HMC

Thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited's financial results briefing for third quarter of fiscal year to March '26. First of all, allow me to introduce the attendees today. Mr. Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer.

Good to see you, everyone.

We have Mr. Eiji Fujimura, Director, Managing Executive Officer.

Thank you.

And Mr. Masao Kawaguchi, Operating Executive Head of Accounting and Finance Unit.

This is Kawaguchi, good to see you, everyone.

Mr. Kaihara will first present the financial results of third quarter ended December '25, and forecast of consolidated results for the fiscal year ending March '26. Then Mr. Fujimura will present the details. Over to you, Mr. Kaihara.

Thank you very much for your continued support for Honda's activities. I would like to present to you the financial results for the third quarter of fiscal year to March 2026. I would like to start with the highlights of the financial results. Our operating profit for the third quarter of the year to March '26 was JPY 591.5 billion. Motorcycle operations saw solid global unit sales led by India and Brazil. And in addition, the restriction on ICE vehicles in Vietnam, which was a concern, had only limited impact to sales compared to our assumption. For results up to third quarter, we've attained record high unit sales, operating profit and operating margin. Automobile operations saw declines in profit due to nonrecurring expenses related to EV in addition to impact from tariffs. Operating cash flow after R&D adjustment, which indicates the resource available for future investments, came to JPY 1.8558 trillion, generating cash on par with the same period last year. The forecast for the consolidated results for the term ending in March '26 is operating profit of JPY 550 billion and profit for the year of JPY 300 billion, unchanged from the previous forecast. Impact from tariffs were initially forecast at JPY 450 billion at the beginning of the term, but our prospects are now that it will be reduced to JPY 310 billion. Toward the end of the term, though we expect growth in profit due to yen depreciation, the competitive environment for automobiles in Asia will intensify requiring incentives. Taking into consideration uncertain business environment, we are maintaining the previous forecast. Going by business segments, for motorcycle operations, with the tailwind of solid sales in India and Brazil, we continue to aim for 21.3 million units, the highest record sales. For automobiles, we will maintain the forecast of 3.34 million units, unchanged from last forecast. The shortage of semiconductor supply experienced in third quarter now has good prospects for preventing recurrence. On the other hand, we are beginning to see signs of supply risk for other materials such as rare earth metals and memories, and we will closely monitor the situation and take actions as needed. To give you the consolidated results for the third quarter of the year to March '26, operating profit was JPY 591.5 billion, lower by JPY 548.4 billion compared to the same period last year. Investment earnings due to the equity method was JPY 24.0 billion, higher by JPY 51.3 billion. And the quarter profit attributable to the owner of the parent was JPY 465.4 billion, lower by JPY 339.8 billion. Next, I'd like to cover the forecast for the consolidated results for the term ending March '26. Compared to the previous forecast, we maintain our forecast of operating profit of JPY 550 billion, and then the profit of the year attributable to the owner of the parent of JPY 300 billion, which is unchanged. The exchange rate against the U.S. dollar is assumed at JPY 140 (sic) [ JPY 148 ] for the full year period. Next, for shareholder returns. Forecast for the full year dividend for the fiscal year ending March '26 is JPY 70 per share, unchanged from the previously published forecast. In addition, the Board of Directors meeting held today has resolved on cancellation of treasury stocks. We will execute cancellation of 747 million treasury stocks. So let me explain about the details of the financial performance, and Mr. Fujimura is going to explain. Let me start. So regarding cumulative group unit sales for 3 months (sic) [ 9 months ] up to the third quarter year-on-year, for motorcycles, 16.44 million units sold due to the increase in India, Pakistan and Brazil. For automobiles, 2.561 million units due to decline in Asia, mainly in China. And for power products business, 2.507 million units sold due to some incremental sales in Europe and decline mainly in Asia. We have explained the consolidated performance up to the third quarter already. Next, I will explain factors for changes of operating profit year-on-year. Operating profit was JPY 591.5 billion, down by JPY 548.4 billion year-on-year. Factors behind for changes. Sales made a positive impact by JPY 38.1 billion because of the increase in motorcycle unit sales as well as profit in financial businesses, though automobiles unit sales declined due to the shortage of semiconductor supplies. Price/cost impacts were positive by JPY 225.9 billion due to effective price revisions. Expenses impact was negative on profit by JPY 108.6 billion. R&D impact negative by JPY 35.7 billion. Foreign currency impact negative by JPY 111 billion. Onetime EV-related expenses impact negative by JPY 267.1 billion. And the tariff impact squeezed the profit by JPY 289.8 billion. Excluding onetime EV-related expenses and the tariff impact, the operating profit would be JPY 1.1485 trillion. Regarding operating profit by business segment. Motorcycle business, JPY 446.5 billion (sic) [ JPY 546.5 billion ] operating profit. Automobile business, JPY 166.4 billion losses. Financial service business, JPY 218 billion profit. And the power products and other business, JPY 6.5 billion losses. Operating profit of motorcycle business increased by JPY 44.8 billion year-on-year to JPY 546.5 billion. Factors for changes. Sales impact was positive JPY 61.2 billion due to incremental sales units, mainly in Asia and South America. Price/cost impacts were positive by JPY 48.6 billion due to effective price revisions and so on. Expenses impact negative by JPY 24.1 billion. R&D impact was positive by JPY 4.6 billion. Foreign currency impact negative by JPY 37.7 billion. And tariff impact negative by JPY 7.7 billion. Operating profit of automobile business went down by JPY 569 billion year-on-year, resulting in the operating losses of JPY 166.4 billion. Breakdown of factors for changes. Sales had a negative impact by JPY 82.8 billion due to unit sales decline, mainly due to semiconductor supply shortage, losses associated with the reorganizing of the affiliated company of the group and so on. Price/cost impacts had a positive impact by JPY 177.3 billion due to effective price revisions. Expenses had a negative impact by JPY 11.7 billion. R&D impact, negative by JPY 42.1 billion. Foreign currency impact negative by JPY 62.9 billion. Onetime EV-related expenses had a negative impact by JPY 267.1 billion. And the tariff impact was negative by JPY 279.5 billion. Cash flow situations now. Free cash flows, excluding financial service business, was JPY 917.4 billion. Net cash as of the end of third quarter was JPY 3.1707 trillion and the operating cash flows after R&D adjustment was JPY 1.8558 trillion. Let me explain consolidated forecast for FY ending March 2026. Regarding group unit sales, we will keep the previous forecast of 21.3 million units of motorcycles, 3.34 million units for automobiles, and 3.67 million units for power products volume. And we have already explained the consolidated financial forecast for FYE March 2026. As for factors for changes in operating profit year-on-year for those forecasts, operating profit would be down by JPY 663.4 billion year-on-year. With factors for changes, sales would have a negative impact by JPY 162 billion due to semiconductor supply shortage and so on. Price/cost impact will be positive by JPY 330 billion (sic) [ JPY 230 billion ] due to effective price revisions and so on. Expenses impact, JPY 106.5 billion negative. R&D impact, JPY 166 billion negative. Foreign currency impact, JPY 149 billion negative. And the tariff impact negative by JPY 310 billion. Regarding factors for changes in the forecast of the operating profit, we will keep the previous forecast of the operating profit, for which sales impact will be negative by JPY 10 billion. Expenses impact negative by JPY 15 billion. R&D expenses impact negative by JPY 40 billion. And foreign currency will make a positive impact by JPY 65 billion due to the change of the exchange rate assumption to JPY 148 for $1. Expected capital expenditures, depreciation, amortization and R&D spending of FYE March 2026 will be as follows, reflecting increase in CapEx for acquisition of factory buildings and so on of the battery production JV with LG Energy Solution. Lastly, I would like to speak about the future direction of our operations in view of the current business environment. For automobiles operations, with the expertise we have accumulated on internal combustion engines and hybrid technologies, our results of the third quarter confirmed that we are maintaining a business environment -- business characteristics that continually give us profit if we exclude the nonrecurring impact from EV and impact from tariffs. On the other hand, we are faced with issues, including stagnated growth of EV market, less stringent environmental regulations in different country markets, retreat of multilateral free trade system due to protectionist policies, heightened supply chain risk due to expansion of global procurement, further exacerbated by intensifying global competition from emerging OEMs. Thereby, we need to conduct a fundamental review of our strategies to rebuild our competitive strength. In this situation, we believe that our current tasks are to build lean business characteristics to enable flexible actions against changing business environment and to realize product features and cost competitiveness that overwhelm those of emerging OEMs. To address those issues, firstly, we are working to completely settle, within this fiscal year, the losses related to EVs currently sold in North America. In addition, we are striving to make prompt management decision in line with EV markets, such as disciplined expenditure control, EV product range and review of CapEx plans aligned with the business environment. At the same time, to further enhance the earning capability of hybrid models, we are preparing to launch next-generation hybrid system as well as equipping the hybrid models with next-generation ADAS. We will communicate our review of fundamental medium- to long-term strategy at an appropriate timing sometime during the coming fiscal year. Honda has multiple business domains, including motorcycle and finance business operations, forming a well-balanced business portfolio, each of which help us to generate cash flow and to maintain a sound balance sheet. Because of this, we have adopted a DOE indicator, which allows us to ensure stable returns and dividends aligned with the company's growth even in an uncertain and extremely volatile business environment. Through these initiatives, we will continue to strive to enhance corporate values so that we will remain a company expected to exist in the eyes of our stakeholders. This completes my presentation. I thank you very much for your attention.

Thank you very much for your attention. So now we'd like to take questions from the audience. [Operator Instructions] Then the first question. This is from Mr. Yokoyama of Toyo Keizai.

This is Yokoyama from Toyo Keizai. Can you hear me?

Yes.

I have 2 questions. First question is I just would like to check your outlook for the full year. You are progressing beyond your budget already. But it is true that the fourth quarter, you tend to get a lot of expenses, but you have been saying that the expenses would be JPY 650 billion for the full year. There was one gap. So I just wanted to check that. And then for the automobile profitability, I would just like to check. There was tariffs impact. If we exclude that, that would be IOS of 3.6%. But if you include hybrid, I think earlier, you mentioned like 8% of profitability. So if you say 3.6%, I thought it was kind of sounds lower. So I would like to ask for your evaluation of the profitability of automobiles and then would like to see what your real values are.

Okay. Thank you very much for your question, Mr. Yokoyama. First of all, for the specific numbers for that, this will be covered later. But this time, for the fourth quarter, we slided the results from fourth to third quarter. So let me try to answer how we expect the financial results would land toward the end of the year. So compared with the third quarter results, the tariff impact will work on the positive side. And then the motorcycle and automobile unit sales, because we had favorable results in the Vietnam motorcycle -- well, I should not say favorable, but the damage was less than we had assumed in Vietnam. So I think motorcycle, it will go positive compared to our budget. That is our assumption as well. However, for North America automobile market, if you look at that, and then going forward, I believe there will be further impact from BEV. So the sales will become difficult. So we will have to increase a bit of the incentive. That's one thing we are considering. But as a downside, another downside is that so far, we had the BEV with GM. Well, Mr. Fujimura will explain this later. But we need to do this in negotiation with GM considering the compensation. So depending on how that comes out, we might have a little bit more expenses to be covered. So with that, that is why we're giving those numbers as a forecast. And then as the BEV environment, how it develops, maybe the GHG credit, and then in the finance, we might have our losses from a residual value on the lease. So basis of those, we believe we are just assuming for fourth quarter, the outlook is still maintained. Okay. So I would like to ask Mr. Fujimura to give a little bit more details then.

Okay. Thank you very much for your questions, Mr. Yokoyama. As you mentioned, the negative JPY 650 billion. So, so far, we had a battery EV of negative JPY 650 billion, battery EV, that's what we have been saying. So when we talked about the JPY 650 billion, so the GM-related issues that we talked about, and then of the models that we are developing, let's say, we were doing a review of those models so as to write off certain assets. So with that, we recognized JPY 250 billion, and then JPY 400 billion of R&D. So we put total of JPY 650 billion in the budget. This time, in the results, this is not for the GM portion, but for models in China, because according to the discussions with the partner, we have reviewed our product lineup. Some of the models or some of the development assets, those have been written off. So up until 9 months of this year, we have JPY 270 billion. So that's JPY 270 billion for the 9 months. But if we turn it into budgeted, let's say, amount, it will come to JPY 290 billion, plus JPY 400 billion for R&D. So it is getting close to JPY 700 billion range. So those are the numbers that we have put into the budget. So this JPY 270 billion has already been incurred and then JPY 290 billion for the full year. So the JPY 20 billion remaining, the difference, this is up to the negotiation with GM. So the negotiation with them still has not been established. We have not been offered any number concerning that. So we are assuming -- sorry, we don't know if the JPY 20 billion is sufficient or not. So because of that, looking at the sales situation and then maybe if you think about the exchange rate, that might be upside, but this could be a downside factor. So that is why we are keeping the outlook forecast unchanged. This JPY 700 billion BEV portion, next year -- well, if this JPY 200 billion is no longer there next year, then it will only be JPY 400 billion. That will be the starting line for next fiscal year. But at the end, as Mr. Kaihara explained to you, currently, considering the current EV market, I think we need to rebuild our framework of our strategy. So we'll take this -- well, are we going to really take this JPY 400 billion as a starting point, or are we going to review this? We don't know how much of the disciplined expense cost control is going to be. We are still in the process of formulating those plans. So we hope to be able to issue outlook prospect of that sometime in the future. When it comes to ICE, it was like JPY 900 billion or close to JPY 1 trillion earnings is something we have. However, we do see declines in unit sales in Asia, and we see some impact from exchange rate. And then the semiconductor impact, we are recovering a little bit of that, even though this is onetime. So without the tariff -- that's JPY 700 billion. And then let's say, if there's no tariff, it will be JPY 400 billion. So on the plus. So JPY 400 billion probably would be the starting line. So JPY 300 billion tariff impact, it cannot be recovered just immediately next fiscal year. So we want to closely monitor the cost, so we might proceed with more expanding of our local procurement and try to control costs more closely. I hope that answers your question.

Well, when it comes to talks about the upside, you are assuming the exchange rate at JPY 148 per dollar. But I think this would go toward the upside, right?

I think if things progress as things are going right now, yes. As I might have mentioned, so per dollar, JPY 1 would give us an earning plus of JPY 10 billion or so throughout the year, that is, of course. So we slashed up by 4 to get a quarter-on-quarter number per JPY 1 against the dollar fluctuation.

Next question, please, from Asahi Shimbun Newspaper, Mr. Miura, please.

Asahi Shimbun Newspaper, Miura. I have 2 questions. One, Page 20, EV market trends with the model lineup prioritization and focus, as we mentioned here. Could you elaborate on that, please, the basic idea and the directions, please explain about that to me. And another question is also on the Page 20 about reorganizing the long and midterm strategies. And please tell us about the directions of those strategies.

Thank you for your question, Mr. Miura. So EV market and our attitude for that. Basically, BEV market for us are in the North America and in China for North America. The market environment, for instance, there is ACC now validated and credit for BEV, we cannot really see the values anymore today and demand environment for EV is quite negative today for us. And recent EV situation today would be leading to the idea of reorganizing the EV strategies for that market. And then last year, we had some tax credits, and we had accelerated some prior to the September period. However, now the market is slowing down in this end. In that regard, EV strategies in the future have to be revisited. And therefore, China EV market is -- last year, for instance, half of the market share in the China are supported by the EVs or BEV in China. And then in terms of Honda EVs, unfortunately, there are local EV manufacturers over there. And in terms of the prices, UI, UX perspectives, we are not there. We are behind those companies. And then in terms of the competition in the software environment, we are still behind other companies. Unfortunately, we do not have the established image of the business in the EV area over there. So we have to go back to scratch and then rebuild our strategies for EV. For the cost perspective, the local suppliers over there or engineering companies over there, we would have to make use of those present that way. We have to turn our direction dramatically, so that we can then gain our cost competitiveness utilizing them. NOA, ADAS, those will be updated with them, so that we can be competitive again to challenge the markets once again. In that regard, as I mentioned the other day, the timing of the launches will be revisited in order to have our entry once again in the EV market over there. Thank you very much.

Next question come from Nikkei Paper, Mr. Okinaga.

This is Okinaga from the Nikkei Newspaper. I'd like to ask about the EV again. So throughout the year, you said JPY 290 billion for the year. Is there a possibility of, let's say, further impairment booking or posting of impairment losses? So that's one question. And the other question is concerning semiconductor. So you said that you have good prospects for preventing recurrence of this shortage problem happening. So I just would like to know what you have been doing. And then JPY 150 billion negative for China. So any impact for Japan and China? So I would like to know how the situation has been for China and Japan.

Thank you very much, Mr. Okinaga. First, about the EV, the impairment losses for the nonrecurring one. Well, we don't know what's going to happen, but we have been processing this in accordance with the accounting principles. So whatever we know, we have incorporated into our books. However, as mentioned by Mr. Fujimura, we don't know what kind of compensation issues might come up with GM. So there is a bit of an unclear future prospects. And then actually, as I've explained, because the EV market is dramatically changing. So we would need to monitor our sales volume trends. And then we might have to take some actions if needed. Any details you can add?

Okay. Then if the intention of your question is about the impairment losses for the EV business in general, like at other OEMs, because we are not sure what's happening at other companies, so I would like to refrain from mentioning anything about other companies. But what we are saying is that with the models that we have developed as the die and tooling and then the development R&D assets, some of those have to be written off. And then this is not really impairment, but we would need to do some compensation. So because of the review that we have conducted as a product lineup, we are booking some temporary losses, those expenses that are incurred. But you asked about the impairment, but impairment means that -- this is a CGU that we use. Whether this leads to cash generation in the future, and then how the business environment has been doing, and what management decision has been in view of those. And then in view of all of those, we are getting audited, and then with the auditors included, we discuss. So we are not recognizing any impairment like that have happened in other companies. But we have been talking with the accounting. We have been discussing on a continuous basis. And then we have been discussing how we at management should assess those costs and expenses. So I just wanted to mention that whatever that were incurred up until 3 quarters, those are only those associated with the product lineup review. We don't know if it's going to be enough, but we have included whatever we can so far. And then the second question, you asked about semiconductor. So last year, in North America, from the end of October, we had to go into production adjustment and a production suspension in Mexico. So the impact actually is, I think I mentioned, 120,000 units affected. We hope that we are able to recover a bit. So the affected will be 110,000 units. But it would be JPY 150 billion impact we assume. So of that -- this is unfortunate, but for Japan and China, we have had some disruptions in production. From China, we had about 3 weeks or so from the beginning of the year -- end of the year, sorry. And then for Japan, we have had to suspend production like at Suzuka for 2 or 3 days, and then did some production adjustment for a few days after that. So because of that, even though there was an impact once, but for Japan and China, we have the capacity to sufficiently recover. So we will be able to complete the recovery of those lost production before the end of this fiscal year. So in terms of business impact, it is very limited. So we have not considered that into our business. But anyway, we have faced those problems. So basically to the suppliers, so I'd say, we are trying to do a multi-sourcing of the suppliers, and then we have been asking them to keep appropriate inventory levels. However, some of the suppliers, unfortunately, have not provided us with that much of the details. So to be blunt, we have been relying heavily on our suppliers. So that's something we are reviewing fundamentally, so that we will keep a close watch over our supply chain all the way up to upstream and then see what kind of risk there may be, and then we will do appropriate risk assessment and then keep appropriate inventory management or go multi-sourcing as well. And then that needs to be done from the development stage as well. So at the earlier development stage, we have been looking at the cost sourcing. Well, in view of that, there are some single-sourcing strategies as well. But in terms of business continuity strategy, if we go single-sourcing, we will pay careful attention to upstream of each of those components containing semiconductor, and then we will decide how much of inventory we will hold. And then we will do a review about what is going to happen if we go multiple sourcing and then take actions accordingly. Currently, as you may know, the semiconductor issue, in addition to what we have experienced so far for the memory and then, of course, the rare earth issues are there. We are aware of those. So when those issues arise, we would -- of course, at this point in time, I don't think there is anything that would lead to immediate problems right now. But in the future, of course, well, it is not very clear. So we will work closely together with the suppliers and take actions as needed. However, for the rare earth metals, it is nothing that one single corporate entity can do anything about. As you may know, at the JAMA level as well, this is being discussed. And also with the governmental agencies included, this needs to be reviewed. So we would like to deepen our collaboration with different entities. Thank you very much. This concludes my answer.

Next question, Ms. Ukita from Yomiuri Newspaper, please.

Ukita from Yomiuri Newspaper. I have 2 questions. One is about tariff impact. Little by little compared to the start of the year, it is coming down. It is down from the JPY 386 billion from the beginning now. And could you tell me more about the reasons behind this? And then the other question is about sales situation of the automobiles. Your target is there, but it's not achieved. And in order to achieve the target volume of the sales, what are you going to do with the Japan and North American market?

So tariff, Mr. Fujimura is to address.

Thank you very much for your question, Ms. Ukita. And as you said, until last time, a gross impact in the first half, JPY 385 billion impact expected because of tariff, and the recovery of the cost expected JPY 50 billion. And then JPY 338 billion (sic) [ JPY 335 billion ] net impact. And then 110,000 units reduced in the U.S. because of the semiconductor situation. And then including that, JPY 338 billion net actually is because of the foreign exchange and so on, it will be about JPY 360 billion. That's the actual gross and JPY 50 recovery. So net was JPY 310 billion impact incorporated in the accounting. And then the recovery part, they were realized. Therefore, JPY 310 billion, this is the number finalized, let's say, for this. And what kind of recovery plans are incorporated in the JPY 50 billion? And with the suppliers and others, we had made adjustment looking at the logistics and so forth. And then additional local procurements were progressed as well to achieve USMCA, and we are more confident in achieving that. Plus within U.S. credit, utilization is also to be added. And we scrutinized how far we can incorporate from that, and we had a broad consideration. And then eventually, JPY 50 billion recovery plan is realized into the JPY 310 billion figure.

And as for the sales strategy, let me address that question. For the North America, as I mentioned a little earlier, IRA credits were pushed toward the end of the period, and it was included in the BEV drops quite dramatically. Therefore, going forward, it will be staying at a very low level. And then going forward, we have to be focusing on the hybrid brand, taking advantage of the brand to make sure that those models will be selling more. And then as of today, in North America, various companies had the impact of the tariff. And then we were thinking that they will be increasing the selling prices. However, we do not see the dramatic selling price increases. And then we had seen some incentives utilized in the different areas. And then the actual prices on the decreasing trend, practically speaking. Therefore, we have to use incentives. At the same time, we have to appeal the hybrid models. And customers who are looking for the affordable models, the ICE models can be provided to. So we try to cater for the needs of the customers to try to get by the situation here. And together with the dealers, we have to do the marketing activities. And we were not really focusing too much. However, in the area of the fleet, which was not really focused before. We have to work on that to sell more cars in the fleet customer field. And Japan, hybrid models, that is very focused in the Japanese market. In Japan, rather than the competition, I think it is more of the customers and how we can include and support those customers. The dealers will make sure that they have a close contact with the customers, for instance, one-on-one strategy, one person looking at one customer, one-on-one strategy to try to satisfy their needs for sure. And that is very down to the ground activity, let's say, but it is what we are up to. And then next year onward, MMC and other campaigns expected to try to maintain the market share or improve the market share with those plans.

The next question come from NHK, Mr. Yasunaga.

This is Yasunaga from NHK. One question. The rare earth metals supply concern, concerning that explanation. So there is an export restriction on China. Is my understanding correct? And also about the diversification of supply chain. So for rare earth metal, you have no choice but to rely on China. But what would be your appropriate action in response to this situation?

Okay. Thank you very much, Mr. Yasunaga. For the rare earth metal concern, yes, as you said, currently, rare earth metal, those are subjected to export restriction from China. But currently, are the exports stopped? No. All we can do is apply for exports, and we do see those exports coming through. But sometimes it just takes some time, a longer time. So if you ask us, can we get the exports coming through as expected, not really. So as you know, rare earth metals, those are used in different various components. So if the supply stops, the risk is high. So we need to ensure, as I mentioned, we need to apply without any delay, apply for permission for exports. And then, of course, when it comes to fundamental countermeasure is to go without use of rare earth, but that will take a long time for development. So currently, we will take some parts that are difficult to switch over or take a longer development. All we can do is to simply hold inventory. But currently, we don't have any actual problem in the supply. But how is it going to be in the future? We don't know. It is very uncertain, as I mentioned. So the supply, we need to work closely together with our suppliers, get interviewed them, and then ask them what kind of supply chain our supplier have for the rare earth that's needed for their components. So we will continue to consider our permanent or long-term countermeasure. And this will be for more medium term, but we will consider development of parts and components that do not use the rare earth. But for the time being, all we can do -- the first thing we can do is to secure inventory. And then also secondly, to apply for export permissions on a timely manner. So those are the things that we can do currently. I hope that answers your question.

This rare earth-free components, specifically, what kind of components do you have in mind? And where would be the real critical point?

Well, there are different components, but there are different types of rare earth. So some are used in motor, some used in meters. So for each and every component that uses rare earth, for every one of them, we are looking into what can be done to replace them without rare earth.

Ms. Nagai from TV Tokyo.

Question one about the third quarter alone sales in the period for automobiles. Excluding the automobile sales, you had a reduction of the volume. And excluding the impact by the semiconductor, what is the situation as compared to the expectations in the beginning of the year? And the second question is about Page 20. As Kaihara-san said, the direction of the businesses going forward. You said that it is going to be a dramatic revisiting of that. And as I heard about incentives in the North America, there could be kind of limitation to improve the profitability by doing by itself alone, but I suppose that you're still speaking to Nissan or Mitsubishi, not just those 2, I thinking about possibility of the collaboration with other companies other than those 2.

Thank you very much, Ms. Nagai, for your question. And 3 months volume, right? That's your question, right?

Yes, correct.

And then volume, you mentioned that the volume had declined for the period year-on-year, I suppose. But for the automobiles, actually, the volume sales increased as compared to the plan for the automobile businesses for the third quarter. You're comparing from same time last year, right? And for the original plans, third quarter, we had actually overachieved the plan for the third quarter automobile. And as compared to last year, it declined because of the next 3-year semiconductor impact that is the largest, and also Chinese market for ICE. EV -- NEV market is increasing or expanding in China and ICE market is shrinking in China, because of which volume in China is in a tough situation. So year-on-year, it dropped. That is about the volume. And what was the next question? Alliance question, right? And Nissan Alliance. Well, actually, with Nissan, the integration possibility, we do not talk about that at all now. And I have to say that. And another thing is that as you said now, development cost will be needed in the future, for instance, software, architecture and so forth require investments. And for the future EVs, batteries, e-axle, if we can commonize those or have a co-development together, that will help reduce the development cost, or cost itself may reduce, thanks to that. However, for those matters, we continue to discuss with Nissan. However, not just Nissan, if it is possible to build a relationship like them with other alternative companies, of course, as long as we can expect a win-win results altogether, of course, for those, we will continue to consider other possibilities. And that is all for your question.

Our next question from Mr. Fujiwara from Nikkan Jidosha Shimbun, Daily Automotive Newspaper.

This is Fujiwara from Daily Automotive Newspaper. I have 2 questions as well. My first question is about the automobile, the factors for press. You had a big contribution from the selling cost that helped to grow your revenues. So I wanted to know what region and what products. And then second question. This may have been covered by Toyo Keizai's question, but the hybrid volume has grown by about 5% in the third quarter. So I would like to know what kind of contribution this 5% growth of HEV volume in the third quarter?

Okay. Thank you for your questions. This is from year-on-year comparison, I believe. Sorry, the selling price and cost impact that work to the plus, that was for automobiles, there was a bit of a plus in the selling price and cost impact. If we look at the total graph, it's about JPY 60 billion. There was about JPY 40 billion for automobiles, because this is from selling price impact. When we say selling price, per year, at the beginning of the term or in fall, we do go through price hikes. So of the JPY 40 billion or so, about half of it happens in the States. And then for the other regions, those are just prorated -- if you can prorate it to different regions by the volume. And then the hybrid volume for the third quarter, for the hybrid, the unit sales in the states -- well, particularly in the states, hybrid is doing very well. And then how we do the incentive, incentive can be kept low relative to the ICEs. However, the competitors are coming into the hybrid market. So our favorable condition, of course, is not going to last forever. So on our part, we will be getting into the transition period for different models. Our competitors are going to come up with new models. So we need to kind of maybe build up -- spend some more incentives. But the hybrid requires relatively lower incentive compared to petrol engines. But in the future, we might have to spend some more incentives in the future. But on the other hand, for the petrol, gasoline engine vehicles, so we do need incentives more than hybrid for ICE. However, if you look at the contents of the components, gasoline engine requires less tariff impact. So in that sense, petrol engine, gasoline engine contribute better. So we need to strike a good balance between those 2 groups. And then recently, if we look at the transaction -- one of the reasons why transaction prices are deteriorating in the States is that the model type variants which cost lower are attracting customers. So because we do have both gasoline and hybrid, we need to strike a good balance. And then we need to survive through this transition period between those different models using those good mix.

So due to time, the next question will be the last one for the day. Mr. [ Tsurumi ] from Mainichi Newspaper, please.

Earlier, you talked about the alliances with Nissan. And based on the reports, the models in the U.S. with Nissan and powertrain commonization and so forth. You talked about that earlier. And what is the progress today? Are there any updates for us as much as you could share with us? That is all for me.

Thank you for your question. So in conclusion, there is no specific information I can share with you today. But with Nissan, as I said earlier, in many different field areas, we try to explore different possibilities. And as you said, the complementary supply of the models or production, the models from each other. If those are complementary to the other company, we could look for the possibility, and also one company produce a model of cars and then provide or make supplies. We have discussion about it. However, we have not decided on any specific plans yet. We simply continue our discussion. And then as I said earlier, the commonization of the software or architectures, such topics are, of course, one of the discussion topics for the development. However, both of us have made progresses in individual projects. Therefore, it is not yet the time to make a conclusion yet, but we continue to discuss positively with each other. So once any output or plans are solidified, we will make sure that we will share with you.

Thank you. So now that concludes our press conference for the business performance results. And those materials and handouts are available from our website of Honda. Thank you very much for your participation, everyone. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

I thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited's financial results briefing for second quarter of fiscal year to March '26. First of all, allow me to introduce the attendees today. Director, Executive Vice President and Representative Executive Officer, Mr. Noriya Kaihara.

Good to see you.

Director, Managing Executive Officer, Mr. Eiji Fujimura.

Good to see you, everyone.

Operating Executive, Head of Accounting and Finance Unit, Mr. Masao Kawaguchi.

Good to see you, everyone.

Mr. Kaihara will first present the financial results of second quarter ended September 30 of 2025, and forecast of consolidated results for the fiscal year ending in March '26. Then Mr. Fujimura will present the details. Over to you, Mr. Kaihara.

I thank you very much for your continued support for Honda's activities. I would like to present to you the financial results for the second quarter of financial year to March '26. I'd like to start with the highlights of the financial results. Our operating profit for the second quarter of the year to March '26 came to JPY 438.1 billion. Motorcycle operations saw unit sales decline in Vietnam, but global sales trended solidly and strongly, led by Brazil. For results up to second quarter, we've attained a record high unit sales, operating profit and operating margin. In Automobile operations, though there was some positive profit impact due to price revisions, we saw a decline in profit due to impact from tariffs and onetime expenses related to EV. Operating cash flow after R&D adjustment, which indicates the resource available for future investment, came to JPY 1,281.3 billion, on par with the same period last year. The forecast for the consolidated results for the term ending in March '26 is operating profit of JPY 550 billion and profit for the year of JPY 300 billion. We are revising the previous forecast, considering the decline in Automobile unit sales and the reduction in production volume expected as of now due to semiconductor shortage, though we expect profit growth due to yen depreciation. In Motorcycle operations, while we expect declines in unit sales in Vietnam, we hope to recover this in other regions, thus we maintained 21.3 million units. For Automobiles, in addition to lower sales volume, mainly in China and ASEAN, declines due to semiconductor shortage has been taken into consideration for North America. We are revising down from 3.62 million to 3.34 million units. To give you the consolidated results for the second quarter of the year to March '26, Operating profit was JPY 438.1 billion, lower by JPY 304.4 billion compared to the same period last year. Investment earnings due to the equity method were JPY 10.8 billion, higher by JPY 31.6 billion. And the half year profit attributable to the owner of the parent was JPY 311.8 billion, lower by JPY 182.8 billion. Next, I'd like to cover the forecast for the consolidated results for the term ending in March '26. Compared to the previous forecast, our forecast is operating profit of JPY 550 billion, down by JPY 150 billion and the profit for the year attributable to the owner of the parent of JPY 300 billion, down by JPY 120 billion. The exchange rate against the U.S. dollar is assumed at JPY 145 for the full year period. Forecast for the full year dividend for the fiscal year ending March '26 is JPY 70 per share, unchanged from the previously published forecast. Next, Mr. Fujimura will present the details of the results.

Allow me to present the results. The group unit sales during the 6 months to the second quarter were as follows: compared to the same period last year, for Motorcycle operations, though there was a decline in Vietnam with growth mainly in Brazil and the Philippines, it came to 10.763 million units. For Automobile business, it came to 1.68 million units due to declines mainly in China. For Power Products, though there were declines in Asia, Europe led the growth and the total came to 1.699 million units. The consolidated results during the 6 months to the second quarter were as explained earlier. Next, I'd like to present the factor analysis of operating profit for second quarter compared to the same period last year. Operating profit was JPY 438.1 billion, down by JPY 304.4 billion compared to the same period last year. Factors affecting the operating profit were: first, impact from sales was positive by JPY 83.9 billion due to expanding motorcycle unit sales. Selling price and cost factors was an increase of JPY 162.4 billion due to effective price revision. Expenses gave us a negative impact of JPY 26 billion. R&D expenses led to a profit decline of JPY 20.4 billion. Currency effect resulted in a negative impact of JPY 116.2 billion. EV-related and onetime expense led to a negative impact of JPY 223.7 billion and impact from tariffs led to a profit decline of JPY 164.3 billion. Our trial calculation, excluding the EV-related onetime expenses and the tariff impact, comes to operating profit of JPY 836.2 billion (sic) [ JPY 826.2 billion ], on par with the same period last year. Regarding operating profit by business segment, Motorcycles, JPY 368.2 billion; Automobiles, JPY 72 billion of losses; and Financial Services, JPY 143.2 billion profit; and the Power Products and other businesses, we put up JPY 200 billion of losses. Operating profit of Motorcycles business was JPY 368.2 billion, up by JPY 42.4 billion year-on-year due to the following factors. Regarding sales impact, JPY 60.2 billion increase by additional sales volume mainly in Asia and South America. Regarding price and cost impact, profit increased by JPY 32.3 billion due to the effective price revisions and so on, JPY 7 billion decline of the profit due to expenses, JPY 3.5 billion positive profit by R&D and JPY 41.3 billion profit decline due to the foreign currencies and JPY 5.3 billion decline of the profit due to tariffs. In Automobiles business, operating profit declined by JPY 351 billion year-on-year, resulting in JPY 72 billion operating losses due to the following factors. Regarding sales impact, profit declined by JPY 24.5 billion, accounting for the losses associated with the restructuring of the group companies. Price cost impact, increase of the profit by JPY 130 billion due to the effective price revisions and so on. Expenses, JPY 33.8 billion increase of profits. Research and development, JPY 24.4 billion decline. Foreign currency effect, JPY 64 billion decline. Onetime EV-related expenses, JPY 223.7 billion decline. And tariff impact, profit declined by JPY 158.1 billion. Next, regarding the cash flow situation. Free cash flow, excluding Financial Services business was JPY 760.6 billion. Net cash balance at the end of the first half was JPY 3,053.9 billion and operating cash flow after R&D adjustment was JPY 1,281.3 billion. Next, I'll explain consolidated forecast for fiscal year ending March 2026. Regarding the group's unit sales as compared to the previous forecast, in Motorcycles business, reflecting reduction in volume in Asia and increase in regions mainly in Brazil and others, we will maintain the volume of 21.3 million units. In Automobiles business, in addition to the volume decline mainly in Asia, we reflect a volume reduction by 110,000 units in North American region due to the impact of the semiconductor shortages. Thus, we would expect the volume to be 3.34 million units. In Power Products business, there are some regional reviews to be reflected, we will keep the previous forecast of 3.67 million units. I've explained the consolidated business forecast of the fiscal year ending March 2026. Next, I'll explain factors of ups and downs of operating profits year-on-year. The operating profit would decline by JPY 663.4 billion year-on-year because of the following factors. Regarding the sales impact, although losses were put up in conjunction with the group company's restructuring, thanks to the unit volume increase of Motorcycles and so on, we expect the profit to increase by JPY 3.3 billion. Regarding price and cost impact, JPY 280 billion increase of the profit is expected due to the price revisions and so on. Expenses declined by JPY 91.5 billion. R&D expenses declined profit by JPY 126 billion. Foreign currency impacts declined by JPY 214 billion, and gross tariff impact decline of profit by JPY 385 billion. And the potential decrease of the production volume due to the semiconductor supply shortages is incorporated in the forecast based on the current assumptions, which would be JPY 150 billion negative. Next, I'll explain the factors behind the operating profit changes in expectations comparing to the previous forecast. Operating profit is expected to decline by JPY 150 billion from the previous guidance because of the -- regarding the sales impact, incentive hikes and unit sales decrease of Automobiles and so on, the profit would decline by JPY 83 billion. Regarding price cost impact, we revisited the recovery from the tariff impact. Thus, the profit would decline by JPY 70 billion. Regarding foreign currency impact, because of changes of the exchange rate to JPY 145 for $1, JPY 88 billion positive profit on that. For tariff, we scrutinized the impact in values, and it will be JPY 65 billion positive. And regarding semiconductor shortage, the impact will be JPY 150 billion negative for the profits. Lastly, this is the forecast of the capital expenditures, depreciation and amortization and R&D expenditures. That is all. Thank you very much for your attention.

Thank you very much for your attention. Then we'd like to proceed to the Q&A session. [Operator Instructions]. Okay. The first question, Ms. Ukita from Yomiuri Newspaper.

I hope you can hear my voice.

Yes, we can.

My first question is, so the Motorcycles is operating great. And then for Automobiles, it's JPY 73 billion losses. So I'm sure there are tariffs and semiconductor impact. But I just want to ask for your input or your general comment on your prospects for the future.

Okay. Let me take that question, our overall perception. And then for details, I will ask Mr. Fujimura for some more comments. First of all, so for Motorcycles, we had the best record high results. So we had a decline in Vietnam. But in Brazil and Thailand, we were able to maintain our good profit. For the second half, so for the full year, we expect things to proceed fairly well. So we need to be considering about whether we can cover the potential decline in Vietnam. But I think generally speaking, it should be okay. For Automobiles, so the ICE and HEV gave us some cash so far. Now we need to spend that money into intelligence and hybrid -- sorry, electric vehicles. So we have been doing okay. In North America, we had the HEV good sales revenues. So we believe that the profitability has been increasing -- improving. However, because of the tariff directive and also due to the changes in environmental regulations, so the business environment has been changing dramatically. For tariffs, I think compared to other OEMs, we have a pretty high local procurement ratio in North America. So in that sense, I think the impact should be limited. Still, we have over JPY 300 billion impact. So for the tariffs, actually, in a sense, as Mr. Fujimura mentioned, we consider this as a new normal, which we believe would continue for some time. And while we can maintain the good results in North America, the sales volume in China and Asia has been declining. Particularly in Asia, the profitability in the ICE worsened beyond our expectations. So we would need some fundamental changes in actions for those. So for future actions, what we are thinking of, we need to maintain the build in Asia and Oceania, the profitability structure to make gains from ICE and HEV. So the number of models and the number of volume, so we need to revise our investment plans, so that we need to further reinforce the competitiveness of HEV. So we need to further enhance the profitability in ICE and HEV. So we do need to review our product lineup, and then we need to focus our attention in our profitable models, and then we need to invest in those. So we need to really bring up the overall volume. And in particular, in line with the current situation, we need to rationalize the fixed expenses. I think that's something we need to work on quickly. And also for BEV, so far, we have been, well, making quite a lot of expenditures. So for future by shifting over to our own BEV, so we would need to have a breakeven at least. So we need to curb the losses, I would say, going forward. And then for tariffs, as I mentioned, we believe this is going to continue into the future as well. So we want to go by the policy of produce where there is demand, so that we can combat, through our supply chain, the impact from the tariffs. That's something we will continue. Particularly for the improvement of profitability for Automobiles, that's something we need to do. And overall, we need to improve our profitability overall. Anything you want to add in terms of number?

Okay. Ms. Ukita, thank you for your question. This time, we have the JPY 438 billion. So the Automobiles is JPY 73 billion losses. And then for Motorcycles, it's JPY 370 billion positive. So for Motorcycles, it's the best highest record. So those are pretty peculiar numbers that we've got here. But as we've mentioned from the beginning of the term, there's a lot of noise from kind of external factors. So to add a little bit about the JPY 438 billion, we have this impact, this negative of JPY 450 billion. That's the onetime cost. So the JPY 890 billion, that's our normal standardized performance, I'd say. This JPY 450 billion negative, as introduced in the material, we have JPY 160 billion due to tariffs and then the EV provision for losses, we will allocate JPY 250 billion throughout the year. So we have put it in the budget. And then of that, we allocated JPY 225 billion of that into the first half. And then we have the group restructuring. So we have some losses from the transfer of our subsidiary, which is JPY 43 billion. And also in the financial operations and in the U.S. and the U.K., we had some settlement of like JPY 20 billion for litigation. So put them together, it's JPY 890 billion. So we have like JPY 20 billion for financials, but most of this was related to Automobiles. So all of those included, we have this JPY 73 billion losses for Automobiles. So versus the plans, as I mentioned, those noises or the external factors had almost been incorporated. What may have been excluded may have been the financial operations and then also the Asia and China volume decline. Those were worse than our initial anticipation. So for the impact for the full year, at the beginning of the fiscal year, what I mentioned was that we were thinking of JPY 500 billion. That was the target that we mentioned at the very beginning. But compared to the last fiscal year, we have a negative JPY 450 billion due to exchange rate, and we need to recover from that. So that's another tariff, JPY 450 billion, so JPY 900 billion. So all of that put together. So JPY 1.4 trillion, that's our actual performance. But we put it together, the prospects or the forecast for the year is, against the JPY 550 billion, because of the exchange rate, semiconductors and the tariffs, it came to like JPY 1.3 trillion. That's about the idea we have. Initially, we used to say JPY 1.4 trillion. That we said JPY 1 trillion was the Financial operations and Motorcycles, and the rest was Automobiles, and then the battery EV of JPY 600 billion negative. But for the Motorcycles and Finance, we have the Vietnam in decline, but we used to say JPY 1 trillion, but we have recovered. So it's JPY 1 trillion is okay. But for the JPY 100 billion decline, at that time, we were thinking of BEV losses from JPY 600 billion, but we had a provision of JPY 50 billion. So put that together, JPY 650 billion. We used to say ICE of JPY 1 trillion back then. Now that came down to JPY 900 billion. That's as far as it declined. So putting those together, because of our business structure, as Mr. Kaihara mentioned, first, we need to reboost our profitability in the ICE. And then for battery EV, it's JPY 650 billion. This is the gross profit of JPY 250 billion. That's all for the provisions. Now we have ended putting in the provision. So we're going to start the -- we will try to eliminate -- we will try to bring down the negative from the gross profit level as close as 0 to possible. The rest will be for R&D expenditures. So probably we will come to JPY 450 billion. So that will be the baseline for the next year. And then for the tariffs as well, of course, net, we do have JPY 330 billion or so impact. So we will need to work through those, how much of this recover in a few years. I just mentioned P&L a little bit, but the cash expenditure control is well in place. So if you look at the balance sheet and the cash flow, the strength of those are continuing as well. So particularly for the cash control, we need to have a good monitor over that. And then with the need to recover our P&L for the Automobiles quickly. And then having said that, of course, we need to put in our resources to prepare ourselves for the future. So we want to put those together. And then we want to do a stable dividend with the DOE. So we want to be able to provide a stable dividend to our shareholders as well. So we want to have a good P&L and balance sheet balance. We want to have a good, well-balanced structure. And so we want to recover our profitability for the time being now and also get prepared for the future. For Automobiles, as I mentioned, we do have a keen sense of crisis, and then we are ready to take actions. Thank you very much.

One more question, may I? You said already perhaps about impact by the chips. It's already incorporated in those values, about JPY 150 billion. And in North America, there is this impact in reality. But what is the prospect for the procurement? And do you think the situation will improve or getting worse? Do you have a risk of such? Please tell us?

I will answer the question then. So for the semiconductors, for the customers, suppliers, we are causing the troubles with that. Sorry about it. As we said right at the beginning, it's already reported in the media, a company called Nexperia. The chips from the company has been stopped, suspended. Therefore, we have impact on the procurement. And then we work together with the Tier 1 manufacturers to try to minimize the impact on the production. And as for the 27th of October, in the production plant in North America, we are adjusting the production situation today. So as of now, we have an impact of 110,000 units that's reflected. And then I said JPY 250 billion, but operating profit of JPY 150 billion that is put up in this announcement today. And I heard that shipment has resumed in China now. And we have already started our communications to the suppliers, and we are trying our best so that we can get supplies of those chips as much as we can. And going forward, it is difficult to tell definitively. But as of now, in the week of 21st of November, probably in that week, we wish to resume our production eventually, and we are trying to achieve that now. And as of today, the parts that are coming up now back in the network and then getting better, and we are seeing some signs. However, it is not definitive as of yet. So we are communicating with this very closely, so that we can try to resume and that is the situation today. Thank you.

Thank you. Thank you to Ms. Ukita as well. We'd like to take the next question from Nikkei Newspaper, Mr. Okinaga, please.

This is Okinaga from Nikkei Newspaper. For the impact from Nexperia, I'd like to ask another follow-up question. So why has Honda suffered such a big damage? And then you said that you hope to start production on the week of November 21. But have you considered procuring alternative parts? So do you think that the impact should not go beyond JPY 150 billion?

Okay. First of all, so the reason why we have this much impact is this time, the components -- well, I cannot give you any details about the component, but the components was sourced from one supplier. That was one major factor. And another thing is, in the past, for semiconductors, yes, we have had some impacts such as this. So we have worked together with the supplier to hold the kind of interim inventory or appropriate inventory level. We asked them to hold that. That has happened. However, it was single sourced. And then also in North America, the sales have been going very well that we have been producing almost at full capacity. So in that sense, well, the interim inventory was getting low as well. So because of that, the supplier was impacted. Then promptly that impact led to impact our production as well. For whether we are considering some alternative sourcing, of course, yes, we are considering alternative, let's say, products or off-the-shelf products. So to the extent we are able to find out, yes, we are using them. So at an as early stage as possible, we want to apply whatever we can utilize. So that is why sometime during the week of November 21, we believe we should be able to resume production. So for future supplies in China, if they ever stop shipping shipment again, we will never know the impact. But should that ever happen, if you're asking me, that's going to be another impact. I cannot say for 100% sure, no. But at this point in time, as far as we know, from the intelligence that we have, we should be able to resume operation by the date that I mentioned. That concludes my answer. Thank you very much.

I would ask another question. The reason for your downward revision. So at August, you said JPY 650 billion EV-related onetime expenses. Has this gotten better? And then for sales, in North America, I think is it difficult to raise prices in North America? So that turned out to be negative. So I just want to know the reason. And then you said that you want to bring down the gross profit -- gross losses to 0. So I would like to ask about what you plan to do.

Okay. Thank you very much for the second question. Let me try to answer that. For the EV-related onetime expenses -- sorry, first, the tariffs impact. Against the number that we gave you last time, we have been able to minimize the impact. So therefore, our profitability, it is getting better. And then for the EV impact, we have put in some more amount. So in that sense, the impact has become greater. For the price hikes in North America, initially, for North America, we were assuming that we will be able to raise prices and then we have been prepared for that. However, price hikes, it's nothing we can do easily by ourselves. So we need to evaluate the market situation. What has happened is that in North America, particularly in the U.S., other OEMs incentives have been getting higher. So the actual market selling price has not gone up in real terms. Therefore, of course, we have done the annual price revisions. However, looking at the other companies' status, we found it difficult to raise prices due to the tariffs impact. So we were not quite able to gain that positive impact due to the price hikes that we had anticipated at the very beginning. Unfortunately, we cannot expect that. So for the second half of this year as well, for the price hike, I don't think we can really expect good impacts to come from that at all. That completes my answer.

So I'll explain those numbers in addition. And then last time, JPY 450 billion negative gross tariff impact and then JPY 100 billion recovery, so JPY 350 billion net impact from tariff. And then this time, gross JPY 385 billion. And actually, gross impact is less of JPY 685 billion. And then recovery is about JPY 150 billion, and net impact is about JPY 335 billion. Eventually, that is the net impact. And then the gross impact, JPY 650 billion. Of course, we had an accurate understanding today. But for as much as JPY 500 billion, we have export from Thailand or Asian countries to U.S., and we were concerned about a possible recession and its impact over there. So we incorporated that in our expectation before, but now we released it. And that means we have less of JPY 650 billion from gross. And then we have a net recovery from JPY 1,100 billion to JPY 650 Billion. Actually, in the Automobiles market, it is difficult to revise the prices. So therefore, we need to delete that part for the Automobiles, and that is why we have those numbers.

Thank you very much, Mr. Okinaga. So if you have questions, please tell us 2 questions in sequence. Okay. We'll take the next question from Yasunaga-san from NHK.

This is Yasunaga from NHK. Can you hear my voice?

Yes.

Just one question because others have asked the same questions. In the Automobiles business, China and Asia, you had some declines, you said. But in your company, you are very much struggling with your sales in China. That's the impression. So there was GT. GT's launch timing has been postponed. I'd like to hear about the facts about it. And then what are you going to do? And then where is the difficulty of the market. So I'd like to hear about that.

Okay. Thank you very much, Mr. Yasunaga. For the China market, let me try to answer that question. For Chinese market -- overall market, actually, because of the incentive has been reduced. So the total market has been declining slightly. But basically, it's sideways movement. That's the total market. And then for this time, for Honda, particularly for ICE, well, actually, the price discount has been staying at a high level. So we have been struggling a lot. So in a sense, value for money, we are behind others. We are aware of that. And then for BEV, so for the features, the NOA, navigate on autopilot, that's not provided on our cars. So people consider our cars pricey. And then other companies put in this to put the momentum and then offer it at a lower price. So that is why it's difficult actually. And then that is the situation in China. And then for electric vehicle, as pointed out earlier, the E-Series, the 1, 2 and 3 were in our horizon, but we felt the need to completely review this. So we came up with a GT we had assumed. However, we did have to postpone it in reality. So this we were thinking of next year -- initially, for next fiscal year, sorry. However, we will, for the time being -- I cannot tell you exactly when that's going to be, but we will postpone that. And then from the planning stage as well, we need to consider right from the planning stage how we want to launch this model. So for electric vehicle, this current situation will continue for some time. And then against that kind of business environment, for ICE, we need to make solid sales from those. Fortunately, we have completed depreciation of all the factories. So we need to enforce our business structure in the indirect and then also optimize manpower and then do a more precise sales prediction and then we'll try to make our business more profitable. That is what we are doing right now. And then this is all I can say for now.

Thank you very much, Mr. Yasunaga. Next question from Asahi Shimbun, Mr. Miura, please.

Miura from Asahi Newspaper. I have 2 questions. One, in the Motorcycles business, Vietnam, you had a decline of their businesses. And then they had restrictions on the electrification vehicles. And how much of those impacts did do you incorporate in this statement? And then what is your action against it? And question 2 is about Automobiles, about specifically EVs in China. And you said that you're going to have a radical action. And then what is the reason why you have a struggle in the Chinese market? What do you think is the cause for that?

Mr. Miura, thank you for your question. To start with Vietnam for Motorcycles. In Vietnam, as you know -- well, it is not yet implemented in the market; however, ICE motorcycles now would be regulated, especially in the city area. And then they said that they might apply this new regulation starting middle of the next year or so. However, with that in place, actually, when the announcement was made last summer, people started refraining their buying of the products. And then we were expecting some negative impact on the Vietnamese business. However, in October, we are seeing the business is coming back slightly. And then probably other things that this regulation is still only -- we don't know if that is practically to be applied in Vietnam. So for some time, probably current model of the ICE-based vehicles will suffice. And then, of course, electrification will start sometime later. And then starting this year, we have already launched the 2 ICON e and CUV e, those 2 electrified vehicles over there in Vietnam and the idea is to try to sell more of those EV over there. And in Thailand, we have a plan to start the production of a new EV model. And we are thinking about accelerating the start of this model production. And sometime earlier next year, probably in March, April time next year, we would like to try to bring over those new EVs to Vietnam. So even when they have the new regulations practically in place over there, we can offer the EV vehicles over there. So this time, we are expecting unit volume be a little bit less. However, we have Brazil businesses and Thai businesses quite well. So that will compensate for the situations in Vietnam. So that is our Motorcycles business in Vietnam. China EV, may I?

Please.

So EVs in China, as we said earlier, basically, Ye series, the new products are over there. And looking at the vehicle in comparison to others, for instance, the price range, they are higher, more expensive than the other products; CNY 150,000 for other products, whereas ours CNY 200,000. And our product is not price competitive so much. And also, we have NOA, navigation on autopilot system. It's an automated driving system, basically. The competitors' product have NOA; however, not on our product yet. Therefore, going forward, we will change the models in the future, and we will try to do that earlier. And the moment the local autopilot system could be obtained so that we can add this autopilot system to our products. Doing so, we can strengthen the intelligence of the products and also cost competitiveness, we need to approach, to0. So currently, we are trying to expand the local procurement in China. That way we can improve the competitiveness of the product, and that is what we are trying.

The next question from Toyo Keizai Weekly, Yokoyama-san, please.

This is Yokoyama from Toyo Keizai.

Yes, we can hear you all right.

I have 2 questions as well. The first question, your full year prospects with the impact from semiconductor JPY 150 billion, and then you have JPY 450 billion profit, and then you are thinking of JPY 550 billion. So I guess you do have quite a plan for your profit to suffer in the second half. So can you give me some numbers about what the factors why you see a lower profit for the second half? And my second question is for the profitability in Automobiles business. So right now, for the Automobiles, the ICE IOS, 8% is what you're thinking about for the ICE. For BEV, you're going to have your own battery and then you start from 0 gross profit. But when would it turn into profits? When would it? And also, do you have any additional measures to gain more profits? So I think it might be difficult sensitive whether you're going to get into the profit for the Automobiles this year. So I just want to know.

Okay. First of all, thank you for the question, Yokoyama-san. For the difference between the first half and the second half, of course, we have this JPY 150 billion tariff impact that will continue in the second half as well. But on the onetime expense, we have the BEV provision that was in the first half. So those would offset each other. Well, that's what we expect it to do. And then for the first half and the second half, there will be a negative of JPY 40 billion about the foreign exchange and the rest will be the substantial portion. Maybe it's better to tell you the numbers. We have JPY 440 billion, and it goes down to JPY 110 billion. So JPY 320 billion, that will be the difference between the first and the second half. So let me explain that, first of all. So as I said, with the semiconductor and the onetime expenses, those will offset each other. And then so JPY 320 billion and then we take away JPY 40 billion for the impact and then JPY 290 billion, that would be the actual substance difference. So concerning this difference between first half and second half, as you can imagine, so the expenses and R&D, there is a difference between the first and the second half. I hope you can see that, which is [indiscernible]. And then for quality-related issues based on the sales base, there's a bit of a difference in calculation. But anyway, those are mainly those numbers. Incentives, when it comes to incentive, we have this negative of 110,000 units decline in North America. We don't know how we're going to use this incentive. But going by the original expected volume for North America, we were able to keep the original target. However, maybe we need to increase the incentive a little bit. But now that accounts for the difference between the first half and the second half. We have not really decided -- we need to discuss with American Honda how we're going to make those work actually. Okay. That's all for the numbers.

Okay. And then let me try to answer the rest about the EV, the gross profit for EV. For North America, that's the assumption for the answering my question. So this year, we do have losses. We have JPY 650 billion. We have that. So this includes onetime expenses as well. So next business year, I think we will start from a JPY 400 billion range level, that level. And then from there, of course, we won't have the IRA subsidy. So the business environment is very, very challenging. So because of that, we cannot be pursuing a far larger sales volume. However, we do have good prospects for the supply from GM. So now we will have more and more BEV of our own development. So now we need to think about focus on how to reduce the manufacturing cost for own BEV, and then also, it's important to consider whether we can produce at a very efficient way. And then with those efforts, we need to minimize the losses to the best we can. However, looking at the market, it's very difficult to read how the market would move. So at the very beginning of mass production, of course, the burden of fixed cost will be heavy. So we just need to work on how best we can flexibly produce, reduce cost so as to enhance or improve profitability. If you ask me when, I guess all I can say is that as soon as we can, we want to make it to profit. Thank you.

So the Automobiles business, at this time do you have any disclosure for the expectations, the profit or losses?

So we do not disclose as per product levels. JPY 550 billion, and we have to subtract from that level. So for the Motorcycles, it will be about JPY 600 billion to JPY 700 billion, same as last year; and JPY 300 billion for Finance, like last year. And both together, we would earn JPY 1 trillion. We said that, and then we could actually assume from that. For the Automobiles, we would end up in losses. But for EV, onetime JPY 250 billion; for also chips, onetime JPY 150 billion again. Both together JPY 400 billion negative altogether. Plus this term, we have a tariff impact as well on the top. So the number will be including all those factors. And then as we said before, we need to earn money, revenue based on ICE; and losses coming from the BEV should be controlled better. And not just P&L, we have to look into the spending out of the cash flow. We have to control the time line of spending too. So that is how I'd like to manage.

I do see a lot of hands raised, but due to the time restriction, we'd like to make the next question the last. From TV Tokyo, Ms. Nagaya.

Can you hear me?

Yes, we can hear you.

One question. For this fiscal year's forecast, 3 months ago, you revised upward. But this time, you're revising downward. So when you make the forecast, are you -- I just want to know about the approach, are you being very conservative? The second is your forecast for the unit sales for -- I think you covered a lot of China. But excluding China, for other ASEAN markets, I think there is a bit of a decline. Compared to 3 months ago, we are struggling in Asia so much. What's the reason? What are the factors?

Thank you very much for your question, Ms. Nagaya. So how to put up our plans. So I wouldn't say we are conservative putting together those plans, because usually, the idea is that the transparency is our focus. So whatever we get to know, we try to incorporate in those explanations to give you the explanation. And then tariff issue, for instance, we would have those -- the alleviation of tariff impact and then calculating all those returns, refund, we would have that much of refund included. And then these are the well calculated impacts. And exchange rate, ForEx, for JPY 70 billion plus, we include that too. The chips, that is the extra one, that is a bit of a special one, but JPY 50 billion tariff impact that is included, as we said, and plans are put together based on the principle that it is not always conservative. Please be acknowledged about it. And then the forecast of the unit sales in ASEAN regions, the decline of the unit sales is a bit significant as what you said is quite right, because in ASEAN region, the unit sales, the volume is expected to be down a bit, 750,000 units less. So it is a significant reduction as compared to the first forecast. And then especially Indonesia, Thailand, in those countries, or Malaysia as well. There are the government policies to be looked at also and also the market is a bit shrinking too, because of which we have expected a reduction of the volume in Thailand. The competitors' competition is something that accounts for the situation too. For instance, selling prices, we are losing price competitiveness against the others. And so sales are stagnant, and we need to react and take actions against the situation, especially in ASEAN countries. We need to have radical measures against it. And then from this term -- next term, next year, we do not have a new launch models, big minor change of the city. That's one thing I can share with you. And then the big minor change of the city, the timing of that could be a kind of opportunity to take advantage for us to get back to the ASEAN market. But nevertheless, the ASEAN market is tough. And because of that, we decided to revise our expectations.

And then again, the conservativeness about the volume expectations. It is rather a solid conservative number, I thought. And also you mentioned about the competition of the competitors. Would that include the Chinese supplier, that is always the case. Is that right?

So in terms of the volume of the sales, this is the number that we will commit to achieve. That is how we set up this volume. And about the competitors, of course, the Chinese suppliers, their accounts as well. But in the ASEAN markets, there are emerging Chinese products coming in. And against them, the existing manufacturers are providing more incentives, prices are kind of discounted against Chinese. And then that is making the situation more competitive in terms of the prices. That is the market situation over there. Thank you very much. Thank you, Ms. Nagaya.

Okay. Thank you very much. We would like to close now the financial results briefing. The material is listed on our website. So please refer to it. Thank you very much for your participation.

Thank you very much.

Thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited's financial results briefing for fiscal first quarter ended June 30, 2025. First of all, allow me to introduce the attendees today. Mr. Eiji Fujimura, Director, Managing Executive Officer, CFO. Good to see you. Mr. Masao Kawaguchi, Operating Executive, Head of Accounting and Finance Unit. Good to see you. First, Mr. Fujimura will present the financial results of first quarter ended June 30, 2025, and consolidated results forecast for full year to March 2026. Then Mr. Kawaguchi will present the details. Over to you, Mr. Fujimura.

I thank you very much for your continued support for Honda's activities. I would now like to present to you the financial results for the first fiscal quarter ended June 30, 2025. I'd like to start with a summary. Our operating profit for the fiscal first quarter came to JPY 244.1 billion. Motorcycle operations saw sales expansion in Brazil and Vietnam, and we've attained the record high operating profit for a quarter period. In automobile operations, we needed to post impact from tariffs and nonrecurring expenses related to EV, while sales in North America were strong. The forecast for the full year results to March 2026 has been revised up to operating profit of JPY 700 billion and net profit for the year of JPY 420 billion. Due to a review of our tariff impacts and changes in exchange rate assumptions, this means JPY 200 billion increase versus the previous forecast. An examination of the impact due to tariffs led to a revision of our gross impact to JPY 400 billion. And for exchange rate, in view of the recent developments, we are revising our assumption against the U.S. dollar from JPY 135 to JPY 140. While uncertainty persists surrounding policy changes, including tariffs, we will improve our earnings structure, and we aim to expand our profit further. Concerning the share buyback, which we announced on -- resolved on December 23, 2024, for the JPY 1.1 trillion. As of July 31 of this year, shares worth JPY 936.5 billion have been acquired. To give you the consolidated results for the first quarter ended June 2025, our operating profit was JPY 244.1 billion, lower by JPY 240.5 billion compared to the same period last year. Equity method earnings were JPY 4.2 billion, higher by JPY 2.7 billion. And the quarter profit attributable to the owner of the parent was JPY 196.6 billion, lower by JPY 197.9 billion. Next, I'd like to cover the forecast for the consolidated results for the full year. Again, compared to the previous forecast, our forecast is operating profit of JPY 700.0 billion, up by -- sorry, up by JPY 200 billion and the profit for the year attributable to the owner of the parent of JPY 420.0 billion, up by JPY 170 billion. The exchange rate against the U.S. dollar is assumed at JPY 140 for the year. The forecast for the full year dividend for the fiscal year ending in March 2026 is JPY 70 per share, unchanged from the previous published forecast. The acquisition of owned shares resolved on December 23, 2024, for the amount of JPY 1.1 trillion is explained earlier. Next, Mr. Kawaguchi will present the details of the results.

Okay. Then I will present the results for the first quarter. To give you the group unit sales during the 3 months of the first quarter, for motorcycle operations compared to the same quarter last year, with growth mainly in Brazil and other regions, it came to 5.143 million. For Automobile business due to declines mainly in China and other Asian regions, it came to 839,000 units. And for Power Products, though there were declines in North America and Asia, Europe led the growth, the results, the total came to 828,000 units. The consolidated results during the 3 months of the first quarter are as explained earlier. Next, I'd like to explain the factor analysis of operating profit for the first quarter compared to the same period last year. Operating profit was JPY 244.1 billion, down by JPY 240.5 billion compared to the same period last year. Factors affecting the operating profit were impact from sales was positive by JPY 109.1 billion due to unit sales increase in North America. Selling price and cost factors was an increase of JPY 68.5 billion due to effect of pricing revision. Expenses gave us a negative impact of JPY 69.4 billion. R&D expenses led to a profit decline of JPY 24.5 billion. Currency effect results in a negative impact of JPY 86.1 billion. EV-related nonrecurring expenses led to the negative impact of JPY 113.4 billion, and the tariffs impact led to a profit decline of JPY 124.6 billion. Our trial calculation, excluding the EV-related nonrecurring expenses and the tariff impact comes to operating profit of JPY 482.1 billion on par with the same quarter last year. This EV-related nonrecurring expenses include the provision for losses on EVs currently sold in the U.S. and the impact from write-off of development asset of EV models due to the change in our product range. Regarding operating profit per business segments. For Motorcycles, OP was JPY 189 billion. Automobiles, JPY 29.6 billion of operating losses. Financial Services, JPY 85 billion of operating profits, and the Power Products and other businesses, JPY 200 million of operating losses. Operating profit of the Motorcycle businesses marked JPY 189 billion, up by JPY 11.3 billion year-on- year. As for the factors behind the differences, the sales impact was positive by JPY 41 billion due to increased sales volume in South America and so on. Pricing cost impact was positive by JPY 14.2 billion due to the effect of price revision and so on. Expenses squeezed the profit by JPY 12.7 billion. R&D increased the profit by JPY 1.3 billion. And currency effect reduced profit by JPY 30.6 billion and the tariff effect squeezed profit by JPY 1.8 billion. For the Automobile businesses, sales impact was positive by JPY 46.4 billion due to increase of the sales volume in North America. Price and cost impact was positive by JPY 53.5 billion due to the effect of the price revision and so on. Expenses negative for the profit by JPY 43.1 billion. R&D was negative by JPY 26.4 billion and the foreign currency effect also negative by JPY 47.3 billion. As I mentioned earlier, excluding onetime EV-related expenses and the tariff impact, the operating profit would have been JPY 205.8 billion. Regarding cash flows, free cash flows of the businesses other than Financial Service businesses was JPY 294 billion. Net cash balance at the end of the quarter was JPY 2,907.9 billion. Operating cash flow after R&D adjustment was JPY 583 billion. Moving on to the consolidated financial forecast of FY ending March '26. Regarding the forecast of the sales volume of the group, motorcycle unit sales will keep 21.3 million units, reflecting the volume decline in Europe and increase in Brazil and other regions. For automobiles, we will keep the previous forecast of 3.62 million units. And for power products, we will keep the previous forecast of 3.67 million units. Consolidated earnings forecast for FY March 2026 has been already explained. Next, I will explain the factors behind the changes of operating profit forecast year-on-year. Operating profit is expected to decline by JPY 513.4 billion year-on-year because of the factors of sales impact being positive for the profit by JPY 106 billion due to incremental volume of the motorcycles and automobiles in North America. Price and cost impact will be positive for profit by JPY 350 billion due to effect of the price revisions and so on. Expenses will be negative for the profit by JPY 91.5 billion, R&D be negative by JPY 126 billion and foreign currency impact to be negative by JPY 302 billion and the gross impact of the tariff to be negative by JPY 450 billion. I'll explain the changes of the operating profit forecast comparing to the previous guidance. Operating profit is to be up by JPY 200 billion from the previous forecast because of the sales impact being negative by JPY 50 billion due to onetime expenses related to EVs. Price and cost impact to be negative by JPY 100 billion, JPY 100 billion as we reviewed recovery of the tariff impact. And foreign currency impact will be positive by JPY 150 billion as we changed currency exchange rate JPY 240 for dollar. We examined the tariff impact in values, which will be expected to be positive by JPY 200 billion. Lastly, expected spending on capital expenditures, depreciation, amortization and R&D expenditures for fiscal year ending March 2026 as shown on the slide. And that concludes my presentation. Thank you very much for your attention.

[Operator Instructions] The first question will be by Mr. Okinaga from Nikkei Newspaper.

This is Okinaga from Nikkei Newspaper. My first question is about the impact from tariffs. So between the U.S. and Japan agreement, the automobile tariffs has been changed from 25% to 15%. So it looks like higher tariff has come down. That means your negative impact to the profit has been fixed now. So what's your take on that? And then for Mexico and Canada, well, still the view is not clear. So what is your take on what might happen to the Canada and Mexico? Okay. So that's the second question. And then accompanying -- in line with that, for the production, you've expressed transferring production from Japan to Canada. So I guess your take on emphasizing production in the States, that will remain unchanged. So do you -- are you still in the sense -- are you holding the sense of crisis for the Trump's tariff situation? Is that correct to say that your stance does not change?

Okay. Thank you for the questions. Okay. So both your questions are related to tariffs. So between -- due to the 25% has come down to 15% between the States and Japan. Concerning that point, yes, for us, for our business, the change from 25% to 15% means that is -- should -- it brings us a positive impact and also for -- to the customers and then also, we do have a lot of non-Japanese shareholders. So for our company, of course, this agreement for reducing the tariff is a positive. And then it's just that what has not been established is now clearly identified, which is a good turn of events. So I'd like to -- we'd like to pay our respects to all the related parties. And then on the other hand, as your question suggested, for example, if I think about the short-term view, so if there's going to -- what's going to be happening with the retroactive application of the tariff or when it's going to go into effect. So details have not been worked out. So I hope that there will be early decision and then disclosure between the governments, and we have communicated our wish to the Japanese government. And then so it used to be -- what used to be 2.5%, now that's been up to 15%. So as our general stance is that it doesn't affect just Honda, but to other OEMs as well, I think we are trying to do a free trade and competition around the globe. So that has really developed foster the competitiveness of the auto industries in different countries and then which led to providing good quality products to different country markets. And then this must have been contributing to the local communities. And then that stance remains unchanged, and I hope that will continue. However, now that it is a possibility, we need to assume that this will become the new normal. We would need to take that stance. So now that direction, I believe, relates to the second question that you've asked. As you know, we have the production in the U.S., like 60% or 70% are produced in the U.S. So the local production manufacturing ratio is high to begin with. So our stance is to produce where there is demand. That has been our ongoing approach. I believe Mr. Mibe mentioned this in the previous briefing. We have a 2-shift operation in the States. We might change it to 3-shift operation in the states so that the production equipment uptime will be -- might be increased so that we can increase the production volume without spending too much on the capital investment. That's something we'd like to continue to do. And then, of course, our suppliers need to keep up with those changes. So we need to engage in discussions with our suppliers to take actions carefully. I guess the key highlights here would be that in the States, hybrid vehicles -- for hybrid vehicles, many of the core parts are coming from Japan. So I believe we call that Sankei -- sorry, the 3 major components, the motor, battery and ECU, how we can localize the production there will be the critical point. So concerning those, we are holding discussions. This concludes my answer. Thank you.

Next question from NHK, Mr. Nishizono, please.

Nishizono speaking. Can you hear me?

Yes, please.

So thank you for your presentation today. And one question. So the forecast for this fiscal year regarding the tariff, what is your assumptions for your forecast other than the automotive tariff, there will be other kind of tariffs involved as well? And this time, parts automotive tariff, when are you going to -- with that to start, what is your assumption there? And what's your assumption to come up with those forecasts? That's all.

So details will be provided by my colleague, Mr. Kawaguchi, but at the beginning of the fiscal year, what is our assumptions to be for the tariff and its calculations and so forth. Actually, the appendix of presentation materials includes all those explanations. So please have a look at those materials later on. But basically, CBU and parts and the raw materials and motorcycle power products. So we have the assumptions of tariff in values in those categories. And in the first quarter, American Honda had a standard tariff amount for the tariff. Actually, they worked out on the breakdowns, how much for the U.S. part, U.S. portions, what is the [ area ] for the import and so on. So eventually, we changed the gross impact from JPY 650 billion to JPY 450 billion after those calculation. And what kind of breakdown involved to have those numbers down? And Kawaguchi-san is going to give us the details about it now.

So thank you for your question. So with regard to the assumptions for the tariff, as Fujimura-san said earlier, the main part is the automotive tariff. That is the main area of the thing. And then for the CBUs, we have plants in Canada and Mexico and those CBU completed vehicles imported from there to the U.S., there will be the tariff imposed there. So that is the main area plus the assumption of that part has been already explained in the beginning of this fiscal year, we have not changed so much about it. However, probably we will change the production allocations slightly. For instance, instead of exporting from other countries to U.S., we can produce in Indiana instead or the U.S.-made ones were exported to South America. And then instead, we could use and sell those U.S.-made product within the U.S. and we sort of organized the reallocation again. And then in terms of the import of the CBUs, there will be the tariff imposed on them. And if the parts and components are manufactured in the U.S., those will be exempted from the tariff. And then the question is the portion of those kind of the parts. We examined how much of those are in that area. And then actually CBU that we have in the value like that reflects all those exercises. And then parts, raw materials, steel, aluminum and those coppers. And of course, there will be tariff involved, not just U.S. and Japan, the Canada-Mexico involvement, there is not much advancements so far, no progress. However, right from the beginning of the year, the parts imported from Canada and Mexico, that could be in the jurisdiction of MCA, and we joined with suppliers to scrutinize how much will be in the area of the jurisdiction -- excuse me, the MCA. And then we couldn't finish the exercise yet. However, at this moment, at the time of the beginning of the year, we applied 15% for them because we couldn't examine all of them with the supplier. But we are still working together with the suppliers to check one by one those breakdowns of the tariff. And then from Canada, Mexico, the parts from there could be actually under the rule of MCA. So we have been working on how much of them like that. And then, of course, we have parts components imported from other countries other than Mexico and Canada, Tier 3, 4 included. So we need to go down that level of the details in order to have a precise understanding, and we've done a bit of the work so far. And of course, JPY 450 billion gross impact is made and estimated based on such exercise up until now. And we have this tariff between the U.S., Japan agreement. And then at the moment, we do not know when exactly the automotive tariff would start to apply. But at the moment, our assumption is to start the 15% of the tariff to start from September. That is the assumption for the calculation this time.

Okay. The next question from Yomiuri Newspaper from Mr. Narahashi.

Okay. This is Narahashi from Yomiuri Newspaper. I have one kind of detailed questions we'd like to check on, and then ask 2 questions. The automobile operation have an operating loss from May to June. After how many -- since how many years has it been that you got the red losses? Now I have 2 questions. First, about the tariffs. So from -- if you do CBU exports from Mexico or Canada to the states, that's 25%. I thought that a lot of it might be exempted. So the actual amount that Honda would have to bear, how much would it be? So is it going to be lower than the 15%? Or is it going to be greater than that? That's something I'd like to know. My second question about the sales -- unit sales for Asia, Europe and Japan, so you've seen decline year-on-year. So I'd like to know about -- more about the detail about the causes. So is it that the sales competition outside the U.S. must be -- could be intensifying because of the tariff impact in the U.S.? So I'd like to know specifically if there's any region where the competition is getting worse.

Okay. To answer -- so let me look into the first question that you said you wanted to -- a clarification on. Okay. So to answer your first question, the CBU coming in from Mexico and Canada, concerning the parts as well, this also applies but quite a bit of amount will be exempted. I believe Mr. Kawaguchi mentioned it earlier a little bit. Concerning CBU, are quite -- there is quite of a cost for the States. We have done a closer review and the effective tax amount has been reduced quite a bit. I cannot give you the number right now, but it has gotten a little bit somewhat close -- smaller. And for the parts as well, for those parts coming in from Mexico and Canada, which I've mentioned at the beginning of the term, the USMCA contents will be outside the scope if it's co-applied. So that regulation was out there already. It's just that it's going to take a little bit longer time because it might take to do a better scrutiny. But we see that, that would be -- can be reduced by JPY 100 billion or so. So not all of it, but we have been able to reduce this out of the JPY 100 billion, we have been able to reduce it by like 70% of this. That is the position. For Asian, Oceania and Japan, about the unit sales, different markets, regions have different regions, I must say. First of all, for Asia, so in different countries, markets, we did have strong shares in each of the Asian markets. But in the past few years, Chinese OEM have participated into some of those markets, and then we are struggling some of those countries, the markets. And in addition to that, hybrid vehicles are popular in some markets and in some other markets, not at all, because this is related to actually the subsidies from the government. So I need to actually -- I should be talking about different markets separately. But when we try to come up with the hybrid models, we -- there are some markets where we have not been able to launch some -- into some market. So in ICE, we are losing against Toyota, for example. So this might take some time, but we would reinforce launching hybrid models into some of those markets, try to compete. For Europe, we have always -- we have been struggling several years ago, U.K. and Turkey production sites had to be closed. We had to do that. When it comes to unit sales, I think it's only around -- it's been trending around 100,000 units or so, just a slight decline since then. But within that trend, for Automobiles business in general, we are putting a lot of efforts into markets like U.S., Japan and India. We still do need to revisit internally what we want to do with the European market. That is the situation for Europe. So there are some areas where competition is intensifying. And then there are some other areas where we need to put a lot more efforts. So we want to be clear about our selection and then make further efforts going forward.

That closes my question on that. For about the April to June losses, since how many years it's been?

The last time this happened was the 2020 fiscal year. Due to the pandemic, we had some losses. So this is the first time we had losses since then.

Next question Toyo Keizai Magazine, [ Mr. Yokoyama ], please.

Yokoyama speaking. Can you hear me?

Please.

I have 2 questions. One is first quarter results and the full year forecast, you are changing a bit the operating losses put up for the Automobile businesses. And Fujimura-san, Mr. Mibe already said that there will be some EV expenses to be put for the first half. And then we have about JPY 100 billion or so. And then for the full year, JPY 600 billion or so already put up previously. And is your situation today in line with your expectations back then? And then if you kind of multiply the quarter results by 4 quarters amount, I think you should have the forecast a little higher than that. What is your expectation assumption and so on? And then 19.9% operating profit margin for the Motorcycle businesses, that is quite a very outstanding way of the businesses. And then you've grown the businesses in Europe and South America. South America and you were quite aware of the importance of the profitability there. And what is the real capability in the first quarter? What is the reason behind such a good results of the Motorcycle businesses?

Thank you. And to start with a conclusion of the results, financial results and EVs implication. And then starting from the 3 months, JPY 240 billion for 3 months. That is actually the half of the amount from the previous year. And then in the graph, we have those tariff about tariff impact of JPY 120 billion or so. And as we have been saying so far, out of JPY 120 billion in the first quarter, we had some recovery plus refund expected after the imports, and we had handled those based on cash. In fact, because of such situation, we have more put up for the first quarter. And EV, one time. And then in the beginning of the year, JPY 200 billion were expected, anticipating some to be added later. That is why we budgeted JPY 200 billion for the EV related. And then we have about JPY 60 billion plus JPY 50 billion that was unexpected part out of the EV-related ones, and then that amounts to JPY 110 billion eventually. And then out of the JPY 60 billion, as we expected, as I said, we decided that situation would tell us that we need to have a bold decision that is to suspend some of the development efforts of some of the EV models, and we needed to have some write-offs for some of the efforts. And the remainder is JPY 120 billion. And out of JPY 50 billion, which is not the expected ones. Regarding that, in the end of the term, we had the NEV, we had to put up for the reserves for as much as JPY 50 billion at the end of the year. And that was the reserve to be used for the future losses. However, we would have the IRA subsidies and the California ACC II related credit values. And actually, those were included in the losses that we were calculating for the future. However, those are now gone. Therefore, it is not necessary anymore to do that. And then we now have JPY 50 billion future loss expectations. And then again, for the full year, it's a bit complicated. We anticipated JPY 600 billion. That is in line with what we thought. And then we have JPY 50 billion higher than that. Because of the IRA subsidies cancellation, ACC II invalidity anymore. And then those are actually negative for that. And then JPY 600 billion is now JPY 650 billion instead. And then for the Motorcycles, 19.9% operating profit margin, you said is too good. And of course, we've made a good result and then with that is getting better. And this time, if you look at the plans, in India, for instance, there's a little bit of slowing down. However, we're not worried about it because we can bring it back again recovery. So we don't have the things going on as planned in India. However, we have South America, Vietnam, we have a good recovery instead. And then so far, it's been like when we have some issues in one place, one region, we have other regions, which is good to compensate for the other part. That is the situation we've been seeing for some time. And then we have a very high profitability in Vietnam. South America, we have a high profitability as well for the businesses. And then -- so in Brazil, for instance, we have a lot of shares. Therefore, the number of those vehicles running there is almost all Honda. So we actually are supplying only to satisfy the demands, however, not enough. And then we had 1.3 million car capacity of the production. Now we are going to increase it to 1.6 million production capacity. So the demand is higher than the supply at the moment. And pricing is healthily down, too. Because of that, profitability in South American market is very good. So -- as I usually say repeatedly, the region there is of a high volatility. So I have to remind you that the result is perhaps too good. But that was what happened in the first quarter for the Motorcycle businesses. Thank you very much.

Okay. Then we'll take the next question. From Bloomberg, Mr. Inajima, please.

This is Inajima from Bloomberg. I'd like to ask about sales in China. Up until June, it has been declining for 17th consecutive month. So what kind of initiatives do you have to rebuild the sales? And then how -- when do you think it's going to recover? So still the decline continues even after the launch this year. So I think we'd like to know about it. And then another question is that there will be -- there was talks about -- report about discussions that you're trying to get supply from Nissan and then sell in the States. So I'd like to ask about any update if there's any discussions with Nissan.

Okay. Mr. Inajima, thank you for the questions. Concerning China, yes, the situation is very -- continuing to be very difficult. So talk about the total market, it will be under 24 million. So this will be on a par with last year. So for the NEV market condition will still continue to stay this way. Maybe over 50% of those is what I'm assuming over 50%. For the past several years, we have been trying to adjust our capacity. And then over the past 2 or 3 years, we have adjusted the capacity by 0.5 million. Well, we have 1.24 million capacity. And then 1 million is about the ICE and then 0.2 million is a battery EV. That's our factory capacity. But with these results, so we have not changed it from the beginning of the year, but 0.7 million units capacity. So we still have available capacity. But concerning the available capacity, the direct reasons is that we have been matching our manpower for the -- in line with the capacity. Actually, we do have a remaining very old equipment, old production line. So I don't think we have that much impact from depreciation. That's the situation in the factory. But we will continue to take -- make adjustments. But this is a very sensitive topic and nothing has been decided yet. But we will need to monitor the production models, and then we need to discuss with our partners and take very careful actions. For EV, we are struggling with the sales of EV, this e:N Series. This is something that we made some investments from the end of last fiscal year to the beginning of this year. But against the original plan, we are underachieving the initial plan. When it comes to the actual driving performance of the vehicle, we have received quite a certain level of good assessment. But within this market where there is a discount strategy continues, even looking at the price that we initially launched, it was not in line with the market expectations. And also for the intelligent functionality, the market expectations were not met by our vehicles. So we need to expedite to taking actions. So we might put the deep seek with OTA or we might work with Momenta in the area of ADAS. So we want to promptly proceed to take action to address that issue. And then when it comes to the talks with Nissan, yes, I am aware that a lot has been reported, but nothing has been decided and nothing has been announced by ourselves. So please take note of that. We have been saying since some time ago that business-related collaboration, we are exploring the different formats of a collaboration of Nissan and Mitsubishi Moto. That is something we are discussing, continuing to discuss. So as soon as something gets finalized, we would like to talk to you about it.

Next question from TV Tokyo, Ms. [ Naga ], please.

Naga from TV Tokyo. I have 2 questions. One is tariff. Tariff, they won't, of course, pass through the prices, 100% for that much. And then with that plus the retail prices of the vehicles should be needed. And what is your idea about price increases of the cars or the vehicles? And then next one is forecast. Just like Toyo Keizai's colleagues said, the progress level is quite fast as compared to the forecast so far. The forecast 3 months ago was rather conservative. But what is the concept behind -- for instance, volume not changing. However, what is your idea about environment of the businesses? What is your assumptions or the ideas behind those forecasts and the guidance?

So as for the price increases, price hikes. I talked about JPY 650 billion gross tariff impact now down to JPY 450 billion. And we have about JPY 200 billion recovery plans included in that process. And that includes JPY 100 billion for that much. Recovery part is now JPY 100 billion, is about JPY 200 billion this time. And half of that is actually related to the price hikes. And U.S. economy, not just cars, what is the inflationary trend in the U.S. plus other OEMs pricing situations. So we need to cautiously watch out to put up our forecast. That was what we were like. And then in the first half this year, already August, however, for the price hike situation, apparently other companies, other OEMs are not doing price increases. We had annual ones. But with respect to the tariff response, we are still cautious. And in the first half, we couldn't reflect such part in our expectations and price hikes of the vehicles. It's decided that way based on the position like that. And the recovery, JPY 100 billion might have them, but we have to still cautiously watching out the situation to make a final decision. And then -- so JPY 700 billion in about JPY 240 billion, that is the progress today, as you said. And then, of course, that comes largely from the volume. And then the exchange rate is now set JPY 140. And JPY 145 and JPY 135 in the first and second half. Average is JPY 140. That is the assumption of the ForEx, and that is why we have that recovery part. And then usually, we tend to have more expenses put up in the second half, such as SG&A and R&D, those expenses are skewed put up in the second half, and that is another reason behind.

And 3 months ago, you were very conservative and that is stressed on that, but are you still that way? What do you think about it?

Well, I said we were conservative because, one, ForEx exchange rate, of course, that is just the assumption and also that is as per the way we think about it. So I don't know if I should say that conservative. But at that time, 3 months ago, we told you about those tariff as on the assumption at that time. And then now JPY 650 billion to JPY 450 million impact based on the well-progressed scrutinizing exercise of the tariff impact. And out of JPY 450 billion, JPY 350 billion for automobile and JPY 100 billion for motorcycle, that is the breakdown. And JPY 100 billion motorcycle includes direct impact by tariff. However, not that it has a direct increase of the prices because of that, but rather the potential recession was something we were thinking about at that time. And because of that, we still have a JPY 50 billion or so impact by that. So recession-related concerns, JPY 50 billion. However, although we had anticipated some like that, however, it is not materialized yet. It is not realized at this time for the first half. Therefore, you could say we were conservative. However, this was the assumption we had.

We'd like to take the next question from Automotive, I'd like to ask Mr. Hans Greimel.

This is Hans from Automotive News. Can you hear me?

Yes.

Is it okay I ask in simple English? I would just like to confirm 2 things about the price hikes and the EV losses in the United States. Can you -- the price hikes in the United States, are they still -- it seems that there are still many -- much of the price hikes still to come later in the fiscal year. Are you still baking in those price hikes? And can you give us an average percentage increase that you expect to charge for vehicles in the U.S.? And regarding EV losses, can you give us a clear breakdown of the EV losses in the U.S. for the first quarter and how much you expect for the full year? And does that change your strategy or time line for rolling out EV production of the 0 Series in the U.S?

[Foreign Language]

Thank you very much, Hans-san. Okay. About the price hikes, so exactly what kind of a hike per -- what kind of model, that is something strategically sensitive and then that would affect the sales. So I would like to refrain from the details. But for example, last year or 2 years ago, in the recent years, we have made some hikes. That was in line with the inflation. So of course, this reflects the strength of the U.S. economy and then also depends on the features and attractiveness of our vehicles. So those are the factors that went into our pricing decisions. The price hikes that we are talking about is referring to those normal annual price hikes in our annual price hikes, not particularly related to the tariffs, but we are talking about those annual ones that we would raise in MMC and the annual price hikes. So during those first quarter, during April to June, we have raised some prices for some models. But -- so please refer to those as the -- for your information. Sorry, details cannot be given out because this will affect our sales going forward. elated to the EV losses, I don't have any details about the first quarter, the breakdown by quarter. But just to give you a general image, I told you that the JPY 650 billion of that, generally speaking, of the JPY 650 billion, I mentioned JPY 200 billion at the beginning of the first term. Those -- we assume that kind of losses of the JPY 200 billion. So we did some write-off on certain models, JPY 50 billion for certain models in the first quarter. So that is part of it. So we would say JPY 250 billion would be the losses -- kind of nonrecurring losses. So I mentioned the JPY 200 billion we mentioned at the very beginning of the term. And then now the IRA that went away. So those are the losses -- additional losses of like JPY 250 billion. So of the JPY 650 billion, JPY 250 billion would be about the losses for this term. So we still have about JPY 400 billion remaining. So R&D would be JPY 300 billion, gross profit of JPY 100 billion. Please take it that way. So we have a gross margin of JPY 100 billion. I think we had about JPY 150 billion last year that was larger than that. But we are narrowing down on the volume compared to last year. So that's why we are positioning that JPY 100 billion. For 0 Series, as mentioned, the -- because of the impact from IRA expenditures and also the cooling down of the market, we are not very optimistic to put a plane, but we would like to be fully prepared and then launch next term. So when it comes to good timing, I will give you more information about it.

We are very sorry that -- and we know that many hands still up for making questions. However, because of the time, next one is going to be the last question from Reuters, at Daniel, please.

Can you hear me?

Yes, I can hear you.

So earlier, USMCA discussions, I'd like to confirm a few things. So especially in the first half for this year, what is the real actual tariff rate to be? If that cannot be publicly open, do you have examples citing some particular parts or components? For instance, a lower tariff rate is applied, like expensive ones, parts and so on. Are there any alleviated -- the tariff alleviated kind of parts or components you could cite, if there are any?

Thank you. I'm sorry, I should refrain from publicly saying too much. However, maybe I can talk about CBU. The question is about CBU related to the USMCA. And if I say that too, well, it would reveal our cost structures. Therefore, I cannot say too much. However, rather the examples for the high rates rather than low, like hybrid. Hybrid system, the critical hybrid systems, there are quite a few sent from Japan. So it is the area where the high rate is applied. And for that area, next gen, next generation hybrid like the 27 series we are going to launch in that year with the new gen systems and specifically for them battery motors, PCUs. The thing is how can we produce those areas in the U.S. That is one of the focus area of the discussion today. Would that be right? Thank you.

Thank you very much, Daniel. So now that concludes our presentation for the financial results. And those slides and materials and the presentation package is available from our website. Thank you very much for your participation today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]