key materials are further tightened, a substantial increase in compliance costs is expected. Although the Group offers products that meet environmental standards under the "Eco Aichi" certified product category, additional development and manufacturing costs associated with raised regulatory standards may affect business performance and financial condition.

As the Group conducts business internationally in Japan, Asia, Oceania, Europe, and other regions, fluctuations in the political situation and economic conditions of each country and region, as well as unexpected changes in tax and legal systems or trade policies, may lead to a decline in product demand. The rise of geopolitical risks or protectionist policies could directly affect exports and overseas operations, potentially worsening business performance and financial condition.

Although the Group hedges foreign currency-denominated transactions, primarily related to exports, through forward foreign exchange contracts and other means, the impact on business performance cannot be completely avoided in the event of significant exchange rate fluctuations. In addition, fluctuations in exchange rates used to translate the financial statements of overseas subsidiaries into yen may affect the consolidated financial statements.

Although the Group has established an internal control system and strives to prevent compliance risks in advance, if a legal violation or similar event occurs, business activities may be restricted due to disciplinary action by regulatory authorities, litigation, or loss of social credibility. Such events carry the risk of having a material impact on business performance and financial condition.

As the Group conducts business activities at multiple sites in Japan and overseas, if an unforeseen event causes environmental problems such as the release or leakage of hazardous substances, air pollution, water pollution, or soil contamination, this could result in damages, substantial remediation costs, administrative sanctions, loss of social credibility, and suspension of production and sales activities. Although the Group undertakes environmental measures in accordance with the laws and regulations of each country and region, it is difficult to completely eliminate such risks.

If unpredictable events such as natural disasters or infectious diseases occur at business sites in Japan, Asia, Oceania, Europe, and other regions, production and sales activities as well as the supply chain may be affected, impacting business performance. Although the Group has established a risk management system and BCP measures, it is difficult to completely avoid such risks, and the Group continues to implement infection prevention measures, including thorough hygiene management, prioritizing the safety and health of its employees.