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 third quarter of fiscal year to March 26. First of all, allow me to introduce the attendees today. Mr. Noriya Karihara, Director, Executive Vice President, and Representative Executive Officer. Good to see you, everyone. We have Mr. Eiji Fujimura, Director, Managing Executive Officer. Thank you. And Mr. Masao Kawaguchi, Operating Executive, Head of Accounting and Finance Unit. This is Kawaguchi. Good to see you, everyone. Mr. Kaihara will first present the financial results of third quarter ended December 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. Thank you. 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 third quarter of fiscal year to March 2026. I would like to start with the highlights of the financial results. Our operating profit for the third quarter of the year to March 2026 was 591.5 billion yen. Motorcycle operations saw solid global unit sales led by India and Brazil. And in addition, the restriction on ICE vehicles in Vietnam, which was a concern, had only limited impact to sales compared to our assumption. For results up to third quarter, we've attained the record high unit sales, operating profit and operating margin. Automobile operations saw declines in profit due to non-recurring expenses related to EV in addition to impact from tariffs. Operating cash flow after R&D adjustment, which indicates the resource available for future investments, came to 1,855.8 billion yen. generating cash on a par with 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 unchanged from the previous forecast. Impact from tariffs were initially forecast at 450 billion yen at the beginning of the term, but our prospects are now that it would be reduced to 310 billion yen. Toward the end of the term, though we expect growth in profit due to yen depreciation, the competitive environment for automobiles in Asia will intensify, requiring incentives. Taking into consideration uncertain business environment, we are maintaining the previous forecast. Going by business segments, for motorcycle operations, with the tailwind of solid sales in India and Brazil, we continue to aim for 21.3 million units, the highest record sales. For automobiles, we will maintain the forecast of 3.34 million units unchanged from last forecast. The shortage of semiconductor supply experience in third quarter now has good prospects for preventing recurrence. On the other hand, we are beginning to see signs of supply risk for other materials such as rare earth metals and memories, and we will closely monitor the situation and take actions as needed. To give you the consolidated results for the third quarter of the year to March 26, operating profit was 591 billion yen, lower by 548.4 billion compared to the same period last year. Investment earnings due to equity method was 24.0 billion yen, higher by 51.3 billion. And the quarter profit attributable to the owner of the parent was 465.4 billion yen, lower by 339.8 billion yen. Next, I'd like to cover the forecast for the consolidated results for the term ending March 26. Compared to the previous forecast, we maintain our forecast of operating profit of 550 billion, and then the profit of the year attributable to the owner of the parent of 300 billion yen, which is unchanged. The exchange rate against the U.S. dollar is assumed at 140 yen for the full year period. Next, for shareholder returns, forecast for the full-year dividend for the first career ending March 26 is 70 yen per share, unchanged from the previously published forecast. In addition, the Board of Directors meeting held today has resolved on cancellation of Treasury stocks. We will execute cancellation of 747 million Treasury stocks.

So, let me explain about the details of the financial performance, and Mr. Fujimura is going to explain. Let me start. So, regarding cumulative group unit sales for three months up to the third quarter year on year for motorcycles, 16.44 million units sold due to the increase in India, Pakistan, and Brazil. For automobiles, 2.561 million units due to decline in Asia, mainly in China. And for power products and business, 2.507 million units sold due to some incremental sales in Europe and decline mainly in Asia. We have explained the consolidated performance up to the third quarter already. Next, I will explain factors for changes of operating profit year on year. Operating profit was 591.5 billion yen, down by 548.4 billion yen year on year. Factors behind for changes? Sales made a positive impact. by 38.1 billion because of the increase in motorcycle unit sales, as well as in profit in financial businesses, though automobile unit sales declined due to the shortage of semiconductor supplies. Price and cost impact were positive by 225.9 billion due to effective price revisions. Expenses impact was negative on profit by 108.6 billion, R&D impact negative by 35.7 billion, foreign currency impact negative by 111 billion, one-time EV-related expenses impact negative by 267.1 billion, and tariff impact squeezed the profit by 289.8 billion yen. Excluding one-time EV-related expenses and the tariff impact, the operating profit will be 148.5 billion yen. Regarding operating profit by business segments, motorcycle businesses, 446.5 billion yen operating profit, automobile businesses, 166.4 billion yen losses, financial services businesses 218 billion yen profit, and the products and other businesses 6.5 billion yen losses. Operating profit of motorcycle business increased by 44.8 billion yen year-on-year due to market for 546.5 billion yen factors for changes. Sales impact was positive to add 61.2 billion yen due to incremental sales units mainly in Asia and South America. Price-cost impacts were positive by 48.6 billion due to effective price revisions and so on. Expenses impact negative by 24.1 billion, R&D impact was positive by 4.6 billion yen, foreign currency impact negative by 37.7 billion yen, and tariff impact negative by 7.7 billion yen. Operating profit of automobile business went down by 569 billion year-on-year, resulting in the operating losses of 166.4 billion yen. Breakdown of factors for changes. Sales had a negative impact by 82.8 billion yen due to unit sales decline, mainly due to semiconductor supply shortage, losses associated with the reorganizing of the affiliated company, of the group, and so on. Price and cost impact had a positive impact by 177.3 billion yen due to effective price revisions. Expenses had a negative impact by 11.7 billion. R&D impact negative by 42.1 billion. Foreign currency impact negative by 62.9 billion. One time EV related expenses had a negative impact by 267.1 billion. And the tariff impact was negative by 279.5 billion yen. Cash flow situations now. Free cash flows excluding financial service businesses was 917.4 billion yen. Net cash as of the end of the third quarter was 3 trillion and 170.7 billion yen. And operating cash flows after around the adjustment was 1 trillion and 855.8 billion yen. Let me explain consolidated forecast for FY ending March 2026. Regarding group unit sales, we will keep the previous forecast of 21.3 million units of motorcycles, 3.4 million units for automobiles, and 3.67 million units for power products volume. And we have already explained the consolidated financial forecast for FYE March 2026. As for factors for changes in operating profit year-on-year for those forecasts, Operating profit would be down by ¥663.4 billion year on year. With factors for changes, sales would have a negative impact by ¥162 billion due to semiconductor supply shortage and so on. Price-cost impact will be positive by ¥330 billion due to effective price revisions and so on. Expenses impact 106.5 billion yen negative, R&D impact 166 billion yen negative, foreign currency impact 149 billion yen negative, and the tariff impact negative by 310 billion yen. Regarding factors for changes in the forecast of the operating profits, We will keep the previous forecast of the operating profit, for which sales impact will be negative by 10 billion, expenses impact negative by 15 billion, R&D expenses impact negative by 40 billion, and foreign currency will make a positive impact by 65 billion yen due to the change of the exchange rate assumption to 148 yen for a dollar. Expected capital expenditures, depreciation, amortization, and warranty spending for March 2026 will be as follows, a reflecting increase in capex for acquisition of factory buildings and so on of the battery production JV with LG energy solution.

Lastly, I would like to speak about the future direction of our operations in view of the current business environment. For automobiles operations, with the expertise we have accumulated on internal combustion engines and hybrid technologies, our result the third quarter confirmed that we are maintaining business characteristics that continually give us profit if we exclude the non-recurring impact from EV and impact from tariffs. On the other hand, we are faced with issues including stagnated growth of EV market, less stringent environmental regulations in different markets, retreat of multilateral free trade system due to protectionism policies, heightened supply chain risk due to expansion of global procurement, further exacerbated by intensifying global competition from emerging OEMs. Thereby, we need to conduct a fundamental review of our strategies to rebuild our competitive strength. In this situation, we believe that our current tasks are to build lean business characteristics to enable flexible actions against changing business environment and to realize product features and cost competitiveness that overwhelm those of emerging OEMs. To address those issues, firstly, we are working to completely settle within this fiscal year the losses related to EVs currently sold in North America. In addition, we are striving to make prompt management decisions in line with EV markets, such as disciplined expenditure control, EV product range, and review of CAPEX plans aligned with the business environment. At the same time, to further enhance the earning capability of hybrid models, we are preparing to launch next-generation hybrid systems, as well as equipping the hybrid models with next-generation ADAS. We will communicate our review of fundamental medium- to long-term strategy at an appropriate timing sometime during the coming fiscal year. Honda has multiple business domains including motorcycle and finance business operations, forming a well-balanced business portfolio. each of which help us to generate cash flow and to maintain a sound balance sheet. Because of this, we have adopted a DOE indicator, which allows us to ensure stable returns and dividends aligned with the company's growth even in an uncertain and extremely volatile business environment. Through this initiative, we will continue to strive to enhance corporate values so that we will remain a company expected to exist in the eyes of our stakeholders. This completes my presentation. I thank you very much for your attention.

Thank you very much for your attention.

So now I'd like to take questions from the audience. We have already introduced you with the Zoom for the questions. Please limit your questions to two questions due to the interest of time. And if you are to ask questions, please turn on your microphone and the camera from your end. Thank you for your cooperation. So please push the raise your hand button if you have questions, please.

Okay, then the first question. This is from Mr. Yokoyama of Toyo Keizai Paper.

Okay, this is Yokoyama from Toyokeza.

Can you hear me? Yes. Okay, thank you. I have two questions. First question is I just would like to take your outlook for the full year. You are progressing beyond your budget already. But it is true that the fourth quarter, you tend to get a lot of expenses. But you have been saying that the expenses would be $2,650 for the full year. There was one gap, so I just wanted to check that. And then for the automobile profitability, I would just like to check. on the tariffs impact, if we exclude that, that would be an IOS of 3.6%. But if you include a hybrid, I think earlier you mentioned like 8% of profitability. So if you say 3.6%, I thought it was kind of sounds lower. So I would like to ask for your evaluation of the profitability of automobiles and then would like to see what your real values are. Thank you. Okay, thank you very much for your question, Mr. Yokoyama. First of all, for the specific numbers for that, this will be covered later. But this time, for the fourth quarter, we slided the results from the fourth to third quarter. Let me try to answer how we expect the financial results with land toward the end of the year. So compared with the third quarter results, the tariff impact will work on the positive side. And then the motorcycle and automobile unit sales, because we had favorable results in the Vietnam motorcycle – well, I should not say favorable. the damage was less than we had assumed in vietnam so i think a motorcycle it will go positive compared to a budget that is our assumption as well however for north america uh automobile market if we look at that and then going forward i believe uh there will be further impact from bev So, the sales will become difficult, so we will have to increase a bit of the incentive. That's one thing we're considering. But as a downside, another downside is that so far we had the BEV with GM. Well, Mr. Fujimura will explain this later. We need to do this negotiation with GM considering the compensation. So depending on how that comes out, we might have a little bit more expenses to be covered. So with that, that is why we're giving those numbers as a forecast. And then as the BEV environment, how it develops, maybe the GHG's credit, and then in the finance, we might have our losses from our residual value on the lease. So on the basis of those, we believe, we are just assuming for fourth quarter, the outlook is still maintained. Okay, so I would like to ask Mr. Fujimura to give a little bit more details then. Okay, thank you very much for your questions, Mr. Yokoyama. As you mentioned, the negative 650 billion So, so far, we had a negative battery EV of negative 650 battery EV. That's what we have been saying. So, when we talked about the 650 billion, so the GM-related issues that we talked about and then of the models that we are developing, we were doing a... Let's say we were doing a review of those models so as to write off certain assets. So with that, we recognized 250 billion, and then now 400 billion of R&D. So we put a total of 650 billion in the budget. This time, in the results, the portion – this is not for the GM portion, but for models in China, because according to the discussions With the partner, we have reviewed our product lineup. Some of the models or some of the development assets, those have been written off. So up until nine months of this year, we have 270 billion yen. So that's 270 billion yen for the nine months. But if we turn it into budgeted uh let's say amount as you come to 290 billion plus 400 billion for r d so it is getting close to 700 billion range so those are the numbers that we have put into the budget so this 270 has already been incurred and then the 290 billion for the full year, so the 20 billion remaining. The difference, this is up to the negotiation with GM. So the negotiation with them still has not been established. We have not been offered any number concerning that. So we are assuming, we don't, sorry, we don't know if the 220, sorry, 20 billion is sufficient or not. So because of that, looking at the sales situation, And then maybe if you think about the exchange rate, that might be an upside, but this could be a downside factor. So that is why we are keeping the outlook forecast unchanged. This 700 bev portion, next year, well, if this 200 billion is no longer there next year, then it will only be 400 billion R&D. That will be the starting line for next fiscal year. But at the end, as Mr. Kaihara explained to you, Currently, the current EV market, considering the current EV market, I think we need to rebuild our framework of our strategy. So we'll take this – well, are we going to really take this 400 billion as a starting point, or are we going to review this? We don't know how much of the disciplined expense cost-cost control is going to be. We are still in the process of formulating those plans, so we hope to be able to issue outlook prospect of that sometime in the future. When it comes to ICE, it was like 900 billion yen or close to 1 trillion yen. earnings is something we have. However, we do see declines in unit sales in Asia, and we see some impact from exchange rate. And then the semiconductor impact, we are recovering a little bit of that, even though this is one time. But so without the tariff, that's 700. And then let's say if there's no tariff, it'll be 400 billion on the plus. So 400 billion probably would be the starting line. So 300 billion yen tariff impact, it cannot be recovered just immediately next fiscal year. So we want to closely monitor the cost so we might proceed with more expanding of our local procurement and try to control cost more closely. I hope that answers your questions. When it talks about the upside, you are assuming the exchange rate at 148. per dollar but i think this would go to toward uh at the upside right i think if things are progressed as things are going right now yes as i might have mentioned i saw per dollar one yen uh would have uh give us an earning plus of 10 million yen or so throughout the year, that is, of course. So, well, slashed up by four to get a quarter number per yen, per one yen against the dollar fluctuation. Okay, thank you very much, Mr. Yokoyama. Next question, please.

From Asahi Shimbun newspaper, Mr. Miura, please. Asahi Shimbun newspaper, Miura. Thank you for your explanation today. And I have two questions. One, page 20, EV marketer trends with the model lineup prioritization and focus, as you mentioned here. Could you elaborate on that, please? The basic idea and the directions, please explain about that to me. And another question is also on the page 20 about reorganizing the long-term and mid-term strategies. And please tell us about the directions of those strategies. Thank you for your question, Mr. Miura. So EV market and our for that. Basically, market For us in the area of North America and in China, for North America, the market environments, for instance, there is the SEC now invalidated and created for BEV. We cannot really see the values anymore today and demands environments for EVs are quite negative today for us. And recent EV situation today would be leading to the idea of reorganizing the EV strategies for that market. And then last year, we had some tax credits, and we had accelerated some prior to the September period. However, now the market is slowing down in this end. In that regard, EV strategies in the future have to be revisited. And then for China, EV market is, last year for instance, half of the market share in the area of China are supported by the EVs in China. And then in terms of Honda EVs, unfortunately, there are local av manufacturers over there and in terms of the prices ui ux perspectives we are not there we are behind those companies and then in terms of the competition In the software environment, we are still behind other companies. Unfortunately, we do not have the established image of the business in the EV area over there, so we have to go back to scratch and then rebuild our strategies for EV. For the cost perspective, The local suppliers over there or engineering companies over there, we would have to make use of those presence. That way, we have to turn our direction dramatically so that we can then gain our cost competitiveness utilizing them. Those will be updated with them so that we can be competitive again to challenge the markets once again. In that regard, as I mentioned the other day, the timing of the launches will be revisited in order to have our entry once again in the EV market over there. Thank you very much. Thank you very much.

Thank you very much, Mr. Miura.

Next question, Kampusama Nikkei paper, Mr. Okinaga. This is Okinaga from Nikkei newspaper. Yes, I can hear you. Concerning, I'd like to ask about the EV again. So for throughout the year, you said 20, 90 billion yen for the year. Is there a possibility of, let's say, further impairment booking, posting of impairment losses? So that's one question. And about the other question is concerning semiconductor. So you said that you have a good prospects for preventing recurrence of this shortage problem happening. So I just would like to know what you have been doing. And then 150 billion yen negative for China. So any impact for Japan and China? So I would like to know how the situation has been for China and Japan. OK, thank you very much, Mr. Okinaga. First, about the EV, the impairment losses for the non-recurring one. Well, we don't know what's going to happen, but we have been processing this in accordance with the accounting principles. So whatever we know, we have incorporated into our books. However, as mentioned by Mr. Fujimura, we don't know what kind of compensation issues might come up with GM. So there is a bit of an unclear future prospects. And then actually, as I've explained, because the EV market is dramatically changing, so we would need to monitor our sales volume trends. And then we might have to take some actions if needed. Any details you can add?

OK.

If the intention of your question is about the impairment losses for the EV business in general, like at other OEMs, because we are not sure what's happening at other companies. So I would like to refrain from mentioning anything about other companies. But what we are saying is that with the models that we have developed, as the die-in tooling and then the development R&D assets, some of those have to be written off. And then this is not really impairment, but we will need to do some compensation. So because of the review that we have conducted as a product lineup, we are booking some temporary losses, those expenses that are incurred. But you asked about the impairment, but impairment means that This is a CGU that we use. This is CGU, whether this leads to cash generation in the future and then how the business environment has been doing and what management decisions have been in view of those. And then in view of all of those, we are getting audited and then with the auditors included, we discuss. So we are not recognizing anything, any impairment like that have happened in other companies. We have been talking with the accounting. We have been discussing on a continuous basis. And then we have been discussing how we at management should assess those costs and expenses. So I just wanted to mention that whatever that were incurred up until three quarters, those are only those associated with the product lineup review. We don't know what, we don't know as if it's going to be enough, but we have included whatever we can so far. And then the second question you asked about semiconductor. So last year in North America, From the end of October, we had to go into production adjustment and a production suspension in Mexico. So the impact actually is – I think I mentioned 120,000 units affected. We hope that we have been – we are able to recover a bit, so the affected will be 110,000 units. it would be 150 billion yen impact, we assume. So of that, this is unfortunate. But for Japan and China, We have had some disruptions in production from China. We had about three weeks or so from the beginning of the – end of the year, sorry. And then for Japan, we have had to suspend production like at Suzuka for two or three days, and then did some production adjustment for a few days after that. So because of that, even though there was an impact once, but for Japan and China, we have the capacity to sufficiently recover. So we will be able to complete the recovery of those lost production before the end of this fiscal year. So in terms of business impact, it is very limited. So we have not considered that into our business. But anyway, we have faced those problems. So basically to the suppliers, Let's say we are trying to do a multi-sourcing of the suppliers, and then we have been asking them to keep an appropriate inventory levels. However, some of the suppliers have not, unfortunately, have not provided us with that much of a details. So to be blunt, we have been relying heavily on our suppliers. So that's something we are reviewing fundamentally so that we will keep a close watch over our supply chain all the way up to upstream. and then see what kind of risks there may be, and then we will do appropriate risk assessment and then keep appropriate inventory management or go multi-sourcing as well. And then that needs to be done from the development stage as well. So at the earlier development stage, we have been looking at the cost Well, in view of that, there are some single sourcing strategy as well. But in terms of business continuity strategy, if we go single sourcing, we will pay careful attention to upstream of each of those components containing semiconductor. And then we will decide how much of our inventory we will hold. And then we will do a review about what is going to happen if we go multiple sourcing and then take actions accordingly. Currently, as you may know, The semiconductor issue, in addition to what we have experienced so far, for the memory, and then, of course, the rare earth issues are there. We are aware of those. So when those issues arise, we would, of course, at this point in time, I don't think there is anything that would lead to immediate problems right now. But in the future, of course, it is, well, It is not very clear. So we will work closely together with the suppliers and take actions as needed. However, for the rare earth metals, it is nothing that one single corporate entity can do anything about. As you may know, at the JAMA level as well, this is being discussed. And also with the governmental agencies included, this needs to be reviewed. So we would like to deepen our collaboration with different entities. Thank you very much. This concludes my answer.

Thank you very much, Mr. Okinaga.

Next question, Mr. Utita from Yomiuri newspaper, please. Okita from Yomidi Newspaper. Hello? Thank you for the explanation. I have two questions. One is about tariff impact. Little by little, as compared to the start of the year, it is coming down. It is down from the 386 billion from the beginning now. And could you tell me more about the reasons behind this? And then the other question is about sales situation of the automobiles. your target is there, but it's not achieved. And in order to achieve the target volume of the sales, what are you going to do with Japan and North American markets? So, tariff, Mr. Fujimura is to address. Thank you very much for your question, Ms. Utelta. And as you said, until last time, a gross impact in the first half, 385 billion yen impact expected because of tariff and recovery of the cost, expected 50 billion, and then 385 billion yen 38 billion net impact, and then 110,000 units reduced in the U.S. because of the cyber-contact situation, and then including that, 338 billion net actually is, because of the foreign exchange and so on, it will be about 360 billion. That is the actual growth, and there are 50 recoveries. So net was 310 billion, in fact, incorporated in the accounting. And then the recovery part, They were realized. Therefore, 310 billion yen, this is the number finalized, let's say, for this. And what kind of recovery plans incorporated the 50 billion? And with the suppliers and others, we had made adjustment looking at the logistics and so forth. And then additional local procurements were progressed as well to achieve a USMCA, and we are more confident in achieving that. Plus, with the US credit utilizations is also to be added. And we scrutinized how far we can incorporate from that. And we had a broad consideration. And then, eventually, a 50 billion yen recovery plan is now realized into the 310 billion figure. And as for the sales strategy, let me address the question for the North America. As I mentioned a little earlier, our A credits were pushed toward the end of their period, and it was included. And then BEV drops quite dramatically. Therefore, this going forward, it will be staying at a very low level. And then going forward, we have to be focusing on the hybrid brand. to take advantage of the brand to make sure that those models will be more. And then, as of today, in North America, various companies had the impact of the tariff, and then I would we were thinking that they will be increasing the selling prices. However, we do not see the dramatic selling price increases. And then we had seen some incentives utilized in the different areas. And then the actual prices are on the decreasing trend, practically speaking. Therefore, we have to use incentives. At the same time, we have to appeal the hybrid models. And customers who are looking for the affordable models, the ICE models can be provided, too. So we try to cater for the needs of the customers to try to get by the situation here. And together with the dealers, we have to do the market activities. And we're not really focusing too much, however, in the area of the fleet, which was not really focused before. We have to work on that to sell more cars in the fleet customer field. And Japan, hybrid models, that is the very focus in the Japanese market. In Japan, rather than the competition, I think it is more of the customers and how we can support those customers, the dealers will make sure that they have a close contact with the customers. For instance, one-on-one strategy, one person looking at one customer, a one-on-one strategy to try to satisfy their needs, for sure. And that is very important. down to the ground activity, let's say, but it is what we are up to. And then next year onward, MMC and other campaigns expected to try to maintain the market share or improve the market share with those plans. Thank you very much. That is all from me. Thank you.

Thank you very much, Ms. Ukita.

The next question comes from NHK.

Mr. Yasunaga, over to you.

Okay, looks like he's not connected.

May we proceed to the next reporter first for the time being? Okay, now we got your voice. Yes, you're coming through now. Sorry about that. This is Yasunaga from NHK. Thank you very much for the presentation. One question. The rare earth metals supply concern, concerning that explanation, so there is export restriction on China. Is my understanding correct? and also about the diversification of supply chains. So for rare earth metals, you have no choice but to rely on China. But what would be your appropriate action in response to this situation? Okay, thank you very much, Mr. Yasunaga. For the rare earth metal concern, yes, as you said, currently rare earth metal, those are subjected to export restriction from China.

But currently, are the exports stopped?

All we can do is apply for exports, and we do see those exports coming through. But sometimes it just takes some time, a longer time. So if you ask us, can we get the exports coming through as expected? Not really. So as you know, rare earth metals, those are used in different various components. So if the supply stops, the risk is high. So we need to ensure, as I mentioned, we need to apply without any delay, apply for permission for exports. And then, of course, when it comes to fundamental countermeasure, is to go without use of rare earth. But that would take a longer time for development. So currently, we will take some parts that are difficult to switch over. It will take a longer development. All we can do is to simply hold our inventory. But currently, we don't have any actual problem in the supply. But how is it going to be in the future? We don't know. It is very uncertain, as I mentioned. So the supply, we need to work closely together with our suppliers, get interviewed them, and then ask them what kind of supply chain our supplier have for the rare earth that's needed for their components. So we will continue to consider our permanent long-term countermeasure. And this would be for more medium-term, but we will consider development of parts and components that do not use the rare earth. But for the time being, all we can do, the first thing we can do is to secure inventory. And then also, secondly, to apply for export permissions in a timely manner. So those are the things that we can do currently. I hope that answers your question. Thank you very much. If not, there's rare earth-free components. Specifically, what kind of components do you have in mind, and where would be the real critical point? Well, there are different components, but there are different types of rare earth. So some are used in motor, some used in meters. So for each and every component that uses rare earth, for every one of them, we are looking into what can be done to replace them without rare earth.

Thank you very much for Mr. Yasunaga.

So, Ms. Nagai from TV Tokyo. Yes, thank you. Question one about the third quarter alone sales in that period for automobiles, excluding the automobile sales, you had a reduction of the volume and excluding the impact by the semiconductor. What is the situation as compared to the expectations in the beginning of the year? And the second question is about page 20, as Kai Harrison said, the direction of the businesses going forward. You said that it is going to be a dramatic revisiting of that. And as I heard about the incentives in North America, There could be a kind of limitation to improve the profitability by doing it by itself alone, but I suppose that you're still speaking to Anissan or Mitsubishi, not just those two. I'm thinking about the possibility of the collaboration with other companies other than those two. Thank you very much, Ms. Nagai, for your question. Three months' volume, right? That's your question, right? Yes, correct. You mentioned that the volume had declined for that period year on year, I suppose. But for the automobiles, actually, the volume sales increased as compared to the plan for the automobile businesses for the third quarter. You're comparing from last year, same time last year, right? And for the original plans, third quarter, we had actually overachieved the plan for the third quarter automobile. As compared to last year, it declined because of the next barrier, semiconductor impact. That is the largest and also Chinese market for ice. EV, NAV market is increasing, expanding in China, and ice markets are shrinking in China, because of which volume in China is in a tough situation. So, year on year, it dropped. And that is about the volume. And what was the next question?

Alliance question, right?

And Nissan Alliance. Well, actually, with Nissan, the integration possibility, we do not talk about that at all now. And I have to say that. And another thing is that, as you said now, development cost will be needed in the future, for instance, software. E and E architecture, so forth, with required investments. And for the future EVs, batteries, E-Axle, if we can commonize those or have a co-development together, that will help reduce the development cost, or cost itself may reduce thanks to that. However, for those matters, we continue to discuss with Nissan. However, not just Nissan. If it is possible to build a relationship like them with other alternative companies, of course, as long as we can expect a win-win result altogether, of course, for those, we will continue to consider other possibilities. And that is all for your question.

Thank you very much. Next question comes from Mr. Fujiwara from Nikkan Jidoushashinbun, Daily Automotive Newspaper. This is Fujiwara from Daily Automotive Newspaper.

Yes, we can hear you. I have two questions as well. My first question is about the automobile, the factors for PROS. You had a big contribution from the setting cost that helped to grow your revenues. So I wanted to know what region and what products. And then this was a second question. This may have been covered by Toyo Keizai's question, but the hybrid volume has grown by about 5% in the third quarter. So how much is the contribution? I would like to know what kind of contribution this 5% growth of volume in the third quarter.

Okay. Thank you for your questions.

I'd like to

This was from year-on-year comparison, I believe.

So, sorry, the selling price and cost impact that worked to the plus, which was in automobiles, that was for automobiles. There was a bit of a plus in the selling price and cost impact. If you look at the total graph, it's about 60 billion yen. There was about 40 billion yen for automobiles. Because this is from selling price impact, when we say selling price, per year at the beginning of the term or in fall, we do go through price hikes. So of the 40 billion yen or so, about half of it happens in the States. And then for the other regions, those are just prorated, if you can prorate it to different regions by the volume. And then the hybrid volume for the third quarter, for the hybrid, the unit sales in the States, well, particularly in the States, hybrid is doing very well. And then how we do the incentive. Incentive can be kept low relative to the ICEs. However, the competitors were coming into the hybrid market, so our favorable condition, of course, is not going to last forever. We will be getting into the transition period for different models. Competitors who are going to come up with new models. So we need to kind of maybe build up, spend some more incentives. But incentives, sorry, the... hybrid requires relatively lower incentive compared to petrol engines. But in the future, we might have to spend some more incentives in the future. But on the other hand, for the petrol or gasoline engine vehicles, we do need incentives more than hybrid. for ICE. However, if you look at the contents of the components, gasoline engine require less tariff impact. So in that sense, petrol engine, gasoline engine contribute better. So we need to strike a good balance between those two groups. And then recently, if we look at the transaction, one of the reasons why transaction prices are deteriorating in the States, is that the model type variants which cost lower attracting our customers so because we do have both gasoline and hybrid we need to strike a good balance and then we need to well survive through this transition period between those different models using those uh using those good mix okay thank you very much thank you very much mr fujiwara sorry due to a time the next question will be the last one for the day mr tsurumi from my latest paper please

Can you hear me, please?

Sorry about my internet connection, but my face may not be shown, sorry.

And earlier, you talked about the alliances with Nissan. And based on the reports, the models in the U.S. with Nissan and the powertrain, communization, so forth, you talked about that earlier. And what is the progress today? Are there any updates for us, as much as you could share with us? That is all from me. Thank you for your question. So in conclusion, there is no specific information I can share with you today, but with Nissan, as I said earlier, In many different fields or areas, we try to explore different possibilities and, as you said, the complementary supply of the models or production, the models from each other. If those are complementary to the other company, we could look for the possibility and also One company produce a model of cars and then provide or make supplies. We have discussion about it. However, we have not decided on any specific plans yet. We simply continue our discussion. And then, as I said earlier, the colonization of the software or architectures. Such topics are, of course, one of the discussion topics for the development. However, both of us have made progress in individual projects, therefore it is not yet the time to make a conclusion yet, but we continue to discuss positively with each other. So once any output or plans are solidified, we will make sure that we will share with you. Thank you very much. That is all from me. Thank you.

Thank you very much. Thank you.

So now that concludes our press conference for the business performance results. And those materials and handouts are available from our website of Honda. Thank you very much for your participation, everyone. Thank you.