Honda Motor Company, Ltd.

Thank you very much for attending. This is Honda Motor Company, FY23, second quarter, financial results announcement meeting. First, I'd like to introduce the executive's representative director, executive vice president, and representative executive officer, CFO, Kohei Takeuchi. This is Takeuchi speaking. Thank you. Operating executive and head of accounting finance supervisor unit, Eiji Fujimura. How do you do? I am Fujimura. I would like to ask Takeuchi to first announce the FY23 second quarter financial results and FY23 forecast, followed by Fujimura, who will give the details on the above. Mr. Takeuchi, the floor is yours. First of all, I'd like to thank all of you for your support towards Honda products and activities. I'd like to thank our customers and all stakeholders. Thank you. We apologize that the delay in vehicle production is causing inconvenience to our customers who are waiting Honda's products. We are working hard to deliver our products as soon as possible. We hope to gain your understanding. I'll now explain the financial results for the second quarter of FY23 and give a summary of the forecast for the fiscal year. First, FY23 results. Amidst a difficult business environment, including the semiconductor shortage driving down automotive production and unit sales, combined with soaring raw material prices, Honda has been making company-wide efforts to improve profitability. In addition, the increase in motorcycle unit sales and the impact of yen depreciation as sales revenue and operating profit for the first six months have increased year on year. In the second quarter, a specific semiconductor shortage affected production of main models, mainly in North America. But we made worldwide production allocations, utilized substitute parts, and replaced models sold, resulting in a year-on-year increase in group unit sales of automobiles. In addition, sales revenue, operating profit, and profit for the period have all increased year-on-year due to price increases commensurate with improved product value and strong motorcycle business impact of the yen's depreciation. in the fy 23 forecast a group unit sales of automobiles is lowered by 100 000 units to 4.1 million units taking into account the impact of semiconductor supply shortages in addition to the decline in unit sales we expect to see continued inflationary pressure on costs however we have revised upward our previous forecast for sales revenue operating profit and profit for the period reflecting profitability improvement efforts, motorcycle unit sales increase, and recent weak yen. Despite the challenging business environment, Honda will continue to accelerate initiatives for electrification and new growth in preparation for the future. Next, the status of our automobile business in major markets. The first half of sales decreased from the same period year-on-year due to semiconductor supply shortages and others, despite the positive effect of new model launches. In the second quarter, sales in Japan and China increased year-on-year, but in the U.S., a shortage of certain semiconductors drove down production of mainstay models and inventories at dealers. Although demand is expected to reaffirm, we have revised downward our previous forecast for FY23. In the second quarter, Honda announced its initiatives for electrification. In the U.S., Honda has agreed with LG Energy Solutions to establish a joint venture to produce EV batteries and to manufacture them in the state of Ohio. Honda has also decided to devolve the three existing plants in Ohio as a home to EV production in North America. In China, Honda has established a new JV with Dongfang Motor Group and also Guangzhou Automobile Group to procure EV batteries. In addition, we signed an MOU with CATL to further strengthen our partnership, aiming to establish a long-term stable procurement system in China and further enhance our competitiveness. Honda will continue to accelerate its efforts toward electrification. Next, the motorcycle business status. Although there were some effects of semiconductor supply shortages, sales in many countries were higher than in the same period of the previous year due to replacement of models sold and the use of substitute parts, et cetera. In Vietnam, we recorded record high sales for the month of September. Although sales in Pakistan Affected by flooding, as well as China and other countries dropped, sales in India, Vietnam, and other countries were strong, leading to an upward revision of the previous forecast for consolidated F-123 unit sales. In September, HUD announced it will launch more than 10 electric motorcycle models globally by 2025, and 3.5 million unit sales by 2030 to achieve carbon neutrality. Here is an overview of the first half of FY23. Despite the decrease in automobile production and unit sales due to semiconductor shortages and rising raw material prices, operating profit increased 11.2 billion yen reaching 453.4 billion yen due to price increases commensurate with enhanced product value and reduced incentives as well as increased motorcycle unit sales and currency impact. Earnings per share attributable to owners of the parent was 338.5 billion yen, mainly attributable to share a profit of investments accounted for using the equity method of Japanese affiliates. The table shows unit sales and profit and loss. Next, consolidated FY23 forecast. Although we expect to see continued pressure on costs in addition to the impact of lower automobile unit sales, we revised upward the forecast operating income by 40 billion yen to 870 billion yen, reflecting further efforts to improve profitability, including higher motorcycle unit sales in India, Vietnam, as well as other countries, and currency impact. Earnings per share attributable to owners of the parent is revised upward by ¥15 billion to ¥725 billion. Exchange rate assumptions are ¥135 to the dollar for the second half and ¥135 to the dollar for the full year. Unit sales and profit loss are shown in the table. As for dividends, interim dividend is ¥60 per share. The annual dividend forecast remains unchanged and is 120 yen per share. Honda will continue to strive for stable and sustainable dividend payments, aiming for a consolidated dividend amount payout ratio of 30%. Regarding share buyback announced on August 10, as of October 31, the total number of shares repurchased was 15.33 million shares at a total cost of 53 billion yen. Fujimura, operating executive and head of accounting of finance supervisor unit, will give the details.

Let me explain. Honda Group's cumulative unit sales until the second quarter of 2023 were as follows. Motorcycle businesses, 9.202 million units sold, mainly with incremental sales in Asian countries year on year, and automobile businesses, 1.785 million units due to the decline in sales in North America, and power products businesses, it was 2.935 million units due to decline in North America. Next, let me explain factors behind ups and downs of the profit before income tax for the first two quarters year on year. The profit before taxes were 515.8 billion yen, 44.5 billion decline year on year. Operating profit was 453.4 billion yen, up by 11.2 billion yen year on year. Excluding factors of foreign currency impact, the profit was practically negative by 141.9 billion yen, The breakdowns are as follows. Regarding impact on sales, profit declined by 100.1 billion due to reduction in unit sales, changes in model mix, and profit decline in financial businesses. Regarding impact on retail prices and cost, there were impacts by selling raw materials prices and product pricing, reflecting product value improvements. However, the profit increased by 8.2 billion yen. regarding miscellaneous expenses profit declined by 41.9 billion yen due to quality related costs and regarding research and development expenditures profit declined by 8.2 billion yen in terms of sales revenues and operating profits in each of the business categories operating profit in motorcycle business was at 224.7 billion yen and of the automobile businesses, OP was 63.5 billion, and of financial services businesses, it was 153 billion yen. Out of the automobile and financial services businesses combined, the operating profit associated with the automobile sales is estimated to be 211.3 billion yen when aggregated together. Next operating profit of the power products and other businesses was 12 billion yen, which include operating losses of the aircraft and the aircraft engine businesses being 12 billion yen. Next, I'll explain about cash flow situations. Free cash flow of the non-financial services businesses was 153.3 billion yen. Net cash at the end of the second quarter was 2,560.9 billion yen. Let me talk about our forecast of a consolidated business performance for FY 2023. With regard to the Honda Group's unit sales in the motorcycle business, as compared to the previous forecast, the expected unit sales will be 18.43 million, mainly reflecting the flood in Pakistan and the demand decline in China, and so on. When consolidated, we expect unit sales to be 120.2 million units, up by 360,000 units, reflecting good sales performance in countries such as India and Vietnam. Unit sales expected in our automobile business would be 4.1 million, mainly reflecting decline in North America. For power products businesses, we maintain the previous forecast of 5.556 million units. Next, I'll explain factors behind ups and downs of profit before income tax as compared to the results from last year. We expect the profit before tax to be 1 trillion and 80 billion yen, up by 9.1 billion yen year on year. and operating profit to be around the same level from the results of the last fiscal year. Excluding foreign currency impacts, we expect negative profits of 287.2 billion, of which the breakdowns are as follows. For the impact of the sales, profit will be increasing by 41.8 billion yen due to unit sales increase of motorcycles and automobiles. Regarding retail price and cost impact, profit would decline by 110 billion due to soaring raw materials prices and so on. Regarding miscellaneous expenses area, profit would decline by 152 billion due to incremental sales and quality-related cost. For research and development expenditures category, we expect the profit to drop by 67 billion. Comparing our new expectations to the previous forecast, the differences as follows. Profit before income taxes will be up, revised by 40 billion. Operating profit will be up, revised by 40 billion yen. Excluding foreign currency impact, we expect a negative profit of 80 billion yen, for which breakdowns are, regarding sales impact, down by 125 billion yen. 128 billion yen, mainly due to unit sales decline in automobiles and in the area of the retail price and cost impact. Although some cost increases expected due to inflation impact, we will manage pricing practices to reflect enhanced product values to add profits by 36 billion yen. Regarding research and development expenditures, we expect the profit to go up by 16 billion. Finally, for CAPEX depreciation and amortization, as well as R&D spending for FY2023, we revised the previous expectations to reflect the currency impact. That concludes my explanation. Thank you very much.

We have informed the media beforehand. We will take questions through Zoom. And in the interest of time, we kindly ask you to limit your questions to two per person. We seek for your cooperation. Those of you who have questions, please press your raise hand button. We'd like to go to Nikkan Jidousha Shimbun. Mr. Mizutori, please. My name is Mizutori from Nikkan Jidousha Shimbun newspaper. Can you hear me? Yes. I have two questions. The first, well, currently we're seeing a depreciation of the yen, and this has boosted your profit. But in order to maximize your benefit when it comes to production and procurement, what kind of ideas will you come up with? Honda localizes its production, but are you making any changes to your approach? The second question. Worldwide, there is a concern over recession at your major markets, U.S. and China. How do you see the prospect of the economy? Mr. Mizushima? Mr. First of all, in regards to your exchange rate question, as you rightly mentioned, we have the policy of producing where the demand exists. This is our basic policy. That is how we have set up our production sites. And so it's locally produced and locally consumed, meaning that we are, well, of course, given the major fluctuation in the currency rate, it does have an impact to a certain extent. But compared to other manufacturers that are exporting from Japan, compared to those manufacturers, I don't think that our impact is that big. Well, but having said that, still, to explain the currency impact, the U.S. denominated only. If there's one yen, there's a difference of the current situation. There is a swing of 10 billion. It used to be 12 billion, but it's now 10 billion, of which half is the export of components. or the loyalty received from overseas. So it's mainly cash flow. And also, we generate profit overseas, and we convert this in Japanese yen. And in that conversion, we have half of the difference. So that is the impact of currency. But as for the yearly forecast, we are estimating now 135 yen against the dollar. And so, this would mean an impact of 120 billion yen in profit. But still, the supply chain, we have suppliers and others relationship. So, it's not the case that we can immediately shift our production to Japan. Basic philosophy is to produce where the demand exists will remain in place. That's in regards to your currency question. And about the U.S. and China's economy, well, the midterm election is being, the vote count is underway right now in the United States. Given the 8 percent inflation continuing towards the end of the year, as everyone says, there is likely to be an impact on the economy, so we also share that concern. But if we look at the current situation, our car supply for certain models due to the shortage of semiconductors, we have lost some unit sales. But customers are waiting for our products. So looking at the current situation in regards to our customers, And we believe that the cars we produce will be purchased by our customers. But economically, as is being said, there is the interest rate increase and inflation occurring. And therefore, there will be some impact to a certain extent. And keeping this in mind, we will continue with our operation. Likewise in China, the Chinese GDP compared to a few years ago is declining. But automobiles annually, the passenger car is about 23 million units per annum in line with that. especially in the market, electrification. Last month also, or this month, we see 20 percent or 19 percent ratio, and therefore we have this EV car on the market, the first one, and we've announced a second. We are focused on electrification, and we want to meet our customers' demands, also in China. And this is how we want to market our products in China.

Thank you. Thank you very much, Mr. Mizutori. So next question. Yomiuri newspaper, Mr. Nakamura, please. Nakamura from Yomiuri Shimbun newspaper. Can you hear me? Two questions. First of all, sales the price increases in overseas and also potential price increases in Japan. Please share with me the potential. And Japan and Southeast Asia markets are good, and what is the reason behind, and how long do you think it would continue on going forward, the motorcycle business? May I? so thank you for your question uh pricing retail price situations and uh uh the pricing are reflecting the uh productive values that's how we call it and in the u.s including inflation situations uh we are uh repricing that to reflect values of the product. Of course, raw materials, precious flooring, and also safety equipments are rearranged as well. So including all that, people buy the products. And in the U.S., the stock level is quite low, including that situation. We try to price the products in appropriate level. for them to buy. And in Japan, when we have such a soaring raw material prices, of course, that has impact on the revenue. However, we also have a certain relationship with competitors, the peer companies in the same industries. We will look at how they are reacting, and then, if necessary, we would do repricing, increasing the prices. But at this moment in Japan, We do not have a specific information as of today. And as for the motorcycle situations, thankfully, in the second quarter, the motorcycle business performance was very good. Specifically, the best area is Asia markets, specifically Vietnam, Thailand. Number of units sold was very good, which gave us additional revenue. And how long will that continue? Well, as of now, without any economic or turmoil of the kind. For this term, Thai and the Vietnamese market will continue as it is perhaps, and also for the motorcycle businesses, we have EV electrification plans for India and the countries toward excuse me, in Indonesia from 2030 and 35. And including that, we will try to come up with the appropriate pricing and so forth for the electrification plans with the motorcycle. Thank you.

Next question. Nikkei. Mr. Tanabe, please. Ms. Tanabe, can you hear me? Yes. Well, about automobile, about the unit sales forecast. In North America, you said that it's been reduced. Well, I think there might be some differences in the unit semiconductor shortage depending on the region. So what about Japan and North America and Asia? Can you give some regional differences? And do you think that this is likely to continue? What is likely to happen in next fiscal year? That's the first question. The second question is about the way of thinking towards the exchange rate. Well, it's contributed to the profit to quite an extent. But if this continues the longer, I think there might be some challenges ahead. So can you candidly share with us how you assess the currency forecast? Thank you very much, Tanabe-san. First, about the units, the automobile units. Due to the shortage of semiconductors, we have downward revised by 100,000 units in the U.S., and we are trying to catch up here in Japan and Asia. But it's a 100,000-unit downward revision. As I already explained earlier, it is a specific type of semiconductor that has this issue with semiconductor, and it has an impact on our CRV-Civic. And so for these specific models, we have seen this impact of the shortage. And this is the second quarter. This was the situation. And in North America, in the second half of the year, we think that it will be difficult to increase the production, and therefore, it's difficult for us to catch up. This is the downward revision for U.S. What about China? When it comes to China, naturally, in the first half, there was impact. But in the second half, the production system is such that we think that we can catch up, and therefore, we think that we can catch up. You mentioned about Asia, Indonesia, et cetera. The numbers are growing. And therefore, as I said, it's not, well, the cars in Asia are relatively small. So for the smaller cars, there are the semiconductors available. So we can catch up there. About the supply of semiconductors this fiscal year, we have inconvenienced our customers to quite an extent. We apologize about that. Well, the old semiconductors sometimes experience a shortage, so we have to try to observe carefully, and we need to monitor carefully the situation because there are some abrupt incidents occurring in the supply. Now, about the currency situation, as I've already explained, we believe that we should be producing where the demand exists. Therefore, the currency impact is limited, but given the fluctuation occurring in such a short period of time, this volatility does have an impact, and we cannot hedge against this. We need to have a currency where there is long-term stability. That is all. Thank you. Thank you, Mr. Tanabe.

Next question. Newspeaks, Mr. Oka, please. Ms. Oka, please. Thank you very much. Newspeaks, Oka speaking. Thank you. Two questions. First one, operating profit of the automobile businesses as compared to last year in OED is a bit lower. And as you said before, of course, do you have any additional explanations on the top of the presentation about this? In what situation can you expect the OP to go up? And the second question is about electrification. The Ohio plant will be the hub for EV productions. And yes, there are IRA, Inflation Reduction Act, there, but how do you take the benefits of the Ohio electrification production hub? So operating profit automobile was rather lower as compared to last year, and as you said, One is semiconductor supplies. Because of that, a number of the units have to be constrained. That is the big factor. And also, OP of automobile have to be improved. And in the last two, three years, we've been making efforts to push it up, for instance, reducing fixed-cost closure of the plants in Europe and Japan and so forth. materializing its effect, and we have a Honda architecture, specific designs and so on, or specification to make a better efficiency, and numbers are reflecting those efforts. However, in terms of the unit cells, it's not yet there because of the semiconductor constraints. We are still in the process of improvements. the numbers still be restraints. And of course, there are hypothetical situations as well, and we are on track, in fact, toward their unit sales improvements. And Ohio Electrification Hub, you mentioned ILA lacked $7,500 and $3,750 and so on according to ILA. There are still details to be decided, but we will produce batteries with LG, and we have two plants, Merritt Westville and Eastern Laboratory, other plants and so on in Ohio, and those places will be a hub for the EV products. And, of course, the principle is to make a production where the demands exist, and this is working well. And also, we have to take the benefits from the IRA, incentive plans. Thank you. MS.

And next question, please. NHK. Mr. Toma. Toma-san, can you hear? Excuse me. This is Toma from NHK. Can you hear me? Yes. Thank you. First, I'm looking at the numbers announced. The sales revenue, I thought it was record high. There was a record high, if any. Can you elaborate on which part was the record high in terms of the sales revenue? And about the profit, operating profit, I don't think it's a record high, but what are the reasons? Cost? And what cost was increased? Can you explain? That's the first part. And second question about support to suppliers. And can you elaborate on what you're thinking about giving support to the suppliers? Mr. Toma, thank you for the question. First, in regards to the sales revenue this time, the FY23 forecast and the second quarter three months and the first half six months, all recorded a record high, but it was mainly attributable to the currency. And in terms of unit volume, it was not a record high. So we really did not say proudly that this was a record high. Due to that, the unit sales was not high. It was mainly attributable to the currency, and therefore the operating profit was not a record high. But in the second quarter, three months, the motorcycle profit margin was 70 percent or more, operating margin, 70 percent or more. So this is a very high number. About the supplier support, yes. Well, we also, in this FY23 forecast, compared to last fiscal year, there is a rise in the raw material price and also the logistics, inflation, etc., So the inflation part is having an impact significantly on the cost. And suppliers, likewise, are experiencing the same pressure. And in line with the situation of the different suppliers, we consult with them and think about what needs to be done. So it's not the case where for all the suppliers we'll be providing the same support, but we have to tailor to the different situations of the suppliers. We consult with them and provide, if necessary, support or take other measures. So we have to decide for each case. That is all. Thank you.

Thank you very much, Mr. Toma. Next one. Wall Street Journal. Mr. Davies, please.

Hello. Thank you very much for taking my question. I have one follow-up on semiconductors. We're hearing from some other automakers that they feel like they've made it past the worst of the shortages. Is that similar in Honda's view at the moment? And my second question is on electrification. A few weeks ago, we heard from General Motors that they're pushing back some of their EV timelines because they're having trouble ramping up battery capacity. Is Honda seeing any impact from that issue, especially with regard to jointly developed vehicles and timelines around those? Thank you.

Thank you. The first question is about semiconductors. In the case of other companies, the shortage of semiconductors is said to be the worst time of the year. Do you have the same opinion? The second question is about EVs. In the case of GM, So semiconductor question, whether or not the worst time has been over. I think from the points, high level, the worst shortest period of the semiconductor at large has been has gone for general use of a semiconductor. However, we have different types of semiconductors and different applications in the vehicles and so on. Where the matching are well supported, the worst time has been over. But still, some specific area we still have the shortage. I don't think we have passed the worst time for the specific application area of the semiconductors. So we try to address the situation so that we can make a delivery of the products to the customers as soon as we can and, of course, to optimize our production and delivery situations. We are working on that and also electrification with GM and EV timeline delays. At this moment, we have a program with GM after 2025. We have two vehicle plans with GM with their supplies, and for that particular one, battery production capacity is not going to affect. We haven't heard of that yet. Well, all of the GM vehicles be electrified. I don't know if that is the case. They might need batteries, as many as those. And then we haven't heard, and I don't know how they're going to say that, but that is our response. Thank you.

Thank you very much, Ms. Davis. And next, Asahi Shimbun, Kondo-san, please. Kondo from Asahi Shimbun, can you hear me? Yes? Thank you. About the raw material cost, that's my first question. The raw material cost and inflation you mentioned. Well, what is the outlook? What do you think the situation will be? Is it going to stop, the rise will stop, or is it likely to continue to rise into next fiscal year? I think this will have an impact on your profitability for automobiles. So what is your outlook forecast for inflation going forward? And the second about some numbers, a very detailed question. Well, looking at the end of September, I think that you have a positive for the operating profit, but the net profit is a negative. So what is the cause of this negative? Yes, let me explain about the raw material part.

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and also the logistics cost inflation, what is the outlook? Well, yes, it depends on the material, but for example, the rare metal, et cetera, for the past few years, a few months, it is not rising, but it's showing a slight downturn. So I think that this is reflected in partially our forecast, but is it going to dramatically decline? Well, it depends on the material, the raw material you're talking about. But those raw materials for batteries, I think the supply is not sufficient. And if I cannot say anything about that, but other raw materials, if the current situation would continue, I think the rise will be more gradual. But still, will we see a dramatic decrease in near future? Well, depending on the material as electrification progresses, I think that the production balance, et cetera, the demand and supply balance, prices are determined. So at this point in time, there might be some changes, but we have to capture those changes early on so that we can provide good products to our customers. That is how we want to address this issue. about the operating profit. About the first six months, I think you were asking about the first six months about the operating profit. Well, mainly it is positive, but the reason for the negative is the non-operating profit and also for the share profit of investments accounted for using equity method. Now, as for the first, I think the interest rate and exchange rate is volatile. And Honda Finance, so they are doing the procurement of funding, and so the derivative We have a hedge, and the assessment of the hedge, et cetera, is one of the negative factors. So this is a non-operating profit. And as for the share profit of investment accounted for using the equity method, well, in China, Well, the business, it's rather than the business per se, positive or negative. Recently, the share prices are declining. And therefore, we have the balance sheet based on the equity method. But if we could compare this to the share prices, and those that we assess using the equity method, if the share price, if there is a gap, we have to write it off. And therefore, that is the reason why we have a negative for the net profit.

Thank you very much, Mr. Kondo. Next question, Automotive News. Hans, Sam, please.

Can you hear me? Hello? I'll ask a question in English. Can I? Sure. My question is about the EV strategy in the United States, specifically with regard to the EV partnership with Sony. Can you give us any new guidance on how Honda plans to approach the retailing of those EVs in the United States? Will Honda use its existing retail network to support the sales of those Sony Honda EVs? Or will it be completely or I should say sales and servicing of those EVs? Or will it need some kind of different and independent servicing network? Thank you very much.

Yes, I have a question. Regarding the electric car EV strategy in the U.S., is there any new guidance regarding the partnership between Sony and Honda? Especially in the U.S., how do you approach the sale of EVs with ice? How do you approach the sale of EVs with ice? Thank you. So Sony and Honda joint venture has kicked off, established in September, and the other day Mizuno and Kawanishi-san made a joint announcement together and how we're going to sell. the products. Of course, with that framework, we have established a new joint venture company, new mobility that will be not Honda, not Sony, but it will be a new mobility. That is why we established a new company. And then how we are going to sell, it is not defined as yet, clearly, so I can't share with you at the moment. And using the existing network may not be the case. However, service network, we have one thousand hundred and three hundred actual service network one thousand hundred and three hundred extra at service network across ius we could make use of that however the way to sell maybe um uh you know in line with the new kind of mobility new world completely new things. So personally, I think it is going to be something new, but all those things are still under contemplation. So I don't think I can refer to that today, but it is going to be non-conventional, no Sony, no Honda, something totally new. And that is how we have started up with this joint venture company. So please expect us for the next move. Thank you, Hans.

Next question. ,, please. Miss ,, can you hear? Can you hear me? Yes. My name is Egami from Nikkan Kogyo Shinbu Newspaper. Now, looking at the current situation, you said that you would replace some of the models to be sold, but in what regions, what kind of models did you replace? Can you elaborate on that? Well, you mentioned that about the operating margin of automobiles, but the unit volume, et cetera, but the motorcycles were not that much impacted. And that is the reason why the operating margin for motorcycles is good. Can I interpret it that way? Well, in what regions, what kind of models have been replaced, et cetera, I cannot make any specific reference. But in the first half of the first six months or three months, for Civic CRV, we had a shortage of semiconductors. And the second half, we think, in the United States, given the current production situation, will be difficult to catch up. So instead, the small models in Japan and Asia, these are those for which we do not have a shortage of semiconductors, and therefore we place them with these models. On a weekly and also a regional basis, we are doing such things so that we can deliver products to our customers as soon as possible. So such replacements are taking place. About the automobile profit margin. Well, yes, because of the shortage of semiconductors, we are not achieving the unit sales that we intended to, so we cannot achieve the margin that we wanted to. Motorcycles likewise are impacted by semiconductors, and depending on the country, the market, I believe motorcycles, which motorcycles sell are different, and therefore we are able to cover with that difference. Those which have high margin in those countries, the unit volume has increased, and therefore in Thailand and Vietnam. And that is the reason for the positive. So it's not the case that we do not have any problem. Unfortunately, those markets where we have high margin were the areas in which we saw growth in the unit sales. Thank you.

Thank you, Ms. Tegami. Next question, Toyo Keizai, Weekly Toyo Keizai. Yokoyama-san, please. Yokoyama Toyo Keizai, hello. Thank you. I have two questions. First question is a confirmation. In the PowerPoint, the factors behind the profit before tax, you had 36 billion yen of the retail price factor for the ups and downs. You had raw materials, the situation, You had managed every pricing successfully to make this number. Is that how it went? Please share with us your strategy as well. And also you talked about the pricing and also in many vehicles, K cars there. produced in Japan, consumed in Japan. And in fact, the soaring oil prices directly impacting the mini vehicles. And what is the impact on that? Because pricing is difficult on that. So let me explain the first part. For the first half, like this time, we say 36 billion yen plus. Despite raw material prices hike, we managed. That was about the question. throughout the year annually speaking for this fiscal year as compared to last one raw material prices from the previous forecast because of the inflation situation the distribution labor cost and supplier of course suffer the same issues but a cost up pressure is 390 billion yen the cost of pressure upward total up to that much, and our approach is to try to provide – have a pricing that reflects values. And of course, throughout the year, inflation and supplier situations, specifically the price negotiation, and actually those events are happening in the second half, rather, So, when we do pricing, we actually take up in first half already, anticipating what's going to happen next. But actually, that is a plus positive impact on the first half. But throughout the year, I don't think we can absorb all of those cost-increase factors. And then we have differences of the impact in second half and first half, and that is those ups and down factors are sort of allocated over the period. So pricing in Japan, as Yokohama Sun sent, speaking of the domestic market, of course, we are looking at the competitors as well, and those many cars. We have the OEMs for supply that choose. And we, of course, watch out the prices of those products of other companies. It is kind of difficult to reflect the raw material price hike situations to the price of the products directly. We have to make a decision. taking over the competitive product. And when we have the new model, new specification, we may pass it on the price hike part for the price of the product. But we would try to do that as we go going forward. And thank you very much, Yokoyama-san.

The next question will be the last question. Nikkei Business, Iyama-san, please. Iyama-sama, can you hear? Yes, can you hear me? Thank you. About motorcycle sales. Well, it's a detailed question, but Indonesia. Compared to others, I think the growth is not that fast. There is a reason. What is the reason? You talked about EV motorcycles. But in Asia, the competitors, do you see that there is pressure coming from your competitors to try to push EV motorcycles, electrified motorcycles? Iyama-san, thank you very much. Indonesia is more than 100 percent, but the growth is slower than other regions. Where did this come from? Can you elaborate on your question? Excuse me. In the second quarter, the Indonesian sales, it says 101.9%. And in the fourth quarter, it's 90%, I think. So that ratio I'm talking about. I'm sorry. I'll look it up. Well, in regards to Indonesia, there is an impact of the recession, the slowdown of the economy, especially last year. When it comes to Thailand and Vietnam, there was a lockdown in Asia, as you recall. And because of that impact, that point in time, Vietnam and Thailand grew. So this is in comparison. I hope that you'll understand that to be the case. And about the electrification of motorcycles in Asia. Well, in India, there is this new manufacturer we just started up, and they have a very forward-looking plan, sales plan, and it seems to be working. And Indonesia, again, competitors are putting pressure on us in terms of electrified motorcycles. Also, as I explained the other day, heading towards 2030 and 35, we want to aim for a large unit sales in Asia when it comes to EV motorcycles. It's true that competitors are putting pressure on us because of their growth, but mobile battery pack, we're using battery. And the rickshaw in India, we installed battery and doing demonstration tests there. So I think in Asia, mainly in the motorcycle sector, we'll try to electrify and put together a strategy in this market going forward. Thank you. Thank you very much. Iyama-san.

So this concludes our presentation session today, our financial result presentations, of course. Those materials and the presentation package are available on our website. And thank you very much indeed for your participation.