Honda Motor Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 8, 2024

There are 2 speakers on the call.

Operator

The breakdown is as follows: sales impacts of positive profit sales impact is positive of 360.6 billion, mainly due to an increase in automobile unit sales, price and cost impacts. Although there is an increase in labor costs, positive effects of pricing plus a decline in raw materials such as precious metals is will lead to an increase of JPY 4 JPY 434,000,000,000 expenses negative JPY 353,400,000,000 due to an increase in warranty expenses and others expenses and negative impact of JPY 51,000,000,000 on profits currency effects, a positive impact of JPY 79,000,000,000. Although profit before income taxes expected to increase by JPY565,400,000,000, mainly despite a decrease in equity method profit mainly from China, offset by increase in interest income and others. Next, changes from the previous forecast.

Operator

Operating profit and profit before tax forecast is increased by JPY 50,000,000,000. The breakdown is as follows: sales impacts, negative JPY 11,000,000,000, really due to decrease in consolidated unit sales a price and cost impact. Although there is labor cost increase, pricing relating to the increased product value plus decrease in raw materials such as precious metals will result in a JPY 40,000,000,000 increase in profit expenses, minus JPY 32,000,000,000 is forecast mainly due to an increase in warranty expenses currency effects, an increase of JPY 53,000,000,000. Lastly, the forecast for capital expenditures, depreciation and amortization and R and D expenditures for FY 2024 as shown. There are no changes from the previous forecast.

Operator

This concludes my explanation. Thank you for your attention.

Speaker 1

Thank you very much for your attention. So we'd like to now continue on with the questions and answers. As we have announced before, we are going to take on the Zoom. And because of the interest of time, please limit your questions to 2 questions per person. Thank you very much for your cooperation.

Speaker 1

Your first question from the Asahi Shimbun newspaper, Mr. Wakai, please. Question 1 is Daihatsu obligation problems. You have many K cars by yourself and what is the impact of sales because of that? And those are thought in the location and and development stage, what sort of actions do you take to prevent those non compliances?

Speaker 1

And second question is on auto earthquakes. There should be some reduction of production ongoing today. What is the prospect going forward as a BCP? How do you address the situations, especially with the suppliers involved? Thank you very much for your question, Mr.

Speaker 1

Wakai. Thank you for those two questions. And let's start with the Daihatsu's is broad. And the company matters and we do not fully understand what actually had happened. Therefore, speaking of the financial status and also what we do to prevent such are things.

Speaker 1

That's the thing we can explain perhaps. And in terms of the results, Daihatsu may have a less number of the sales and then the sales of those k cars, whether that will be added to our sales of battery cars. In fact, we do not have any reflections as such effect of additional sales in our account financial results at this time. However, of course, there should be some impact on the sales to a certain extent, however, their cars and our K cars are priced differently, different price range. And also, our gate cars are not really shipped to the general dealers, different sales dealer style, therefore, the impact should be restricted, I believe.

Speaker 1

And also in terms of our actions to prevent such fraud, at Honda, we have those homologation testing And we have those homologation departments who does the testing and application of those matters. These department businesses are separately organized away from the development and the production. And in order for that department to conduct are taste and process for qualification. They already have the well documented processes as to, for instance, how many days it should take until the acquisition of those certificates. And of course, those certification has to be given in order to make the process to go on to the next development process.

Speaker 1

We have the clear rules for that. Therefore, we do not have the error system such that we don't we can prevent the very tight development schedule which might induce the fraud of those kind. And starting from the April 1st, new homologation departments and quality improvement departments are to be a part of the functional department so that they can have the improved and fortified quality governance going forward and in the EV area coming up now, digital as well, maybe in those areas of electrifications or digital things, we would have additional checks, including cybersecurity, I suppose. Therefore, we should make sure we would have a good hand on that. And as a head office, we have a good organization to ensure those control.

Speaker 1

In terms of the Noto Peninsula earthquakes, as we said right at the beginning, we would like to wish for a quick restoration of the affected areas and people there. And our situation is that Tier 1, Tier 3 suppliers, those have a very tight lifeline situations and the possibility of the recovery of the production, the stock levels and so on. In fact, every day, we are taking out the level of the stocks, their situation of the recovery of those suppliers. And every day the situation is progressing. And in fact, our financial statements at this time do not reflect are the impacts by the Northropinish earthquakes.

Speaker 1

However, every day the situation progresses. And as for the recent production conditions, specifically with the K Cars, Mini Cars, so called shaving reduction of the production unit per day is actually conducted now. And we had the operations plans on Saturdays, Sundays, holidays too, but we had to cancel holiday operations in order to adjust production. And we have there about 20,000 units due to that reason. And in terms of the recovery and so forth, we will continue to look into the situation so that we can explain when the situation is clear.

Speaker 1

And in terms of the BCP and the supplier condition, how we control that? Specifically, suppliers operating the affected areas, of course, are making the greatest efforts to recover. And thanks to them, we try to get information about what they do, stock levels and the potential production of alternative manufacturing in other areas globally. In fact, we've had quite a good know how since the last were events. Therefore, at earlier stage, we could grasp the situation earlier.

Speaker 1

So this is the situation today.

Operator

Mr. Okinona, please? We cannot hear you. Can you check out with your microphone? Can you hear me?

Operator

Yes. Thank you. And for the presentation,

Speaker 1

I

Operator

have two questions. We have seen a number of recalls in this fiscal year, and I think it's reached to tens of 1,000. And you say that the warranty is at 353,400,000,000. And does this include all the costs for recalls? Or is it a case that the warranty expense will increase further from what you have already stated?

Operator

Yes, thank you. And yes, in the 3rd quarter, well, the warranty costs, expenses have increased. I did explain that. And so there was a fuel pump Emperor, this incident, so this has been added on. And the fuels pipe.

Operator

First of all, I'd like to express my condolence to the person who has passed away. But this in terms of the accounting, the financial statement, is this reflected in the numbers? Well, in terms of the units, as you mentioned, it is increased to some few million units, and we will respond to this situation. And in terms of the financial statement, we believe that this is a failure coming from our supplier side. And therefore, we will have them compensate for the recall expense, and this is how we've handled it in our financial statement.

Operator

In regards to this case, the warranty expense is not that large. That is our understanding. And the reason why it's large, on February 1, to the U. S. Authority.

Operator

We've already filed notification of a retail. There's a seat weight sensor, and there was a failure with the sequence incentive. And we have added some 55,000,000,000 yen for that recall, and I think that this is a reason that can be attributed to the increase in warranty cost. Thank you. May I have an ask another about your buyback of shares.

Operator

Why did you decide to acquire Oom's shares? Yes, I think there's still room for an increase in shares given the weekend, but and I think that's impact of the interest rate hike in the U. S. And China. But is that the reason behind this decision, the resolution?

Operator

About the acquisition of our own shares. We want to improve the capital efficiency. And recently, the issue is the PBR, onefold. And we have given this, I'd like to start talking from there. We, the management, we are aware of this PBR issue, and we take it seriously.

Operator

And therefore, we are thinking of what we need to do. We believe that is a responsibility for us to take are the steps. It's about 1700 yen. It's about 10.7 folds right now, and it's less than 1 fold, 1.0. And I think there are 3 reasons for this.

Operator

Well, the 3 are, well, for those accumulated from the past and the current and the future. So these are the 3 folds. First, for the past. Over the past decade, capital has increased from JPY 6,000,000,000,000 to JPY 12,000,000,000,000. And so it's 45% in terms of the ratio.

Operator

And so we have to deal with this past that we have. And the current situation is that for a long time, the automobile revenue had dropped, and therefore, the share prices were not increasing because of this situation. But in regards to this, looking at the financial results here. As we've been saying from the past, we are trying to reduce the fixed cost and also improve the revenue of new models. And incorporating these measures and plus, the shortage we are starting to recover from the shortage of semiconductor and therefore, the revenue of automobile business is improving.

Operator

And so this is the current situation and what's more important is the future. Well, the auto sector on the whole, the ship prices are not picking up. This is because in this age of Zev, we really don't know who the winner will be. And therefore, there is this lack of transparency, uncertainty. And I think that this is having an impact on our business.

Operator

But we believe that given the age of 0 emission, we have to come up with our own strategy and try to improve our resolution, so to say, and try to make investment in the growth sectors and try to reap the profit from those investments. So in order to improve this so called resolution, the other day at CES, we communicated that we have a brand strategy in place plus we have technology investment and other strategies to reap the fruit from our efforts in place. And next fiscal year, we are going to have a present press meeting. And so the way we communicate will be changed so that we can gain more understanding from the market. And we will also try to change our way of communicating our technology to the public.

Operator

So this is something that we are thinking of right now. So amongst these 3, going back to the first one, So in regards to our capital here, we want to return to investment. And from the beginning, we have had 200,000,000,000 yen acquisition of own shares, and this program has ended in December last year. So just like that, we are going to maintain that pace. And by the end of this fiscal year, we want to complete this process.

Operator

And given this, we believe that this time, the JPY 50,000,000,000 decision was made, and we just made this

Speaker 1

announcement here.

Operator

We want to be actively investing in the future. And so while we do that, and also, we have to try to continue to earn with the profitability of ICE, internal combustion engine, and we have to invest in growth and have a balanced way and at the same time improve our capital efficiency. This is the management message that we want to communicate to you by announcing that we will acquire our own shares. That is all. Thank you.

Speaker 1

Thank you very much. Are Mr. Tanaka. Next one, Yubi Oli Newspaper. Mr.

Speaker 1

Tanaka, now coming from Yumiuri Newspaper. I have two questions. 1 about semiconductor procurement status now. The production situation is very well good now, but do you think that semiconductor supply situations have recovered fully before the COVID. And the second question was, you said about pretax at projects and profits and you talked about the precious methanol prices.

Speaker 1

And what is the current status of those prices including graphorex are situation 2. You mentioned the reduction of the precious metal prices.

Operator

So in

Speaker 1

terms of the semiconductor supply procurement. This year or from the February, March period in 2023, the situation have been on the recovery. We've done a lot of measures and those actions are getting some fruitful results. And nowadays, it is not a concern at all. Once in a while, we might face some situation, however, recovered now.

Speaker 1

And now we have a full scale of production in place after a long while and until the Q2. So in the U. S. Or the places like that, there were a shortage of the labors at the supplier and equipment are problem because the winds were not running for quite a long time and we had some situations like that. However, those issues have been resolved.

Speaker 1

And in the North America, full scale production continues after a long Stretch of not having 1, but we have a stable condition. And in terms of the precious metal conditions, actually those are utilized in the mufflers or catalyst in the mufflers that is to purify the air emissions. A few years ago, the precious metal prices were soaring really, but in the last several years, prices have fallen because in China, they have progressed the electrification that may be the main reason for the precious metal prices are dropping down. And in addition to that, in electrification efforts, not just automobiles, but when the economy is booming, precious metals or steel, copper, resin, those material prices are to fluctuate a bit and we have to, of course, look at ForEx currency rates as well. We would like to keep watching out all those are factors as we go.

Speaker 1

Thank you very much. Thank you, Mr. Nakamura.

Operator

Next question, please. Can you hear me? This is Yoko Elba from Toyokizai. Thank you. I also have 2 questions.

Operator

The first is about the full year forecast. Well, until the Q3, I think that you are making good progress about the content through the Q3. I think Q4 will be showing a slowdown in your operating profit increase. What's the upside and downside? In automobile and motorcycle, power products, I think the situation will be different.

Operator

But can you share with us your perspective towards the full year forecast. Can I continue the second question about China? Well, currently, I think the unit volume is increasing, as you say. But at the last presentation, I think that there is a severe competition, there's a discount race in China. I understand that is the situation, but how do you see the Chinese market environment?

Operator

You are I think Mr. Fujima talked about the need to cut production capacity. So what are your thoughts on China? Mr. Okema, thank you very much.

Operator

In terms of the numbers, the 4th quarter outlook. Rather than talking about that, I know I wasn't asked to talk about this. I would like to give an overview of the financial results at this time. Well, this Q3, the October December 3 month actual, we had a $380,000,000,000 operating profit. And so the breakdown of the automobile and motorcycle is RMB 160,000,000,000 each.

Operator

So RS is 20.1%. It's the highest in terms of the quarterly results for the motorcycle business. And I think the situation is that well, this is continuation of what he explained. There's a downturn in Vietnam and also there is a greater scrutiny in terms of the quality, but in Brazil and Turkey and Europe included, the unit volume is increasing or the profitability is increasing. In Asia, likewise, though there are areas where we see a decreased in unit volume.

Operator

I think that we have a proper pricing in place and other efforts, which is trying to show results. So for automobile, meanwhile, last fiscal year, there was the semiconductor issue. So this was a major challenge, but in North America, it's a +120,000 units. This is mostly hybrid. 2nd quarter, there was a logistics disruption, but this has been cleared already.

Operator

And thanks to this, we have a dealer inventory of 30 days. So this is the standard that we have in place now. So 3 30 days. So we've reached this standard now. In Japan, it's a +20,000.

Operator

This is because of the semiconductor, in sales is in a positive range. Now China, it's plus. This leads me into the second question, but it is are positive, but the Q3 last year, in Q3, the inland area, there was a lockdown and there was impact of semiconductor lie, so it's a quite low number in China. Therefore, year on year, it is a positive because of this. But so there is this shift towards net and also the reduction in ice market, and I think that this situation continues to be tough for us.

Operator

We have to use incentives to compete against the others. This is the situation we have put in place. As for the automobile profit, despite these conditions, as mentioned, the RMB160,000,000,000 Amex's number, we and the realignment of a supplier. And it's related to Yachio. So there was the impairment of the subsidiary, about $50,000,000,000 or should I say 45,000,000,000 that is Yachiyo impairment plus the warranty cost 50,000,000,000 yen so close to 100 1,000,000,000 yen Factors are included here, but we still have this 160,000,000,000 yen and its ARS of 4.6 percent and 9 months, dollars 460,000,000,000.

Operator

So it's a 4x profit from compared to last year. And despite this tough condition, the volume increase in North America and the hybrid success and pricing, these factors are all combined together. And despite this onetime impairment and warranty cost issue. We have our OS6% level. And so I think that this is a situation that we currently have at JPY 600,000,000,000.

Operator

And in 9 months, operating profit, dollars 1,000,000,000,000 free cash flow, dollars 930,000,000,000 so we are in a situation where we are having a record high. And in December, as an outlook, have a JPY 1,250,000,000,000 RIS of 6.2 percent. And so with excluding the onetime events, if we have 135 yen at currency exchange, we think that we have a RLS level of 6.9%. And by 2025, we are aiming towards 7% of the operating margin, but in May, when we close our books for next fiscal year, when we announce our forecast for next fiscal year, I think that we will be able to declare that we have achieved our goal 2 years earlier. The Q4.

Operator

As for the decline, I'm just finally coming to your answer. The Q4, compared to the past 3 quarters, you say that we will see a decline. Well, Karl Gucci will explain about the details here, but especially the suppliers. We have made cost adjustments plus in America U. S.

Operator

And the wage increase from January we began is so there's that cost plus. It's always the case, but we have a fluctuation of our quarterly numbers because of the costs and also R and D, and so these are going down in the 4th quarter. So please, Mr. Kaguchi. Mr.

Operator

Yokoyama, thank you for the question. Now the 3rd quarter versus 4th quarter and the fluctuation in the profit. As Fujimoto has already explained, yes, just as well, to give you some numbers. As was said, the 3rd quarter, just the 3 month, we have some JPY 380,000,000,000 operating and operating profit. And the full year forecast, if you deduct this according to our current plan, the Q4, we are expecting some 170,000,000,000 yen.

Operator

So there is a dropped of some JPY 200,000,000,000, but the reason is because the assumption is the foreign exchange. So this is different. In the Q4, we are estimating JPY 140 against a dollar. The 3rd quarter, the average was about 146 yen against the dollar. And therefore, because of this expense, according to our plan, the premise was JPY 140,000,000,000, so there is a minus JPY 80,000,000,000 or so.

Operator

Meanwhile, the Q3, as was said, the supplier. There was impairment of some JPY 50,000,000,000 and therefore, this part will be netted. And what remains is the 4th quarter skewed cost and also R and D expense. Well, there will be the model development timing and the various activities that are underway, which will influence this. But we think that of expenses are more skewed towards the Q4, and this is about JPY 220,000,000,000 compared to JPY 4, it's a negative in the Q4.

Operator

And, as I explained, a cost part. Again, in North America, mainly, the wage increased and labor costs and inflation impact. Cost is on the rise. And these things also has aggravated the cost situation, plus some seasonality with the suppliers, and we have some adjustments to be made. And these all combined in cost is about an JPY 80,000,000,000 of 3rd to 4th quarter negative.

Operator

So about the upside and downside that you asked, upside is the foreign exchange. It's 146 is 47 yen. So, the well, it's difficult to predict the foreign exchange rate. But if it continues until March, then, according to our competitor plan, it will be on the upside. Meanwhile, the downside of North American economy and also the impact of the earthquake.

Operator

These will be the downside factors. But through our sales activities, we want to minimize the downside as much as possible. That is all from me. Thank you. Mr.

Operator

Yokoyama, about China, about the production capacity. I forgot to mention this, so I have to answer that part of your question. Well, last time, when we make our financial announcement production situation in China, as I said earlier, we have 1,200,000 units capacity, but newly, we have the NAB dedicated factory, 2 factories, so it'll come to 1,700,000 units. And once these new factories I'm sorry, is currently $1,490,000 plus that will the new will be $1,700,000 but we think that $1,200,000 is the appropriate level. So we have to make adjustments for the remaining, dollars 500,000 and for the China, we are talking with our partners.

Operator

Now in terms of how we see the issue, I think our partner sees the same way. We are on the same page in regards to this issue, however, especially in China, when it comes to employment, they are very sensitive. And so I cannot give you any details here. But from the Q2, as I'm saying this, so compared to that, are we are on the same page with our partner and moving forward. This is a progress report, and we have to make adjustments for 500,000 units, and we have to talk to them about how this will be done.

Operator

That is all from me. Thank you.

Speaker 1

Thank you, Mr. Grammar. Next question, Thank you. I have 2 questions. I'll go 1 by 1.

Speaker 1

First question is about current EV sales trend. In our main market in our Western countries, it is slowing down a bit instead of hybrid cars are getting popular. I hear that. How do you see that situation now? With that will that be a kind of within expectations?

Speaker 1

Or would that be a kind of a tailwind for your businesses? And you have a target of 2,040. And what is the impact of that on electrification strategy? Thank you very much, TerKe san. And yes, we get this question quite frequently this based, but in terms of the Western countries' markets, the EV growth is kind of slowing a bit.

Speaker 1

And in the U. S, EV ratio is about 8% recently. That's my understanding. And for us, I think such things can happen. So we were sort of imagining this kind of thing could happen.

Speaker 1

But in the long run, for 2,035 or 2014. In line with the carbon neutrality trend, we need to push forward electrification initiatives. Nevertheless, this is our idea as a mobility company. So as of now, at 20%, 30%, 40% 80% in 2,035% and 100% in 2,040. This is the EV battery EV goals and such goals are to stand, no change, and we will just simply go on for that.

Speaker 1

And we are sort of a latecomer in the area. Therefore we need to make sure that we today, the customer viewpoints to find out and think what is the needs by the customers for the EVs so that we can provide them to them to get a good profit from that and that is the important point of are the same. Therefore, we don't change the strategy. We simply go on what we do. And of course, the situation may change from time in time and of course there is a kind of a lag of several years and so forth.

Speaker 1

And then 2020 into 2020, such things can happen. Therefore, of course, for strategic spending, maybe we can adjust the cash out timing and so on as we go. In the meantime, unit sales should be supported by some means as well and we will stay flexible to support are the situation like that. But in terms of the hybrid, popularity is quite solid. And for sure, out of the ICE models, hybrid will be the kind of bridging technology up until the capital neutrality therefore, our hybrid has been already well appraised so far in the United States.

Speaker 1

Are called CRV hybrid models are available and we have a very good demands and already the like it's a fifty-fifty sort of split between the ICE are petrol based cars and hybrid. And hybrid demand is very good. And hybrids are available for high grade models and it is a profitable model set. And in terms of the incentives as well, hybrid models would not require much incentive. Because of that, this year, perhaps until summertime around, Civic Hybrid will be launched by then.

Speaker 1

And after the 20 27 model onward, hybrid will be the and evolution model such as more compact performance, profitability, body weight, everything will be of our evolution for the hybrid and of we will evolve them further and further. And that much is about North America and Western markets, however, in China, speed is a little bit different. In China, they have the emerging structures from China, they enter into Vietnam, Thailand, where we need to battle in the different ways. And we will keep watching the situation from the global viewpoints and also on the appropriate timeline idea so that we can compete there too. Thank you

Operator

very much.

Speaker 1

The second question, you talked about the challenging market situation in the Jinko market situation in Asia and you mentioned that several times and closing carefully in first half, did you see any changes since the first half closing time? And what is the prospect of our upcoming situation of our Asia market. Maybe, I can answer your question based on the motorcycle because this is because of the year as year. Since the last announcement, the change of the goals are not really happening. There's some differences.

Speaker 1

However, differences are always due to some good reasons in Thailand and Indonesia. Maybe in Thailand, as I said before, the long credit assessment is tougher now and the economy is a bit slowing down in Thailand. Of there are situations like that. However, at Honda Duo Plus is doing good and we are getting the shares getting high. And although we have a higher share now, the market itself is tough.

Speaker 1

And in Vietnam, the export businesses are facing with a tough situation because of the economic stagnation. And I thought the economy would recover quicker. However, maybe this condition may continue to fall this year, 24. And for Honda, value SEK 160,000,000. That's something we have to compete.

Speaker 1

And its market share has marked a very high level. Negative thing could be our own situation though in Indonesia. The market itself is growing in Indonesia. Here, but in the Q2, there was a rushed issue of the error frames because of which we had our unit sales falling down. But we had measures and actuals to recover our trust by the customers and we are leading the sales recovery because of that efforts and Indonesia sales next term, it will be on the positive side, I believe.

Speaker 1

And in terms of the future prospect by different countries in Thailand, first, it will continue with a little bit of negative for a more while. And I don't know it is related to the and there could be some upper limit for loans for the customers starting in April. And when that comes in, the Thai situation is a bit tough. And in India, if our issues are cleared, it will be fine. India, Brazil, Turkey, European countries including Turkey, our positive situation can continue are for a while.

Speaker 1

So thank you for understanding. Thank you very much.

Operator

Thank you very much. I apologize. But in terms of time, the next will be the last question. Can you hear me? This is Mizutori from the DAILIES Automotive newspaper.

Operator

I have 2 questions. The first is about China. Last time, you said that it's about 1,100,000 unit in sales that you're expecting for the full year. That was at the midterm. But is your forecast unchanged?

Operator

Is that understanding correct? I want to double check this. And having said that, next fiscal year, what is the forecast? Well, at the midterm announcement, I think that you were saying that you were thinking that the same trend will continue into next year. Does that remain the same?

Operator

And the second, I'm only asking this question, but about the sales price and cost impact, the waterfall chart that you mentioned. And can you explain about the breakdown? So 9 months and also the full year. So what is the what are the factors that comprise these numbers? Thank you very much.

Operator

In regards to China, the 1,100,000 units that we're expecting for this year, well, this is what we announced at the middle of the year. According to VICCRV, these core models, we have invested a lot of our resources here. And if we underperform, then we think that our market performance as we shift to will not be good for us, and therefore, we think that, well, we are at a rather high price. But in order to maintain our presence, we think that we need to maintain a certain volume for the sake of the future. And that is how we've competed.

Operator

And as a result of the Q3, we have slightly over performed our plan, and it's plus 30,000 from the 1,100,000. The 4th quarter, there is a dealer inventory that has talked up and therefore about 160,000. So we have narrowed down on our wholesale are planned. But looking at the current situation, maybe the number could be larger. That is a pressure that we get right now as of now.

Operator

As for next fiscal year, the current 1,100,000 units plus EV for the EN series, the second of the series will be the first half and the third series will be coming up in the second half of the next fiscal year. And therefore, if it turns out to be 1,300,000 this year, then we think that we could go beyond that. And about the second question, Mr. Kaguchi. Thank you for the question.

Operator

About the selling sales and also the cost impact and what we explained in the waterfall. Let me explain about that. First, about the 9 months. In this, the waterfall, dollars 360,000,000,000 plus was what I explained, of which the pricing impact, this is about 2 70,000,000,000 yen or so. It's a plus $270,000,000,000 of the plus $360,000,000,000 So that is the one part.

Operator

And the remaining $90,000,000,000 is the impact of the cost. That is the breakdown. About the pricing. This is mainly the automotive market. For each region, there are differences in the inflation rate and also, the customer situation plus our model value added situation are different.

Operator

And therefore, we have to examine these closely in determining our selling price. But because of this, we have of the JPY 2 70,000,000,000 for the Ottomans, is about RMB 200,000,000,000 attributable to pricing. The remaining costs, the plus impact the manufacturing cost and also the drop in the precious metal price. This has an impact. So we have these factors.

Operator

And cost, the labor cost is rising, plus there the inflationary trend and therefore there is this cost pressure, cost increase pressure. Of minus $27,000,000,000 but meanwhile, the precious metal and material cost is going down and so is a plus JPY 760,000,000,000. Netting this, it's about a positive of JPY 80,000,000,000 to JPY 90,000,000,000. Now, annually, in other words, how we see the Q4 with the well, throughout the year, the selling price impact. We could think that we'll continue to have an impact because we'll continue the change and also the change in selling price will continue to have an impact.

Operator

So we'll continue to see that impact in the Q4. Annually, as I showed you in the full year forecast, the cost impact is about JPY 430,000,000,000 plus, of which JPY 360,000,000,000 this is full year is the impact of the pricing. Meanwhile, the cost part, well, the material cost, yes, it is declining. But once the declining pace slows down. And then in the 4th quarter, we have incorporated that slowdown, the plus impact, will compared to last fiscal year will come down.

Operator

Meanwhile, the cost, we think of that, the labor cost increase, the wage increase will continue to have an impact. Cost, the plus 9 months is about $80,000,000,000 I said. But for full year, it will be slightly less. The cost of the supplier, we are consulting with the suppliers and sharing information and carrying out activities. That is all.

Operator

Thank you.

Speaker 1

We did not get this question, but I would like to appeal on point. If you have time, though the time is already finished. However, if you could stay on, please so in terms of the summary of the year, financial statements, I didn't say it because it will be too long. But now the thing is that why motorcycle business is so strong. That is the area frequently asked the question recently.

Speaker 1

And we would like the midyear people to understand that fully. Maybe you can write an article that for your for the COVID-nineteen in 2019, we had 220,000,000 units sales globally. Now we have 188 1,000,000,000 units in the plans this term. But back in 2019, our OP was at JPY 290,000,000,000, 14 and our S now we have 500,000,000 businesses and the RP per unit is about 20,000 to 40,000 yen, the profits per 1 unit of the motorcycle. And then, we have a 40 near 40% global share.

Speaker 1

In some countries, we have 80% market share of the motorcycles. And then We have such sales commercial power and we have a well trusted brand power that is are fruit of the cumulative efforts of my predecessors. And then since 2010s, we had mega module, platform and form a strategy in place, part range, frames. We had a model or we had a commonality as initiative across the models, across the regions. Because of that, we improved our profit structures, and we had also improved more contact with the customers with many more models available to them.

Speaker 1

And now in South America, in Europe, we have a high profit businesses, which is a good positive thing for us. Therefore, we used to be profiting from Asia, but now 60% Asia, the rest are from the rest of the regions, which includes 20% in Brazil, 20% from Europe, that could be the kind of a split that occurs in the world. And then, of course, the volatility can be seen in some countries with regions. However, the 20% or less, of course, if we can sustain that level of an ROEs could be another story. However, I should say that we have established a structure to be robust against the volatility or changes and such efforts successful efforts in the last 20 years have fruited this way.

Speaker 1

And in the next 20 years of create attractive models with the cost containment, commercial values, powers, financial power. So when everything is in place, passing the automobile area, BEV is shrinking the ice businesses in China. However, in motorcycle, the growth is still expected. Ice motorcycle will grow. Batteries will be add on and battery Aries will be an add on to that.

Speaker 1

Therefore, this is still growing business and battery EV know how ahead of others. And We have those efforts in our automobile, and we can get a synergy from automobile to the motorcycle business areas, which can grow, thanks to the synergy, I think. Therefore, I just wanted to say that we have the motorcycle businesses like the one I described. Thank you for your time. I said 20% in Europe, at 20%, including the developed countries, including Europe, that includes U.

Speaker 1

S, Japan as well. So that's the precise term. So please understand our motorcycle businesses precisely. And very much now we can conclude our press conference. And our financial statements are available on our website.

Speaker 1

And thank you very much indeed for your participation. Thank you.

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Earnings Conference Call
Honda Motor Q3 2024
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