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 second quarter of fiscal year to March 26. First of all, allow me to introduce the attendees today. Director, Executive Vice President, and Representative Executive Officer, Mr. Noriya Kaihara. Good to see you. Director, Managing Executive Officer, Mr. Eiji Fujimura. Good to see you everyone. Operating Executive, Head of Accounting and Finance Unit, Mr. Masao Kawaguchi.

Good to see you everyone.

Mr. Kaihara will first present the financial results of second quarter ended September 30 of 25 and forecast of consolidated results for the fiscal year ending in March 26. Then, Mr. Fujimura will present the details. Over to you, Mr. Kaihara. I thank you very much for your continued support for Hondo's activities. I would like to present to you the financial results for the second quarter of financial year to March 26. I'd like to start with the highlights of the financial results. Our operating profit for the second quarter of the year to March 26 came to 438.1 billion yen. Motorcycle operations saw unit sales decline in Vietnam, but global sales trended solidly and strongly, led by Brazil. For results up to second quarter, we've attained the record high unit sales, operating profit, and operating margin. In automobile operations, though there was some positive profit impact due to price revisions, we saw a decline in profit due to impact from tariffs and one-time expenses related to EV. Operating cash flow after R&D adjustment, which indicates the resource available for future investment, came to 1,281.3 billion yen on a par with the same period last year. The forecast for the consolidated results for the term ending in March 26 is operating profit of 550 billion yen and profit for the year of 300 billion yen. We are revising the previous forecast considering the decline in automobile sales and the reduction in production volume expected as of now due to semiconductor shortage, though we expect profit growth due to yen depreciation. In motorcycle operations, while we expect declines in unit sales in Vietnam, we hope to recover this in other regions. Thus, we maintain 21.3 million units. For automobiles, in addition to lower sales volume, mainly in China and ASEAN, declines due to semiconductor shortage has been taken into consideration for North America. We are revising down from 3.62 million to 3.34 million units. To give you the consolidated results for the second quarter of the year to March 26, operating profit was 438.1 billion yen, lower by 304.4 billion in compared to the same period last year. Investment earnings due to the equity method were 10.8 billion yen, higher by 31.6 billion yen. The half-year profit attributable to the owner of the parent was 311.8 billion yen, lower by 182.8 billion yen. Next, I'd like to cover the forecast for the consolidated results for the term ending in March 26. Compared to the previous forecast, our forecast is operating profit of 550 billion yen, down by 150 billion yen. and the profit for the year attributable to the owner of the parent of 300 billion yen down by 120 billion yen. The exchange rate against the U.S. dollar is assumed at 145 yen for the four-year period. Forecast for the four-year dividend for the fiscal year ending in March 26 is 70 yen per share unchanged from the previously published forecast. Next, Mr. Fujimura will present the details of the results.

Allow me to present the results.

The group unit sales during the sixth month to the second quarter were as follows. Compared to the same period last year, for motorcycle operations, though there was a decline in Vietnam, with growth mainly in Brazil and the Philippines, it came to 10.763 million units. For automobile business, it came to 1.68 million units due to declines mainly in China. For power products, though there were declines in Asia, Europe led the growth, and the total came to 1.699 million units. The consolidated results during the sixth month to the second quarter were as explained earlier. Next, I'd like to present the factor analysis of operating profit for second quarter compared to the same period last year. Operating profit was 438.1 billion yen, down by 304.4 billion yen compared to the same period last year. Factors affecting the operating profit were, first, impact from sales was positive by 83.9 billion yen due to expanding motorcycle unit sales, Selling price and cost factors was an increase of 162.4 billion due to effective price revision. Expenses gave us a negative impact of 26 billion yen. R&D expenses led to profit decline of 20.4 billion yen. A currency effect resulted in a negative impact of 116.2 billion yen. EV-related, a one-time expense led to a negative impact of 223.7 billion yen. And impact from tariffs led to profit decline of 164.3 billion yen. Our trial calculation excluding the EV-related one-time expenses and the tariff impact comes to operating profit of 8.36.2 billion yen, on par with the same prior last year.

Regarding operating profit by business segment, motorcycles, 368.2 billion yen, automobiles, 73 billion yen of losses, and financial services, 143.2 billion yen profit. And the power products and other businesses, we put up 200 billion yen of losses. Operating profit of our motorcycle business was 368.2 billion yen, up by 42.4 billion yen year-on-year due to the following factors. Regarding sales impact, a 60.2 billion yen increase by additional sales volume mainly in Asia and South America. Regarding price and cost impact, profit increased by 32.3 billion yen due to the effective price revisions and so on. 7 billion yen decline of the profits due to expenses, 3.5 billion yen positive profit by R&D, and 41.3 billion yen profit decline due to the foreign currencies. a 5.3 billion yen decline of the profit due to tariffs. In automobile businesses, operating profit declined by 331 billion yen year on year, resulting in 73 billion yen operating losses due to the following factors. Regarding sales impact, profit declined by 24.5 billion yen, accounting for the losses associated with the restructuring of the group companies. Price-cost impact, increase of the profit by 130 billion yen due to defective price provisions and so on. Expenses, 33.8 billion yen increase of profits. Research and development, 24.4 billion yen decline. Foreign currency, in effect, 64 billion yen decline. At one time, EV-related expenses, 223.7 billion yen decline. And tariff impact, profit declined by 158.1 billion yen. Next, regarding the cash flow situations, free cash flow excluding financial businesses was 760.6 billion yen. Net cash balance at the end of the first half was ¥3,053.9 billion, and operating cash flow after R&D adjustment was ¥1,281.3 billion. Next, I'll explain consolidated forecast for fiscal year ending March 2026. Regarding the group's unit sales, as compared to the previous forecast, in motorcycle businesses, reflecting reduction in value in Asia and increase in regions, mainly in Brazil and others, we will maintain the volume of 21.3 million units. In automobile businesses, in addition to the volume decline, mainly in Asia, We reflect a volume reduction by 110,000 units in North American region due to the impact of the semiconductor shortages. Thus, we would expect the volume to be 3.34 billion units. In power-productive businesses, there are some regional reviews to reflect it, and we will keep the previous forecast of 3.67 billion units. I have explained and consolidated the business forecast of the fiscal year ending March of 2026. Next, I'll explain factors of ups and downs of operating profits year on year. The operating profit would decline by ¥663.4 billion year on year because of the following factors. regarding the sales impact. Although losses were put up in conjunction with the group company's restructuring, thanks to the unit volume increase of motorcycles and so on, we expect the profit to increase by 3.3 billion yen. Regarding price and cost impact, 280 billion yen increase of the profit is expected due to the price revisions and so on. Expenses decline by 91.5 billion yen. R&D expenses decline of profit by 126 billion yen. Foreign currency impacts decline by 214 billion yen. And gross tariff impact decline of profit by at 385 billion yen. And the potential decrease of the production volume due to the semiconductor supply shortages is incorporated in the forecast based on the current assumptions. which would be 150 billion yen negative. Next, I'll explain the factors behind operating profit changes and expectations comparing to the previous forecast. Operating profit is expected to decline by 150 billion yen from the previous guidance because of the area regarding the sales impact, incentive hikes and unit sales decrease of automobiles and so on. The profit would decline by 83 billion regarding price-cost impact. We visited the recovery from the tariff impact. Thus, the profit would decline by 70 billion yen. Regarding foreign currency impact, because of changes of the exchange rate to 145 yen per dollar, 88 billion yen positive profit on that. For tariff, we scrutinized the impact in values, and it will be 65 billion positive. And regarding semiconductor shortage, the impact will be 150 billion yen negative for the profits. Lastly, this is the forecast of the capital expenditures, depreciation and amortization, and R&D expenditures.

That is all.

Thank you very much for your attention.

Thank you very much for your attention.

Then we'd like to proceed to the Q&A session. We will take questions through Zoom, which you have been informed about in advance. Due to the time restriction, we'd like to limit it to two questions per person. And please turn on the camera and the microphone on when you want to ask the question. So please use the raise your hand button to let us know if you have a question.

Okay, the first question.

Ms. Ukita from Yomiuri Newspaper.

I hope you can hear my voice.

Yes, we can. My first question is, so the motorcycle is operating great. And then for automobiles, it's 73 billion yen losses. So I'm sure there are tariffs and semiconductor impact. But I just want to ask for your input on your general comment and your prospects for the future. Okay, let me take that question, the overall perception. And then for details, I will ask Mr. Fujimura for some more comments. First of all, so for motorcycle, we had the best record high results. So we had decline in Vietnam, but in Brazil and Thailand, we were able to maintain our good profit. For the second half, so for the full year, we expect things to proceed fairly well. So we need to be considering about whether we can cover the potential decline in Vietnam, but I think generally speaking, it should be okay. For automobiles, so with the ICE and HEV gave us some cash so far, now we need to spend that money into intelligence and hybrid, sorry, electric vehicles, so we have been doing okay. In North America, we had good sales revenues, so we believe that the profitability has been improving. However, because of the tariff directive and also due to the changes in environmental regulations, so the business environment has been changing dramatically. For tariffs, I think compared to other OEMs, We have a pretty high local procurement ratio in North America. So in that sense, I think the impact should be limited. Still, we have over 300 billion yen impact. So for the tariffs, actually, In a sense, as Mr. Fujimura mentioned, we consider this as new normal, which we believe would continue for some time in the future. And while we can maintain the good results in North America, but the sales volume in China and Asia has been declining. Particularly in Asia, the profitability for the HEV and the ICE will worsen beyond our expectations. So we would need some fundamental changes and actions for those. So for future actions, what we are thinking is we need to maintain or build – maintain the build in Asia and Oceania the profitability structure to make gains from ICE and HEV. So the number of models and the number of volume. So we need to revise our investment plans so that we need to further reinforce the competitiveness of HEV. So we need to further enhance the profitability in ICE and HIP. So we do need to review our product lineup, and then we need to focus our attention in profitable models, and then we need to invest in those. So we need to really bring up the overall volume, and in particular, in line with the current situation, we need to rationalize the fixed expenses. I think that's something we need to work on quickly. And also for BEV, so far, we have been, well, making quite a lot of expenditures. So for future, by shifting over to our own BEV, so we would need to have a break even at least. So we need to keep curb the losses, I would say, going forward. And then for tariffs, as I mentioned, we believe this is going to continue into the future as well. So we want to go by the policy of produce where there is demand so that we can combat through our supply chain. the impact from the tariffs. That's something we'll continue. Particularly for the improvement of profitability for automobiles, that's something we need to do. And overall, we need to improve our profitability overall. Anything you want to add in terms of number? Okay. Ms. Ukita, thank you for your question. This time, we have 438 billion yen, so the automobile is 73 billion yen losses. And then for motorcycle, it's a 370 positive. So for motorcycles, it's the best, highest record. So those are pretty peculiar numbers that we've got here. But as we've mentioned from the beginning of the term, there's a lot of noise, kind of external factors. for so for the to add a little bit about the 438 billion yen we have this uh impact uh this uh negative of 450 billion yen that's the one-time uh cost so the 890 billion yen uh that's our normal standardized performance i'd say this uh 450 billion negative as introduced in the material uh we have the we have uh 160 billion yen due to tariffs. And then the EV provision for losses, we will allocate 250 billion yen throughout the year. So we have put it in the budget. And then of that, we allocated 225 billion yen of that into the first half. And then we have the group restructuring. So we have some losses from the transfer. of our subsidiary, which is 43 billion yen, and also in the financial operations, and then the U.S. and the U.K., we had some settlement of like 20 billion yen for litigation. So put them together, it's 890 billion. we have like a 20 billion yen for financials but most of this was related to automobiles so if we all of those included uh we have this uh 73 billion yen uh losses for automobiles so versus the plans as i mentioned those noises or the external factors uh were had almost been incorporated what may have been uh excluded may have been the financial operations and then also the Asia and China, volume declined. Those were worse than our initial anticipation. So for the full year – in fact, for the full year, at the beginning of the fiscal year, what I mentioned was that we were thinking of 500 billion yen. That was the That was a target that we mentioned at the very beginning. But compared to the last fiscal year, it's – we have a negative of 450 billion – 450 billion yen due to exchange rate, and we need to recover from that. So that's the – another tariffs, 450 billion, so 900 billion yen. so all of that put together so 1.4 trillion yen that's our actual performance but we put it together the prospects or the forecast for the year is uh 500 against the 550. billion because of the exchange rate, semiconductors and the tariffs. It's – came to, like, 1.3 trillion yen. That's about the idea we have. We – initially, we used to say 1.4 trillion yen. That – we said 1 trillion yen were the financial operations and automobile – motorcycle, and the rest was automobiles, and then the battery EV of 600 billion yen negative. But for the motorcycles and the finance, we have the Vietnam in decline, but they were used to say 1 trillion yen, but we have recovered. So it's 1 trillion yen is okay. But for the 100 billion yen decline, At that time, we were thinking of losses from 600 billion yen, but we had a provision of 50 billion yen. So put that together, 650 billion yen. We used to say ICE or 1 trillion yen back then. Now that came down to... 900 billion yen. That's as far as it declined. So putting those together because of our business structure, as Mr. Kaihara mentioned, first, we need to reboost our profitability in the ICE. And then for battery EV, it's 650 billion. This is the This is the gross profit of 250 billion. That's all for the provisions. Now, we have ended putting in the provision. So we're going to start the, we will try to eliminate, we'll try to bring down the negative from the gross profit level as close as zero to possible. The rest will be for R&D expenditures. So probably we'll come to 450 billion yen So that will be the baseline for the next year. And then for the tariffs as well, of course, net, we do have 330 billion yen or so impact. So we will need to work through those, how much of this we cover in a few years. I just mentioned PL a little bit. but the for the cash expenditure control is well in place so if you look at the balance sheet and the cash flow uh the strength of those are continuing as well so particularly for the cash control we need to have a good uh monitor over that and then uh with the need to recover our pnl for the automobiles quickly and then having said that of course we need to put in our resources to prepare ourselves for the future so we want to put those together and then we want to do a stable dividend with the doe so we want to be able to provide a stable dividend to our shareholders as well So we want to have a good PL and balance sheet balance. We want to have a good, well-balanced structure. And so we want to recover our profitability for the time being now and also get prepared for the future. For automobiles, as I mentioned, we do have a keen sense of crisis, and then we are ready to take actions. Thank you very much.

Thank you very much. One more question, may I? You said already, perhaps, about impact by the chips. It's already incorporated in those values, about 150 billion yen. And in North America, there is this impact in reality. But what is the prospect for the procurement? And do you think the situation will improve or getting worse? Do you have a risk of such? Please tell us. I will answer the question then. So for the semiconductors, for the customers, suppliers, we are causing the troubles with that. Sorry about it. As we said right at the beginning, it's already reported in the media, a company called Nexperia, the chips from the company has been stopped. suspended, therefore we have impact on the air procurement. And then we work together with the tier one manufacturers to try to minimize the air impact on the air production. And as of the 27th of October, in the production plant in North America, we are adjusting the production situation today. So as of now, we have the impact of 110,000 units. That's reflected. And then I said 250, but operating profit of 150 million that is put up in this announcement today. And I heard that shipment has resumed in China now. And we have already studied our communications to the suppliers, and we are trying our best so that we can get supplies of those ships as much as we can. And going forward, it is difficult to tell definitively, but as of now, in the week of the 21st of November, Probably in that week, we wish to resume our production eventually, and we are trying to achieve that now. And as of today, the parts, those chips are coming up now back in the network, and then it is getting better, and we are seeing some signs. However, it is not definitive as yet, so we try to stay communicating with the suppliers very closely so that we can try our best to resume, and that is the situation today. Thank you.

Thank you.

Thank you to Ms. Ukita as well. We'd like to take the next question. From Nikkei newspaper, Mr. Okinaga, please. This is Okinaga from Nikkei Newspaper. Thank you very much. For the impact from Nexperia, I'd like to ask another follow-up question. So for Honda has suffered – why has Honda suffered such a big damage? And then you said that you hope to start production on the week of November 21st, but have you considered procuring alternative parts? So any – do you think that the impact should not go beyond 150 billion yen? Okay, thank you very much. Mr. Okinaga? First of all, so the reason why we have this much impact is that this time the components – well, I cannot give you any details about the component, but the components was sourced from one supplier. That was one major factor. And another thing is, in the past, for semiconductor, yes, we have had some impacts such as these. So we have worked together with the supplier to hold a kind of interim inventory or appropriate inventory level. We asked them to hold that. That has happened. However, it was single sourced. And then also in North America, the sales have been going very well. that the we have been producing almost at a full capacity so in that sense uh well with the interim uh inventory was getting low as well so because of that the supplier was impacted then promptly that impact letter led to impact our production as well for whether we are considering some alternative sourcing of course yes we have our considering alternative let's say products or off-the-shelf products so to the extent we are able to find out yes we are using them so at an early stage as early stage as possible we want to apply whatever we can utilize. So that is why sometime during that week of November 21st, we believe we should be able to resume production. So for future supplies, in China, if they ever stop shipment again, we will never know the impact. But should that ever happen, if you're asking me is that going to be another impact, I cannot say for 100 percent sure no. But at this point in time, as far as we know from the intelligence that we have, we should be able to resume operation by the date that I mentioned. That concludes my answer. Thank you very much. Thank you very much. I would ask another question. The reason for your downward revision, so in August, you set out 650 billion yen EV-related one-time expenses. Has this gotten better? And then for sales in North America, I think, is it difficult to raise prices in North America? So, you know, that turned out to be negative. So I just want to know the reason. And then you said that you want to bring down the gross profit, gross losses to zero. So I would like to ask about what you plan to do. Okay, thank you very much for the second question. Let me try to answer that. For the EV-related one-off on-time expenses – oh, sorry. First, the tariffs impact. Against the number that we gave you last time, we have been able to minimize the impact. So therefore, for our profitability, it is getting better. And then for the EV impact, we have put in some more amounts. So in that sense, the impact has become greater. For the price hikes in North America, Initially, for North America, we were assuming that we would be able to raise prices, and then we had been prepared for that. However, price hikes, there's nothing you can do easily by ourselves, so we need to evaluate the market situation. What has happened is that in North America, particularly in the U.S., Other OEMs incentives have been getting higher, so the actual market selling price has not gone up in real terms. Therefore, of course, we have done the annual price revisions. However, looking at the other companies' status, we found it difficult to raise prices due to the tariffs impact. So we were not are quite able to gain that positive impact due to the price hikes that we had anticipated at the very beginning. Unfortunately, we cannot expect that. So for the second half of this year as well, for the price hike, I don't think we can really expect good impacts to come from that at all. That completes my answer. Thank you very much.

So I'll explain with those numbers in addition. And then last time, the gross, it's 450 billion negative gross tariff impact, and then 100 billion recovery. So 350 billion net impact for tariff. And then this time, gross 350 85 billion, and actually gross impact is less of 65. And then recovery is about 100 to 50, and net impact is about 335 billion. Eventually, that is the net impact. And then the gross impact, 650. Of course, we had an accurate understanding today, but for as much as 500 billion, we have export from Thailand or Asian countries to U.S., and we were concerned about a possible recession and the impact over there. So we incorporated that. in our expectation before, but now we released it, and that means we have less of 650 from gross, and then we have a net recovery from 1,100 to 650. Actually, in the automobile market, it is difficult to revise the price. Therefore, we need to delete that part for the automobiles, and that is why we have those numbers. Thank you very much, Mr. Okinaga. So if you have questions, please tell us two questions in sequence.

Okay, we'll take the next question from Yasunaga-san from NHK.

This is Yasunaga from NHK.

Can you hear my voice? Yes. Thank you. Just one question, because others have asked the same question. In the automobile business, China and Asia, you had some declines, you said. But in your company, you are very much struggling with your sales in China. That's the impression. So there was a GT's launch timing has been postponed. I'd like to hear about the facts about it. And then what are you going to do? And then where is the difficulty of the market? So I'd like to hear about that.

Thank you very much, Mr. Yasunaga.

For the China market, let me try to answer that question. For Chinese market, overall market actually, because of the incentive has been reduced, so the total market has been declining slightly. But basically, it's sideways movement. That's the total market. And then for this time for Honda, particularly for ICE, Well, actually, the price discount has been staying at a high level, so we have been struggling a lot. So in a sense, value for money, we are behind others. We are aware of that. And then for BEV, so for the features, the NOA, Navigate on Autopilot. That's not provided on our cars, so people consider our cars pricey. And then other companies put the momenta and then offer it at a lower price. So that is why it's difficult, actually. And then that is the situation in China. And then for electric vehicle, as pointed out earlier, the EA series, The one, two, and three were in our horizon, but we needed to – we felt the need to completely review this. So we came up with a GT, we had assumed. However, we did have to postpone it in reality. So this would be, we were thinking of next year initially, for next fiscal year, sorry. However, we will, for the time being, I cannot tell you exactly when that's going to be, but we will postpone that. And then from the planning stage as well, we need to consider right from the planning stage how we want to launch this model so for electric vehicle this current situation will continue for some time and then against that kind of business environment for ice We need to make solid sales from those. Fortunately, we have completed depreciation of all the factories, so we need to enforce business structure in the indirect and then also optimize our manpower and then do more precise sales prediction. And then we'll try to make our business more profitable. That is what we are doing right now. And then this is all I can say for now. Thank you very much. Thank you very much, Mr. Yasunaga.

Next question from Asahi Shimbun. Mr. Miura, please. Thank you for your explanation. And then for two questions. One, in the motorcycle businesses, Vietnam, you had a decline of the air businesses, and then they had restrictions on the electrification vehicles. And how much of those impact did you incorporate in this statement? And then what is your action against it? And question two is about automobiles, about specifically EVs in China. And you said that you're going to have a radical action. And then what is the reasons why you have a struggle in the Chinese market? What do you think is the cause for that? Mr. Miura, thank you for your question. To start with Vietnam for motorcycles. In Vietnam, as you know, while it is not yet implemented in the market, however, ICE motorcycles now would be regulated, especially in the city area. And then when they say that they might apply these new regulations starting middle of the next year or so. With that in place, actually, when the announcement was made last summer, people started refraining their buying of the products, and then we were expecting some negative impact on the Vietnamese businesses. However, in October, we are seeing the businesses coming back slightly, and then probably the things that this regulation is still talk only. We don't know if that is practically to be applied or in Vietnam. So for some time, probably a current model of the ice-based vehicles will suffice. And then, of course, electrification will start some time later. And then from starting this year, we have already launched the two ICON-E and CVE, those two electrified vehicles over there in Vietnam. And the idea is to try to sell more of those EV over there. And in Thailand, we have a plan to start the production of a new EV model, and we are thinking about accelerating the start of this model production. And sometime earlier next year, probably in March, April time next year, we would like to try to bring over these new EVs to Vietnam. So even When they have the new regulations practically in place over there, we can offer the EV vehicles over there. So this time, we are expecting unit volume be a little bit less. However, we have Brazil businesses and Thai businesses quite well, so that will compensate for the situations in Vietnam. So that is motorcycle businesses in Vietnam. China, EV. May I, please? So EVs in China, as we said earlier, basically series, the new products are over there. And looking at the vehicle in comparison to others, for instance, the price range, they are higher, more expensive than the other products. 150,000 yuan of other products, whereas ours are 200,000 yuan, Chinese RMB. And our product is not price competitive so much. And also, we have NOA, Navigation on Autopilot system. It's automated driving system, basically. The competitors' products have NOA, however, not on our product yet. Therefore, going forward, we will change the models in the future, and we will try to do that earlier. And the momentum, the local autopilot system could be obtained so that we can add this autopilot system to our products. Doing so, we can strengthen the intelligence of the products and also cost competitiveness we need to approach too. So currently, we are trying to expand the local procurement in China. That way, we can improve the competitiveness of the product, and that is what we are trying. Thank you very much.

Thank you.

Thank you, Mr. Miura.

okay the next question next question from a toyoka weekly uh yokoyama-san please This is Yokoyama from Toyo Keizai. Yes, we can hear you all right. Thank you. I have two questions as well. The first question, your full year prospects with the impact from a semiconductor 150 and then you have a 450 profit and then you are thinking of a 550. So I guess you do have uh quite a plan uh for your profits to suffer in the second half so can you give me some numbers about uh what the factors why you see a lower profit for the second half and my second question is for the profitability and automobile business so right now For the automobiles, the ICE, IOS 8% is what you're thinking about for the ICE. For BEV, you're going to have your own battery, and then you start from zero gross profit. But when would it turn into profits? When would it? And also, do you have any additional measures to gain more profits? I think it might be difficult, sensitive, whether you're going to get into the profit for the automobiles this year. So I just want to know. First of all, thank you for the question, Yokoyama-san. for the uh the uh the difference between the first half and the second half this uh we have this uh of course uh we owe this 150 150 billion yen uh tariff impact that will continue in the second half as well but on the one-time expense we have the bev uh provision that was in the first half so those would offset each other well that's what we expected to do and then for the first half and the second half There will be a negative of 40 billion yen about the foreign exchange, and the rest will be the substantial – substance portion. Maybe it's better to tell you the numbers. We have 440, and it goes down to 110. So 320 billion, that will be the difference between the first and the second half. So let me explain that, first of all. So, as I said, with the semiconductor and the one-time expenses, those will offset each other. And then so 320, and then we take away 40 for the impact, and then 290 billion, that would be the actual substance difference. So concerning this difference between first half and second half, as you can imagine, So, the expenses and R&D, there is a difference between the first and the second half. I hope you can see that, which is a pattern. And then for quality-related issues, based on the sales base, there's a bit of a difference in calculation. But anyway, those are the – mainly those numbers. When it comes to incentives, we have this negative of 110,000 units decline in North America. We don't know how we're going to use this incentive. going by the original expected volume for North America. We were able to keep the original target. However, maybe we need to increase the incentive a little bit. But now that accounts for the difference between the first half and the second half. We have not really decided. We need to discuss with American Honda how we're going to make those work, actually. Okay, that's all for the numbers. Thank you. Okay, then let me try to answer the rest about the EV, the gross profit for EV. For North America, that's the assumption for answering my question. So this year, we do have losses. We have 650 billion. We have that. So this includes one-time expenses as well. So next business year, I think we'll start from a 400 billion yen range level, that level. And then from there, of course, we won't have the IRA subsidy. So the business environment is very, very challenging. So because of that, we cannot be pursuing a far larger sales volume. However, we do have good prospects for the supply from GM, so now we have more and more BEV of our own development. So now we need to think about focus on how to reduce the manufacturing cost for own BEV. And then also, it's important to consider whether we can produce at a very efficient way. And then with those efforts, we need to minimize the losses to the best we can. However, looking at the market, it's very difficult to read how the market would move So at the very beginning of mass production, of course, the burden of fixed costs will be heavy. So we just need to work on how best we can flexibly produce, reduce costs, and so as to enhance or improve our profitability. If you ask me when, I guess all I can say is as soon as we can, we may get to profit. Thank you.

So the automobile businesses this time, do you have any disclosure for their expectations, their profit or losses? So we do not disclose as per our product levels. $550 billion, you have to subtract from that level. So for the motorcycles, it will be about 600 to 700 billion, same as last year, and 300 billion for finance, like last year. And then, both together, we would earn 1 trillion yen. We said that. And then you could actually assume from that for the automobiles, we would end up in losses. And battery EV, at one time, 250 billion put up, and also chips. One time, 150 million again, altogether 400 million negative altogether plus. This time – this term, we have a tariff impact as well on the top. So the number will be including all those factors. And then, as we said before, We need to earn money, revenue based on ICE, and losses coming from the BEV should be controlled better, and not just PL. We have to look into the spending out of the cash flow. We have to control the timeline of spending, too. So that is how we like to manage. Thank you very much. This is all. Thank you.

Thank you very much.

Mr. Yokoyama. i do see a lot of hands raised but due to the time restriction we'd like to make the next question the last from tv tokyo miss nagaya can you hear me yes we can hear you thank you One question. For this fiscal year's forecast, three months ago, you revised upward. But this time, you're revising downward. So when you make the I just want to know about the approach. Are you being very conservative? The second is your forecast for the unit sales for I think you cover a lot of China, but excluding China, for other ASEAN markets, I think there's a bit of a decline. Compared to three months ago, you know, we are struggling in Asia so much. What's the reason?

What are the factors?

Thank you very much for your question. So how to put up our plans. So I wouldn't say we are conservative about putting together those plans, because usually the idea is that the transparency is our focus. So whatever we get to know, we try to incorporate in those explanations to give you the explanation. And then, for instance, we would have the alleviation of tariff impact. And then calculating all those refunds, we would have that much of a refund included. And then these are the well-calculated impact. And the exchange rate forex for 70 billion yen plus, we include that, too. And the chips, that is an extra one. That is a bit of a special one, but 50 billion tariff impact, that is included, as we said. And plans are put together based on the principle that it is not always conservative. Please be acknowledged about it. And then the forecast of the unit cells in ASEAN regions. The decline of the unit cells is a bit significant. What you said is quite right, because in ASEAN region, the unit cells, the volume is expected to be down a bit. 750,000 units less. So it is a significant reduction as compared to the first forecast. And then especially Indonesia, Thailand, in those countries, or Malaysia as well. There are the government policies to be looked at also, and also the market is a bit shrinking too, because of which we have expected a reduction of the volume in Thailand. The competitors' competition is something that accounts for the situation too. For instance, selling prices. We are losing price competitiveness against the others. And so sales are stagnant, and we need to react and take actions against this situation, especially in Asian countries. We need to have radical measures against it. And then from this term, next term, next year, we do not have a new launch model. A big, minor change of the city, that's one thing I can share with you. And then the big, minor change of the city, the timing of that could be a kind of opportunity to take advantage of force to give a kick to the Asian market. But nevertheless, the Asian market is tough, and because of that, we decided to now revise our expectations. And then, again, the conservativeness about the value of expectations. It is rather a solid conservative number, I thought, and also you mentioned about a competition of the competitors. Would that include the Chinese supplier? That is always the case, is that right? So in terms of the volume of the sales, this is the number that we will commit to achieve. That is how we set up this volume. And about the competitors, of course, the Chinese suppliers, their accounts as well. But in the Asian markets, there are emerging Chinese products coming in. And against them, the existing manufacturers are providing more incentives. prices are kind of discounted against the Chinese. And then that is making the situation more competitive in terms of the prices. That is the market situation over there. Thank you very much.

Thank you very much.

I would like to close now the financial results briefing. The material is listed on our website, so please refer to it. Thank you very much for your participation. Thank you very much.