SUBARU CORPORATION

North America accounts for approximately 80% of revenue, and the automotive business constitutes over 90% of operations, making the Company susceptible to North American economic downturns, demand decreases, and intensifying price competition. Major production sites are also concentrated in two locations—Gunma Plant and SIA (Subaru of Indiana Automotive, Inc., in Indiana, USA)—so changes in North American policy and trade trends directly affect business performance. The Company seeks to maintain profitability through continuous monitoring of supply-demand trends and agile revision of production and sales plans.

Due to changes in US tariff policy, additional tariffs have been imposed on completed vehicles exported from Japan to US sales subsidiaries and on certain parts procured from overseas by US production sites, which already affected earnings in the previous fiscal year. If the tariff policy is prolonged, or if it is compounded by significant volatility in foreign exchange and financial markets or a decrease in demand, it could significantly affect business performance and financial position. The entire group is working together on improving sales composition, curbing sales incentives, reducing costs, and cutting expenses, while relevant departments in Japan and the US closely coordinate to consider countermeasures.

As North American revenue accounts for approximately 80% of the total and many items are denominated in local currencies centered on the US dollar, a stronger yen has a negative impact on revenue and financial condition. The structure is such that the divergence between the assumed exchange rate in the full-year earnings forecast and the actual translation rate at financial closing directly affects business performance. In addition to natural hedging through production in both the Japanese and US markets, the Company implements hedges such as forward foreign exchange contracts as circumstances warrant.

If the Company fails to accurately capture customer needs amid discontinuous and rapid changes in the business environment—such as the shift to electrification, the spread of mobility services, autonomous driving, and sharing—and sales of new models and new products fall short of plan, this could significantly affect business performance and financial position. Electrification makes market forecasting difficult, and there are risks of losses from excessive development investment as well as the risk of not having appropriate technology and products ready if market penetration proceeds rapidly. Under the

The strengthening of fuel efficiency and emissions regulations in various countries and the inclusion of the Company under carbon pricing systems such as carbon taxes present transition risks, including increased R&D expenses and restricted product sales opportunities. As physical risks, there are also operational risks such as disruption to procurement, production, and logistics activities due to abnormal weather such as torrential rains, and plant flooding. In addition to information gathering and forecasting by each specialized department, the Risk Management and Compliance Office has established an overall management structure for emergencies as part of business continuity planning (BCP).

Targeted attacks, ransomware, supply-chain-mediated attacks, and other threats are becoming more sophisticated and frequent, creating risks of information leaks, system failures, impacts on product safety, and damage to brand value. With the expanding use of generative AI, new risks are also emerging, including the external leakage of confidential information, infringement of intellectual property rights, and the use of erroneous outputs in business operations. The Company addresses these risks through the establishment of a Cybersecurity Committee chaired by the CISO, the development of a SIRT (Security Incident Response Team) structure, and the establishment of data backup systems across multiple sites.

In addition to surges in raw material prices, logistics costs, and energy prices, as well as rising labor costs stemming from geopolitical risk, supply-demand tightness, and environmental regulations, increased parts procurement costs due to US tariff policy have compounded these pressures; if these cannot be absorbed through cost improvement or price pass-through, it could adversely affect business performance and financial position. Dependence on specific raw materials and suppliers heightens the risk of supply-demand fluctuations. The Company strives to build a stable procurement structure through securing multiple suppliers, enhancing supply chain visibility, developing alternative technologies, and building long-term business relationships.

If the supply chain is disrupted by geopolitical risk, changes in trade policy, natural disasters, infectious diseases, cyberattacks, or other factors, maintaining stable procurement in terms of cost, delivery time, and quality, as well as product shipment, could become difficult, affecting production activities, business performance, and financial position. Uncertainty is further heightened by constraints such as supply restrictions on critical parts and logistics constraints due to driver shortages. In April 2025, the Company established the CLO and Logistics Division to build an integrated management structure, while promoting supplier diversification, consideration of alternative procurement, and maintenance of appropriate inventory levels.

If a large-scale recall or similar event occurs, substantial quality-related expenses would be incurred, and damage to brand image would significantly affect business performance and financial position. Ensuring quality at every stage—from the most upstream development stage, including response to new technologies such as electrification, through production, logistics, and after-sales service—is a challenge. The Company continues and accelerates the

Due to labor market tightness, intensifying competition for talent including from other industries, and labor issues, if the Company is unable to secure specialized talent in fields such as electrification, advanced safety technology, and IT, this could affect business activities and management. Insufficient talent development and an inadequately developed workplace environment that respects diversity could also affect business activities. The Company is promoting active recruitment of software development talent through the expanded functions of