本田技研 (HMC) 2025 Q3 法說會逐字稿

Thank you very much for sparing your time to join us here today.

We now like to begin Honda Motor Company Limited FY 2025, third-quarter financial results briefing.

Allow me first to introduce the executives in attendance.

The Director, Executive Vice President, and Representative Executive Officer, Shinji Aoyama.

How do you do?

And Director, Managing Executive Director, and CFO, Eiji Fujimura.

Thank you very much.

Now first, Mrs. Aoyama will overview the FY25 third quarter financial results and FY25 full year consolidated forecasts followed by Mr. Fujimura's explanation on the details.

Mr. Aoyama, the floor is yours.

Thank you for your continued support for Honda's business activities.

Thank you very much and let me explain the financial results for the FY 2025 third quarter.

First, let me highlight the key points.

The FY 2025 third quarter a cumulative operating profit was JPY1,139.9 billion with an operating profit margin of 7.0%.

In motorcycle business, sales volume remained strong globally, and third quarter cumulative total was 15.5 million units.

In automobile business, consolidated unit sales volume decreased by 297,000 units year-on-year despite solid sales in North America due to drop in Asia, mainly China.

Operating cash flow after R&D adjustment representing funding for future investments remained at the same level year-on-year at JPY1,945 billion.

The FY25 consolidated financial forecasts are unchanged.

Operating profit JPY1,420 billion.

Profit for the year JPY950 billion.

Motorcycle unit sales has been revised upward to a record high due to strong global sales.

Automobile operations, mainly due to decline in Japan, is revised downward to 3.75 million units.

However, due to rise in motorcycle sales and exchange rate, operating profit and profit for the year forecasts remain unchanged.

A resolution was made on December 23, 2024, to repurchase JPY1.1 trillion worth of company shares.

JPY184.9 billion has been acquired as of January 31, 2025.

We will work to complete repurchase of JPY1.1 trillion in shares.

Next, the situation in the major markets.

Regarding motorcycle operations due to strong demand in India and Brazil combined with economic recovery in Vietnam.

Sales exceeded the same period last year.

Automobile business saw an increase in Japan and the United States, but due to the severe market environment in China, total sales dropped year on year.

In Japan, sales volume in the third quarter was lower than the same period last year due to fierce competition amongst the others.

The cumulative consolidated financial results for FY25 third quarter is as follows.

Operating profit increased by JPY63.5 billion year-on-year, totaling JPY1,139.9 billion.

Equity method investment profit decreased by JPY94.5 billion, a loss of JPY27.2 billion.

Profit for the period attributable to owners of the parent company was JPY805.2 billion, down JPY64.3 billion.

Consulted financial forecasts for the fiscal year ending March 2025.

We maintain our previous forecast for both operating profit at JPY1,420 billion and current profit attributable to owner of the parent company JPY950 billion.

Exchange rate assumption is JPY152 against the dollar for the fourth quarter and full year.

The forecast for the annual dividend remains at JPY68, unchanged from the previous announcement.

Additionally, a resolution was made on December 23, 2024, to repurchase JPY1.1 trillion worth of company shares.

As of January 31, 2025, JPY184.9 billion has been acquired.

Cumulative FY 2025 total of acquired shares is JPY472 billion.

Mr. Fujimura will present the details of the financial results.

I'll explain the results of the third quarter.

Regarding the cumulative unit sales until the third quarter in FY March 2025 of the group.

For the motorcycle segment, due to the year-on-year increase mainly in Asia, 15.508 million units sold for automobile segments due to decrease in Asia, mainly China. 2.817 million units sold.

And for power product segment due to decrease mainly in Europe, 2.516 million units were sold.

Consolidated financial results of the cumulative third quarter were explained already.

Next, I'll explain factors of ups and downs of a profit before income taxes of cumulative nine months year on year.

Operating profit increased by JPY63.5 billion year-on-year because of the following factors.

Regarding our sales impact, our profit increased due to the rising sales unit.

However, incentives went up, thus the profit was squeezed by JPY104.3 billion.

Regarding price/cost impact thanks to the pricing that commensurate improved the product values, profit increased by JPY376 billion.

Regarding expenses due to incremental labor and the subcontractor costs, profit squeezed by JPY54.3 billion. R&D

cost increased JPY97.5 billion downward impact on profit and the currency effects squeezed the profit by JPY56.3 billion.

Profit before income taxes were down by JPY38.9 billion because of the profit of equity method declined due to a drop of the [EBIT] sales in China and so on, although operating profit itself increased.

Regarding the operating profit by segments, JPY501.6 billion for our motorcycle business and JPY402.6 billion for automotive, and JPY244.9 billion for financial service businesses and power products and other businesses made losses of JPY9.3 billion.

Next are the cash flows.

Free cash flows from the businesses excluding financial services businesses were JPY693.7 billion during the first nine months cumulative of the FY March '25.

Net cash at the end of the quarter was at JPY3.7789 trillion.

Operating cash flows after R&D adjustment were JPY1.945 trillion.

Next, I'll explain consolidated the business forecast of FY March 2025.

Regarding the projection of the Group's unit sales versus the previous forecast, unit sales of the motorcycle will be JPY20.6 million, mainly reflecting the increase in Asia.

And units of automobiles will be 3.75 billion, mainly reflecting the decline in Japan and those power products businesses will stay at 3.66 million, same as the last forecast.

I've covered the forecast of the consolidated performance of the FY March 2025.

Next, let me explain factors behind the changes in profit before income taxes year-on-year basis.

Operating profit will be up by JPY38 billion year-on-year.

The breakdown of the differences will be regarding the sales impact, although the incremental unit sales will push up the profit, however, the higher incentives and so forth will squeeze the profit by JPY198 billion.

Regarding price/cost impact, pricing reflecting a product value improvement and so on will add profits by JPY535 billion.

Expenses will increase by JPY73.5 billion squeezing the profit, and R&D cost will increase by JPY125 billion, squeezing the profit too.

And the currency effects will impact negatively on profit by JPY100.5 billion.

Although operating profit itself increased, the profit before income taxes will drop by JPY177.3 billion, reflecting a decline in profit of equity method.

Because of the reduction in unit sales in China.

Next, let me explain the differences in a comparison to the previous forecast.

We will keep the same operating profits of the previous guidance of which, the breakdowns will be.

Motorcycle sales will increase, however, the unit of automobiles will reduce.

Thus, the sales impact will squeeze the profit by JPY27.5 billion. Price/cost

will squeeze the profit by JPY15 billion.

Expenses will increase by JPY5 billion, reducing the profit, and the currency effects will push up the profit by JPY47.5 billion.

Profit before impact, taxes, before -- income taxes will be expected to be higher by JPY30 billion reflecting yen depreciation causing ForEx gains.

Lastly, this is a forecast for capital expenditures, depreciation and our -- and the spending.

And that concludes my presentations.

Thank you very much.

And thank you for your listening.

And now we'd like to proceed to Q&A.

As we have pre-informed, we will be taking questions via Zoom.

Currently we are receiving a number of inquiries regarding our business integration.

However, those questions will be addressed when our President holds a news conference from 4:50 PM.

So we would like you to refrain from asking questions regarding to our business integration and focus solely on the financial results related questions.

We ask for your understanding and cooperation.

(Operator Instructions)

First question.

From [Toyo Kezai, Mr. Yokohama] please.

This is Yokohama from Toyo Kezai.

Can you hear me now?

Yes.

thank you.

I have two questions.

First, about the full year -- the fourth quarter's plan.

The third quarter is about operating profit, JPY410 billion and you deduct the JPY280 billion for the third quarter.

So what is the reason for the decline and I'm asking the same question.

I think it's related to the expenses.

But compared to the past plans, please talk about the risk and opportunities.

And so that is my question.

And I would like to proceed to the next questions but in the interim announcement, you talked about the EV incentives to quite an extent and I think it was a JPY100 billion increase from the original plan and the third quarter -- after the third quarter as of February right now, North American incentive, how much increase are you seeing?

And are you seeing that the incentive costs are increasing.

And I think that the consolidated for automotive is declining.

So please explain about the incentives in North America.

Thank you, Mr. Yokohama.

I think you've asked two questions, but first about the fourth quarter plan.

And well of the third quarter actual compared to the actual third quarter, we're asking about what about the fourth quarter?

That was my understanding of the question here.

But basically, speaking that the fourth quarter, well it's the end of our fiscal year and so what increases is especially the R&D area and also SGA.

And because it's the end of the fiscal year, there are a number of things that are paid out and delivered to us and so there's an increase in expenditure.

And therefore in the fourth quarter it tends to be the SGA and R&D.

They tend to be, well, roughly speaking, one stage higher.

Well, it's JPY390 billion or a little less than JPY400 billion for the third quarter operating profit, but most of that is SGA and R&D.

So I think that those are the main ones.

What -- North American incentive related items.

Well, slightly, the procurement cost is in some cases, in other words, the finance business I'm talking about here, the procurement cost is increasing, but [debt] included, but it's mostly the SGA and R&D that will explain the numbers for the fourth quarter.

Now about North America and the intensives in North America.

Well, it has increased slightly now, but the procurement cost is slightly higher, and this is also reflected partially.

And in total I think that it's just a marginal increase as a total that is.

And because we're talking about North America on the whole and the intensives of North America on the whole but the EV incentives, if you just focus on the EV incentives in the second quarter, in the first half, I said, there will be for a full year an impact of JPY100 billion.

And just talking about that part, I do think that the number has slightly declined.

In other words, we were able to reduce the incentives, but because of the sales unit volume and also the production, well, these are products being produced at GM, and the production, there is adjustment in the supply.

And therefore, the final vis a vis the supply there -- we have tried to reduce the supply and therefore there is the need to make payments or discuss the possibility of making payments for compensation, et cetera.

And therefore, in the fourth quarter, these things could turn out to be on the negative side.

But right now, we don't have any numbers at hand and therefore they are not reflected right now but there are the possibility of such negative factors in the fourth quarter.

Is there any additional explanation?

Well, yes.

About the fourth quarter, well, to begin with.

Compared to the original plan, I think you were asking what it looks like right now.

But for the full year forecast, the exchange rate, we've changed it to JPY152, but we still have JPY1,420 billion operating profit and it has been covered, offset by the motorcycle, but -- and it has not been fully offset for the automotive.

And therefore, for the full year, it in fact [sometimes] it will be negative, but the third quarter, the motorcycle business did offset the automotive business, and there was the weakening of the yen and there was about JPY30 billion compared to the budget add on to -- in the third quarter.

So, the full year negative has more been skewed to the fourth quarter and that is the difference between the last time and this time.

That is all.

Thank you.

Next, question.

Asahi Shimbun Newspaper [Mr. Nishiyama] please.

I'm Nishiyama from Asahi Shimbun.

Can you hear me?

Yes, please.

So thank you for the explanation.

And I have two questions.

First one, earlier, the question was already covering this point, which is automobile business profitability as compared to motorcycles.

In a way, motorcycle business is a very good, that is the [factor] behind.

However, in order to improve the profitability of the automobile businesses, of course there could be another separate discussion about business integration so on forth, but what is your measures for improving the profitability of the cars.

And then in the last presentation, and that time around there was Trump's administration topics talked about a lot and then tariff for Canada and Mexico is to be risen.

Of course it is a frozen for a month, but we don't know when (inaudible) will be coming back again, and what is your measure against that.

And once the tariff is in place, what is the impact on your businesses?

Thank you very much, Mr. Nishiyama.

So profitability of the automobile businesses.

To start with our recent situation, the revenue for this year.

Looking at that revenue, of course, that may look a little lower, especially in comparison to the -- that of our motorcycle business.

However, in order to give you the precise answer, for instance, battery EV development cost and battery EVs sales volume is not so high in North America and in China.

However, if battery EV businesses and those investment in the development, well, that is deducted from that.

The remainder will be the ICE and hybrid businesses.

And for that part alone, actually the situation for that part is not so different from the previous term.

The profitability is about 8% for that part.

Therefore, hybrid and then gasoline-based engine cars have profitability that is far improved from the previous situation.

That is a kind of overall picture.

And battery EVs, we are preparing for the business of battery EVs now, for instance, GM production, that was the starting point for North America.

And then right next fiscal year, we are going to produce and launch the cars that we developed by ourselves in North America and the US.

And as of today, I wouldn't say that that will be making a very good business right at the start.

However, including the preparation for the next gen cars, we are going to improve the businesses of the upcoming models, and we will spend the development efforts with investment, which will improve the situation furthermore.

And then, profitability of the global businesses.

From these middle years '27 onwards, we already explained that in December last year, next generation hybrid, starting around middle year '26 or '27.

And the hybrid in those years will be of a much higher profitability and also a commercial values of those will be much better.

And with them in place it will improve the profitability of the entire businesses, including ICE cars and hybrid.

And then Trump administration after the March 1, the question is still hypothetical, I should say, however, if I want to try to answer your question squarely.

Thank you for your question, of course.

So suppose, in March 1, 25% tariff is started, if that comes in place.

So the impact on the business, up until March this year, there could be perhaps a JPY20 billion-plus impact that is the assumption as of today.

However, it is a super short-term impact, right?

Production in Mexico, Canada, we have those productions in there and we will try to bring over those products from those two areas to the US earlier, perhaps you know, February.

And that is our actions in the short term.

And in terms of the tariff increase, again, in the big picture of course every year the situation is rather different.

However, about one-third were -- higher than one-third of the businesses are using the componential product road down from Canada and Mexico.

The remainder of the two quarters, two-thirds are produced in the US, therefore, our second highest local content of the production of the vehicles next to Ford in the United States.

And the question is how effective would that policy would become?

In fact, it is very difficult to visualize it.

So at this moment, what we can do is to do something in the short term, which is about current production based on the current model mix and production in Mexico and Canadian factories.

We could -- we organize the mix product mix of the productions that were there.

This is something we can do short term.

But in a midterm perspective, we could, change the allocation of the model mix in a different ways.

We are preparing for that too.

However, we have a possible actions and the consideration for short term, midterm, long term, so forth, but we don't really give a goal at this moment for any of the actions on the table today.

So Fujimura-san, anything to add. please?

So again, the tariff.

So what is the approximate estimate of the impact based on the simple calculation, based on the CBU.

Complimentary supplies in the United States, we have the, next to Ford, sort of, local content of the productions, meaning of 60% of the products are produced in the US.

We have some import from Japan as well, but 40% of those are supported from -- by the production in Mexico and Canada and of course.

Those two countries are also dependent on the US too.

And at the moment we're talking about the sales in the US which pertains to the production in Mexico and Canada.

Last year, it was about 550,000.

And Canada is dependent on the US for 40,000 and Mexico is dependent on 20,000.

That adds up to 610,000 units.

And of course that depends on the type of models, but suppose cost 30,000 for the cost of those cars.

And then 25% of the tariff to that amount of the money.

That way you can calculate impact on the cars plus you can think about others like steels and aluminum, other miscellaneous materials and so forth.

But that could be like a four digits, high end of the four digit figures I suppose.

As much as I could expect as an impact.

And my colleague Aoyama said about our short, mid, long-term measures, actions, and when should we trigger to start those actions.

Of course we have to watch carefully what's going on then I decide when to start with that.

Thank you.

Yomiuri Shimbun, [Mr. Narahashi] please.

Narahashi from Yomiuri Shimbun Newspaper.

Thank you.

About the motorcycle sales in Thailand is declining again from the last quarter.

I think it's due to market conditions.

And what impact does this have on your automobile business?

That's my first question.

And the second question about repurchasing your shares.

Well, as of December, yes, there was the talk of the business integration with Nissan.

Based on that, well, now that this has been scrapped, what is the reason for continuing to do the repurchase?

Thank you, Mr. Narahashi.

Well, about your first question, the impact on automotive business, right?

Yes,

Okay.

Yes.

What is your outlook of the Thai market and

--

Okay, I understand.

Motorcycle sales in Thailand this year's numbers compared to last year is quite low, that's for sure.

And this apparently is because of the credit, the difficulty in financing.

And so that is the cost that is clear.

But about the motorcycle sales in Thailand, just looking at that towards the end of last year, well, we have for the low-income bracket, seeing that the income tax was refunded, and the Thai motorcycle sales was better, but still it's quite significantly low year-on-year.

Now about automobile and related to the financing and difficulty to secure loans, I think this is continuing and therefore the market, both in the motorcycle and automotive market in Thailand, it has been on the decline for the past year or so.

So given such circumstances, however, as for motorcycle business, well, the Thai market, we have an 80% market share and therefore we want to maintain this share and wait for the market to recover, should I say.

And as for the automotive business.

On the macroscopic level, the loan screening is very tough and it's difficult to secure loans.

But in addition to that for the automotive business, there are the Chinese OEM, which are introducing EVs, and I think that this has had an impact.

But for battery EV, 20% -- within the market, about 20% or so are in the passenger vehicle segment EVs, battery EVs.

So it's not increasing but it's rather sluggish, in Thailand, the battery EVs.

But we also have been making effort to sell EVs and we want to work harder next fiscal year.

About your second question, about the repurchase of our shares and why we're continuing to do so.

Well, to begin with, on December 23, we announced that we will start consultation for possible business integration, and at the same time this resolution was made and decided.

But while the talks continue, we try to ensure that this will not comprise any insider trading and therefore that is the reason why we had that resolution and made the announcement.

But it was just a matter of timing.

And so I'm talking about the size of the repurchase, and this is the accumulation of the from the past and we want to optimize our equity ratio and, therefore, we believe that the timing of which this was resolved was just at the time when we were starting the business integration talks with Nissan, but the size of the repurchase and the schedule of the buybacks, well, it was high time for us to do it.

So it was just a matter of timing.

But this was due to the need to optimize and that was some coming from the past.

And we will continue to buy back and nothing will change.

Mr. Fujimura?

Well, let me add some numbers here.

As of the end of December, net cash, it was JPY3.8 trillion, and so it's about 2.5 months' worth from the beginning of the month, due to the Lehman crisis and others we have experienced.

From that experience, 1 month's worth of cash is something that we want to hold normally.

So -- but, against that, it was a 1.5 months' worth rather, so, it was 1.5 months worth rather.

And so we want to make appropriate our equity ratio.

And so PBR one-fold, that was our target and instead of holding cash at hand, we want to return to our shareholders and therefore we have decided for a buyback of JPY1.1 trillion.

And as Mr. Aoyama has explained, this was not because of the business integration talks with Nissan.

This JPY1.1 trillion program, once it is completed, we will have a one-month level of cash at hand.

So we think that this is the appropriate level.

Thank you.

Thank you.

[Nikkei, Nihon Keizai Shimbun, Mr.

Noguchi] please.

Noguchi from Nikkei.

Can you hear me?

Yes.

Thank you.

So motorcycle and automobile businesses going forward, what is the concept or ideas for the operating profit for them?

For the time being, EV development and SG&A cost is prioritized, and automobile profitability is not growing, may be suppressed a bit.

And also, with the motorcycle businesses we have an electrification going on.

So how much would that grow given the good marketplace too?

However, overall, if you have a mixture of the two businesses, do you think you can grow them together continually going forward?

Or would that be suppressed a bit, or are there any opportunities to grow to?

So that is the question.

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

In fact, it is for the automobile too.

The progress of our battery EVs and the progress that was [that] I think the assumption of that speed is one thing that we have to mind about however, it is kind of difficult to anticipate the speed of that at this moment because of the North America policy situation and the things are quite unclear now.

However, let's start with the motorcycle businesses.

Electrification of the motorcycles is as compared to that of automobiles, we have investment on those for motorcycle and the amount of the investment is not very big as compared to that of automobiles.

With that, we are successfully electrifying motorcycles based on the past technologies of the engines and frames and we are working on similarly with the battery EVs.

We best combine the technologies as a whole, that way we can have the restricted development cost that was successful.

And then as we said with the automobiles, the battery EV cost for the cars is quite a lot, that of motorcycle it is not that much.

And looking at the global motorcycle market today, I think we still have the leeway, the growth potential to -- in India, Brazil in a short while.

We still have markets there, the Philippines, Pakistan, Bangladesh, for instance.

We still have lots of markets that to grow into.

In that regard, even with the ICE engine-based vehicles, we will be able to maintain a high level of the profitability for the motorcycle businesses for quite a while.

And for the automobiles, we covered that a bit in the first question, but we have the gasoline-based engines including hybrid which have the 8% profitability today.

And with the next generation hybrid that comes in in 2029 or '27 or '28, excuse me, those profitability will be growing into the two digits, above 10%.

Therefore, so profitability or business of the battery EV, what would the business be like, this situation.

And we are going to launch a battery EVs newly going forward.

And of course, we will have improvement as compared to the current situation in the United States.

However, as I said, currently the visibility is quite poor.

For instance, IRA income tax deduction so forth.

We thought about LGES battery plants, so forth, would be utilized, with the assumption of $7,500 reduction of the taxes based on the IRA.

That was the original assumption.

And now the question is what will become of, eventually in this picture.

So we can't really say what's going to happen.

Therefore, it is very difficult to tell you the business outlook.

But nevertheless, we like to maintain the high level of profitability with the ICE and current gasoline-based vehicles.

In the meantime, with the battery-based EVs vehicles, we could be more flexible and be more flexible to react to the any given circumstances as we go.

Thank you very much.

[Mr.

Mizutori from Japan Automotive Daily] please

Mizutori speaking.

Can you hear me?

Yes, thank you.

I think you're muted now.

We cannot hear you.

Can you hear me now?

Yes, please.

Thank you.

The first question about China.

So we see that there is a 40% year-on-year decline from April to December, and the E-series and that was, thought to be promising, but there has been a bit longer time required for ensuring the quality.

And therefore locally, the HEV market seems to be developing but how are you trying to make a recovery in China?

That's my first question.

And about the number.

I want to make some confirmation, the full year.

The capital expenditure is JPY70 billion or so less, I think.

So is this due to the revisiting of the exchange rate?

Is there anything that you postponed in terms of your CapEx?

About -- well, (inaudible) first of all, thank you very much for the question.

Now, first about the E-series, yes, the quality, well, yes, in the preparation for mass production, I think, that we were a month or two behind schedule, that is for sure.

But there wasn't any significant problem.

So from March to April, we will be launching.

So I think that this is the current plan.

But the MSRP, the final decision has not been made, MSRP, and the current market, including the incentives, the situation is quite tough, and what pricing we should adopt, et cetera.

These are things that we're still looking into right now.

Well, about the competitiveness, whether there is or is not competitiveness, as we are making announcements locally, about the styling, the appearance, the interior, space, design, have all won a high appraisal.

So we have a high expectation for our models.

But, yes, first, the E-series.

Well, as we've been announcing the past, the E7, the E-series EA7, we'll start with that model.

And then the sedan GT, will be launched and then after EA7, this -- well, we'll have a 3-row seat, large SUV launched, so we are preparing this model too.

So this will be this series.

And therefore, with this we want to establish and expand the E-series.

That is for the current battery EV plan.

Meanwhile, as you know, the NEV ratio in 2024 calendar year, it was more than 46%.

Next year, what will happen?

Well, there are different views on this.

So -- but still, in that case, we are thinking, 55% or more.

So there will be an increase of new energy vehicles.

But for the premier hybrid, we want to go ahead with that.

We want to use the current Accord and CRV and the sister plug-in hybrid vehicles.

And, well, we have an incentive race right now which is quite tough, so it's not selling that much.

But other than that, we think of that basically, next fiscal year, no, maybe the year after, as I said, the next generation hybrid will start mass production in China.

So it's FY27.

Yes, FY27.

So at that timing it will start.

And we want to sell these models, but the NEV ratio is increasing and therefore -- well, if there's a 10% increase, then the non-NEV vehicles will decline, the market -- because the vehicle market will decline by more than 10%.

This is something that we cannot deny.

So next fiscal year, depending -- well, looking at our unit sales, well, we have to assume what market changes will take place and put together a business plan.

Well, yes, and I think that with the NEV ratio increasing, we want to sell our NEVs, that is, the opportunity that we want to capture.

About the second CapEx, so yes, the decline of JPY70 billion it's not really a delay, but instead, it has been postponed slightly.

Well, what we are planning for the end of the fiscal year will be carried over to the next fiscal year, the beginning of next fiscal year.

So that's about the change that we are seeing.

The specifics, can I disclose the specifics?

Well, the battery EV related investment, Canada related, well, there has been -- not really a delay but we've just changed the timing.

Okay, thank you.

Nikkei [Mr. Take] please.

Hello,

(inaudible).

Can you hear me?

Yes.

Thank you.

Two questions.

First one is, the US market automobiles.

In the United States, Trump administration has started and upcoming BEV sales.

What do you think it -- how it would be.

And, well, hybrid demand is good today.

But how do you assess the current EV and the hybrid sales situation?

How would you address current situation.

And the other question is Southeast Asian region.

Hybrid and plug-in hybrid are well accepted, very popular there I heard.

And do you have a plan to be more engaged in the businesses for them.

So please share with us your assessment of how you're going to do about your businesses in there.

Thank you very much, Take-san for your question.

So Trump's administration started eventually.

And then as of now, well, the things keep changing minute by minute, but our stance is to stay flexible and be able to be agile in reacting to the situation.

But as of now, Canada and Mexico and its tariff situation, the current interest point is around that.

And aluminum and steel tariff, 25% on those would provide us some impact of course.

However, those materials like aluminum or steels, it is not too difficult to find out our solution because we have quite a bit of procurement within the country in the US.

A part of the air supplies could be from Canada, from Japan as well, for aluminum and steel.

However, I don't think it is very difficult to address the situation of the tariff for those two materials.

But 25% of this [order] CBU from Mexico and Canada, if that's a tariff policy continues for half a year, two, three years for instance, the, it will be a difficult situation.

So our action might be different depending on how we would assess the upcoming situations like that.

And as of now, like I said before, $7,500 [tax] how would that be eventually.

And also the state of California is having this ZEV regulation.

And how would that be changing under Trump administration, the ZEV and the other regulation in California.

In fact, from the middle-year '26, we had to incorporate the ZEV requirements and then under this regulation, we need to sell more battery EVs.

However, Given the current situation, it is quite difficult to achieve that requirement for the regulation.

And I wouldn't say this is perfectly linked with the Trump's administration intention.

However, the ZEV-related regulation will have to change as accordingly perhaps.

But as for the hybrid, affordably priced hybrid, can be available with a more variety for the choice of the consumers.

That is what's happening today as a fact.

And in case of Honda this year, about 400,000 hybrid cars are to be sold in this fiscal year ending March '25.

And next year it will be a little more, maybe a little less than 500,000 units of a hybrid we expect.

Therefore, this year we have 25% of hybrid cars out of the -- all types, that is our prospect for this year.

And next year, 500,000 units in North America for hybrid.

Therefore, in a global context, this year the volume will be a bit less in China, a bit less hybrid over there too, but this year I would say 900,000 hybrid cars for this current year.

And next year it will be more than 1 million.

That's our assessment as of today.

And what is the benefit for Honda?

I think that was your first question, I suppose.

I didn't understand the intent of the question really.

But about Southeast Asian countries, the demands for hybrid in Thailand and in Indonesian market, the demands for that is mounting.

In Thailand, the hybrid ratio is growing, let's say 30% or so hybrid, I suppose.

Indonesia, the competitor is going ahead, and we are a little behind.

However, the ratio out of the entire market will be like, of course with the battery EV is a bit growing, 6% in Indonesia, hybrid is about 8%.

So out of the entire market, there are still a small percentage, and Honda is a little bit behind as of now, but next year we will be more aggressive launching and selling the hybrid cars in Indonesia.

Thank you.

I apologize for the unclear question, but when I talked about benefit, I was saying that we are seeing an increase in demand for HEV, hybrid and therefore I thought that there might be an opportunity for Honda to sell more hybrids.

So in that context, well you said that there'll be an increase in the United States of some 100,000 units, so I think that you've answered my question.

Thank you.

And one clarification if I may about the North America market.

You said the ZEV regulation will become reality, but what is the realistic number.

And also, the hybrid ratio for this fiscal year is 25%, I think, But next fiscal year, if it were to increase, what will be the ratio for next fiscal year?

Can you add that Explanation, please?

Yes, about the hybrid ratio.

Well this year it's about 25%.

Next fiscal year, there will be an increase of 100,000 in North America, but I think the ratio will be 35%, a little more maybe, about 35% I guess.

And about the ZEV regulation.

I was talking about the industry on the whole.

I think it will be difficult to achieve that regulation standard, but currently looking at the situation, the regulation itself might become something more realistic.

That was what I was trying to say here.

So I really don't have any specifics to talk about here.

We're just thinking that the regulation might be loosened to a more realistic number.

Thank you.

Ms. Take, thank you very much.

And it's time for us to end.

And with this we would like to end our financial results briefing session.

As for the materials, they will be posted on our website.

Once again, thank you for your participation.

Statements in English on this transcript were spoken by an interpreter present on the live call.

The interpreter was provided by the company sponsoring this event.