Honda Motor Company, Ltd.

today.

We would now like to begin Honda FY2024 Third Quarter Financial Results Press Conference.

First, an introduction of the executives on stage. Executive Officer, CFO, Eiji Fujimura.

Thank you.

I am Fujimura.

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

Thank you. I'm Kawaguchi. First, Fujimura will present the FY2024 Third Quarter Financial Results and FY24 Financial Forecast, followed by Kawaguchi's explanation on the details of both. No further ado, Mr. Fujimura, please.

To start with, first of all, I would like to extend my deepest sympathy to the victims of the Reiwa 6 Dodo Peninsula earthquakes on January 1st, as well as to their families, and I wish for a quick recovery and reconstruction, restoration of the affected areas. I will explain the financial results of the third quarter and forecast of the full year of the FY2024. Starting with the summary of the results. With regard to the cumulative unit sales until the third quarter FY2024, the unit sales of the motorcycles business series increased, mainly in Brazil and Europe, achieving the highest ever operating profits and operating margins. In the automobile businesses, despite the impact of the warranty expenses, the volume went up mainly in North America, significantly raising the operating profits year on year. As a result, operating profits of the whole company marked 1 trillion and 76.3 billion yen, with the operating profit margin being 7.2%. Regarding the forecast for 2024, although some challenging market environment exists in Asia, reflecting additional strength of the earning structures and the favorable currency impacts, we will revise the previous forecast. For the shareholder returns, in order to improve the capital efficiency, we made a decision about share buybacks in the Board of Directors meeting today for the amount of about 50 billion. Together with the already acquired 200 billion this term, it will add up to 250 billion in total. Further to the share buybacks, we resolved the cancellation of the treasury stocks, as many as 154 million shares. Honda will accelerate our efforts to improve capital efficiencies in order to enhance corporate values. Let me explain the current situation of mobile businesses in the main markets. Due to the solid demands in the United States and the production recovery in Japan leading to the incremental unit sales, the entire unit sales increased year on year. In terms of the sales forecast of the FY2024, We are expecting the sales drop in Thailand and Indonesia. However, we expect the sales unit increase in China. There's no change of the previous forecast. Speaking of our initiatives for electrification, in the CES, the world largest tech exhibition in Las Vegas the other day in the U.S., In that show, we made a world premiere presentation of the new global EV concept model of our Honda Zero series, the concept model named Saloon and Space Hub. At the Fuel Cell System Manufacturing LLC, the joint venture company with General Motors, We have started the production of the air fuel cell systems. Next, moving on to the motorcycle businesses. In terms of the air cumulative results until third quarter, despite the unit sales fell in Vietnam because of the economic slowdown, we had a stable demand for both Indonesia and Brazil. Thus, the entire results end up at the equivalent level last year.

In the third quarter alone, we had increased the unit sales in Brazil and India.

Due to the reduction of units in Vietnam, the entire result was lowered year on year. Speaking of the results forecast over FY2024, we expect a unit sales reduction in Vietnam and in Japan. However, sales in India and Thailand would grow. Therefore, the previous forecast was stalled and changed. In November 2023, Honda organized a briefing session on electrical motorcycle businesses. We updated our sales target of electric motorcycle in 2030 from the previous announcement of 3.5 million to 4 million units. We announced how many models to be launched and we announced electrification strategies such as production and procurement structures. Honda will accelerate electrification of our motorcycles and businesses as well toward the realization of the carbon neutral. Next, regarding the outline of the cumulative financial results up until the third quarter FY2024, in spite of the negative impact of warranty expenses, we had incremental unit sales of automobiles and the pricing scheme that reflects the commercial value of the products and so on, due to which the operating profit increased by 342.4 billion yen year-on-year to reach 1.0763 trillion yen. The profit for the period attributable to owners of the parent is 869.6 billion yen, up by 206.4 billion yen. Moving on to the consolidated financial forecast of the FY2024, in spite of the challenging market environment in Asia and the higher round expenses, with the reflection of additional fortification for profit improvements and current impact, we have revised operating profit expectations to 1.25 trillion yen up by 50 billion yen. The profit for the period attributable to owners of the parent is expected to be 960 billion yen, up by 30 billion. Forex assumption is 144 yen for dollar in the second half and is 142 yen for the dollar for the full year projection. It is sales and PL shown in this slide. Regarding dividends, Expected annual dividends for FY2024 will be 174 yen per share based on the condition before splitting the shares. Therefore, no change from the previous announcement.

At today's board meeting, we passed a resolution regarding acquisition and cancellation of our own shares. For the acquisition, we have set an upper limit of 34 million shares or 50 billion yen. Regarding the cancellation, approximately 154 million shares will be cancelled. Next, Mr. Kawaguchi will explain the details of the financial results and forecast. Let me begin. First, the Honda Group FY24 April to December 9-month unit sales by business area is as follows. Motorcycles declined to 13,961,000,000 units compared to the same period last year, mainly due to decrease in Asia. at 3,114,000 units led by an increase in North America. Power products business total sales amounted to 2,548,000 units led by a decrease in North America. Next, a change in profit before income tax for nine months compared to the same period last fiscal year. Firstly, operating profit increased by 342.4 billion yen. the change factors are as follows.

Sales impact.

The positive impact and profit of due to increase of automobile price, automobile sales. Price and cost impacts, pricing that reflects increased products value, a decrease in precious metal prices and other raw material costs had a positive impact of 359.8 billion yen.

Expenses.

Increase in warranty expenses plus artifactives had a negative impact on profit of 366.6 billion yen. R&D expenses had a negative impact of 28.5 billion yen. Currency effects had a positive impact of 95.4 billion yen. Profit before income taxes, despite a decrease in equity method profit, mainly from China, due to an increase in operating profit, interest in income and others, profit was increased by 405.1 billion yen. Next, sales revenue and operating profit by business segment. Operating profit marked a record high of 411.5 billion yen in motorcycle business. Operating profit for automobile was 460.5 billion yen. Financial services, 204.8 billion yen. Power products businesses and others was a negative 400 billion yen. Next, I would like to explain the cash flow situation. The FY2024 nine-month free cash flow of operating companies, excluding financial, was 926.5 billion yen. Net cash balance at the third quarter end was 3,183.3 billion yen. Next, the forecast for fiscal 2024. Although reviewing Honda Group unit sales for each business operation by region, the total volume is unchanged from a previous forecast. Next forecasted change factors behind profit and before income taxes year on year. First operating profit we expect an increase by 469.2 billion yen.

The breakdown is as follows.

Sales impacts of positive Profit price sales impact is positive of 360.6 billion yen, mainly due to an increase in automobile unit sales price and cost impacts. Although there is an increase in labor costs, positive effects of pricing plus a decline in raw materials such as precious metals will lead to an increase of 430 billion yen. 434 billion yen. Expenses negative 353.4 billion due to an increase in warranty expenses and others. R&D expenses a negative impact of 51 billion yen on profits. Currency effects a positive impact of 79 billion yen. Although profit before income taxes expected increase by 565.4 billion yen, despite a decrease in equity method profit mainly from China, offset by increase in interest income and others.

Next, changes from the previous forecast.

Operating profit and profit before tax forecast is increased by 15 billion yen. The breakdown is as follows. Sales impacts, negative 11 billion yen, mainly due to decrease in consolidated unit sales. Price and cost impact. Although there is labor cost increase, pricing relating to the increased product value plus decrease in raw materials such as precious metals will result in a 40 billion yen increase in profit. Expenses. Minus 32 billion yen is forecast mainly due to an increase in warranty expenses. Currency effects, an increase of 53 billion yen. Lastly, the forecast for capital expenditures, depreciation and amortization and R&D expenditures for FY2024 as shown. There are no changes from the previous forecast. This concludes my explanation. Thank you for your attention.

Thank you very much for your attention.

So we'd like to now continue on with the questions and answers. As we have announced before, we are going to take questions on the Zoom. And because of the interest of time, please let me take questions to two questions per person. Thank you very much for your cooperation. So please push the raise your hand button on the system, please, if you have questions.

your first question from the Asahi Shimbun newspaper Mr. Wakai please Wakai speaking from Asahi Shimbun can you hear me? yes I have two questions.

Question one is Daihatsu homologation problems. You have many K-cards by yourself and what is the impact of sales because of that? And those afloat in the home location and development stage, what sort of actions do you take to prevent those non-compliances? And the second question is not earthquakes. There should be some reduction of production ongoing today. What is the prospect going forward as a business fee? How do you address the situations, especially with the suppliers involved?

Thank you very much for your question, Mr. Wakai.

Thank you for those two questions. And let's start with Daihatsu's quote. It is of other company matters and We do not fully understand what actually has happened. Therefore, speaking of the financial status and also what we do to prevent such things, that's the thing we can explain. And in terms of the results, Daihatsu may have a less number of the sales and then the sales of those K cars, whether that will be added to our sales of K cars. In fact, we do not have any reflections as such effect of the sales in our account, financial results at this time. However, of course, there should be some impact on the sales to a certain extent. However, their cars and our key cars are priced differently, different price range. And also, our key cars are not really shipped to the general dealers. different sales dealer style, therefore the impact should be restricted, I believe. And also in terms of our actions to prevent such fraud, at Honda, We have those homologation testing, and we have those homologation departments who does the testing and application of those matters. Actually, this department is separately organized. We're from the development and the production. And in order for that department to conduct tests and process for homologation, They already have the well-documented processes as to, for instance, how many days it should take until the acquisition of those certificates. And, of course, those certifications have to be given in order to make the process to go on to the next development process. We have the clear rules for that. Therefore, we do not... have the air system such that we can prevent the very tight development schedule, which might induce the fraud of those kind. And starting from April 1st, new homologation departments and quality improvement departments are to be a part of the functional department so that they can have the improved and fortified quality governance in the EV area coming up now, digital as well, maybe in those areas. of electrifications or digital things, we would have additional checks, including cybersecurity, I suppose. Therefore, we should make sure we would have a good hand on that. And as a head office, we have a good organization to ensure those controls. In terms of the Noto Peninsula earthquakes, as we said right at the beginning, we I would like to wish for a quick restoration of the affected areas and people there. And our situation is that Tier 1, Tier 2 suppliers, those have a very tight lifeline situation. the possibility of the recovery of the production, the stock levels and so on. In fact, every day we are checking out the level of the stocks there. situation of the recovery of those suppliers, and every day the situation is progressing. And in fact, our financial statements at this time do not reflect the impact by the auto-financial earthquakes. However, every day the situation progresses. And as for the recent production conditions, specifically with the K cars, minicars, so-called shaving Reduction of the production unit per day is actually conducted now. And we had these operations plans on Saturdays, Sundays, holidays too, but we had to cancel those holiday operations in order to adjust the production. We have the area about 20,000 units affected due to that reason. And in terms of the recovery and so forth, we will continue to look into the situation so that we can explain when the situation is clear. And in terms of the BCP and the supplier condition, how do we control that? Specifically, the suppliers operating the affected areas, of course, are making the greatest efforts to recover and thanks to them. We try to get information of what they do, stock levels and the potential production of alternative manufacturing in other areas globally. In fact, we've had quite a good know-how since the last earthquake event. Therefore, at earlier stage, we could grasp the situation earlier. So this is the situation today.

Semiconductor included as well. Next question. Nikkei. Okinaga, please. Mr. Okinaga, please. We cannot hear you.

Can you check up with your microphone?

Can you hear me? Yes. Thank you for the presentation.

I have two questions. We have seen a number of recalls in this fiscal year, and I think it's reached tens of thousands. And you say that the warranty is $353.4 billion. And does this include all the costs for recalls, or is it a case that the warranty expense will increase further from what you have already stated?

Yes, thank you.

And yes, in the third quarter, well, the warranty cost expenses have increased. I did explain that. And so there was a fuel pump emperor, this incident. So this has been added on. And in the fuel pipe, first of all, I'd like to express my condolences to the person who has passed away. But this, in terms of the accounting, the financial statement, Is this reflected in the numbers? Well, in terms of the units, as you've mentioned, it is increased to a few million units, and we will respond to this situation. And in terms of the financial statement, we believe that this is a failure coming from our supplier side. And therefore, we will have them compensate for the recall expense. And this is how we've handled it in our financial statement. In regards to this case, the warranty expense is not that large. That is our understanding. And the reason why it's large, on February 1st, the U.S. authority, we've already filed a notification of a recall. There's a seat weight sensor. And there was a failure with the seat weight sensor. And we have added some $55 billion for that recall. And I think that this is a reason that can be attributed to the increase in warranty costs. Thank you. May I ask another? About your buyback of shares. Why did you decide to acquire your own shares? Well, yes, I think there's still room for an increase in shares given the weekend. And I think that's the impact of the interest rate hike in the U.S. and China. But is that the reason behind this decision, the resolution?

About the acquisition of our own shares, we want to improve the capital efficiency and recently The issue is the PBR, one-fold. And we have given this.

I'd like to start talking from there. We, the management, we are aware of this PBR issue, and we take it seriously. And therefore, we are thinking of it. what we need to do. We believe that it is a responsibility for us to take further steps. It's about 1,700 yet. It's about 10.7 folds right now, and it's less than one fold, 1.0. And I think there are three reasons for this. Well, the three are those accumulated from the past and the current and the future. So these are the three folds.

First, for the past. Over the past decade,

capital has increased from 6 to 12 trillion yen and so it's 45% in terms of the ratio and so we have to deal with this past that we have and the current situation is that for a long time the automobile revenue had dropped and therefore the share prices were not increasing because of this situation. But in regards to this, looking at the financial results here, as we've been saying for the past, we are trying to reduce the fixed cost and also improve the revenue of new models. and incorporating these measures, plus we are starting to recover from the shortage of semiconductors, and therefore the revenue of automobile business is improving. So this is the current situation, and what's more important is the future. The auto sector on the whole, the share prices are not picking up. This is because in the this age of Zev we really don't know who the winner will be and therefore there is this lack of transparency uncertainty and I think that this is having an impact on our business but We believe that given the age of zero, zero emission, we have to come up with our own strategy and try to improve our resolution, so to say, and try to make investment in the growth sectors and try to reap the profit from those investments. So in order to improve this so-called resolution, the other day at CES we communicated that we have a brand strategy in place, plus we have technology. investment and other strategies to reap the fruit from our efforts in place and next fiscal year we are going to have a present press meeting and so the way we communicate will be changed so that we can gain more understanding from the market. And we will also try to change our way of communicating our technology to the public. So this is something that we are thinking of right now. So amongst these three, going back to the first one, so in regards to our capital here, we want to return to our investment. And from the beginning, we have had 200 billion yen acquisition of our own shares. And this program has ended in December last year. So just like that, we are going to maintain that pace. And by the end of this fiscal year, we want to complete this process. And given this, we believe that this time, The 15 billion yen decision was made, and we've just made this announcement here.

Well, we want to be actively investing in the future.

And so while we do that, and also we have to try to continue to earn with the profitability of ICE. and we have to invest in growth and have a balanced way and at the same time improve our capital efficiency. This is a management message that we want to communicate to you by announcing that we will acquire our own shares. That is all. Thank you.

Okinaga-sama, arigatou gozaimashita.

Thank you very much, Mr. Okinaga. Next one, Yori Yori newspaper. Mr. Okinaga, please.

Can you hear me?

Yes, we can.

Nakamura from Yomiuri Newspaper. I have two questions.

One about semiconductor procurement status now. The production situation is very well now, but do you think that semiconductor supply situations have been recovered fully before the COVID? And the second question was you said about pre-tax appropriate, and you talked about the precious metal price fees. And what is the current status of those price fees, including a forex situation, too? You mentioned the reduction of the precious metal prices. So in terms of the stable conductors supply procurement, this year or from the February-March period in 2023, the situation has been on the recovery. We've done a lot of measures and those actions have it incurs some fruitful results, and nowadays it is not a concern at all. Once in a while, we might face some situation, however, recovered now. And now we have a full-scale production in place after a long while, and until the second quarter or so in the U.S. or the places like that, there were a shortage of the laborers at the supplier, and equipment problem because the equipment were not running for quite a long time and we had some situations like that however those issues have been resolved and in North America full scale production continues after a long stretch of not having one but we have a stable condition and in terms of the precious metal conditions Actually, those are utilized mufflers or catalysts in the mufflers to purify the air emissions. A few years ago, the precious metal prices were soaring, but in the last several years, because in China they have progressed the electrification that may be the main reason for the precious metal prices dropping down. And in addition to that, in the electrification efforts, not just automobiles, but when the economy is booming, precious metals, steels, copper, resin... Those material prices are to fluctuate a bit and we have to, of course, look at forex currency rates as well. We would like to keep watching out all those factors as we go. Thank you very much. Thank you, Mr. Nakamura.

Next question, please.

Next question, please. Can you hear me?

This is Yokoyama from Toyo Keizai. Thank you. I also have two questions. So first, is about the full year forecast. Well, until the third quarter, I think that you are making good progress about the third quarter. I think fourth quarter will be showing a slowdown in your operating profit increase. What's the upside and downside? Automobile and motorcycle, power products, I think the situation will be different. But can you share with us your perspective towards the full year forecast? Can I continue? The second question. About China. Well, currently, I think the unit volume is increasing, as you say. But at the last presentation, I think that there's severe competition. There's a discount race in China. I understand that is the situation. But how do you see the Chinese market environment? I think Mr. Fujima talked about the need to cut production capacity. So what are your thoughts on China?

Mr. Yokoyama, thank you very much. In terms of the numbers, the fourth quarter outlook, rather than talking about that, I wasn't asked to talk about this.

I'd like to give an overview of the financial results at this time. Well, this third quarter,

the October and December three-month actual.

We had a 380 billion operating profit and so the breakdown of the automobile and motorcycle is 160 billion each. So ours is

20.1%.

It's the highest in terms of the quarterly results for the motorcycle business. And I think the situation is that, well, this is a consideration of what I explained. There's a downturn in Vietnam, and also there is a greater scrutiny in terms of the quality, but in Brazil and Turkey and Europe included, the unit volume is increasing or the profitability is increasing in Asia. Likewise, there are areas where we see a decrease in unit volume. I think that we have a proper pricing in place and other efforts, which is trying to show results. So for automobile, meanwhile, last fiscal year, there was the semiconductor issue. So this was a major challenge. But in North America, it's a plus. 120,000 units. This is mostly hybrid. Second quarter, there was a logistics disruption, but this has been cleared already. And thanks to this, we have a dealer inventory of 30 days. So this is the standard that we have in place now. So 30 days. So we've reached this standard, though. And in Japan, it's a plus 20,000. This is because of the semiconductor. The unit sales is in a positive range. Now, China, it's plus. This leads me into the second question, but it is a positive. But the third quarter, last year, the third quarter, In the inland area, there was a lockdown, and there was the impact of semiconductor supply, so it was a quite low number in China.

Therefore, year on year, it is a positive because of this, but

So there is this shift towards NEV and also the reduction in ICE market, and I think that this situation continues to be tough for us. We have to use incentives to compete against the others. This is the situation we have put in place. As for the automobile profit, despite these conditions,

As the 160 billion, amongst this number, we have a reliance of a supplier. It's related to Yachiyo.

So there was the impairment of the subsidiary. About 50 billion, or should I say 45 billion, that is Yachio impairment, plus the warranty cost, 50 billion. So close to 100 billion yen factors are included here, but we still have this 160 billion. And its R.S. is 4.6% and nine months, $460 billion. So it's four times the profit from compared to last year. And despite this tough condition, the volume increase in North America and the hybrid success and pricing, these factors are all combined together. And despite this one-time impairment and warranty cost issue, We have a 6% level, and so I think that this is the situation that we currently have, 600 billion.

And in nine months, operating profit, 1 trillion, pre-cash flow.

930 billion, so we are in a situation where we are having a record high, and in December, as an outlook, we have 250 billion, or 6.2%. So, excluding the one-time events, if We have 135 yen currency exchange. We think that we have an RRS level of 6.9%. And by 2025, we are aiming towards 7% of the operating margin. But in May, when we close our books, or next fiscal year, when we announced our forecast for next fiscal year, I think that we will be able to declare that we have achieved our goal two years earlier. The fourth quarter, as for the decline, I'm just finally coming to your answer. The fourth quarter, compared to the past three quarters, you say that we will see a decline. Well, Kaoguchi will explain about the details here, but

Especially the suppliers. We have the cost adjustments in America, U.S., The wage increase from January, we began this, and so there's that cost plus.

It's always the case, but we have a fluctuation of quarterly numbers because of the cost and also R&D.

And so these are going down in the fourth quarter. So, please, Mr. Kawaguchi.

Mr. Yokoyama, thank you for the question. The third quarter versus fourth quarter and the fluctuation in the profit. As Fujima has already explained, yes, just to give you some numbers, as was said, the third quarter, Just the three months, we have some 380 billion operating profit. And the full year forecast, if you deduct this, according to our curve, the first quarter, we are expecting some 170 billion. So there is a drop of some 200 billion. But the reason is because the assumption is the foreign exchange. So this is different. In the fourth quarter, we are estimating 140 yen against the dollar. The third quarter, the average was about 146 yen against the dollar, and therefore because of this difference, according to our plan, the premise was 140, so there is minus 80 billion or so. Meanwhile, the third quarter was that the supplier, there was an impairment of some 50 billion, and therefore this part will be netted.

And what remains is the fourth quarter.

also R&D expense. Well, there will be the model development timing and all the various activities that are underway which will influence this. But we think that expenses are more skewed towards the fourth quarter. And this is about 220 billion. Compared three to four, it's a negative in the fourth quarter. And as I explained, the cost part. Again, North America mainly, the wage increase and labor costs and inflation impact. Cost is on the rise. And these things also has aggravated the cost situation. Plus, the seasonality with the suppliers, we have some adjustments to be made. And these all combined, the cost is about 80 billion yen, third to fourth quarter negative. So about the upside and downside that you asked, upside is the foreign exchange. It's 146, 47 yen. So it's difficult to predict the foreign exchange rate. But if it continues until March, Then, according to a competitive plan, it will be on the upside. Meanwhile, the downside, North America economy and also the impact of the earthquake, these will be the downside factors. But through our sales activities, we want to minimize the downside as much as possible. That is all from me. Thank you. Mr. Yokoyama, about China, about the production capacity, I forgot to mention this, so I have to answer that part of your question. Well, last time, when we made our financial announcement, production situation in China, as I said earlier, we have 1.2 billion units capacity, about 2 billion, We have, other than that, a dedicated factory, two factories, so it will come to 1.7 million units.

And the rest of these new factories are... I'm sorry, it's currently 1.49 million plus...

The new will be 1.7. But we think that 1.2 million is the appropriate level. So we have to make adjustments for the remaining half a million.

And for China, we are talking with our partners. Now, in terms of how we see the issue, I think our partner sees it the same way.

We are on the same page in regards to this issue. However, especially in China, when it comes to employment, they're very sensitive. So I cannot give you any details here, but from the second quarter, I've been saying this. So compared to that, we... are on the same page with our partner and moving forward. This is the progress report. And we have to make adjustments for half a million units. We have to talk to them about how this will be done. That is all from me. Thank you.

Thank you. Thank you, Mr. O'Connor. Next question.

Mr. O'Connor.

Taki from Nikkei Aja, can you hear me?

Yes, please. Thank you. I have two questions. I'll go one by one. First question is about current EV sales trend. In the main market in Western countries, it is slowing down a bit. Instead of hybrid cars getting popular, I hear that. How do you see that situation now? Will that be a kind of within expectations or will that be a kind of a tailwind for your businesses? And you have a target of 2040 and what is the impact of that on electrification strategy?

Thank you very much, Takeshita.

And yes, we get this question quite frequently these days in terms of the Western countries' markets. The EV growth is kind of a slow anchor rate, and in the U.S., EV ratio is about 8% recently. That's my understanding.

And for us, I think such things can happen.

So we were sort of imagining this kind of thing could happen, but in the long run, in that For 2035 or 2040, in line with the carbon neutrality trend, we need to push forward electrification initiatives nevertheless. This is our idea as a mobility company. So as of now, 20, 30, 40% and 80% in 2035 and 100% in 2040. This is the battery EV goals and such goals are to stand, no change and we will just simply go on for that. And we are sort of a latecomer in the EV area, therefore we need to make sure that we stay the customer viewpoints to find out and think what is the needs by the customers for the EVs so that we can provide them to them. to get a good profit from that and that is the important point of this game therefore we don't change the strategy we simply go on what we do and of course the situation may change from time to time and of course there is a kind of a lag over several years and so forth and in 2020s Such things can happen. Therefore, of course, for strategic spending, maybe we can adjust the cash out timing and so on as we go. In the meantime, unit sales should be supported by some means as well, and we will stay flexible to support the situation like that. But in terms of the hybrid, popularity is quite solid. And for sure, out of the ICE models, hybrid will be the kind of bridging technology up until the carbon neutrality. Therefore, our hybrid has been already well-appraised so far in the United States. Of course, CRV hybrid models are available, and we have a very good demand. And already, it's a 50-50 between the petrol-based cars and hybrids. And hybrid demand is very good. And hybrids are available for high-grade models, and it is a profitable model set. And in terms of incentives as well, hybrid models would not require much incentive. Because of that, this year, perhaps until summer time around, Civic Hybrid will be launched by then. And after the 2027 model onwards, Hybrid will be the evolution model, such as more compact performance, profitability, body weight. Everything will be of evolution for the hybrid, and of course we will evolve them further and further. And not much is about North American and Western markets. However, in China, speed is a little bit different. In China, they have emerging manufacturers. From China, they enter into the Vietnam, Thailand, where we need to battle in different ways. And we will keep watching the situation from the global viewpoints and also on the appropriate timeline ideas so that we can compete there too. Thank you very much. Second question, you talked about the challenging market situation in the Asia and you mentioned that several times and closing for the first half, did you see any changes since the first half closing time and what is the prospects of upcoming situation of the Asian market? Maybe I can answer your question based on the motorcycle businesses because of the Asia. Since the last announcement, the change of the goals are not really happening. There's some differences. However, differences are always due to some good reasons in Thailand and Indonesia. Maybe in Thailand, as I said before, the loan credit assessment is tougher now and the economy is a bit slowing down in Thailand. Of course, there are situations like that. at Honda Duo Plus is doing good and we are getting the shares are getting high and although we have a higher share now, the market itself is tough and in Vietnam The export businesses are facing with a tough situation because of the economic stagnation. And I thought the economy would recover quicker. However, maybe this condition may continue to fall this year, 2024. And for Honda, value 160. That's something we have to compete, and its market share has marked a very high level. Negative thing could be our own situation in Indonesia. The market itself is growing in Indonesia, but in the second quarter, there was a rust issue of the airframes. because of which we had our youth sales falling down. But we had measures and actions to recover our trust by the customers, and we are getting the sales recovery because of that effort. And Indonesia sales next term, it will be on the positive side, I believe. And in terms of the future prospect by different countries in Thailand, first, it will continue with a little bit of negative for a more while. And I don't know if it's related to the regulations that... There could be some upper limit for loans for the customers starting in April. When that comes in, the high situation is a bit tough. In India, if our issues are cleared, it will be fine. India, Brazil, Turkey, European countries, including Turkey, our positive situation can continue for a while. So, thank you for understanding. Thank you very much.

Thank you very much. I apologize for the instance of time.

The next will be the last question.

Nikkan Jidousha.

Mizutori, please.

Can you hear me?

This is Mizutori from the Daily Automotive newspaper. I have two questions. The first is about China. Last time you said that it's about 1.1 million unit in sales that you're expecting for the full year. That was at the midterm. But is your forecast unchanged? Is that understanding correct? I want to double-check this. And having said that, next fiscal year, what is the forecast? Well, at the midterm announcement, I think that you were saying and saying that you were thinking that the same trend will continue into next year. Does that remain the same? And the second, I'm only asking this question, but about the sales price and cost impact, the waterfall chart that you mentioned, and can you explain about the breakdown? So nine months and also the full year. So what are the factors that Thank you very much. In regards to China, the 1.1 million units that we're expecting for this year, well, this is what we announced at the middle of the year. Of course, the big CRV, these core models, we have invested a lot of our resources here. And if we underperform, then we think that our market performance, as we shift to will not be good for us, and therefore we think that we are selling at a rather high price, but in order to maintain our presence, we think that we need to maintain retain a certain volume for the sake of the future. And that is how we've competed. And as a result, in the third quarter, we have slightly overperformed our plan, and it's plus 30,000 from the 1.1 million. The fourth quarter, there is a dealer inventory that has topped up, and therefore about 160,000. So we... are narrowed down on our wholesale plan. But looking at the current situation, maybe the number could be larger. That is the impression that we get right now, as of now. As for next fiscal year, the current 1.1 million units plus The EN series, the second of the series, will be the first half, and the third series will be coming up in the second half of next fiscal year. And therefore... If it turns out to be 1.3 million this year, then we think that we can go beyond that. And about the second question, Mr. Kawaguchi. Thank you for the question. About the selling sales and also the cost impact and what we explained in the waterfall. Let me explain about that. First, about the 9-month waterfall. 360 billion plus was what I explained, of which the pricing impact, this is about 270 billion or so. It's a plus 270 billion of the plus 360. So that is the one part, and the remaining... 90 billion is the impact of the cost. That is the breakdown. About the pricing, well, this is mainly the automotive market. Well, for each region, there are differences in the inflation rate and also the customer situation plus our model. value-added situation are different. And therefore, we have to examine these closely in determining the selling price. But because of this, we have of the 270 billion for the automobile, it's about 200 billion attributable to pricing. The remaining cost, the plus impact, the manufacturing cost, also the drop in the purchase middle price, this has an impact. So we have these factors.

And cost, the labor cost is rising.

There is the inflationary trend, and therefore there is this pressure, cost-decrease pressure. So mine is 27 billion, but meanwhile the precious metal and material cost is going down, and so it's a plus 360 billion. They think this is about a positive of 80 to 90 billion yen. Now, annually, in other words, how we see the fourth quarter with this, well, throughout the year, the selling price impact, we think that it will continue to have an impact because we'll continue the change, and also the change in selling price will continue to have an impact. So we'll continue to see that impact in the fourth quarter. Annually... As I showed you in the full year forecast, the cost, in fact, is about $430 billion plus, 360 billion, this is a full year, is the impact of the pricing. Meanwhile, the cost part, well, the material cost, yes, it is declining, but once the decline pace slows down, then in the fourth quarter, we have incorporated that slowdown, the plus impact, compared to last fiscal year, will come down. Meanwhile, the cost, we think that the labor cost increase, the wage increase will continue to have an impact. Cost plus, the most is about 80 billion, I said, but for the full year, it will be slightly less. The cost, the supplier, we are consulting with the suppliers and sharing information and carrying out activities. That is all. Thank you.

Thank you very much, Mitsutori-sama.

Today, we did not get this question, but I would like to appeal one point.

If you have time, although the time is already finished, however, if you could stay on, please stay with us. So, in terms of the summary of the error, If I'm not mistaken, I didn't say it because it would be too long back now. The thing is that why motorcycle businesses are so strong, that is the frequently asked question, and we would like the media people to understand that fully. Maybe you can write an article about that for the Eurovision. All right. And then if you have time, please let me state this. Before the COVID-19 in 2019, we had 20 million units sales globally. Now we have 188 billion units in the plans this term. But back in 2019, our OP was 290 billion yen, 14% ROS. Now we have 500 million businesses. And the RP per unit is about 20,000 to 40,000 yen, the profits per one unit of the motorcycle. And then we have a near 40% global share. In some countries, we have 80% market share of the motorcycles. And then... We have such sales commercial power, and we have a well-trusted brand power that is a fruit of the cumulative efforts of my predecessors. Since 2010, we had a mega-module platform strategy in place, power trains, frames. We had a model platform. or we had a commonality as initiative across the models across the regions and because of that we improved our profit structures and we had also improved more contact with the customers with many more models available to them and now in south america in europe we have a high profit of businesses which is a good positive thing for us. Therefore, we used to be profiting from Asia, but now 60% of Asia, the rest are from the rest of the regions, which includes the 20% in Brazil, 20% from Europe. That could be the kind of a split across the world. And then, of course, the volatility can be seen in some countries with regions. However, the 20% or less Of course, if we can sustain that level of ROAS, it could be another story. However, I should say that we have established a structure to be robust against the volatility or changes, and such efforts, successful efforts in the last 20 years have been fruited this way. And in the next 20 years of motorcycle businesses going forward, our technology power to create attractive models with the cost containment commercial values, powers, financial power. So when everything is in place, first in the automobile area, that is shrinking the ICE businesses in China. However, in motorcycle, the growth is still expected. ICE motorcycle growth, batteries will be add-on. Battery EVs will be an add-on to that. Therefore, this is still a growing business and battery EV know-how ahead of others, and we have a manufacturing capital in place. We have a Doze Force in our automobile, and we can get a synergy from automobile to the motorcycle business areas, which can grow thanks to this synergy, I think. Therefore, I just wanted to say that we have the motorcycle businesses like the one I described.

Thank you for your time.

I said 20% in Europe, but 20% including the developed countries, including Europe. That includes U.S., Japan as well. So that's the precise term. So please understand our multiple businesses precisely. Thank you very much.

Now we can conclude our press conference.

And our financial statements are available on our website. And thank you very much indeed for your participation.

Thank you.