Hyundai Motor Co

Hello, this is Michael Yoon, Head of Investor Relations Team. I would like to ask, we have Senior Vice President Ja Yong-Koo, Seung Jo Lee, and we also have Lee Hyung-Suk from Hyundai Capital as well. Welcome everyone to Hyundai Motor Company's 2024 Q1 Business Results Conference Call. On behalf of Hyundai Motor Company, I appreciate your time for participating in today's call. please refer to the presentation HMC 2024 Q1 business results on our IR website. Today's presentation consists of two parts, sales summary and financial summary. For more information, please refer to the appendix page. First part is sales summary. Our 2024 Q1 global wholesale decreased by 1.5% year-on-year to 1,006,767 units, while retail sales decreased by 4% year on year to 946,870 units. In the first quarter, wholesale decreased slightly compared to the previous year. However, sales momentum continued in markets such as North America and India, where profitability is solid. In the domestic market, Sales decreased by 16.3% compared to the previous year due to temporary shutdown of Atam Plant, which was planned in advance for the retooling of lines to produce new EV. The sales decreased by 16.3%, as mentioned. North America saw a 11.1% increase in sales, driven by continued strong sales of high-margin vehicles. The U.S. market witnessed increased sales of SUVs and hybrids with respective growth rates of 9.9% and 14.2% compared to the previous year, boosted by the launch of all-new Santa Fe in January and all-new Santa Fe hybrid in March. Genesis also saw an 18% increase in sales compared to the previous year, driven by the success of the GV80 facelift launch in March. In Europe, despite a decrease in demand for EVs due to reduced subsidies, sales increased by 1.8% compared to the previous year on a wholesale basis, exceeding quarterly business plan, driven by strong sales of the Kona and Tucson hybrids. In India, sales increased by 8.1% compared to the previous year on a wholesale basis, driven by the strong sales of the Creta facelift release in January and continued growth in the SUV segment. Next is sales by model and key status. Global SUV sales accounted for 57.2%, a 4 percentage point increase compared to the previous year, influenced by the global expansion of Santa Fe and the release of the Creta facelift in emerging markets. Despite a 4.8% decrease in sales for eco-friendly vehicles due to weakened EV demand, hybrid sales increased by 16.6% compared to the previous year. In the domestic market, hybrid sales accounted for 21%, a 6.3 percentage point increase compared to the previous year driven by strong sales of the Tucson and Santa Fe hybrids. This is the end of presentation on sales summary, and now I'll move on to financial summary. This is the income statement. In the first quarter of 2024, revenue increased by 7.6% year on year to 41 trillion won. while operating profit decreased by 2.3% year on year to 3.6 trillion won. In the automotive division, despite a slight decrease in sales volume compared to the previous year, revenue increased by 3.5% year on year due to regional mix improvements centered on North America and product mix improvements centered on high margin vehicles. Operating profit, including consolidation adjustments, decreased by 6.6% year on year. Despite increased provisioning costs associated with growth and size of business and rising interest costs, the financial division saw revenue increase by 30.8% year-on-year due to ASP increase, resulting from OEM's mixed improvement and continuous increase in asset yields. Operating profits increased by 15.4% year-on-year. Net profit decreased by 1.3% year-on-year to $3.4 trillion. Next is revenue and operating income analysis. In terms of revenue, despite a negative volume effect of $231.1 billion caused by decrease in sales, there was a mixed effect of $942.1 billion due to the strong North American sales and ASP increase. Favorable exchange rate environment and increase in financial and other division revenues resulted in a 7.6% increase in total revenue compared to the previous year. As for operating profit, there was a positive FX effect of 251 billion won due to the strengthening of the $1 exchange rate. However, there was a 50 billion decrease due to volume decline and expansion of North American sales and AASP increase offset by incentive increase resulted in a negative total mix of $21 billion, resulting in a 2.3% decrease in operating profit. Our first quarter cost of goods sold ratio recorded a 0.1 percentage point decrease year-on-year to 79.3%. SG&A increased by 17.9% year-on-year to $4.8 trillion due to increase of labor improvement costs. Nonoperating income increased by 16.5% year-on-year to $117.1 billion due to increases in equity method income and decreases in interest costs associated with reduced borrowings. Reflecting discontinued operations losses, net profit decreased by 1.3% year-on-year to $3.4 trillion, affected by the decrease in operating profit. That includes the presentation of the first quarter of 2024. Moving on, we will have Hyundai Motor Company Title Planning and Finance Division Senior Vice President, Seung Jo Lee. Good afternoon, I am Seung Jo Lee, SVP of Agencies Planning and Finance Division. Let me share the Q1 business results for 2024, the performance outlook and Q1 dividend plan. In Q1 of 2024, despite wholesale slightly decreasing due to the retooling of lines and domestic plants and temporary shutdowns, Favorable exchange rates, regional mix in advanced markets, and improvements in the product mix has helped HMC achieve an operating profit margin of 8.7% on a consolidated basis. First, sales volume. EV sales are continuing to slow in 2024 with EV demands weakening from the latter half of 2023. This has led to a significant decrease in EV sales year over year. However, we are maintaining stable sales and profits by flexibly responding to market changes by utilizing our existing lineup of green vehicles, including hybrids and plug-in hybrids. Despite having weak demand in the domestic market, we are continuing to deliver solid growth in key markets such as the U.S., Europe, India, and etc. Next, operating profits. The operating profit for 2024 1Q is 3.6 trillion won and the operating profit margin is 8.7%. As mentioned, we saw the continued effects from the product mix improvement. SUVs increased 5.2 percentage points year-over-year to 60.6%, reaching an all-time high of SUV share in a quarter. Genesis has also increased 0.5 percentage point year over year, continuing to be a high margin vehicle and contributing significantly to our consolidated operating profits. While EVs have seen a huge decline in sales volume, hybrids remain a high margin model. Increasing by 17% year over year, hybrids are contributing to HMC's high profitability. We will continue to focus on high margin vehicles' improved profitability and continue increasing our market share and boosting profitability in key markets. Let's move on to the incentives that recently heightened. The automotive market is rapidly changing due to external factors such as the downturn in EV demand, strong sales, performance of hybrids, and supply chain normalization. However, we remain strong. as we are able to flexibly respond and boost profitability and increase market share amidst changes in the market. Incentives are being managed in a stable manner under high profitability. While incentives may temporarily be above the market average because of strategic decision making, it is being managed so that it does not largely affect profitability and we will continue to thoroughly manage the incentives. Next, I'd like to discuss one Q dividend. With great improvements in our performance in 2023, we implemented a dividend payout ratio of minimum 25%. With stable profits in 2024, we will continue to implement an annual dividend payout ratio exceeding 25%. Considering improvements and being able to create profit, the Q1 dividend was decided 2,000 Korean won per common share, a 501 increase year over year. Lastly, I'd like to mention the Corporate Value Up program that is receiving the spotlight in the market. In light with our medium to long-term shareholder return policy announced in 2023, we are reviewing the Corporate Value Up to enhance our value. Once we finish reviewing the program details, we will seek approval from the Board of Directors and announce our plans to the market. Thank you for listening. Next, we will have Hyundai Capital's Head of Planning and Finance Division SVP, Lee Hyung-seok, present the 2024 1Q Business Results and Outlook for the first half of 2024. Good afternoon. I am Lee Hyung-seok, Head of Planning and Finance Division of Hyundai Capital. I will report the 2024 1Q Business Results and Outlook for the first half of 2024. Despite seeing sustained high interest rates and unfavorable business environments, Hyundai Capital and HMG have a strong sales-finance cooperation to strengthen our auto-finance competitiveness and solidify our position in the market. As a result, Moody's raised Hyundai Capital's corporate credit rating from BAA1 to A3, and Fitch raised Hyundai Capital's corporate credit rating from BBB+, to A-. the highest level among non-bank financial companies in Korea. This has helped strengthen our procurement capabilities. I'll now elaborate on the details of Hyundai Capital and HCA. First is Hyundai Capital. 2024 1Q auto volume increased 5.4% year-over-year and financing assets grew 4.4% year-over-year. With strength and support for auto sales, auto finance grew and takes up 82.4% in the asset portfolio, the highest figure in 12 years. With more competitive installment products and growing leads demand for high value models, the operating profit increased by 14.9% year over year. While interest expenses increased due to sustained high interest rates, bad debt expense decreased 15.2% year over year and the operating profit increased 54.8% year-over-year. Overseas, we have seen profit and loss improve in Germany and Brazil, leading to a 280.9% increase year-over-year through equity method income. As a result, we saw a 112.2% increase of net income year-over-year. In the first half of 2024, we will see delays in lowering interest rates, and we will see uncertainties in the market. However, Hyundai Capital will continue to strengthen auto finance competitiveness and make costs more efficient to increase profitability. Hyundai Capital's delinquency rate remains under 1%, and we will continue to stabilize and improve our fundamentals. Also, we will strategically expand operations in Australia with Hyundai Capital Australia and ensure we strengthen auto finance in overseas HQs. Next is Hyundai Capital America, HCA. With continued strong demand from American consumers, we saw the acquisition rate increase 14.1 percentage point year-over-year and auto financing volume increase by 7.6% year-over-year. Improved sales mix led by SUVs and continuous increase of ASP caused financial assets to go up by 24.2% year-over-year. The growth of assets led by new model installment plans has led to installment profits increasing 65% year-over-year and operating profits increasing 32.5% year-over-year. As the U.S. continues to hold high interest rates, the operating costs increase by 34.1% year-over-year, but the operating profits increase 5.9% year-over-year. While there are concerns over asset soundness, the share of prime customers in HCA's portfolio still stands at 90%. The market price of used cars is dropping, yet at a gradual pace. Leased assets are less than 30% of the portfolio, contributing to stable management of residual value. In 2024, continued high inflation and political events and issues in the U.S. is bound to lead to changes in the market, but HCA is expected to see sound asset growth. With strengthened procurement competitiveness and securing sound fluidity, we will continue our efforts to provide support for auto sales finance in the US. This is all for the presentation from Finance. Thank you for your attention. This concludes our presentation.

The first question will be presented by Yongmin Kim from CGS International.

Hello, I'm Yongmin Kim from CGS International. Thank you for the question. Our sales savings have increased significantly compared to last year. What was the most important factor that affected this? Or were there any specific factors that affected this quarter? I wonder if it has increased like this. And secondly, you mentioned that there is a reduction in cash flow in the financial sector. I wonder if this is reduced by any standard, whether it is related to the market trend or whether it is decided by other factors. And lastly, in terms of profits, the fact that MIX and incentives have been reduced means that I think the segment or the type of car that should be sold with a lot of incentives and a car that brings up MIX will be different, but I would like to ask if you think it is possible to continuously improve the profits through MIX improvement when it includes future incentives. Thank you.

Thank you for the opportunity to ask a question. I'm from CGS International. First of all, my first question is about the sales assurance increase. Were there any other elements affecting this aspect? Or in the first quarter, were there any other subsidiary elements that affected the increase of sales assurance cost? And my second question is related with the finance segment. You said that there was an improvement in terms of cost reduction, and what were the standards or the criteria? Was it related with the market default rate decrease? And lastly, my third question is related with the offset between the incentive increase and mixed improvement. I believe that there are different types of vehicles that are affecting these two elements, so I would like to know what you see and how you view this aspect in the future.

First of all, I would like to answer the first question. It seems that the incentive cost has gone up a lot compared to the previous winter and the previous winter, but we have not specifically reflected the cost of one-time cost. The reason why it went up compared to the previous year was due to the exchange rate, but the exchange rate at the end of March First of all, let me answer to your first question about the incentives cost.

Quarter on quarter, there was an increase and also year on year, there was an increase of the cost. Well, we see that there is this one-off cost issue, and there isn't a specific reason for this, but I would rather say that it was because of the FX rate issue. At the end of March this year, there was an increase of foreign exchange rate denominated liabilities, and they amount to us, in one denominated, they amount to 195 billion won.

At the end of last year, the exchange rate dropped. As the exchange rate dropped, it had the effect of entering the foreign currency while evaluating foreign currency. So, as the difference was reversed, it seems that the 3-minute medium-term bond bond is about 3.8 billion won.

In reverse, I would view that the year-end last year, there was a reversal effect of FX rates on liabilities because in the third quarter, there was a provisional liability impact with the amount of 380 billion won.

In comparison to the previous year, in the first quarter of the previous year, in the first quarter of the previous year, in the first quarter of the previous year, I'm going to re-evaluate it. In 2015, there was a deposit-related deposit that we caught. The balance was left, but the balance was reimbursed according to the world standard. The amount is about 300 billion won. In fact, if we compare the profit and loss of the previous year, it is about 600 billion won less than the previous year. If we exclude the reimbursable deposit and the reimbursable effect, it will be less than the previous year.

Also, compared to the first quarter last year, in accordance with the accounting standards, there were allowances that were re-evaluated. The residual value was about $300 billion right back. If we compare the profit and loss year-on-year, there was an impact of about $60 billion decrease. So, if we compare this in the amount of the write-back for the incentive cost year-on-year, then there will be actually the reversal effect.

The second question is for Mr. Lee.

Yes, I am Lee, the Director of the Hyundai Capital Management Department. The second question is about the reason for the increase in line costs, I mean, the reason for the decrease in line costs. Because Hyundai Capital's asset portfolio is more stabilized than the market environment. As I explained earlier, the share of car finance increased by 82.4% from 80.2% at the end of last year to 2.2%. Since the quality of car finance is better than non-car finance business, Let me answer to your second question. I'm Lee Hyung-seok of Hyundai Capital.

I will say that it is not related with the market environment, but rather it is because our asset portfolio is more stabilized. Because we are increasing our automotive segment portion from 80.2% to 82.4% this year, which is up by 2.2 percentage point year-on-year. So in the finance segment, rather than finance segment, the automotive segment is highly profitable. So that's why we are stabilizing and also strengthening our asset portfolio. And in terms of the default rate as well, more than 30 days is being seen. And year-on-year, we are seeing the ratio from 1.2% to 0.91% increase.

I will tell you about the third question. I told you that the incentive level is a little higher than we planned, but it is in the range that we can manage. That is to tell you the overall incentive level. When we look at the number of cars, we use fewer incentives than planned for cars such as SUVs and hybrid cars. In the market, the demand for electric vehicles is rapidly decreasing, and the level of incentives is high to respond to it, so the overall incentive is rising slightly above the plan.

Let me answer to your third question about the incentive level, because we are seeing the higher number as of now, but it's within our manageable level overall. If we see the different car segments, including SUVs, passenger vehicles, and hybrids, the incentive level is actually lower than our plan. And in terms of EV, the incentive level is higher. And again, we are saying that it is within the manageable level. And overall, because of the mix between these two different segments of vehicles, it seems like the incentive level is a little bit higher.

So I think this trend will continue for the time being. So we will continue to increase the sales of SUVs. And then, we will increase the sales of We will increase the sales mix of the hybrid, which is almost the same level as the built-in system, and reduce the mix of EVs a little more. Overall, we will ensure that the incentive level can enter within the range we manage.

I believe that this trend will continue for the time being. In the meantime, we're going to increase the portion of SUV, which is highly profitable, and also between hybrid and EV. For a hybrid, the profitability is higher, which is equivalent to the level of ICE. We're going to increase the portion of hybrid. We're going to continue to monitor the mix between these two different segments. We're going to reduce the portion of EV as well.

I'm highlighting that the incentive level is within our management level.

And I would like to clarify that I mentioned we will reduce the portion of EB, but it's within our portfolio, not reducing our market share in the market. So our market share of EV will continue to be maintained.

The next question is from Mr. Hwang from Merrill Lynch Securities.

Hello, I'm Mr. Hwang from Merrill Lynch Securities. I am interested in gross margin. First of all, it is impressive that the high number has come out despite the fact that the production has decreased compared to the previous year and the previous year with 20.7%. I fully recognize the mixing effect you mentioned. But from the point of view of charging, the impact of the hybrid mix, the SUV impact, and the local mix, How much does it affect and how much does it need to be determined in the future? The part I want to ask is that it may be a little difficult to tell you the exact numbers, but when comparing it with the trend in the second half of last year, I am curious about whether the U.S. margin rate or revenue level of the first quarter is similar to the current U.S. margin rate. Second, when the sales profit rate of the hybrid side is compared to the second half of the year that we have recently updated, Lastly, if we go to the Hyundai Capital America website, we can check the delinquency rate. Please check if the share of prime customers is rising recently among the backgrounds that can maintain such a stable portfolio.

I have three questions today. The first one is regarding your performance in the 1Q of 2024. You have an impressive growth margin of 20.7%, and I believe that it is because of hybrid mixes increase, SUV mixes, and regional mix improvements. If you compare that to last year, the second half of last year, do you think that it has improved in the U.S. in terms of profit margins and profitability, or do you think it is similar? My second question is about the hybrid profit operation margin. I would like to see if it has improved from the second half of 2023. And my third question goes to HCA. If you go to the HCA website, you can check the delinquency rate there. And I would like to know the background of why the portfolio has improved. Is it because you have more prime customers, or is it something else?

I'll tell you about the first question. In the first question, you asked about the margin rate in the U.S. compared to the second half of last year. Compared to the second half of last year, as I said earlier, the electric vehicle sales in the U.S. are going up a lot, but as the number of exports to the U.S. increases, So let me answer your first question regarding the profit margin rate of the US.

You asked about the comparison between 1Q of 2024 and the second half of 2023. Yes, we have seen an incentive increase in EVs, but we have also seen an increase in exports to the U.S., and we are seeing more favorable conditions in the offset straight as well, which is why we are seeing an offset. We can say that our margin rate is similar to the second half of 2023 or is slightly better.

Yes, the hybrid operating rate is also slightly better in the second half of 2023.

Yes, also for hybrids, our operating profit margin is similar because of the F-exchange rate, and also we're seeing a decrease in raw material prices, especially in lithium-4-EB.

As you may be well aware, the raw material prices decrease will be reflected in the next quarter and I believe that the trend will continue on to the next quarter and to Q.

The third question is for Mr. Lee Hwang-seok.

The third question will go to VP Lee Hwang-seok from Handy Capital.

Yes, as you said, the prime customer share has increased due to the main reason for the stabilization of the HCA rate. To give you a simple number, 80% in 2020, 83% in 2022, To answer your third question, yes, you're correct.

We are seeing a stable delinquency rate because of an increase of prime customers. If we look at the numbers, in 2020, we had an 80% of prime customers. In 2022, 83%. And in the first quarter of 2024, we have reached 89%, which has contributed greatly to reducing and stabilizing our delinquency rates.

Thank you very much for the call.

I have three questions. So the first one is, In regards to the recent news about UAW getting approval at one of your peers in the U.S. in the southern states, how do you think that may impact your operation in the U.S.? And then the second one is, it seems that in the U.S., your mix continues to improve. despite the concerns on higher rates and softening economy. So, do you see that the plan will be sustainable? And the third question is, what was your net cash position for the auto division as of the end of first quarter? Thank you.

Hello, thank you for the question. I am the CEO of JP Morgan. This is the first question. There are three questions in total. The first question is about the U.S. trade union UAW. How do you see the impact of the U.S. trade union UAW when compared to global peers? The second question is about the U.S. trade union UAW. How do you see the impact of the U.S. trade union UAW Hi, good afternoon.

This is Jayoung Koo, head of IR. Thank you for your questions. With regards to your first question about the UAW, Yes, we have seen the news about the UAW approving one of our peers in the southern part. As of now, as far as we know, there are no plans yet of any UAW formation at our firm, but nevertheless, from a salary perspective, of course, the previous UAW increases in the wages have definitely had some impact on our overall, but the overall labor cost for our U.S.

operation is relatively small, so it's not going to be very meaningful from that angle. And your second question with regards to the improvement in the mix, yes I mean as you know

Several years ago in the U.S., our SUV mix was about 50% or so. Now we are at about 75% to 80%, which is pretty much in line with the industry average. We do see the mix improvement in the sense that we will continuously increase our higher proportion of the SUVs like the Genesis. So we do see that kind of trend sustaining over the next several years going forward.

The second question is about the improvement of our mix in the U.S. A few years ago, our mix in the U.S. was about 50%. Now, the U.S. region has 75-80% of our mix. And your final question was on the net cash position.

ex-finance in the first quarter of 2024 was about $16 trillion. which slightly came down over the previous quarter of about 17 trillion won.

Next question.

The next question is from Eun-young Lee from Samsung Securities. Hello, I'm Eun-young Lee from Samsung Securities.

I want to ask two questions, but there are a lot of questions about incentives today. Earlier, you said that the incentives for electric vehicles are being spent a little more than planned, so you are reducing the number. It's not the next release, In the fourth quarter, the new factories will start operating in the United States, and next year, the Ulsan Electric Vehicle Factory will also start operating. However, it seems that it will be difficult for the electric vehicle demand to improve until next year. Then, shouldn't we continue to see the incentive level go up as the new electric vehicle factories return? I would like to ask for your opinion on how you can manage this overall profit management. Secondly, there is a lot of interest in value-up in the market, and I was really looking forward to this performance, but you said that it is being reviewed, so is the direction of this review focused on the dividend side, or is it focused on the self-serve and the purchase and sale section, or is it focused on the overall balance aspect? How much return will you make? Are you moving under this plan? And you didn't specify the time, but we know that we are doing CEO Investor Day around June. Should we think that we will announce it by then? Thank you.

Hello, I am Yimun Young from Samsung Securities. I have two questions today. The first one is about the EV incentives. You mentioned that you are seeing an increase in EV incentives and you're going to decrease the number of units. But I know that this year you have plans to start operations in HMGMA and also next year for the Ulsan EV plant. I know that the demand will significantly increase until the next year. So do you think that increase in incentives will continue in this trend? Do you think that the incentives are in a controllable or manageable state? Second is about the value added project. I know that the value of project, sorry, it's a very hot topic, and I know that you said that you were reviewing the value of projects. Can you tell us a little about the direction that you're headed towards, maybe about the dividends? Do you think that it will affect, it will be regarding the treasury stocks, or do you think that We will buy back or see cancellations of it. I know that in June that we have the CEO Investment Day. Do you think that you will announce your plan then?

Yes, I will tell you about the first question. We are planning to start HMGMA in April next year or at the end of the year. When HMGMA starts operating and electric vehicles are produced, the sales of electric vehicles will increase, and the incentive level will rise accordingly. We plan to invest in the facility with a factory that can produce hybrids at the HMGMA electric car factory. Not only the amount of electric cars, but also the amount of hybrids is increasing. To respond to that, we plan to add more factory equipment so that we can import more hybrids. To answer your first question, yes, we will be operating the HMGMA maybe in the F42 or in October, and you mentioned concerns about the incentive levels being heightened.

But HMGMA is not an EV dedicated plant and we will also be producing hybrids as well. We're currently investing in the facility and also we're installing new equipment to operate HMGMA with hybrids. If we operate HMGMA, we will be able to receive the 7,500 tax credits from IRA and that will not affect an increase in our incentives.

Yes, for hybrids, we are also investing in the system.

We only had systems for large and mid-sized hybrids. but we are also trying to invest in compact size hybrids as well, and that will allow us to have systems for all size SUV hybrids.

I will answer the second question. We know that there is not a lot of expectation for the value program through investment in NDR, and we are currently gathering various opinions. Since the government has not yet released an accurate guideline, the government said that it would announce it in the first half of the year, but regardless of that, we are still reviewing it. When the detailed plan for the first half of the year comes out, we will finalize our plan and communicate with the mayor after receiving the approval of the board. It is difficult to tell you the exact time now.

Yes, to answer your second question, we do understand the excitement for the Value-Out program. We are listening to a lot of voices, but the government has not provided us a detailed guideline. They said that they're planning to in the first half of this year. We're still undergoing reviews, and if there is a detailed guideline set forth by the government, we will also come up with a concrete plan. and we will seek approval from the BOD. Only then can we really discuss it and announce it to the market. As for an exact date, it's very difficult to set the exact date as of now.

Thank you for your question.

I'm Kim Sung-rae from Hanwha Investment. The last question will be presented by Sung-rae Kim from Hanwha Investment and Securities.

Thank you for your question. I'm Kim Sung-rae from Hanwha Investment. I'd like to ask you a question about the current status of the sale of global do-seong on the 4th page. Recently, in fact, even if I talk about it last year, I saw that the sales demand in the United States or Europe, which can be seen as our leading market, would be a little lower than that of Korea, but it was confirmed that the demand is getting a little stronger than I thought. In that respect, there is a difference between the European market and the US market, and the sales volume in the US market is still strong in the case of retail. In the future, these parts will be a factor that will reduce the overall volume and limit the market share. In the case of Europe, it is a factor that will reduce the overall volume There was a sharp increase in the volume of Volkswagen, and in the case of North America, in fact, Japanese companies are very weak in the hybrid center, so I would like to know more specifically about what our alternative strategy is for that. In a way, I think this will be more related to the hybrid strategy, but in a way, if you look at it now, the amount of hybrid has been significantly increased, but compared to the industrial demand of the overall hybrid, compared to the increase in industrial demand, The increase in the number of jobs in the first quarter has increased by about 13%. How can these things be expanded? In particular, I expected that there would be a lot of benefits because there are not many companies operating hybrids globally, including jobs, but there are concerns that the benefits are not as small as expected. Please answer this question. Thank you.

Thank you for the opportunity to ask a question. I would like to go back to the page four about the global sales status. Last year and we thought that in the U.S. and Europe market where are the major markets for HMC, we expected that demand will slow down a little bit, but rather than that, we saw that the solid demand is continuing. So in that aspect, in those areas of EU and North America, how do you view the sales volume going forward? And in North America, as of now, we see the very solid figures. But in terms of the retail figures, there is a little bit of gap. And in the future, going forward, how do you view the overall volume? And would there be any impact on the market share as a whole? Because I have a little bit of concern about this. Also in the EU market, especially Volkswagen has seen an increase of their sales volume in the first quarter. Also in the North American market, the Japanese OEMs are expecting to increase their hybrid vehicles. What are your strategies to respond to this market situation? And along with this, in terms of the hybrid strategy, I think that your number is pretty solid. But compared to the industry level and industry demand level, first quarter result is about 13% increase for HMC sales number. We think that it's going to be increased in the future. And also for the global players, I think that the benefits from this market will not be so large for HMC compared to other hybrid makers. What do you think about this?

Yes, I will tell you about the first question. First of all, let me tell you about the U.S. market. The retail sales in the first quarter increased by 9.7% compared to the previous year. The retail sales increased by 0.7% compared to the previous year.

First of all, let me touch upon the U.S. market. In the first quarter, for wholesale, the year-on-year number is increased by 9.7% to 240K units, and for retail, it increased by 0.7% to 200K units.

In terms of the market share, it is 5.4% and a little bit of decrease which is 0.2% year-on-year.

However, if you see the trend, as of March this year, the market share is actually 5.7%. And we expect that the trend of growing this number is continued. And I think that it is possible that we can meet the target for the market share in the U.S.

market. And now, Santa Fe and Tucson Facelift are going to be released in the U.S. market. Santa Fe is currently in sale, so it will take some time for the sale to continue. And in terms of the U.S.

market, we will be seeing pretty solid growth in Santa Fe and Facebook, which is going to be launched sooner or later. So I think that from the second quarter, from wholesale for these vehicles, it will lead to retail. So I think they don't need to worry about the trend or the inventory level because of the difference between the wholesale and retail.

We are also thinking the same way in the European market. In Europe, Santa Fe will be launched in March. In the European market as well, we see the similar trend and we have the same thought because in March, the all-new Santa Fe will be launched and also Tucson facelift as well will be launched.

and then the gap between the retail and wholesale will be reduced.

Yes, the last question was about the hybrid sales expansion strategy. In the first quarter, we sold about 97,000 to 98,000 units. Compared to the previous year, this has grown by 17%. And then, the business plan is about 28% growth. And on your last question about the hybrid strategy, yes, we are continuing to expand our hybrid volume.

And in the first quarter, the sales unit was 97,000. And year-on-year, it was an increase of 17%. And we're going to increase the number to 480,000 units, increased by 28%, and that is our business plan. And year-on-year number, the figure will be increased by 100,000 units. Since the market requests more demand and volume from our company, we will continue to increase our supply for hybrid models.

For your reference, in the domestic market, the number of vehicles that are on the backlog is 14,000 units, so we are trying really hard to meet the market demand.

This concludes the first quarter earnings result of H&E.

Thank you for listening.