Honda Motor Company, Ltd.

Thank you very much for sparing your time to join us here today. We would now like to begin Honda Motor Company Limited FY2025 Third Quarter Financial Results Briefing. Allow me first to introduce the executives in attendance. Director, Executive Vice President, and Representative Executive Officer, Shinji Aoyama. How do you do? Director, Managing Executive Director, and CFO Eiji Fujimura. Thank you very much. First, Mr. Aoyama will overview the FY25 third quarter financial results and FY25 full-year consolidated forecasts, followed by Mr. Fujimura's explanation on the details.

Mr. Aoyama, the floor is yours.

Mr. Thank you for your continued support for Hondo's business activities. Thank you very much. And let me explain the financial results for the FY2025 third quarter. First, let me highlight the key points. The FY2025 third quarter cumulative operating profit was 1,139.9 billion yen, with an operating profit margin of 7.0%. In motorcycle business, sales volume remained strong globally and third quarter cumulative total was 15.5 million units. In automobile business, consolidated unit sales volume decreased by 297,000 units year-on-year despite solid sales in North America due to drop in Asia, mainly China. Operating cash flow after R&D adjustment representing funding for future investments remained at the same level year-on-year at ¥1,945,000,000. The FY25 consolidated financial forecasts and changed operating profit ¥1,420,000,000, profit for the year ¥950,000,000. Motorcycle unit sales has been revised upward to a record high due to strong global sales. Automobile operations, mainly due to decline in Japan, is revised downward to 3.75 million euros. However, due to rise in motorcycle sales and exchange rate, operating profit and profit for the year forecasts remain unchanged. A resolution was made on December 23, 2024 to repurchase 1.1 trillion yen worth of company shares. 184.9 billion yen has been acquired as of January 31, 2025. We will work to complete repurchase of 1.1 trillion yen in shares. Next, the situation in the major markets. Regarding motorcycle operations, due to strong demand in India and Brazil combined with economic recovery in Vietnam, sales exceeded the same period last year. Automobile business saw an increase in Japan and the United States, but due to the severe market environment in China, total sales dropped year on year. In Japan, sales volume in the third quarter was lower than the same period last year due to fierce competition amongst others. The cumulative consolidated financial results for FY25 third quarter is as follows. Operating profit increased by 63.5 billion yen year-on-year, totaling 1,139.9 billion yen. Equity method investment profit decreased by 94.5 billion yen, a loss of 27.2 billion yen. Profit for the period attributed to owners of the parent company was 805.2 billion yen, down 64.3 billion yen. Consolidated financial forecast for the fiscal year ending March 2025. We maintain our previous forecast for both operating profit at ¥1,420,000,000 and current profit attributable to owner of the parent company ¥950,000,000. Exchange rate assumption is ¥152 against the dollar for the fourth quarter and full year. The forecast for the annual dividend remains at ¥68 unchanged from the previous announcement. Additionally, a resolution was made on December 23, 2024 to repurchase 1.1 trillion yen worth of company shares. As of January 31, 2025, 184.9 billion yen has been acquired. Cumulative FY 2025 total of acquired shares is 472 billion yen. Mr. Fujimura will present the details of the financial results.

I'll explain the results of the third quarter.

Regarding the cumulative unit sales until the third quarter, FY March 2025 of the group, for the motorcycle segment, due to the year-on-year increase mainly in Asia, 15,508,000 units sold for automobile segments due to decrease in Asia, mainly China. 2,817,000 units sold. And for power products segments, due to decrease mainly in Europe, 2,516,000 units were sold. Consolidated financial results of the cumulative three quarters were explained already. Next, I will explain factors of ups and downs of a profit before income taxes of a cumulative nine months near one year. Operating profit increased by 63.5 billion yen year-on-year because of the following factors. Regarding sales impact, profit increased due to the rise in sales unit. However, incentives went up. Thus, the profit was squeezed by 104.3 billion yen. Regarding price-cost impact, thanks to the pricing that commensurate the improved product values, Profit increased by 376 billion yen. Regarding expenses, due to incremental labor and subcontractor costs, profit squeezed by 54.3 billion yen.

R&D costs increased.

97.5 billion yen downward impact on profit, and currency effects squeezed the profit by 56.3 billion yen. Profit before income taxes were down by 38.9 billion yen because of the profit of equity method declined due to a drop of the unit sales in China and so on, although operating profit itself increased. Regarding the operating profit by segments, 501.6 billion yen for a motorcycle business and 402.6 billion for automotive and 244.9 billion yen for financial service businesses and power products and other businesses made losses of 9.3 billion yen. Next are the cash flows. Free cash flows from the businesses excluding financial services businesses were 693.7 billion yen during the first nine months cumulative of the FY 2025. Net cash at the end of the quarter was 3.7789 trillion yen. Operating cash flows after R&D adjustment were 1.945 trillion yen. Next, I'll explain consolidated business forecast over FY March 2025. Regarding the projection of the group's unit sales versus previous forecast, unit sales of the motorcycle will be 20.6 million, mainly reflecting the increase in Asia. And units of the automobiles will be 3.75 billion, mainly reflecting the decline in Japan. And those of power products businesses will stay at 3.66 million, same as the last forecast. I've covered the forecast of the consolidated performance of the FI March 2025. Next, let me explain factors behind changes in profit before income taxes year-on-year basis. Operating profit will be up by 38 billion yen year-on-year. The breakdown of the differences will be regarding the sales impact. Although the incremental unit sales will push up the profit, however, the higher incentives and so forth will squeeze the profit by 198 billion. Regarding price-cost impact, Pricing reflecting a product value improvement and so on will add a profit by 535 billion yen. Expenses will increase by 73.5 billion, squeezing the profit. And R&D cost will increase by 125 billion yen, squeezing the profit too. And currency effects will impact negatively on profit by 100.5 billion yen. Although operating profit itself increased, the profit before income taxes will drop by 177.3 billion, reflecting a decline in profit of equity method because of the reduction in unit sales in China. Next, let me explain the differences in comparison to the previous forecast. We will keep the same operating profit of the previous guidance, of which the breakdowns will be motorcycle sales will increase. However, the unit of automobiles will reduce. Thus, the sales impact will squeeze the profit by 27.5 billion yen. Price cost will squeeze the profit by 15 billion yen. will increase by 5 billion yen, reducing the profit, and the currency effects will push up the profit by 47.5 billion yen. Profit before impact taxes, before income taxes, will be expected to be higher by 30 billion yen, reflecting yen depreciation causing forex gains. Lastly, this is a forecast for capital expenditures, depreciation, and D spending. And that concludes my presentations. Thank you very much.

Thank you for listening. And now we'd like to proceed to Q&A.

As we have been informed, we will be taking questions via Zoom. Currently, we are receiving a number of inquiries regarding our business integration. However, those questions will be addressed when our President holds the news conference from 4.50 p.m. So we would like you to refrain from asking questions. We'd like to do business integration and focus solely on the financial results-related questions. We ask for your understanding and cooperation. Those of you who have questions, please use the raise hand button. Due to the time limitation, we would like you to limit your questions to two per person. When asking a question, please turn on both your camera and microphone.

First question from Toyo Keizai and Mr. Yokoyama, please.

This is Yokoyama from Toyo Keizai.

Can you hear me now? Yes. Thank you. I have two questions. First, about the full year, the four quarters plan. The third quarter is about operating profit 410,000. You deducted the 280 billion for the first quarter. So what is the reason for the decline? And I'm asking the same question. I think it's related to the expenses. But compared to the past plans, please talk about the risks and opportunities. And so that is my question. And I'd like to proceed to the next question. But in the interim... announcement, you talked about the EV incentives to quite an extent. And I think there was a $100 billion increase from the original plan. And the third quarter, after the third quarter of February right now, North American incentive, how much increase are you seeing? And are you seeing that the incentive costs are increasing? And I think that the consolidated port automotive is declining, so please explain about the incentives in North America. Thank you, Mr. Yokoyama. I think you've asked two questions, but first about the fourth quarter plan and, well, the third quarter actual plan. Compared to the actual third quarter, you're asking about what about the fourth quarter. That was my understanding of the question here. But basically, speaking that the fourth quarter, well, it's the end of our fiscal year. And so what increases is especially the R&D area and also SGA. And because it's the end of the fiscal year, there are a number of things that are paid out and delivered to us, and so there's an increase in expenditure. And therefore, in the fourth quarter, it tends to be the SGA and R&AD. They tend to be, well, roughly speaking, one stage higher. Well, it's 390 or a little less than 400 billion for the third quarter operating profit, but most of that is SGA. and R&D. So I think that those are the main ones. But North American incentive-related items, well, slightly, the procurement cost is, in some cases, in other words, the finance business I'm talking about here, the procurement cost is increasing, but that's included. But it's mostly the SGA R&D that will explain the numbers for the fourth quarter. Now, about North America and the intensive in North America. Well, it has increased slightly now, but the procurement cost is slightly higher. And this is also reflected partially. And in total, I think that it's just a marginal increase, as a total, that is, because we're talking about North America on the whole and the intentions of North America on the whole. But the EV incentives, if you just focus on EV incentives, In the second quarter, in the first half, I said there will be for a full year an impact of 100 billion yen. And just talking about that part, I do think that the number has slightly declined. In other words, we were able to reduce the incentives. But because of the sales unit volume and also the production, well, these are products being produced at GM, and the production, there is adjustment in the supply.

And therefore, the final, vis-à-vis the supply,

We have tried to reduce the supply, and therefore there is the need to make payments or discuss the possibility of making payments for compensation, et cetera. And therefore, in the fourth quarter, these things could turn out to be on the negative side. But right now, we don't have any numbers at hand, and therefore they're not reflected right now. But there are the possibility of such negative factors in the fourth quarter. Is there any additional explanation?

Mr. Well, yes.

About the fourth quarter, well, to begin with, compared to the original plan, I think you were asking what it looks like right now. But for the full-year forecast, the exchange rate, we've changed it to 152 yen. We still have 1 trillion, 420 billion operating profit. It has been covered, offset by the motorcycle, and it has not been fully offset for the automotive. And therefore, for the full year, in fact, subsidies will be negative. But the third quarter, the motorcycle business did offset the automotive business, and there was the weakening of the yen, and There was about 30 billion yen compared to the budget add-on in the third quarter. So the four-year negative has been skewed to the fourth quarter. And that is the difference between the last time and this time. That is all. Thank you.

Thank you very much, Mr. Yokoyama.

Next question, Asahi Shimbun newspaper. Mr. Nishiyama, please.

Thank you for the explanation.

I have two questions. First one, earlier the question was already covering this point. which is automobile business profitability as compared to motorcycles. In a way, a motorcycle business is very good. That is the factor behind. However, in order to improve the profitability of the automobile businesses, of course, there could be another separate discussion about business integration and so on and forth. But what is your measures? for improving profitability of the cars and then uh in the last um presentation uh and that time around there was a um trump's administration topics uh talked about a lot and then uh a tariff for canada canada and mexico uh is there to be a reason uh of course it is a frozen format but we don't know when it will be uh coming back again. And what is your measure against that? And once the tariff is in place, what is the impact on your businesses? Thank you very much, Mr. Nishiyama. So profitability of the automobile businesses. To start with our recent situation, the revenue for this year, looking at that revenue, of course, that may look a little lower, especially in comparison to that of a motorcycle business. However, in order to give you the precise answer, for instance, battery EV development cost, And battery EV sales volume is not so high in North America and in China. However, if battery EV businesses and those investment in the development, well, that is deducted from that. The remainder will be the ICE and hybrid businesses. And for that part alone, actually, the situation for that part is not so different from the previous term. The profitability rate is about 8% for that part. Therefore, hybrid and then gasoline-based engine cars have profitability that is far improved from the previous situation that is a kind of overall picture. And battery EVs? We are preparing for the air business of battery EVs now. For instance, GM production, that was the starting point for North America. And then, right next fiscal year, We are going to produce and launch the cars that we developed by ourselves in North America and U.S. And as of today, I wouldn't say that that will be making a very good business right at the start. However, including the preparation for the next-gen cars, we are going to improve the businesses of the upcoming models, and we will spend the development efforts with investment, which will improve the situation furthermore. And then profitability of the businesses from this model year 27 onward, We already explained that in December last year, next generation hybrid, starting around middle year 26 or 27. And the hybrid in those years will be of much higher profitability and also commercial values of those will be much better. And with them in place, it will improve the profitability of the entire businesses, including ICE cars and the hybrid. And then, Trump administration, after the March 1st, the question is still hypothetical, I should say. However, if I want to try to answer your question squarely, thank you for your question, of course. So, suppose a March 1st 25% tariff is started. If that comes in place, So the impact on the business up until March of this year, there could be perhaps a 20 billion plus impact. That is the assumption as of today. However, it is a super short-term impact, right? Production in Mexico, Canada. We have those productions in there, and we will try to bring over those products from those two areas to the U.S. earlier, perhaps in February. And that is our actions in the short term. And in terms of tariff increase, again, in the big picture, Of course, every year the situation is rather different. However, about one-third or Higher than one-third of the businesses are using the components or products brought down from Canada and Mexico. The remainder, about two-quarters, two-thirds are produced in the U.S. Therefore, our second-highest local content of the production of the vehicles next to Ford in the United States. And the question is, how effective would that policy become? In fact, it is very difficult to visualize it. So, at this moment, what we can do is to do something in the short term, which is about current production based on the current model mix and production in Mexico and Canadian factories. We could reorganize the mix, product mix of the productions over there. This is something we can do short term. But in a midterm perspective, we could change the allocation of the air. model mix in different ways. We are preparing for that, too. However, we have possible actions and consideration for short-term, mid-term, long-term, so forth, but we don't really give a go at this moment for any of the actions on the table today. So, Fujimura-san, anything to add, please? So, again, the tariff. So what is the approximate estimate of the impact, based on the simple calculation, based on the CBU complementary supplies? In the United States, we have the next to Ford sort of local content of the productions, meaning 60 percent of the products are produced in the U.S. We have some imports from Japan as well, but 40 percent of those are supported by the production in Mexico and Canada. And, of course, those two countries are also dependent on the U.S. too. And at the moment, we are talking about the sales in the U.S., which pertains to the production in Mexico and Canada. Last year, it was about 550,000. And Canada is dependent on the U.S. for 40,000, and Mexico is dependent on 20,000. That adds up to 610,000. And, of course, that depends on the type of models. But suppose cost 30,000 for the cost of those cars, and then 25 percent of the time to that amount of their money. where you can calculate an impact on the cars, plus you can think about others, like steels and aluminum, other miscellaneous materials and so forth. But that could be like a four-digit, high end of the four-digit figures, I suppose, as much as I could expect as an impact. And my colleague, Aoyama-san, said about our short-meet, long-term measures, actions, and when should we trigger to start those actions. Of course, we have to watch carefully what's going on, then decide when to start with that. Thank you.

Thank you very much, Mr. Nishiyama.

And next question, please. Yomiuri Shimbun, Narahashi-san, please. about the motorcycle sales in Thailand is declining again from the last quarter. I think it's due to market conditions. And what impact does this have on your automobile business? That's my first question. And the second question about repurchasing your shares. Well, as of December, yes, there was the talk of the business integration with Nissan. And based on that, well, now that this has been scrapped, what is the reason for continuing to do the repurchase? Thank you. Mr. Narahashi? Well, about your first question.

Well, the impact on automotive business, right?

Yes.

Okay.

Yes, what is your outlook of the Thai market? Okay, I understand. Motorcycle sales in Thailand this year's numbers compared to last year is quite low, that's for sure. And this apparently is because of the credit the difficulty in financing and so that is the cause that is clear but about the motorcycle sales in Thailand just looking at that towards the end of last year we well we have for the low income bracket seen that the income tax was refunded, and the Thai motorcycle sales was better, but still it's quite significantly low year on year. Now, about automobile and related to the financing and difficulty to secure loans, I think this is continuing. And therefore, the market, both in the motorcycle and automobile market in Thailand, it has been on the decline for the past year or so. So given such circumstances, however, as for motorcycle business, Well, the Thai market, we have an 80% market share, and therefore we want to maintain this share and wait for the market to recover, should I say. And as for the automotive business, on the macroscopic level, the loan screening is very tough. And it's difficult to secure loans. But in addition to that, for the automotive business, there are the Chinese OEM, which are introducing EVs. And I think that this has had an impact. But for battery EV, within the market, about 20% or so are in the passenger vehicle segment. EVs, battery EVs. So it's not increasing, but it's rather sluggish in Thailand, the battery EVs. But we also have been making effort to sell BEVs, and we want to work harder next fiscal year. About your second question about the repurchase of our shares and why we're continuing to do so, well, to begin with, On December 23rd, we announced that we will start consultation for possible business integration. And at the same time, this resolution was made and decided. But while the talks continue, we try to ensure that this will not comprise any insider trading. And therefore, that is the reason why we had that resolution and made the announcement. But it was just a matter of timing. And so I'm talking about the size of the repurchase. And this is accumulation from the past. And we want to optimize our equity ratio. And therefore, we believe that The timing at which this was resolved was just at the time we were starting the business integration talks with Nissan, but the size of the repurchase and the schedule of the buybacks, well, it was high time for us to do it. So it was just a matter of timing, but this was due to the need to optimize, and that was something coming from the past. And we will continue to buy back, and nothing will change.

Mr. Fujimura. Mr. Well, let me add some numbers here.

As of the end of December, net cash, it was 3.8 trillion yen. And so it's about 2.5 months' worth. From the beginning of the month, due to the Lehman crisis and others we have experienced, from that experience, one month's worth of cash is something that we want to hold normally. But against that, it was 1.5 months' worth, rather. So it was 1.5 months' worth. And so we want to make appropriate our equity ratio. And so PBR, one-fold, that was our target. And instead of holding cash at hand, we want to return to our shareholders. And therefore, we have decided for a buyback of 1.1 trillion yen. And as Mr. Ayaman has explained, this was not because of the business integration talks with Nissan. This 1.1 trillion yen program, once it is completed, we will have a one-month level of cash at hand. So we think that this is the appropriate level. Thank you.

Thank you.

So thank you, Mr. Narahashi.

Next question from Nikkei Shimbun, Mr. Noguchi, please.

Noguchi from Nikkei.

Can you hear me?

Yes?

Thank you. So motorcycle and automobile businesses going forward, what is the concept or ideas for the operating profit for them? For the time being, EV development and SG&A cost is prioritized, and automobile profitability is not. growing, maybe suppressed a bit. And also with the motorcycle businesses, we have electrification going on. So how much would that grow given the good marketplace too? However, overall, if you have a mixture of the two businesses, do you think we can grow them together continually going forward? Or will that be suppressed a bit? Or are there any opportunities to grow, too? So that is the question.

Thank you, Mr. Noguchi. To start with the motorcycle businesses,

In fact, it is for the automobile, too, the progress of battery EVs and the progress for that. I think the assumption of that speed is one thing that we have to mind about. However, it is kind of difficult to anticipate the speed of that at this moment because of the North America policy situation. and the things are quite unclear now. However, let's start with motorcycle businesses. Electrification of the motorcycles is, as compared to that of automobiles, We have investment on those for motorcycle, and the amount of the investment is not very big as compared to that of automobiles. With that, we are successfully electrifying motorcycles based on the past technologies of the engines and frames, and we are working on similarly with the battery EVs. We best combine the technologies and so forth. That way, we can... have the restricted development cost, though successful. And then, as we said with our automobiles, the battery EV cost for the cars is quite a lot. But motorcycle, and it is not that much. And looking at the global motorcycle market today, I think we still have the leeway, the growth potential, too, in India, Brazil. In a short while, we still have markets there, the Philippines, Pakistan, Bangladesh, for instance. We still have lots of market to grow into. In that regard, even with the air-ice engine-based vehicles, we will be able to maintain a high level of the profitability for the motorcycle businesses for quite a while. And for the automobiles, we covered that a bit in the first question, but we have the air-gasoline-based engines, including hybrid, which have the air 8 percent profitability today. And with the next generation hybrid comes in, in 2027 or 28, excuse me, those profitability will be growing into the two digits.

about 10%.

Therefore, so profitability or business of the battery EV, what would the business be like at this situation? And we are going to launch battery EVs newly going forward. Of course, we will have improvement as compared to the current situation in the United States. However, as I said, currently the visibility is quite poor. For instance, ROA, income tax deductions, so forth. We thought about LGES battery plants and so forth would be utilized with the assumption of a $7,500 reduction of the taxes based on the RIA. That was the original assumption. And now the question is, what will become? of eventually in this picture. So we can't really say what's going to happen. Therefore, it is very difficult to tell you the business outlook. But nevertheless, we'd like to maintain the high level of profitability with the ICE and current gasoline-based vehicles. In the meantime, with the battery-based EVs, vehicles, we could be more flexible. be more flexible to react to any given circumstances as we go. Thank you very much.

Thank you very much.

Mr. Noguchi, next question, please. From Mr. Mizutori from Japan Automotive Daily, please.

I'm speaking.

Can you hear me? Yes. Thank you.

I think you're muted now.

We cannot hear you.

Can you hear me now? Yes. Please. Thank you. The first question about China.

So we see that there is a 40 percent year-on-year decline from April to December. And the series, that was thought to be promising, but there has been a bit longer time required for ensuring the quality. And therefore, locally, market seems to be developing. But how are you trying to make a recovery in China? That's my first question. And about the number, I want to make some confirmation. The full year, the capital expenditure is 70 billion yen or so less, I think. So is this due to the revisiting of the exchange rate? Is there anything that you postponed in terms of your capex? First of all, thank you very much for the question. First, about the ES series. Yes, the quality, well, yes, in the preparation for mass production, I think that we were a month or two behind schedule, that is for sure. But there wasn't any significant problem. So from March to April, we will be launching. So I think that this is the current plan.

But the...

MSRP, the final decision has not been made, MSRP. And the current market, including the incentives, the situation is quite tough. And what pricing we should adopt, et cetera, these are things that we're still looking into right now. Well, about the competitiveness, whether there is or is not competitiveness, as we are making announcements locally, the styling, the appearance, the interior, space, design, have all won high appraisal. So, we have a high expectation for our models. But, yes, first, the E-Series. Well, as we have been announcing the past, the A7, the A series, A7, we'll start with that model. And then the sedan GT will be launched. And then after, EA7, we'll have a three-seat large SUV. launched, so we are preparing this model, too. So this will be the series. And therefore, with this, we want to establish and expand the year series. That is for the current battery EV plan. Meanwhile, as you know, the nev ratio In 2024 calendar year, it was more than 46 percent. Next year, what will happen? Well, there are different views on this. But still, in our case, we are thinking 55 percent or more. So there will be an increase of new energy vehicles. But for the Premier hybrid, we want to go with that. We want to use the current accord and CRV and the sister plug-in hybrid vehicles. And we have an incentive race right now, which is quite tough, so it's not selling that much. But other than that, we think that basically next fiscal year, no, maybe the year after, as I said, The next generation hybrid will start mass production in China. So it's FY27.

Yes, FY27.

So at that time, it will start. And we want to sell these models, but the ratio is increasing, and therefore Well, if there's a 10% increase, then the non-NEV vehicles will decline. The gasoline vehicle market will decline by more than 10%. This is something that we cannot deny. So next fiscal year, well, looking at our unit sales, well, we have to assume what market changes will take place and put together our business plan. Well, yes, and I think that with the NEV ratio increasing, we want to sell our NEVs. That is the opportunity that we want to capture. About the second capex, so, yes, the decline of 70 billion is not really a delay. But instead, it has been postponed slightly. Well, what we are planning for the end of the fiscal year will be carried over to the next fiscal year, the beginning of next fiscal year. So that's about the change that we are seeing. The specifics, can I disclose the specifics? Well, the battery EV-related investments, Canada-related. Well, there has been not really a delay, but we've just changed the timing. Okay, thank you.

Thank you very much, Mr. Mizutori. Next question from Nikkei Asia. Mr. Take, please.

Hello, I'm talking from Nikkei Asia.

Can you hear me? Yes.

Thank you.

Two questions. First one is the U.S. market automobiles. In the United States, Trump administration has started and upcoming BEV sales? What do you think how it would be? And, well, hybrid demand is good today, but how do you assess the current EV and the hybrid sales situation? How would you address current situation? And the other question is southeast Asian region. hybrid and plug-in hybrid are well accepted, very popular there, I heard. And do you have a plan to be more engaged in the businesses for them? So please share with us your assessment at how you are going to do about your businesses in there. Thank you very much, Dr. Sun, for your question. So Trump's administration started eventually, and then as of now, well, the things keep changing minute by minute. But our stance is to stay flexible and be able to be agile in reacting to the situation. But as of now, Canada and Mexico and its tariff situation, the current interest point is around that. and aluminum and steel. tariff of 25 percent on those would provide us some impact, of course. However, those materials like aluminum or steels, it is not too difficult to find out our solution because we have quite a bit of procurement within the country in the U.S. A part of the air supplies could be from Canada, from Japan as well. for aluminum and steel. However, I don't think it is very difficult to address that situation of the tariff for those two materials. But 25 percent of this on CBU from Mexico and Canada, if that tariff policy continues for a half a year, two, three years, for instance, it will be a difficult situation. So our action might be different depending on how we would assess the upcoming situations like that. And as of now, like I said before, $7,500 things, how would that be? eventually, and also the state of California is having this ZEV regulation. And how would that be changing under Trump administration? the ZEV and other regulations in California. In fact, from the model year 26, we are to incorporate ZEV requirements, and then under this regulation, we need to sell more battery EVs. However, given the current situation, it is quite difficult to achieve that requirement for the regulation. And I wouldn't say this is perfectly linked with Trump's administration intention. However, the ZEV-related regulation will have to change as accordingly, perhaps. But as for the hybrid, affordably priced hybrid can be available with more variety for the choice of the consumers. That is what's happening today as a fact. And in case of Honda, This year, about 400,000 hybrid cars to be sold in this fiscal year, ending March 25. And next year, it will be a little more, maybe a little less than 500,000 units of a hybrid, we expect. Therefore, this year we have 25% of hybrid cars out of all types. That is our prospect for this year. Next year, 500,000 units in North America for hybrid. In a global context, this year, the volume will be a bit less than China, a bit less hybrid over there, too. But this year, I would say 900,000 hybrid cars for this current year. And next year, it will be more than 1 million. That's our assessment as of today. And what is the benefit? For Honda, I think that was your first question, I suppose. I didn't understand the intent of your question, really. But about Southeast Asian countries, the demands for hybrid in Thailand and in Indonesia market, the demands for that is mounting. In Thailand, the hybrid ratio is growing. Let's say 30% or so hybrid, I suppose. Indonesia, the competitor is going ahead, and we are a little behind. However, the ratio out of the entire market will be like, of course, with the battery EVs a bit growing, 6% in Indonesia. Hybrid is about 8%. Out of the entire market, they are still a small percentage, and Honda is a little behind as of now. But next year, we will be more aggressive launching and selling the hybrid cars in Indonesia.

Thank you.

Thank you. I apologize for the unclear question, but when I talked about benefit, I was saying that we are seeing an increase in demand for HEV, hybrid, And therefore, I thought that there might be an opportunity for Honda to sell more hybrids. So in that context, well, you said that there'll be an increase in the United States of some 100,000 units. So I think that you've answered my question. Thank you. And one clarification, if I may, about the North America market. You said the ZEV regulation will become reality. But what is the realistic number? And also, the hybrid ratio. Well, this fiscal year is 25 percent, I think. But next fiscal year, if it were to increase, what will be the ratio for next fiscal year? Can you add that explanation, please? Yes. About the hybrid ratio. Well, this year, it's about 25%. Next fiscal year, there will be an increase of 100,000 in North America. But I think the ratio will be 35%, a little more, maybe. About 35%, I guess. and about the ZEV regulation. I was talking about the industry on the whole. I think it will be difficult to achieve that regulation standard. But currently, looking at the situation, the regulation itself might become something more realistic. That was what I was trying to say here. So I really don't have any specifics to talk about here. We're just thinking that the regulation might be loosened to a more realistic number. Thank you. Mr. Take, thank you very much.

And it's time for us to end.

And with this, we would like to end our financial results briefing session. As for the materials, they will be posted on our website. Once again, thank you for your participation.