Honda Motor Company, Ltd.

I thank you very much for taking time out of the 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 2023. First of all, allow me to introduce the attendees today. Mr. Eiji Fujimura, operating executive and head of accounting and finance supervisory unit. Good to see you, everyone. Mr. Masao Kawaguchi, General Manager of Accounting Division, Accounting and Finance Supervisory Unit. Good to see you, everyone. Then Mr. Fujimura will first present an outline of the third quarter financial results and the forecast for fiscal year to March 2023. Then Mr. Kawaguchi will present the details. Over to you, Mr. Fujimura.

First of all, I would like to thank all our customers around the world for their loyalty to Honda products and all our stakeholders who support Honda's efforts. We sincerely apologize for the inconvenience caused to our customers who are waiting for Honda products due to the current vehicle production delay. We will do our best to deliver our products to our customers as soon as possible and seek for your understanding. I'll now explain our financial results for FY 2023 third quarter and FY 2023 financial forecasts. First, the key points of our financial results. The current business environment continues to be difficult. In the third quarter, production and unit sales of automobiles decreased from the same period of the previous year. due to the impact of the COVID-19 pandemic in China and semiconductor supply shortages. In addition, manufacturing costs continue to rise due to soaring raw material prices and inflation. Under these circumstances, Honda made company-wide efforts to further improve its earnings structure and secured a 6.3% operating margin for the fiscal year 23 third quarter. The motorcycle business posted record high operating profit and margin for the second consecutive quarter. For the full year forecast, we have revised downward automobile unit sales. Despite upward pressure on manufacturing costs, we will maintain our previous forecasts for both operating profit and profit for the year by further improving our business structure. Despite the unfavorable business environment, we believe our earnings structure is steadily improving. And in light of our current profitability, cash level, and future fund requirements, the Board today approved a resolution to acquire 70 billion yen of our own shares. When added to the 100 billion yen already acquired this fiscal year, the total comes to 170 billion yen. Honda will continue to accelerate its efforts toward electrification and new growth to enhance corporate value. Next, I will explain the status of our automobile business in major markets. In the first nine months of the fiscal year, unit sales in major markets declined from the same period year on year. The third quarter period was affected by semiconductor supply shortages and pandemic in China. Unit sales in Japan were higher, while sales in the U.S. and China were lower than in the same period of the previous year. In Japan, the N-Box was the number one selling new car. And the Freed was the number one selling minivan for the calendar year 2022. And in North America, the Acura Integra was named 2023 North American Car of the Year. We have revised downward our previous sales forecast for fiscal year 2023, taking into account the current production and sales condition. In addition, we announced plan to launch a new light commercial EV in spring 2024, utilizing the features of the N-VAN. In the U.S., we announced establishment of a joint venture with LG Energy Solutions to produce EV batteries and the signing of a basic agreement with GSUSA to collaborate on high-capacity, high-output lithium-ion batteries. Next, motorcycle business. In the first nine months, unit sales exceeded year on year in major markets. In the third quarter, Unit sales in major markets exceeded that of the same period last year due to the replacement of sales models, utilization of alternative parts, and the effect of new model launches mainly in Vietnam, despite the effects of semiconductor supply shortages and other factors. In Vietnam, unit sales reached a record high in October following September. And in Brazil, unit sales reached 1 million units for the first time in calendar year since 2014. We have upwardly revised our previous sales forecast for FY23, reflecting the current strong sales trend. As forerunners of the global launch of electric motorcycles, Honda announced the E-M-Y-E in Europe in November, and three commuter EB models in China in January. Next, our overview of FY23 nine months results. Despite decrease in automobile production and unit sales due to semiconductor shortages and pandemic in China, plus higher manufacturing costs due to surging raw material prices and inflation, Operating profit increased 62.2 billion yen to 733.9 billion yen year-on-year due to price increases commensurate with improved product value, increased motorcycle unit sales, and foreign exchange. Profit for the year amounted to 583.1 billion yen, up 1 billion yen from the same period last year. Unit sales and income statement are as shown. Next, FY23, consolidated financial forecast. Despite decline in automobile unit sales and upward cost pressure due to inflation, We are maintaining our previous forecast of 870 billion yen for operating profit, reflecting price increases commensurate with improved product value, increase in motorcycle unit sales mainly in China, and company-wide efforts to further improve profitability. The profit for the year forecast of 725 billion yen is also maintained. Exchange rate assumptions for the fourth quarter and full year are 130 yen and 135 yen to the dollar, respectively. Unit sales and income state are as shown.

Next, I will cover the dividend information. The prospects for fiscal year dividend for fiscal year 2023 is at 120 yen per share, unchanged from our previous announcement. At the board of directors meeting held today, we have resolved to acquire own stock with the objective of enhancing capital efficiency and enabling flexible capital strategies. We will acquire own stock up to the maximum total amount of 70 billion yen. Next, Mr. Kawaguchi, General Manager of Accounting Division, will explain the details of the financial results and forecast. Allow me to start the explanation. To begin with, Honda Group's unit sales for nine months of the fiscal year 2023 In motorcycle operations, unit sales grew year on year, particularly in Asia, and came to 14,285,000 units. Automobile sales came to 2.74 million units, mainly due to decline in China and North America. In power products operations, unit sales came to 4,121,000 units, mainly due to decline in North America. Next, I'd like to explain the changes of our pre-tax profit for the three quarters compared to the same period last year. Pre-tax profit was 859.3 billion yen, which was higher by 14.1 billion yen compared to the same period last year. operating profit was 733.9 billion yen, which was higher by 62.2 billion yen on the year. To give you a factor analysis of the operating profit, impact from sales. Though there was an increase in motorcycle unit sales, declines in automobile sales volume and in financial operations, led to income decline of 97.1 billion yen, impact from selling price and cost. While there was an effect from pricing in line with the product value, Due to surging material prices and inflation, it resulted in a decline in profit by 17.1 billion yen. Next, expenses. Due to increase mainly in selling expenditures and other factors, this gave us a negative impact of 65.6 billion yen. R&D expenses led to a decline of 11.5 billion yen. And currency effect resulted in 253.7 billion positive impact. Next, to explain the sales revenues and operating profit by business segment, for motorcycles, operating profit was 376.5 billion yen. Automobile operations profit was 112.9 billion yen. operating profit from financial services was 220.3 billion yen, and for power products business and other businesses, operating profit came to 24.1 billion yen. Next, I will explain the cash flow. Free cash flow of the operating entities for the third quarter of FY23 came to Next, I would like to talk about the consolidated financial forecast for FY ending in 2023. Firstly, speaking of Honda Group's unit sales, since the previous forecast, in motorcycle business, considering the growth mainly in Asia, forecast is for 18,730,000 units. In automobiles, 3.85 million units, considering the decline mainly in China. And in power products... 5.58 million units in view of the declines in Europe and in Asia. Next, I would like to explain the factor analysis of pre-tax profit compared to the actual results from last fiscal year. Pre-tax profit is forecast at 1 trillion and 80 billion yen, up 9.8 billion yen from the previous year's results. Operating profit is forecast at almost the same level as last year's result. To explain the factors behind the operating profit, impact from sales was negative, 5.2 billion due to reduced income and financial services, though motorcycle unit sales grew. Selling price and cost impact is negative 93.0 billion yen due to surging material prices and inflation, though there was good effect from pricing in line with product value. Expenses impact is expected to be negative 120.0 billion yen due to increase in the quality-related expenses and selling expenses. R&D expense impact is negative 52.0 billion yen, and currency effect is forecast at positive of 269.0 billion yen. Next, the changes since our previous forecast. We are keeping our pre-tax profit and operating profit forecast unchanged. to explain the factors affecting operating profit. Impact from sales is negative 47.0 billion yen, mainly due to decline in automobile unit sales. Selling price and cost impact is positive 17.0 billion yen, thanks to effect from pricing in line with product value, though there is headwind of inflation adding to cost rises. Expenses impact is positive 32.0 billion yen due to declining quality related expenses. R&D expense impact of positive 15.0 billion yen. Currency impact of negative 17.0 billion yen. Lastly, since our previous forecast, our forecast for capital expenditure depreciation and amortization on the expenditures for FY23 remains unchanged. This completes my explanation. Thank you very much for your attention.

Thank you for your listening. And now, we'd like to proceed to questions and answers. We have informed members of the media the procedure, please ask your questions via Zoom. And in the interest of time, we ask you to limit your questions to two per person. We seek for your understanding. Those of you who have questions, please press the raise hand button. Let us begin with Yomiuri Shimbun newspaper, Mr. Nakamura, please. Mr. Nakamura, can you hear me? Yes, please. I'm Nakamura from Yomiuri Shimbun. I have two questions. The sales in China. I want to know the details about sales in China in November. Due to the COVID-19 policy, these plans had to be suspended. But what is the forecast for production sales in China January to March? And also, about trying to shorten the delivery time in Japan and overseas, especially due to the shortage of semiconductors. I think that you're working to try to secure the necessary semiconductors. I'd like to ask you, including that area of semiconductors, how you intend to shorten your delivery lead time. Thank you, Mr. Nakamura, for your question. We have received two questions, first about China. Let me begin with China. As you pointed out, again, and also as explained, For the third quarter, especially October, November, due to the zero COVID policy, the plant had to be suspended. Rather than the coastal areas, it was the inland area of China, which was heavily impacted. And also, we have the Dongfang Honda plant. It's in Wuhan. And because it's in the inland area, including production, there was a big impact. And from December and after, the government is shifting to boosting the economy. And therefore, in regards to the restrictions of outings, the Chinese government have lifted these restrictions. But as a result, the number of infection cases increased. And so, in the third quarter, compared to our original plan, in regards to China, we were short of some 120,000 units. Of course, there is also the semiconductor impact included here. Now, in regards to the fourth quarter, January-March quarter, Well, we came up with the January numbers recently. And due to the pandemic and others, some of the dealers were closed. And there was, to a certain extent, the impact of those sales. And also, due to the Chinese Lunar New Year and also the car acquisition tax, there was a tax reduction, but this was ended at the end of December. And therefore, in January, year on year, compared to last year, it is around 50%. But in regards to these factors, we had factored them in in our plan. And February and the spring, we will be able to resolve these impacts. Meanwhile, looking at the market developments, last year in calendar year 2022 in China, The passenger car market, we are not involved very much in commercial vehicles, so talking about passenger car market, was around 23.5 million units. And in year 23, we're expecting it to be more or less the same. And given that, the breakdown will change. So we believe that there will be growth in the new energy cars, and it will have a share of 30, 40%, seeing a growth of 130%. And so... How are we going to compete given this situation? The EN series, well, we launched this series last year. It is still, we also have ICE, internal combustion gasoline engines, so we'll have to compete with these. Core CRV are highly appraised. And therefore, we want to ensure that these can be produced. And we want to cover with that and also for electrification. The EN series, the second of the series, will be launched within FY2024 and also Honda Connect. And we work on intelligence. Honda Sensing 360, these will be evolved so that by FY27, we will have 10 EVs in the market. So that is our... situation in China. And about the deliveries, both in Japan and overseas, the impact of semiconductor shortage, I said that in China there was also the impact of pandemic, and we had to reduce it by 210,000 from the plan. But other than China, again, we have 40,000. So in total, 250,000 reduction. About the impact of this 40,000 units, given the markets, U.S., North America is a big factor. And relatively speaking, North America, When it comes to the price range of the vehicles, the vehicles will come with a lot of equipment which requires semiconductors. And therefore, North America is more impacted by the shortage. But in Japan and Asia, including the measures that we're taking, we are increasing our unit sales. So the semiconductor impact... Well, we initially were planning for 4.2 million, but it's now 3.8 million units. We are trying to manage the situation on a daily basis. And so if we miss even a single component, we cannot produce. Therefore, together with our suppliers, as well as the semiconductor suppliers, we are directly communicating with them to try to address this issue. Well, it is a very challenging situation. But the third quarter, well, excluding the pandemic in China, Compared to the second quarter, we have been increasing unit sales. And compared to last year's third quarter, the unit volume is increasing. So we think that we are starting to see the situation bottom out. And from the second half of this year, the supply will recover. We are expecting that to happen. So this is the image that we hope.

Thank you very much, Mr. Nakamura. I would like to take the next question. Okay, from Nikkei newspaper, Mr. Tanabe. Okay, this is Tanabe from Nikkei paper. I hope you can hear me. Yes, I can. Please go ahead. Okay, thank you. But your financial services business, so recently from October to December, you saw some declines in your profit. So I'd like to know the reasons. That's my first question. My second question is for the states, I would like to ask. The whole industry, I believe that the incentives are actually coming to the bottom. So from January to March, I wonder what you expect the incentive to go from here where the word recession is a mention so I just want to ask how you see the demand in states okay thank you very much Mr. Tanabe concerning the financial services operations and then states and the incentives okay Mr. Kawaguchi will cover the details about the financial services. But the financial services, since the pandemic started, what has been changing dramatically is that during the pandemic, the The subsidies so far, there has been a lot of good subsidies from the government to individuals. And then we have not been able to provide good new vehicles. So the used car markets prices has been going up. So in our financial services operations, there's a bit of a special factor. There has been some impact in default. and losses of the residual value. So those are negative. Risk expenses has been there. But for the past two or three years, the negative risk factors has been very low. So... We used to have got 330 billion yen operating profit. However, now those risk factors are coming in. So we used to have this. We are thinking, expecting something like 250 to 260 billion yen for throughout the year, for the full year. So that is the effect that we are seeing. So, so far, we were without going without the risk expenses, but those are now coming back. That is the big reason behind this reduced earnings. You have anything to add, Mr. Kawaguchi? Okay. Ms. Tanabe, thank you for the question. As Mr. Fujimura explained... the overview of our financing services business. As you've said, if you look just at the third quarter, compared with the third quarter last year, we have lost about 14 billion yen in operating profit. Two big factors for this. One is that, as Mr. Fujimura explained, those are default those losses associated with the default as a well to repeat myself last fiscal year in the states particularly we had a very good business or the government subsidies so with that the defaulting percentage was very low but now those subsidies because a pandemic came to and coming to an end those are subsidies are coming to an end so that the normal defaulting race ratio has been coming back however in case of Honda The customers, we have been, we have, thankfully, we have many customers who have a very high credit score. So compared to the general increases in defaulting, it is not that we are getting the same level of delinquencies or default. So it is a gradual increase in the defaulting percentage. And another thing is that the credits of the loans, this balance itself is declining. So the loans or the leasing, we have the interest income from them to the customers. So currently, if our lending credits has been declining, that means our revenues are declining. So the financial revenues, sorry, the income has been going down. So due to the semiconductor and the pandemic, the states in general, the retail segment has been very struggling. So the credits that we have been providing to consumers, the lending, those are kind of expiring. And then we are getting a reduced number of loans and lending. So the lending volume has been going down. So those are the two factors that contribute to this. OK, thank you. Then let me try to answer the second question about the incentives. As you said, those are hitting the bottom. I would say that is what we see. So we are struggling with the semiconductor situation. We do have a good demand. However, we are not able to catch up with the supply. So at the dealers, the inventory at the dealers has been very low, generally speaking. So even if you look at the other OEMs across the market, there has been a situation where However, about the American and Korean OEMs, they are getting rid of that situation. They are building up their inventory. So maybe due to that impact, we are seeing that the incentive has bottomed out and then is looking to increase. We are assuming that this situation will continue. But for ourselves, initially, before the pandemic, we were thinking of like 60 days worth of dealer inventory. That's what we used to keep. But we wanted to minimize running at the minimizing of the inventory of dealer inventory. When it comes to keeping down the incentives, this is something that America, Honda believes in, and the dealers in the states that we work with, they understand the situation that this leads to keeping down the incentive. So we don't want to make sure that we don't bring up the inventory level at the dealers to the previous level. And at the same time, of course, per model, there will be some situation where the incentive would need to be raised. However, we want to avoid that situation. We have been trending at the lowest level of incentive originally. So we want to try to keep it even more than the efforts that we used to pour into this before. I hope those answer your question. Thank you, Ms. Tanabe.

Next question. NHK, Mr. Toma. This is Toma from NHK speaking. Can you hear me? Yes. Can you speak a bit louder? This is Toma from NHK. about your operating profit of your automobile business. You have a margin of 1.4 percent, and compared to last year, it's low. What are the reasons, and how will you try to improve? What are your policies going forward? That's the first one. And related to that, the price increase of your automobile models. Can you talk about possible price increase? Tom Mason, thank you. About our operating margin, well, 1.4%. Yes, as you mentioned, it is quite low. We do recognize this to be low. Well, the operating profit or the operating margin of our automobile business, the fact that it's low, well, it's after the Lehman shock. We were struggling and we had a goal of achieving 6 million worldwide, and we started up our factory, but we could not achieve that level. And therefore, to now, we had to decide to close down some of our plants. And about profitability of new models, again, it's pointed out that it's not increasing. We want to try to have common parts across globally and also improve the profitability of the respective models. So, as for plants in Europe, as well as in Japan, Saitama factory, Saitama plant, We have reduced the fixed cost, and for new models, recently from last year, Civic Accord CRV, HRV pilot, our core models being renewed. So I think in terms of our profitability, We have put in a lot of new measures and come this far. As for our capacity, well, I said that we were aiming towards 6 million units. Globally, it's currently 5.14 million. Regretfully, due to the semiconductor and the pandemic situation, it is less than 4 million right now, but at around 70% of what we are aiming towards with the 5.14. Well, this 1.4% operating margin is low, and so we have to think about how first, how to secure the necessary semiconductors so as to improve our top line. But despite this very low utilization rate of our plants, we have managed to come this far. And about the price increase question that you asked, it will be coming up later. Over the past two years, we have had a cost increase impact of 700 billion over the past two years, and we have to take measures to cope with that. And so these factors all combined have resulted in operating margin of 1.4 percent. We have to try to increase the margin. we understand. About the price increase of our automobile models, the way to think about it. Well, about the price increase, we avoid using the term price increase. Instead, as we explained, we try to price it and commemorate with the product value. Well, what we're thinking here is that the car and the service, we have to focus on how our customers will appreciate the value. So this is a first factor that will be important. And we need to... to enable our customers to recognize the value of our products or service. And we need to offer such products and services that our customers would appreciate. Now, how are we going to increase the price? It really depends on the market. It depends on the model. So, a number of factors are involved here. And in the field, we will be very careful and prudent in setting the prices. About inflation, well, it's not because of inflation that we want to increase the price, but to our customers, in order to explain how we are prudent about increasing prices, in regards to our automobiles, Well, there are cases in which we have rather cut, reduced the price. Rather, if we were to reduce it, it will lead to reducing the price of used cars. It's not just new customers, but our existing customers who are already using our cars. models we would undermine the asset value of these vehicles and therefore and said that we are trying to keep incentives to the lowest in the industry so including that we have to try to protect the value of our customers assets this is something that we also need to take into consideration And therefore, for our customers who are going to not just buy a new Honda, but we also have to attach importance to our existing customers who are using our products. And with this in mind, we want to determine this pricing. These are the thoughts that we have in regards to this subject. Thank you.

Thank you, Mr. Toma. Okay, we'd like to move on to the next question. from Automotive News. Over to you, Hans.

Hello. Yes, this is Automotive News. Can you hear me now?

Yes, please.

If I may ask a quick question in English, please. It's about your dealer strategy in the United States with the Sony Honda Mobility. It seems to be a somewhat sensitive issue with Honda dealers there. Your Honda dealers and accurate dealers seem to assume that they will have. Automatic rights almost to start selling Sony Honda, uh, but the Sony Honda mobility joint venture. doesn't seem to agree necessarily with that. What is Honda's position on maybe giving its own dealers an advantage or a priority in selling or, I should say, servicing or aftermarket business with Sony Honda Mobility?

From my side, I would like to ask about Sony Honda Mobility's dealer strategy in the United States. It seems that this is a sensitive issue among Honda dealers. This is Honda and Acura's current dealer. In the United States, it is assumed that EV will be automatically sold as a right, but it seems that the joint venture of Sony Honda Mobility does not agree with this. So I would like to ask you here, what do you think of Honda? As for this current dealer, What are your thoughts on prioritizing the sale, servicing, and aftermarket? Thank you very much, Hans. For Sony Honda Mobility, about the fusion of Sony and Honda, we come from different industries. So this is an unprecedented idea. This is a new mobility value that we alone cannot come up with. So it's something innovative. So we do have high expectations of this. as we started up there with the joint venture and then as their project proceeds but i'm sorry to i have to say this but see this a honda sony mobility's uh vehicle business and uh honda's business And they can become competitors depending on the market where the joint venture dealers and our business work. So they would have to – there are rules and policies, regulations about sales and competition. So we cannot – talk about the Honda Sony Mobility's product and services, what will be made available, and as you've asked, what kind of sales strategy will be adopted. I'm sorry to say that we are unable to answer the question, so I hope you will appreciate our position on this. Thank you very much, Hans.

Mr. Mizutori, please. This is Mizutori speaking. How do you do? Please. Two questions. So, About the nine-month and full year, the operating profits and, well, you talked about the gains and losses and the selling price and cost. And you said, I want to know, and also the material cost. So can you explain the details of how much increase? And also give the breakdown. And another question is, I might be asking the same question every time, but the suppliers. I think looking at their performance, they are also having difficulties, and so the suppliers, are they not requesting that you try to add on their additional cost on the pricing? So are you not receiving such requests, and are you satisfying their requests? Mr. Mizutori, thank you very much. About the breakdown, I would like Kawaguchi to respond to your question about that. the requests that we're receiving from our suppliers to add on their cost to the pricing and for us to accept their increase in pricing. Well, this is true for ourselves as well, but I do think that there is a big impact. in various ways. Recently, there's been the foreign exchange, raw material, energy price, and the personnel cost increase. And along with the semiconductor situation, we had to reduce our production. And therefore, we have to shoulder the fixed cost more than in the past. And we are asking our suppliers to put in place the necessary fixed asset to meet our requirements. And therefore, I think that they are very much impacted by having to reduce their production volume. We do recognize that this is their situation. Well, when it comes to foreign exchange or raw material impact, within the fiscal year, we are purchasing section and the suppliers would work out and try to supplement the shortcomings. But this year, just for this year, the energy price or there's the inflation impact and production reduction impact. So all these included, We are trying to respond fully and try to support our suppliers in struggling with these challenges. And it's not just the Tier 1 suppliers, Tier 2, Tier 3 suppliers, to the supply chain on the whole. We are looking into how we can share the burden. Well, each will be negotiated. And so in our fourth quarter, I think that we were thinking that much of the cost will be posted in the fourth quarter. We are dealing case by case. And in the third quarter, we have already settled it or decided with it in the third quarter. So in the third quarter, in actual numbers, the cost increases already reflected about half of the portion. About the raw material prices included the suppliers' cost increase. Well, it's not really to respond to that situation, but there is a cost increase of 430 billion, of which suppliers also included having to try to deal with the supply situation and the full year. We and our suppliers, we are trying to reduce our costs, improve our earnings structure. We are both on sides, both sides are working on this. And for this fiscal year, I think it will be difficult to ask them to try to work on this. Looking at the supply chain, we will talk with them and decide what needs to be done. That is the situation. And as for how much, I'll hand it over to Kabuchi. Mr. Todi-san, thank you for the question. Well, about the full year. Well, the slide that you saw earlier and also the selling price, cost impact, It's minus $93 billion. About the raw material, steel, aluminum, and also the precious metal and catalysts. These are the areas in which we're seeing quite a bit of impact. The breakdown. Precious metal from last year. Well, especially recently, perennium, rhodium, the market is softening. That is how we see it. And the semiconductor impact is easy. And once the car production increases, the situation might change. We do think that might happen. But just as of now, we see for the precious metal pricing, the market is softening. Meanwhile, steel, aluminum, ever since last year, we have seen quite a bit of increase in price, and this has had an impact on our business. About the full year, minus $93 billion in this explanation. Well, as Fujimoto has already said, the overall cost is $430 billion. This is included. We are trying to make effort to reduce the cost and also to try to price in line with product value. So, through such efforts, we have tried to cover for this, but still, we have this $93 billion. Now, of the $430 billion, raw material, Cost increase also, as I explained, suppliers. We negotiate and talk with our suppliers and try to shoulder some of their costs so that will increase our costs. And labor costs, logistics costs, inflationary impact are all included. Now, there's 430 billion. Well, raw material, just looking at the raw material, about 200 billion would be the portion that accounts for the raw material part. And about the three, nine months period, well, I said the 430 billion earlier, which 250 billion plus has already been realized over these nine months. And raw material impact is about 150 billion plus. I hope you understand that that is the case. That is all. Thank you.

Thank you very much, Mr. Mizutori. We'd like to take the next question from Toyo Keisai. Mr. Yokoyama, please. This is Yokoyama. I hope you can hear me. Yes, please, over there. Okay, I have two questions as well. It's about your production planning. I would like to hear about the forecast. So, of course, for this year, you have shown the volume, but you talked about the semiconductor. So for the next fiscal year, in what direction you'll be heading with the production plan, including your countermeasures and all that? So Toyota said that 10.6 million units. And then that would be the guideline. And then so I'd like to hear what Honda is thinking about. And then about about the deterioration and profitability for automobile business. This was asked earlier. If the unit volume goes up, I guess that profitability deterioration might get worsened. I just would like to know what your prospects are for next business year onwards. Okay, thank you very much, Mr. Yokoyama. About our production plans, our forecast. Well, I hope that we can head toward this capacity of 5.4 million units, but I guess that would be difficult, I would say. So we talked about the three quarter results. So the impact of COVID in China. So that consists of it is very difficult to split up into the impact from a pandemic and semiconductor. But I would say I'd say that 200. 10,000 units reduction, I'd say, more than half of that majority would have been pandemic. So I would say for this fiscal year, that would be the 4 million units or so. And then the 4 million units will be the bottom. So how much we can build on top of it, that's the plan we have for the next business year. That's what we are thinking of. So exactly what kind of numbers we can build up. for that. In May, we will talk about the forecast for next fiscal year. So by then, we should be able to tell you something more. And in terms of actions or countermeasures, we have been making a lot of, taking a lot of actions. So development of alternative components and parts, and then for alternative parts. Concerning semiconductor, we One thing, we have been relying on analog semiconductors to keep the cost reasonable. But even if those are more interchangeable, you know, we would go for even for higher cost and then build. We want to build as many cars as possible. So we want to develop alternative parts while using, relying on that type of parts. And then we will try to coordinate with suppliers as well. That's what we have been doing. And then at the early stage, we are communicating our production plan to the suppliers so that they can expect to secure certain parts volume. That's something we have been doing already, but we would like to reinforce that kind of efforts together to try to work out the production plan for the next fiscal year onwards. And concerning this, as the volume goes up, what is going to happen? I mean, profitability, how much that's going to go up by? As I said, we consider 4 million units as the bottom. And then we are thinking how much on top of it we can build up. So this is only assumptions. So at this point in time, I would prefer to refrain from speaking of it. I hope we can show you something more solid in May. Thank you. Thank you, Mr. Yokoyama.

I apologize, but due to the time limit, the next question will be the last. Last question, Nikkei Asia and Take-san, please. This is Nikkei Asia. Take, can you hear me? Yes. Thank you. I also would like to ask about the semiconductor situation. Well, it might be a bit redundant, but once again, the first question is, well, I think you said that you closely communicate with semiconductor manufacturers, but what specifically are you going to talk about? What do you think would be effective? Are there any exchanges that you can share with us? And second, about the future outlook. Well, the last announcement and this announcement, you again have repeated the shortage of semiconductors from November. I think the shortage content, the amount of content might be different. Things might be improving in some places or the types of short semiconductors that are in short supply might be changing. And can you explain about that and what solutions that you have in mind to try to resolve this situation? Ms. Take, thank you very much. You want us to give you some more specifics. When it comes to components delivery, We have been talking with the tier one manufacturers. We've left it them to work on the situation. But when it comes to semiconductors, tier one suppliers, they have to procure the components and assemble and deliver to us. And this process with the lead time that is required for that. In the case of semiconductors production, manufacturing, the lead time is long, very long. And therefore, we cannot just impose our requirements on tier one manufacturers. We have to show understanding towards their situation. So it's not possible to just make demands. And so whether it's going to be several months, a year, a year or two years, I really cannot give you a definite answer. But given the nature of the semiconductor, the lead time that is required, we are thinking about what sort of information we should be providing them with. And analog semiconductors, well, in terms of our shortage, we do have a shortage of such semiconductors. The manufacturers, though, would find it difficult, well, they, I don't think that they would decide on their own to invest on such capacity. So, we have to share our troubles and to talk about what can be done. So, and through that, we can build up a relationship with our suppliers. So, I think that that is a sort of exchange that we have and we hope to be effective. Now, about the outlook, well, when we announced from November, well, ever since that time, excluding China, It's minus 4 million, 40,000 rather, sorry. So it's, well, compared to the plan, well, Japan and Asia is a plus, and others it's a minus. But the third quarter for North America, finally, compared to the second quarter or the previous year, we saw a positive. And in January, we have seen a positive increase, and the market growth was greater than that of Honda's. So I think that we are starting to see some good signs. So how can we resolve? Going forward, the measures that I explained will have to be taken one by one. I think that is the only thing that we could do about to fully resolve. I think it will take some more time. I think it will start to improve in the second half of. FY24, I think that we will start to see better procurement of semiconductors around that time. Thank you, Ms. Take.

Okay, so thank you very much. With this, I would like to close the financial results briefing. We do have some information about the financial results on the website, so please refer to it. Thank you very much for participating. Thank you very much.