Honda Motor Company, Ltd.

I thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited's financial results briefing for fiscal first quarter, end of June 30, 2025. First of all, allow me to introduce the attendees today. Mr. Eiji Fujimura, Director, Managing Executive Officer, CFO. Good to see you. Mr. Masao Kawaguchi, Operating Executive, Head of Accounting and Finance Unit. Good to see you. First, Mr. Fujimura will present the financial results of first quarter, end of June 30, 2025, and consolidated results forecast for full year to March 2026. Then Mr. Kawaguchi will present the details. Over to you, Mr. Fujimura. I thank you very much for your continued support for Honda's activities. I would now like to I would now like to start with a summary. Our operating profit for the fiscal first quarter came to 244.1 billion yen. Motorcycle operations saw sales expansion in Brazil and Vietnam, and we've attained the record high operating profit for a quarter period. In automobile operations, we needed to post impact from tariffs and non-acquiring expenses related to EV, while sales in North America were strong. The forecast for the full year results to March 2026 has been revised up to operating profit of 700 billion yen and net profit for the year of 420 billion yen. Due to a review of our tariff impacts and changes in exchange rate assumptions, this means 200 billion yen increase versus the previous forecast. An examination of the impact due to tariffs led to a revision of a gross impact to 400 billion yen, and for exchange rate in view of the recent developments, we are revising our assumption against the U.S. dollar from 135 to 140 yen. While uncertainty persists surrounding policy changes, including tariffs, we will improve our earnings structure and we aim to expand our profit further. Concerning the share buyback, which we announced on resolved on December 23rd of 2024 for the 1.1 trillion yen, as of July 31st of this year, shares worth 936.5 billion yen have been acquired. To give you the consolidated results for the first quarter in June 2025, operating profit was 244.1 billion yen, lower by 240.5 billion compared to the same period last year. Equity method earnings were 4.2 billion yen, higher by 2.7 billion yen, and the quarter profit attributable to the owner of the parent was 196.6 billion yen, lower by 197.9 billion yen. Next, I'd like to cover the forecast for the consolidated results for the full year. Again, compared to the previous forecast, our forecast is operating profit of 700.0 billion, up by 200 billion yen, and the profit for the year attributable to the owner of the parent of 420.0 billion yen, up by 170 billion yen. The exchange rate against the U.S. dollar is assumed at 140 yen for the year. The forecast for the full year dividend for the fiscal year ending in March 2026 is 70 yen per share, unchanged from the previous published forecast. The acquisition of owns shares resolved on December 23rd of 2024 for the amount of 1.1 trillion yen is explained earlier. Next, Mr. Kawaguchi will present the details of the results. Okay, then I will present the results for the first quarter. To give you the group unit sales during the three months of the first quarter, for motorcycle operations, compared to the same quarter last year, with growth mainly in Brazil and other regions, it came to 5.143 million. For automobile business, due to declines mainly in China and other Asian regions, it came to 839,000 units. And for power products, though there were declines in North America and Asia, Europe led the growth. The results, a total came to 828,000 units. The consolidated results during the three months of the first quarter are as explained earlier. Next, I'd like to explain the factor analysis of operating profit for the first quarter compared to the same period last year. Operating profit was 244.1 billion yen, down by 240.5 billion yen compared to the same period last year. Factors affecting the operating profit were impact from sales was positive by 109.1 billion yen due to unit sales increase in North America. Setting price and cost factors was an increase of 68.5 billion due to effective pricing revision. Expenses gave us a negative impact of 69.4 billion yen. R&D expenses led to profit decline of 24.5 billion yen. Currency effect results in a negative impact of 86.1 billion. EV-related non-recurring expenses led to the impact of 482.1 billion yen on a par with the same quarter last year. This EV-related non-recurring expenses include the provision for losses on EVs currently sold in the U.S. and the impact from write-off of development asset of EV models due to the change in our operating

profit per business segments. For motorcycles, OPU was 189 million yen. Automobiles, 29.6 billion yen of operating losses. Financial services, 85 billion yen of operating profits. And power products and other businesses, 200 million yen of operating losses. Operating profit of the motorcycle businesses marked 189 billion yen, up by 11.3 billion yen year on year. As for the factors behind the differences, the sales impact was positive by 41 billion yen due to increased sales volume in South America and so on. Pricing cost impact was positive by 14.2 billion yen due to the effect of a price revision and so on. Expenses squeezed profit by 12.7 billion yen. R&D increased profit by 1.3 billion. And currency effect reduced profit by 30.6 billion yen. And the tariff effect squeezed profit by 1.8 billion yen. For the automobile businesses, sales impact was positive by 46.4 billion yen due to increase of the sales volume in North America. Price and cost impact was positive by 53.5 billion yen due to the effect of the price revision and so on. Expenses negative for the profit by 43.1 billion yen. R&D was negative by 26.4 billion. And the foreign currency effect also negative by 47.3 billion yen. As I mentioned earlier, excluding one-time EV related expenses and the tariff impact, the operating profit would have been 205.8 billion yen. Regarding cash flows, free cash flows of the businesses other than financial services businesses was 294 billion yen. Net cash balance at the end of the quarter was ,907.9 billion yen. Operating cash flow after R&D adjustment was 583 billion yen. Moving on to the financial forecast of FY ending March 26. Regarding the forecast of the sales volume of the group, motorcycle unit sales will keep at 21.3 million units, reflecting the volume decline in Europe and increase in Brazil and other regions. For automobiles, we will keep the previous forecast of 3.62 million units. And for power products, we will keep the previous forecast of 3.67 million units. Consolidated earnings forecast for FYE March 2026 has been already explained. Next, I will explain the factors behind the changes of operating profit forecast -on-year. Operating profit is expected to decline by 513.4 billion yen -on-year because of the factors of sales impact being positive for the profit by 106 billion yen due to incremental volume of the motorcycles and automobiles in North America. Price and cost impact will be positive for profit by 350 billion yen due to the effect of the price revisions and so on. Expenses will be negative for the profit by 91.5 billion. R&D will be negative by 126 billion. Foreign currency impact will be negative by 302 billion yen. And the gross impact of the tariff will be negative by 450 billion yen. I'll explain the changes of operating profit forecast comparing to the previous guidance. Operating profit is to be up by 200 billion yen from the previous forecast because of the sales impact being negative by 50 billion yen due to one-time expenses related to EVs. Price and cost impact to be negative by 100 billion, 100 billion as we reviewed recovery of the tariff impact. And foreign currency impact will be positive by 150 billion yen as we changed currency exchange rate to 240 yen for a dollar. We examined the tariff impact in values which will be expected to be positive by 200 billion yen. Lastly, expected spending on capital expenditures, depreciation, amortization and R&D expenditures for fiscal year ending March 26 are shown on the slide. And that concludes my presentation. Thank you very much for your attention.

Thank you very

much for your attention. Then we would like to move on to our Q&A session. We will take questions through Zoom that we have communicated to you earlier. Due to time restriction, we'd like to limit it to two questions per person. And please turn on your microphone and camera when you ask questions. Then please use the raise hand button if you have a question. Thank you.

Okay.

The first question will be by Mr. Okinaga from Nikkei newspaper. Thank you. This is Okinaga from Nikkei newspaper. Yes, we can hear you. My first question is about the impact from tariffs. So between the U.S. and Japan agreement, the automobile tariffs has been changed from 25 to 15 percent. So it looks like how your tariff has come down, that means your negative impact to the profit has been fixed now. So what's your take on that? And then for Mexico and Canada, well, still the view is not clear. So what is your take on what might happen to the Canada and Mexico? Okay. So that's the second question. Okay. And then accompanying in a line with that for the production, you've expressed transferring production from Japan to Canada. So I guess your take on emphasizing production in the States, that will remain unchanged. So are you still holding the sense of crisis for the Trump's tariff situation? Is that correct to say that your stance does not change? Okay. Thank you for the questions. Okay. So both your questions are related to tariffs. So due to the 25 percent has come down to 15 percent between the States and Japan, concerning that point, yes, for us, for our business, the change from 25 to 15 percent means that is a should it brings us a positive impact and also for to the customers. And then also we do have a lot of non-Japanese shareholders. So for our company, of course, this agreement for reducing the tariff is a positive. And then it says that what has not been established is now clearly identified, which is a good turn of events. So I like to, we like to pay our respects to all the related parties. And then on the other hand, as your question suggested, for example, if I think about the short term view, so if there's going to what's going to be effective, so details have not been worked out. So I hope that they will be early decision and then disclosure between the governments. And we have communicated our wish to the Japanese government. And then so it used to be what used to be 2.5 percent. Now that's been up to 15 percent. So as our general stance is that it doesn't affect just Honda, but to other OEMs as well, I think we are trying to do free trade and competition around the globe. So that has really developed faster the competitiveness of the auto industries in different countries, and then which led to providing a good quality products to different countries markets. And then must have been contributing to the local communities. And then that stance remains unchanged, and I hope that will continue. However, now that it is a possibility, we need to assume that this will become the new normal. We would need to take that stance. So now that direction, I believe, relates to the second question that you've asked. As you know, we have the production in the U.S., like 60 or 70 percent produced in the U.S. So the local production-manufacturing ratio is high to begin with. So our stance is to produce where there is demand. That has been our ongoing approach. I believe we've Mr. Miebe mentioned this in the previous briefing. We have a two-shift operation in the states. We might change it to three-shift operation in the states so that the production equipments are uptime, will be, might be increased so that we can increase the production volume without spending too much on the capital investment. That's something we like to continue to do. And then, of course, our suppliers need to keep up with those changes. So we need to engage in discussions with our suppliers to take actions carefully. I guess the key highlights here would be that in the states, hybrid vehicles, for hybrid vehicles, many of the core parts are coming from Japan. So I believe we call that Sunday, the three, sorry, the three major components, the motor, battery, and ECU. How we can localize the production there would be the critical point. So concerning those, we are holding discussions. This concludes my answer. Thank you.

Thank you very much. Mr. Okinaga, next question. From NHK, Mr. Nishizono, please. Thank you. Nishizono speaking. Can you hear me? Yes, please. So thank you for your presentation today. And one question. So the forecast for this fiscal year, regarding the tariff, what is your assumptions for your forecast? Other than the automotive tariff, there will be other kind of tariffs involved as well. And this time, parts of the automotive tariff, when are you going to, with that to start, what is your assumption there, and what is your assumption to come up with those forecasts?

That's

all. Thank

you. So details will be provided by my colleague, Mr. Koguchi, about the beginning of the fiscal year. What is our assumptions to be for the tariff and its calculations and so forth. Actually, the appendix of presentation materials includes all those explanations. So please have a look at those materials later on. But basically, CBU and parts and raw materials and motorcycle power products. So we have the assumptions of tariff in values in those categories. And in the first quarter, American Honda

had

a standard tariff amount for the tariff. Actually, they worked out on the breakdowns, how much for the US part, US portions, what is the error for the importance, so on. So eventually, we changed the gross impact from 650 billion to 450 billion after those calculations. And we're kind of breakdown involved to have those numbers down. And Mr. Koguchi is going to give us the details about it now. So thank you for your question. So the error with regard to the assumptions for the tariff, as Fujimura-san said earlier, the main part is the automotive tariff. That is the main area of the error. Then for the CBUs, we have a plant in Canada and Mexico. And those CBU completed vehicles imported from there to the US, there will be the tariff imposed there. So that is the main area. Plus, the assumption of that part has been already explained in the beginning of this fiscal year. We have not changed so much about it. However, probably we will change the production allocations slightly. For instance, instead of exporting from other countries to the US, we can produce in Indiana instead, or the US-made ones were exported to South America. And then instead, we could use and sell those US-made products within the US. And we sort of organized the reallocation again. Then in terms of the import of the CBUs, there will be the tariff imposed on them. And if the parts and components are manufactured in the US, those will be exempted from the tariff. And then the question is the portion of those parts. We examined how much of those are in that area. And then actually, CBU that we have in the value like that reflects all those exercises. And then parts, raw materials, steel, aluminum, and those copies. And of course, there will be tariff involved, not just the US and Japan. The Canada-Mexico involvement, there is not much advancements so far, no progress. However, right from the beginning of the year, the parts imported from Canada and Mexico that could be in the jurisdiction of MCA too. And we are joined with suppliers to scrutinize how much will be in the jurisdiction of the MCA. And then we couldn't finish the exercise yet. However, at this moment, at the time of the beginning of the year, we applied 15% for them because we couldn't examine all of them with the supplier. But we are still working together with the suppliers to check one by one those breakdowns of the tariff. And then from Canada, Mexico, the parts from there could be actually under the rule of MCA. So we have been working on how much of them like that. And then of course, we have parts components imported from other countries other than Mexico and Canada, Tier 3, 4 included. So we need to go down that level of the details in order to have precise understanding that we've done a bit of the work so far. And of course, 450 growth impact is made and estimated based on such exercise up until now. And we have this tariff between the US Japan agreement. And then at the moment, we do not know when exactly the automotive tariff will start to apply. But at the moment, assumption is to start the 15% of the tariff to start from September. That is the assumption for the calculation this time. Thank you.

Thank

you, Mr. Nishizono. Okay, the next question from Yomiuri newspapers from Mr. Narahashi.

Over

to you, Mr. Narahashi. Okay, this is Narahashi from Yomiuri newspapers. Yes, thank you very much for the briefing. I have one kind of detailed questions we'd like to check on then ask two questions. The automobile operation have operating loss from May to June. After how many, since how many years has it been that you got the red losses? Now I have two questions. First about the tariffs. So from if you do CBU exports from Mexico or Canada to the states, that's 25%. I thought that a lot of it might be exempted. So the actual amount that you Honda would have to bear, how much would it be? So is it going to be lower than the 15? Or is it going to be greater than that? That's something I'd like to know. My second question about the sales, unit sales for Asia and Europe and Japan. So you have seen, you've seen decline year on year. So I'd like to know about more about the detail about the causes. So is, so is it that the sales, the competition outside the U.S. must be, could be intensifying because of the tariff impact in the U.S. So I'd like to know specifically if there's any reason why the competition is getting worse. Thank you. Okay. To answer, so let me look into the first question that you said you wanted to, you want a clarification on. Okay. So you're to answer your first question. The CBU coming in from Mexico and Canada concerning the parts as well, this also applies, but quite a bit of amount will be exempted. I believe Mr. Kawaguchi mentioned it earlier a little bit concerning CBU. Quite, there is a quite of a cost for the states. We have done closer review and the effective tax amount has been reduced quite a bit. I cannot give you the number right now, but it has gotten a little bit somewhat close, smaller. And for the parts as well, for those parts coming in from Mexico and Canada, which I've mentioned at the beginning of the term, the USMCA contents, it will be outside the scope if it's a co-applied. So that regulation was out there already. It's just that it's going to take a little bit longer time because it might take to do a better scrutiny, but we see that that would be, can be reduced by 100 billion yen or so. So not all of it, but we have been able to reduce this out of the 100 billion yen. We have been able to reduce it by like 70 percent of this. That is the position. For Asia and Oceania and Japan about the unit sales, different markets, regions have different regions, I must say. First of all, for Asia, so in different countries markets, we did have strong shares in each of the Asian markets, but in the past few years, the Chinese OEM have participated into some of those markets, and then we are struggling some of those countries, the markets. And in addition to that, hybrid vehicles are popular in some markets and in some other markets not at all because this is related to actually the subsidies from the government. So I need to actually, I should be talking about different markets separately, but when we try to come up with the hybrid models, there are some markets where we have been able to launch some into some market. So in ICE, we are losing against Toyota, for example. So this might take some time, but we would reinforce launching hybrid models into some of those markets, try to compete. For Europe, we have always, we have been struggling. Several years ago, UK and Turkey production sites had to be closed. We had to do that. When it comes to unit sales, I think it's only around, it's been trending around 100,000 units or so, just a slight decline since then. But within that trend for automobiles business in general, the, we are putting a lot of efforts into markets like US, Japan, and India. We still do need to revisit internally what we want to do with the European market. That is a situation for Europe. So there are some areas where competition is intensifying, and then there are some other areas where we need to put a lot more efforts. So we want to be clear about our selection and then make further efforts going forward. That closes my question on that. For about the April to June losses, since how many years it's been, the last time this happened was 2020 fiscal year. Due to the pandemic, we had some losses. So this is the first time we had losses since then. Thank you very much. Thank you.

Thank you very much. Next question. Toyo Keizai magazine. Mr. Yokoyama, please. Thank you very much. Yokoyama speaking. Can you hear me? Please. I have two questions. One is first quarter results and the full year forecast. You are changing a bit. The operating losses put up for the automobile businesses and for Jimura-san, Mr. Mibbe already said that there will be some EV expenses to be put for the air force staff. And then we have about 100 million also. And then for the full year, 600 million also already put up previously. And is your situation today in line with your expectations back then? And then if you kind of multiply the quarter results by four quarters amount, I think you should have the forecast a little higher than that. What is the expectation, assumptions, and so on? And then 19.9 percent profit margin for the motorcycle businesses. That is a quite very outstanding way of the businesses. And then you have grown the businesses in Europe and South America. And you were quite aware of the importance of the air profitability there. And what is the real capability in the first quarter? What is the reason behind such a good results of the air motorcycle businesses? Thank you. And to start with a conclusion of the results, financial results and EVs implication. And then starting from the three months, 240 billion yen for three months. That is actually half of the amount from the previous year. And then in the graph, we have those tariff about tariff impact of 120 billion also. And as we have been saying so far, out of 120 billion, in the first quarter, we had some recovery plus refund expected after the imports. And we had handled those based on cash. In fact, because of such situation, we have more put up for the first quarter. And EV run time. And then in the beginning of the year, 200 billion were expected, anticipating some to be added later. That is why we budgeted 200 billion yen for the EV related. Then we had about 60 billion plus 50 billion that was unexpected out of the EV related ones. And then that amounts to 110 billion eventually. And then out of the 60 billion, as we expected, as I said, we decided that with central situation would tell us that we need to have a bold decision that is to suspend some of the development efforts of some of the EV models. And we needed to have some write-offs for some of the efforts. And a remainder is 120 billion. And out of 50 billion, which is not the expected ones, regarding that, in the end of the term, we had the GMAV. We had to put up the air for the reserves for as much as 50 billion at the end of the year. And that was the reserve to be used for the future. However, we would have the RRA subsidies and the California SAC-2 related credit values. And actually those were included in the losses that we were calculating for the future. However, those are now gone. Therefore, it is not necessary anymore to do that. And then we now have 50 billion future loss expectations. And then again, for the full year, it's been complicated. We anticipated 600 billion. That is in line with what we thought. And then we have 50 billion higher than that because of the RRA subsidies cancellation, ACC-2, invalidity anymore. And then those are actually negative for that. And then 600 is now 650 billion instead. And then for the motorcycles, at 19.9 percent of the profit margin, you say it is too good. And of course, we made a good result. And then the result is getting better. And this time, if you look at the plans in India, for instance, there's a little bit of slowing down. However, we're not worried about it because we can bring it back again, recovery. So we don't have the things going on as planned in India. However, we have South America, Vietnam. We have a good recovery instead. And then so far, it's been like we have some issues in one place, one region. We have other which is good to compensate for the other part. That is the situation we've been seeing for some time. And then we have a very high profitability in Vietnam. South America, we have a high profitability as well for the businesses. And then so in Brazil, for instance, we have a lot of shares. Therefore, the number of those vehicles running there is almost all Honda. So we actually are supplying only to satisfy the demands. However, not enough. And then we had a 1.3 million car capacity of the production. Now we are going to increase it to 1.6 million production capacity. So the demand is higher than the supply at the moment. And pricing is healthily done too. Because of that, profitability in South America is very good. So as I usually say repeatedly, the region there is a high volatility. So I have to remind you that the result is perhaps too good. But that was what happened in the first quarter for motorcycle businesses. Thank you very much.

Thank you.

Okay, then I will take the next question from Bloomberg's Mr. Inajima, please. This is Inajima from Bloomberg. Thank you. I'd like to ask about sales in China. Up until June, has been declining for 17 consecutive months. So what kind of initiatives do you have to rebuild the sales? And then how, when do you think is going to recover? So still the decline continues even after the launch this year. So I think we'd like to know about it. And then another question is that there will be, there was talks about the report about discussions that you're trying to supply from Nissan and then sell in the States. So I'd like to ask about any update if there's any discussions with Nissan. Thank you. Okay, Mr. Inajima, thank you for the questions. Concerning China, yes, the situation is continuing to be very difficult. So talk about the total market. It will be under 24 million, under 24 million. So this would be on a par with last year. So for the Neb market, condition will still continue to stay this way. Maybe over 50 percent of those is what I'm assuming, over 50 percent. For the past several years,

we

have been trying to adjust our capacity. And then over the past two or three years, we have adjusted the capacity by 0.5 million. We have a 1.24 million capacity. And then 1 million is about the ICE. And then 0.2 is a battery EV. That's our factory capacity. But with this results, so we have not changed from the beginning of the year, but 0.7 million units capacity. So we still have available capacity. But concerning the available capacity, the direct reasons is that

we have

been matching our manpower for the inline weather capacity. Actually, we do have a remaining, a very old equipment, old production line. So I don't think we have that much impact from depreciation. That's the situation in the factory. But we will continue to make adjustments. But this is a very sensitive topic, and nothing has been decided yet. We will need to monitor the production models, and then we need to discuss with our partners and take very careful actions. For EV, we are struggling with the sales of EV this year series. This is something that we made some investments from the end of last fiscal year to the beginning of this year. But against the original plan, we are underachieving the plan, initial plan. The when it comes to the actual driving performance of the vehicle, we have received a quite certain level of good assessment. But within this market where there is a discount strategy continues, even looking at the price that we initially launched, it was not in line with the market expectations. And also for the intelligent functionality, the market expectations were not met by our vehicles. So we need to expedite to take actions. So we might put the deep sea with OTA, or we might work with a momenta in the area of ADAS. So we want to promptly proceed to take action to address that issue. And then when it comes to the talks with Nissan, yes, I am aware that that has been reported, but nothing has been decided. And nothing has been announced by ourselves. So please take note of that. We have been saying since some time ago that business related collaboration, we are exploring the different formats of collaboration of a Nissan Mitsubishi motor. That is something we are discussing, continuing to discuss. So as soon as something gets finalized, we would like to talk to you about it. Thank you. Thank you very much.

Thank you very much. Mr. Inazuma.

Next question from TV Tokyo. Ms. Nagai, please. Thank you, Nagai, from TV Tokyo. I have two questions. One is tariff. And tariff, they won't, of course, pass through the air prices 100 percent for that much. And then with that plus the retail prices of the vehicles should be needed. And what is your idea about price increases of the cars or the vehicles? And then next one is forecast. Just like to case I said, colleagues said the progress level is quite fast as compared to the air forecast so far. The forecast of three months ago was rather conservative. But what is the concept behind, for instance, volume not changing? However, what is your idea about environment of the businesses? What is your assumptions or the ideas behind those forecasts and the guidance? Thank you. So as for the price increases, price hikes, I talked about 650 gross tariff impact now down to 450. And we have about 200 billion yen recovery plans included in that process. And that includes 100 billion for that much. Recovery part is now 100 billion instead, but 200 this time. And half of that is actually related to the price hikes. And U.S. economy, not just cars, what is the inflationary trend in the U.S. plus other OEMs, pricing situations. So we need to cautiously watch out to put up our forecast. That was what we were like. And then in the first half this year, already August, however, for the price hike situation, apparently other companies, other OEMs are not doing price increases. We had annual ones, but with respect to the tariff response, we are still cautious. And in the first half, we couldn't reflect such a part in our expectations. And price hikes of the vehicles is decided that way based on the position like that. And the recovery, 100 billion might have them, but we have to still cautiously watch out the situation to make a final decision. And then so 700 billion instead of 240 billion, that is the progress today, and then of course that comes largely from the volume. And then exchange rate is now set at 140. And 145 and 135 in the first and second half, average is 140. That is the assumption of the forex, and that is why we have that recovery pattern. And then usually we tend to have more expenses put up in the second half, such as HGNA and R&D. Those expenses are stutely put up in the second half, and that is another reason behind it. Thank you very much. Thank you. And three months ago you were very conservative, and I'm stressed on that, but I still that way. What do you think about it? Well, I said we were conservative because one, forex exchange rate, of course that is just assumption, and also that is as per the way we think about it. So I don't know if I should say that I'm conservative, but at that time, three months ago we told you about those tariff as on the assumption at that time, and then now 650 to 450 impact based on the well-progressed scrutinizing exercise of the tariff impact. And out of 450 billion, 350 for automobile and 100 billion for motorcycle, that is the breakdown and 100 billion motorcycle includes direct impact by tariff. However, note that it has a direct increase of the prices because of that, but rather the potential recession was something we were thinking about at that time. And because of that, we still have a 50 billion or so impact by that. So recession related concerns, 50 billion. However, although we had anticipated some like that, however, it is not materialized data. It is not realized at this time for the first half. Therefore, you could say we were conservative. However, this was the assumption we had. Thank you very much.

Thank

you very much. Ms. Naraya, we'd like to take the next question from Automotive. I'd like to ask Mr. Hans Remill.

This is Hans

from Automotive News. Can you hear me? Yes.

Thank

you.

Is it okay to

ask in simple English?

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

Thank you very

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

Thank you.

Thank you, fans.

We are very sorry that and we know that many hands still up for making questions. However, because of the time, next one is going to be the last question from Reuter. Daniel, Hello. Yes, I can hear you. So earlier, USMCA discussions, I like to confirm a few things. So especially in the first half for this year, what is the real actual tariff rate to be? If that cannot be publicly open, do you have examples citing some particular parts or components? For instance, lower tariff rate is applied, like expensive ones, parts and so on. Are there any alleviated, you know, the tariff alleviated kind of parts or components you could cite, if there are any?

Thank you.

I'm sorry, I should refrain from publicly saying too much. However, maybe I can talk about CBU. The question is about a CBU related to the USMCA. And if I say that too well, it would reveal our cost structures. Therefore, I cannot say too much. However, rather, the examples for the high rates rather than low, like hybrid, hybrid system, the critical hybrid systems. There are quite a few sent from Japan. So it is the area where the high rate is applied. And for that area, next generation hybrid, like the 27 series, we are going to launch in the air with the new gen systems and specifically for them, battery motors, PCUs. The thing is, how can we produce those areas in the US that is one of the focus areas of the discussion today? Would that be all right? Thank you. Thank you very much. Thank you very much, Daniel. So now that concludes our presentation for the financial results. And those slides and materials and the presentation package is available from our website. Thank you very much for your participation today.