Honda Motor Q4 2024 Earnings Call Transcript

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Provided by Quartr
May 10, 2024

There are 2 speakers on the call.

Operator

FYA24 Financial Results Press Conference. First, the executives in attendance today are Toshihiro Meb, Director, President and Representative Executive Officer. I'm Meb. Thank you very much. Shinji Aoyama, Director, Executive Vice President, Representative Executive Officer.

Operator

I'm Aoyama. Thank you. Eiji Fujimura, Managing Executive Officer and CFO. And Fujimura, thank you very much. First, Mr.

Operator

Mibe will give a summary of the results, followed by Mr. Aoyama, who will present the FY 'twenty four results and FY 'twenty five forecast and shareholder returns. Mr. Mibe, please. Once again, good afternoon.

Operator

I'm Mibe. I would like to first thank all of you for taking time today and providing generous support to Honda's business. As a mobility company, Honda upholds its value proposition of 0 environmental impact and absolute safety. Through the social values of environment and safety, we aim to realize our vision of future mobility and an attractive mobility society. This will enable us to manifest a new corporate path of growth.

Operator

We seek for a continuing understanding and support towards Honda's initiatives. I would now like to review our FY 'twenty four financial results and explain our forecast for FY 'twenty five. FY 'twenty four operating profit was a historical high, 1,381,900,000,000 yen. Operating profit margin was 6.8 percent. In FY 'twenty five, we will steadily dedicate resources to electrification and aim for operating profit of JPY 1,420,000,000,000, operating profit margin of 7%, 1 year ahead of our original plan.

Operator

FY 'twenty four cash flows from operating activities, the source for future investment excluding R and D expenses was roughly 3,000,000,000 yen, up 1,000,000,000 yen year on year. We have the foundation to support future investment for growth. Shareholder returns is regarded as our top priority management issue. FY 'twenty four dividend was JPY 68, up JPY 28 year on year. In FY 'twenty five, we will acquire a record high JPY 300,000,000,000 of the company's shares and realize a stable, continuous dividend policy.

Operator

Next, I will review the initiatives we have taken towards establishing earnings base. Motorcycle business, in addition to our dominant position in Asia, we have expanded large motorcycle sales in advanced nations and expanded product lineup in South America to further strengthen our business structure and build a well balanced global income structure. Regarding automobile business, where profitability was an issue, we increased commonality ratio of core models such as CR V, Civic and Accord, reduced hybrid system cost and enhanced product appeal to steadily improve our business structure. We will further evolve performance at cost of a hybrid system targeting the second half of this decade. Next, initiatives for enhancing corporate value.

Operator

Currently, the BBR remains less than one fold. We believe there are three reasons as shown. To address this, we will optimize capital through proactive shareholder returns, build and maintain earning base and work out granularity of electrification strategy. As for FY 'twenty five, we will acquire 300,000,000,000 yen of our company's shares and aim for an operating profit margin of 7%. The details of our electrification strategy and capital allocation will be explained at the 2024 Honda business briefing on May 16.

Operator

Through these initiatives and continuing dialogue with stakeholders, we'll aim for an early achievement of our more than one PBR. Next, Mr. Aoyama will present the details of our financial results.

Speaker 1

Let me explain about the actual results of FY 2024 followed by FY 2025 outlook and shareholders' returns. With regard to the earlier updates of the main markets of telco bills, the market declined in China, but in the United States due to the stable demand has led to the overall sales exceeding same period last year. For motorcycle businesses, the market in Vietnam declined because of the economic slowdown. However, the unit sales increased in India and Brazil due to the solid demands and contributing to the Opel market of goods similar to last year. Regarding Hollys Group's unit sales of the motorcycles, mainly due to incremental units in Europe.

Speaker 1

As we mentioned last year, we achieved 18,819,000,000 unit sales. For builds, 4,109,000 units sold mainly due to the increase in North America. And for power protective purchases, we achieved 3,812,000 unit sales due to the decline in North America. This is a scenario of the consolidated financial results. On top of the additional automobile unit sales, thanks to the improvements of the model profitability, we achieved the operating profit of 1,380,000,000,000 yen up by 601,200,000,000 yen We accomplished the highest ever results in operating profits, profit ever profit before income taxes and profit for the year attributable to others of the parent.

Speaker 1

IRROC was 9.1 percent and ROE 9.2%. Let me explain factors of ups and downs of the profits as compared to the last year. There were some impacts by inflation and so on. However, due to the effective pricing scheme that reflects improved commercial value of the products and incremental automobile sales, we achieved JPY 1,389,000,000,000 operating profit, up by JPY 601,200,000,000 year on year. Profit before income taxes was JPY 1,643,000,000,000 up by JPY 762,800,000,000 year on year.

Speaker 1

Regarding operating profits by business segments, our Motorcycle business is 556,200,000,000 yen the highest ever result. Automobile business is 560,600,000,000 yen Financial Services Business, 273,900,000,000 yen And for Power Products and Other Businesses, it was negative 8,800,000,000 yen Free cash flow of our business companies excluding financial businesses was JPY 1,460,900,000,000 with JPY 3,7616,000,000,000 of net cash balance at the end of the period. And next, let me explain financial forecast over FY 2025 on consolidated basis Regarding expected unit sales of Honda Group comparing to the last year for motorcycles, we expect 19,800,000,000 units, reflecting the growth in mainly in Asia. 4,120,000 units of automobile is expected, reflecting the incremental mix mainly in Japan and North America. And for power products, we expect 3.36 1,000,000 units, reflecting the decline mainly in Europe.

Speaker 1

Unit sales volume on a consolidated basis will increase in Motorcycle and Automobiles businesses. Moving on to the outlook of the consolidated financial results of IFRS 2025. Operating profit will be 1 point 4 2,000,000,000,000 yen with the operating profit ratio of 7%. And the profit for the year attributable to owners of the parent will be 1,000,000,000,000 yen Foreign exchange assumption is set for 140 yen for a dollar throughout the year. Factors behind those profit before income taxes forecast are as follows.

Speaker 1

R and D and the outlook basis will increase. However, thanks to the pricing scheme that reflects the commercial value of the product, profit before income taxes will be JPY 1,500,000,000,000, down by JPY 142,300,000,000 year on year. And operating profit will be JPY 1,420,000,000,000 up by JPY 38,000,000,000 year on year. These are the outlook of our capital expenditures, depreciation, amortization and R and D spending for FY 2025 on the slide. Lastly, let me touch upon shareholder returns.

Speaker 1

Annual dividends for FY 2024 is a JPY 60 8 per share, JPY 28 more from the year before and JPY 10 higher than our previous projection. Dividend at the end of the year is JPY 39 per share. Annual dividend for FY 2025 is expected to be JPY 68 per share, same as FY 2024. Now in the Board of Directors meeting today, we made a decision to execute share buybacks up to JPY 300,000,000,000. That concludes my presentation.

Speaker 1

Thank you very much.

Operator

Thank you for your listening. And now we'd like to proceed to Q and A. We have provided you with a Zoom function, so please ask a question through Zoom. Each of the manufacturers, they are having difficulty challenging their Chinese EV companies. Meanwhile, I think that there are a lot of fans for ICE vehicles.

Operator

So what is your marketing strategy going forward? And what about the optimization of excessive production capacity? And secondly, is to Mr. Mibe, I think it is the first time since you've become president that you're attending the financial results presentation meeting. So what is the reason for your attendance?

Operator

Is there any message that you would like to deliver directly to us? If so, please introduce them to us. First, about the Chinese business, I, Aoyama, would like to explain. Yes, there are a lot of Honda fans, ICE fans, and I do agree with you on that. And as for our future marketing strategy, well, at the Beijing Motor Show and also prior to that, there was an announcement that we made.

Operator

But the yen series, the second of the series, will be introduced. And this will be done in the first half of this fiscal year. Furthermore, the second half of this fiscal year, as we've already announced, the EA series, the first of the series, will be, well, as the first battery EV platform in China released, the P7S7 will be launched. And therefore, the ES series will be expanded. And this is how we want to expand our business in China, especially the battery EV.

Operator

We want to introduce competitive model products, and this is our basic marketing strategy. Meanwhile, above the overall production capacity and excessive capacity, well, with our joint venture partners, we will consult, and we are currently examining this, what can be done. And for this fiscal year, within our budget for FY 'twenty five, we have included some expenses towards that purpose. About the specifics of how to optimize, we will like you to wait until we can make the announcement. And next, I'm Abe.

Operator

I would like to explain why I'm here today. Well, it is my first time, but in the past, there are presidents have not attended this meeting, and I'm the very first in the history of Honda that I'm attending as president. Well, this is because we are faced with a lot of challenges at this time of transformation. And I, as President, want to explain about the current management situation and also our short- to mid term plans. I thought it was important that I directly to communicate this.

Operator

As I mentioned today, for this well, 20 25, we want to achieve the ROS, But we are 1 year in advance, and we'd like to achieve this margin profit margin, 70%. So this is something that I personally have led, and I want to demonstrate my leadership this fiscal year as well to achieve this goal. And as in my presentation, yes, we have less than 1 PBR. And I think that this is a major challenge that we currently face. And as of the end of March, about 60% of the prime market companies, solicit market have exceeded 1.

Operator

But, Honda, we have it's 0.76 fold. So this is a major challenge on the part of Honda. As I said, shareholder returns, we have to look at the investment balance and consider this. But what's most important is, for us, in order to well, first of all, we have to make clear our growth path. In particular, we want to make clear what our plans are for electrification, our future vision of electrification.

Operator

And that included, we would like to update you on the progress we're making. And I think that there will be opportunities at the financial results to present this. I don't know if I will be attending all the quarterly meetings, but at the final full year announcement, I would like to attend this meeting in the future. About making clear the granularity of our electrification strategy, well, on May 16, we are going to have a meeting, a briefing session to elaborate on our strategy. And we'll talk about our outlook for electrification and all the other details.

Operator

So please wait until 16 for the details. And I would like to I continue to attend this meeting. Thank you.

Speaker 1

Mr. Otinaga, please. Please ask your question. As well, R and D spending. In order to strengthen the share holder reserves, how do you manage that?

Speaker 1

And also, what is the backdrop of having to reinforce your R and D efforts? So let me explain about its positioning situation rather than the each quarter situation. As we said before, liquefaction and software and intelligent use of that. And we said that we are going to invest 5,000,000,000,000 yen by 2,030. And then I'm going to explain more of the details in our on the 16th May.

Speaker 1

But in the meantime, we actually changed our strategy a little bit. For instance, in terms of the electricity, specifically speaking of the batteries, we had explained about Canada before. And we are going to be shifting to the vertical type system in order to sustain the total electrification businesses. To do that, we need to have the investment development as well. We have to internalize those technology, and that will be on the increase as well.

Speaker 1

And for the software, too, core of the software have to be supported by Honda itself and R and D menus will be toward more of the internal kind of efforts. Therefore, we have more spending on that. Fujimura san is going to give us some more details about the spending. And then thank you for the question. As for the R and D spending, it is going to be the highest ever.

Speaker 1

As we said now, JPY 1,000,000,000,000 spending for that would include the upcoming electrification related model development expenditures. And also in the first place, we have to support a foundation for the electrification going forward. We call it DR, which is the functionality and its evolution. And in our R and D efforts, we have to put more efforts in the process before the development of the vehicles to strengthen that part. And specifically for the model year 2027, there will be still more efforts of the ICE model based on the hybrid basically.

Speaker 1

And for those ICE models, towards 2,030, there will be still a 60 percent of the ice motor to be run. Therefore, we need to earn from those businesses. Therefore, we need to allocate some resources. We'll do that as well. So we have to spend on both ends, which will be in the next 3 year efforts.

Speaker 1

And those will be important. And we will keep up with the higher level of R and D spending going forward for the growth going forward, and we will be more aggressive on that part. And the rationale for that effort is such that now after the R and D adjustment, we have this operations cash flow that is a new kind of indicator. And

Operator

for this

Speaker 1

past fiscal year, we had a 3,000,000,000,000 yen and 2 years before, it was a 2,000,000,000 yen. So we are adding JPY 1,000,000,000,000 more to that. But that means we try to improve the profitability of the ICE models that we have supported so far, and that is going to be earning more forward. That is why we can testify such spending. And then we are going to spend a RMB 1,000,000,000 again.

Speaker 1

And cash flow after the R and D adjustment will be staying around RMB3 1,000,000,000. So based on the earnings strength. And then we would like to be based on such a stronger earnings structure and then spend more on the R and D. At the same time, we are going to strengthen our shareholders' return as well. That is our financial strategy.

Speaker 1

And in terms of the capital allocation, as we said, up until 2,030, as we said before, we are going to give you more communication in the business update as scheduled on the 16th May, and we will give you more details on that point on that day. Thank you very much. One more. Do you have one more question? Or what is your second question please?

Speaker 1

So the unit sales as per the regions in China, it declined from the previous year. Is that what you expect again? You are going to provide a new series, right? So the unit sales per regions are we speaking? And for China, as we said that before, EA YE series is going to be the very model, and it is going to be launched in the 2nd year of FY twenty twenty five, the second half of this year.

Speaker 1

Therefore, it will be effective after that. And we plan to provide 50,000 units of those in addition to the existing eyes and head products. Therefore, as compared to the previous year, it is going to be on the decline. And for North America, Civic Hybrid is, which is not yet launched. However, we are going to add Civic Hybrid, which will be added to the growth.

Speaker 1

And in terms of the incremental units, battery EVs, in May April this year, we added BEV and that part will be the incremental portions in the North America. That is the plan.

Operator

Thank you. Next question? Toyokayzay. Mr. Yokoyama, please.

Operator

This is Yokoyama from weekly magazine. Toyo Kiyosaki can hear me. Yes. Thank you. I also have two questions.

Operator

The first about hybrid and competitiveness and product appeal. I'd like to ask one question about this. Yes, in your material, you did refer to this slightly. But in North America and Europe, your competitors Japanese competitors are also doing well. But also, you say that you're going to invest in ICE.

Operator

But the earning base, I think hybrid will be very important contributor. So within your electrification strategy, what is the positioning of hybrid? That's my first question. Yes. I would like to respond to this question.

Operator

Yes. Hybrid's competitiveness, first of all, volume wise, we believe that in FY 'twenty four, about 800,000 units were sold. That is hybrid. But in FY 'twenty five, this fiscal year, we are aiming for 1,000,000 yen. Well, it's 4,120,000 yen in total.

Operator

So, 1 out of 4 vehicles will be hybrid. That's our plan. About our earning power, well, currently, looking at our current situation, well, how we position hybrid will make a difference in terms of our profitability. There's a variance in profitability as how we position hybrid. But ICE and hybrid, these 2 are expected to bring about more or less the same profit.

Operator

And if I add well, the 2018 model year and 2023 model year, If you compare these 2, system wise, it is more efficient and also the performance is higher. And despite that, we've seen that, cost wise, we are trying to make it more affordable. And therefore, in FY rather, the 20 20 7 model, we are currently developing the model. But here, again, we want to increase our competitiveness, not just in terms of cost, but also in terms of performance. That is how we are addressing this.

Operator

In the second half of this decade, we will increase battery and therefore, the volume will fall, but the earning power per unit will increase so that we can earn profit. And this will be happening also in the second half of this decade. And this is going to be the source for injecting resources into electrification battery EV, that is. If I may add? Well, hybrid, yes.

Operator

We have one hybrid that we're focusing on. And yes, we have been reducing the cost. But in the past, from the perspective of our profit, ICE was much more competitive, as OEM has just said. Now it's at par more or less. And so if we had, for example, this fiscal year, in the automotive business, if EV related development expenses were excluded and if it were only hybrid and ICE alone, if we carve out just this too, operating profit margin wise, we can expect 8%.

Operator

So competitiveness wise, including cost, it is quite strong. But in addition to that, in the second half of this decade, it will further evolve. We have one evolution planned, and therefore, the current hybrid is doing quite well. But up until 2,030, we want to be able to compete in North America with the current competitors we have. Unit volume is 1,000,000 this fiscal year.

Operator

By 2,030, if things go well, then I think we'll come close to 2,000,000 units. And that is one plan that we have, including our suppliers. We are trying to meet this increase so as to be able to achieve a scale of 2,000,000 units. That is how we are preparing for hybrid. And if we can lead this, then I think we will have more power to generate cash, and thereby, we will be able to make a transition to electrification.

Operator

So hybrid was, to begin with, a strong weapon, and we want to enhance this technology, the strength technology that we are already strong in. That is how we want

Speaker 1

to do

Operator

our business. Thank you. 2nd question about the profitability of your automotive business. Well, in the Q4, I think the margin compared to the Q3, I think, has gotten worse. I think you mentioned that there's an addition of expenses here.

Operator

But looking about the profit margin of the current automobile business, and I think that you will also have to support the suppliers. So how you said, I think it's about 5% or a little less than 5%, but including the support to suppliers, how are you going to try to increase the operating margin of your automotive business? Thank you. Well, about the Q4, yes, there is a tendency for the to increase. And therefore, if you look at the full year, I think it's better to talk about the full year, not just the Q4.

Operator

As you pointed out, yes, there's been a 4% or so ratio at the end of the fiscal year. And after the Q1, as I've been explaining, this fiscal year well, last fiscal year, there was an increase in the quality related expenses. But it used to be 1% versus the sales, but we are seeing that the warranty has increased in this fiscal year. Based on that, we are accounting for 1.2 percent warranty expense ratio. And so that is the ratio.

Operator

And also the support to suppliers. Because of the restructuring, there was impairment. And so excluding those, it's a little less than 5%. So last fiscal year, I've been saying this, sorry, it's last fiscal year. I think that is the actual result that we have obtained.

Operator

But then going forward, how are we going to improve this? Well, those areas that we have been trying to work on, the profitability and also the fixed cost part, We want to continue to work hard on those things. And so we tightened, and therefore, the top line, where possible, will be raised for this fiscal year in the United States and in Japan. I think these will be major markets, but in those areas, we want to post a positive. And also, will reduce the incentives, etcetera.

Operator

I think that our product bill has increased, and therefore, we can do this. And based on that and also the pricing, though we'll be more prudent, we think of that in each of the domains. We will try to price in line with the value that we're offering our customers. Now about the support to suppliers, that for our suppliers, especially in Japan and U. S, there is the impact of UAW.

Operator

And it's not just an in house production, but also our suppliers. At the same time, we have to, give consideration to this. It's, on a negotiation basis, so it's 1 by 1. But, still, there's the inflation part that we have to take into account. So we have budgeted so that we can provide support for inflation.

Operator

Now, what's different from prior to COVID, we have stable production, and we're doing monozukuri together with our suppliers manufacturing. So we have to think about where we can improve our cost competitiveness together with our suppliers. So we want to do co creation with our suppliers. That is the sort of budget that we have compiled this time. That is all.

Operator

Thank you.

Speaker 1

Next question? From NHK, Mr. Obe, please. First one, the sales turnover, revenue and OP, you are achieving the highest ever, and your business is very good, very well growing. And then in this context, what is your impression reaction to this good business today?

Speaker 1

And the second question is a bit away from the financial results today. Speaking about yen depreciation today in Japan, it is quite commonplace today, JPY 155 per $4 today as of today. However, that may be good for you. That is quite supportive for the businesses for you. But for Japan on the whole, what is your thinking about current exchange rate situation today?

Speaker 1

What is your thought about it? So first question I'd like to address. In the second part of 2010, we said that we would envision 6,000,000 cars, 6,000,000 units. We were on expansion of the businesses mainly, and then we needed to shift our directions. And then we said that we would solidify our basic businesses with the efficiency.

Speaker 1

For instance, we would optimize the surplus capacity by fixed cost reductions and then less derivatives, more commonality of the parts components and system cost reduction of the hybrid cars with better performance to enjoy the cost reduction effectiveness. This way we could improve value of the commercial vehicles with the appropriate prices. With those initiatives in, the automobile businesses have improved a lot. And if you look at the EV businesses alone, we are reaching near 8% today. In addition to that, for the motorcycles, motorcycles, we were relying on the Asian markets quite heavily, but we now had expanded our profitabilities in other areas too.

Speaker 1

In Europe 20%, Asia 18% and South America 20% and Asia 60%. And then for both motorcycle and mobile businesses, both together, we have improved our structure of the businesses quite nicely. And then all together, we were successful in that regard because of that. Now for 2,030, for instance, we can envision 2,000,000 EVs in the air. That is our vision.

Speaker 1

Plus, our business is OS 5% EV. That is our targets. And we will keep spending for research and development so that EV businesses in 2,030 will be something like that. And we have solidified our foundation to achieve that vision finally. And in terms of the yen depreciation situation today, Of course, we are in the manufacturing businesses, and we are reliant on the facilities and equipments heavily.

Speaker 1

Therefore, abrupt changes of the air for works is not really welcome. But recently, of course, it is related to the policies of the U. S. And the Japan government, Bank of Japan's initiative, U. S.

Speaker 1

Counterpart, when they're going to move to reduce the rate and so on. Of course, they are all related. And then the fundamentals behind such ups and downs of the IFRS situation today is actually related to the actual demands for the yen currency. I think that is my thought. And the true actual demands for the yen today will be related to the export from Japan because it was export oriented so far heavily.

Speaker 1

But now in this situation, we would have more internal domestic demands, meaning that we could repatriate our manufacturing business back in Japan. And then Japanese stocks, the share price is now appreciating too, reflecting that. That probably indicates that demand for yen will be improved going forward. And then our expectation or assumption is JPY 140 for the time being in this budget. You might take it quite conservative perhaps.

Speaker 1

And the reason behind JPY 140 is maybe in the first half, it will be something like JPY 145 for dollar in the first half of the year. And then in the second half, JPY 135 because of the interest rates changes as well. That is the expectations. But in a long run, as I said before, the power of the Japanese businesses will be appreciated better with the better actual demands within Japan. Therefore, it will not go to 150 or 60.

Speaker 1

I wouldn't think it will be the case. However, of course, it is not possible to project. However, the aftermarket changes of the currency is difficult for us in the April May situation of the forex. Is not really favorable to us. However, we have to adapt to the changes out there in terms of how we operate everyday basis.

Operator

This is Mizutori from Japan Automotive Daily. Can you hear me? Yes, thank you.

Speaker 1

I have

Operator

two questions. First, FY 'twenty five forecast about this forecast, operating profit increase, you say the selling price and cost impact is a positive of 502,000,000,000 yen Can you give the breakdown? And in relation to that, I want to know about the price increase impact. I think it was a positive last fiscal year. The price increase itself, has it completed the cycle?

Operator

Or is it the case where this fiscal year again, you want to continue and try to increase the profit through the price increase? And that's the first question. And the second is about the business in Japan. In FY 'twenty five, your forecast is that 660,000 units. I think you said.

Operator

But Honda, to begin with, in Japan, your annual unit sales is around 700,000. I think that's more or less the target. But the shortage of semiconductors has ended. And this I think the fact that you cannot reach 700,000, what is the reason? And also to Mr.

Operator

Mibe, once again, how do you position your business in Japan? Can you explain about that as well? Thank you. Allow me to about the operating profit and increase and decrease. And so there is an impact of JPY 502,000,000,000.

Operator

And what is the breakdown of this? That's your question. But I think that it was mentioned earlier, but in Japan and the United States, there's an increase in labor cost. I think this is true also for the suppliers. And so this is included.

Operator

We want we have been working to increase the cost together, and we can reflect this in our motorcycle business, so we have offset that. But mainly, it's the selling price, the positive impact of the selling price. It's about 407,000,000,000 worth. And, well, the inflation part, well, we have to try to introduce competitive products to increase their price. But there are some special factors included.

Operator

In the United States, with the upcoming electrification, dealers and we, the manufacturers, we have to change the roles that we play. I think that we have to factor in this change, the dealer margin. And therefore, on our part, we have done a lot of consultation, and we would have reduced the dealer margin. In other words, the dealer is the profit was allocated to the dealer has been allocated to us. For the new car business, it will be like that.

Operator

But in the future, the maintenance and those parts, as a touch point for the customers, the dealers will be a very strong business partner for us. So that will continue to be the case. So at that profit, within the JPY 47,000,000,000, I think about JPY 100,000,000,000 is included. And therefore, that is if you subtract that, that will be the price increase. And that has been budgeted.

Operator

Meanwhile, recently, North America especially, we have been reducing our inventory and we're trying to reduce the incentives. That's our operation. But prior to COVID well, we have not yet reached the level of the prior to COVID. And I think that the competition is more fierce these days with the competitors, and therefore, we have to budget more the incentive. And in the operation, the pricing and incentive, we are trying to reduce this, hold this down, but we have to offset where needed.

Operator

So, 500,000,000,000 yen, this is a large number, but these factors are included here. So please understand this number to mean that. And this fiscal year, that we can continue to raise our price, as we said earlier, We have to comply with the inflation and also introduce appealing products and try to tap on these strengths that we have. That's all. About business in Japan, Mr.

Operator

Aoyama will first answer. Yes, 700,000 has been the benchmark in the past. That is true. So 700 1,000 units. At one time, we were selling that much, and so that was regarded as more or less a benchmark.

Operator

So you are correct in saying so. But in the mid- to long term, we think that the Japanese automotive market is declining. Unfortunately, we have to admit this overall. And therefore, FY 'twenty five as well, the market itself, there will be a marginal increase. That is how we look at it.

Operator

And so we have the 655,000 units listed here, but the registration is about 700,000 units. For the share wise, if you calculate this in terms of share this fiscal year, 15% or so is what we're aiming towards. And therefore, 15% share is what we want to gain. And this is the highest in history. So this is a plan that we have already.

Operator

We are receiving bookings in advance of the new freed before launch. And so we want to sell this. And also, in addition to that,

Speaker 1

last well,

Operator

at the last at the end of last fiscal year, we launched WRB. So this product, plus the bezel, minor model change. So all these included, we want to introduce some competitive products so as to achieve this 15% high share. And that is how we are looking at this fiscal year. And I'd like to Rime san to talk about our positioning of our Japanese business.

Operator

Well, looking at the current situation, as, how we manage our at CES, we announced that Honda is 0. This is a new EV. And this also, within the global market, we want to introduce this to Japan, too, as a global market. The product lineup also, of the N Series included, we have the smaller minivans, and we are shifting more still the smaller size models. But and therefore, this is one of the reasons why we're seeing a slightly slow increase in unit volume.

Operator

Electrification is a keyword that we're using. This is a new direction that we're aiming towards, and this is a good opportunity for us. And within this process of electrification, once again, of course, we are a Japanese company based in Japan. The Japanese market is a very important market for us. And therefore, in addition to what we were doing in the past, newly, we wanted to introduce a new lineup so as to be able to raise our appeal of the appeal of Honda in Japan.

Operator

Currently, we are working on the details, and therefore, we cannot make any announcements today. But it will not be the same as the past. That is as far as I can say for now. But please expect that we will be making changes and look forward to our strategy in Japan. Thank you.

Speaker 1

Thank you. So next question. Reuters Shiraki, some fees. Thank you for asking me for the question. It's Siraki from Reuters.

Speaker 1

I have 2 questions. Can you hear me? Yes, please. So, away from the financial results, because of the President being here, I'd like to ask to support this opportunity. As of today, what is the what do you think about the status of the battery battery markets and Honda's position today in terms of your negotiation with the other companies and development and sales plans of that?

Speaker 1

Please tell us your frank view on that. And as for the Canadian plant, for instance, recently, for your EV sales goal, for instance, you have today, you're probably having those steps down, absolutely. But other companies are facing with a bit of decelerating trend of their EVs and also discount is being seen in a competitive markets. In that, I believe slowing down trend today, reminding that do you think it is a kind of good time for you to take advantage to accelerate yourself away from others' banger, slow down situations? Or do you EV situation?

Speaker 1

And the second question is about collaboration potential with the Nissan. I understand topics that you are talking about with them today in the negotiation process? Maybe as far as you can, could you share with us? And in the topics with them, would you talk about EV sales, gold and so on? Maybe you would tell us about it in the business update opportunity, but do you have changes on your strategy so on after with regard to their talks with them?

Speaker 1

For the first question about businesses, the EV demand is a little bit down according to what you said. Of course, it is what we are seeing today globally. But since I became the President, our goal is to achieve 40% by 2,030 80% in 2,040, 100% FCV or BEV by 2,040. And of course, that is the kind of backtesting goal based on the CN in 2,050. And it's been 3 years since I became the president and those goals still stand, no change at all.

Speaker 1

So for the goals of 20, 30, and 35, of course, EV related regulations on rules in different countries might change as we go toward those goal years. And that was something we were expecting already. And this is what we experienced today, for instance, to achieve 2,000,000 cars in 2,030. And we'd like to establish the foundation for that business is in order to be able to achieve it. And then we are making plans now, including the investment and plans as well.

Speaker 1

And based on the current EV situation, we still keep up with our original strategy, no change. And in terms of the investment, maybe the opportunities, the timing of the investments of those might be a little bit shifted within the range that we would anticipate. But there's no change to the goal, no strategy changes at all. And in terms of the hybrid, it is a good technology as a tentative solution, and we have the businesses of that today on with hybrid and we are not denying the hybrid business at all. But after 2,030, the global regulations and so forth would require battery EVs for sure in order to achieve a capital neutrality.

Speaker 1

And then we have working we have been working on the small mobilities today. The battery EVs could be the best solution for those small mobility runs. And then we have those milestones one after another, and we like to take on achieving those steps as we go. And with regard to the collaboration with the Nissan, we have announced it on the March of 15, March 15. And since that time, we've had frequent discussions between the 2 companies with different groups of people.

Speaker 1

And then, as was announced by Mr. Jiro of Nissan the other day, actually, I've checked the progress participating in some of those meetings. And what sort of values can we provide by this collaboration? We are actually discussing about it right now and I cannot disclose what is being discussed at the moment. However, we are coming to a good conclusion nearly and once that is well summarized, we can share with you.

Speaker 1

And as we said on the March 15, basically it will be in the area of the electrification, software and also complementary product supplies and so on. And for the growth in the future, it will be in the electrification software. Those 2 will be very important for the growth purpose. And then software, especially with AA included and the semiconductor together, the development cost will be enormous and that area is one of the potential collaborative area. And also for the scalability for the electrification, Scalability can be quite advantageously obtained with the collaboration, I suppose, with the electrification efforts.

Speaker 1

And then we are having discussions closely on those points. And once we find and identify the benefits, we will start working together. And I cannot give you much today. However, we are having discussions in the very broad scopes in front of us. And on 16th of this month, I don't think I can give you the clear answers or the discussion items we did today.

Speaker 1

But of course, the discussion will not go forever. Sometime very soon, I can give you some ideas about the collaborative talks between the 2. So by summer maybe, can you give us a kind of a first round of the year sharing with us of the information by summer time? What is your goal? For instance, I wouldn't think it will be until the end of this year.

Speaker 1

It is but long. Summertime, maybe by then, I'd like to come up with some sort of idea that we can share with you. That is what I think. And we will focus on the discussions really. So that's, of course, including whether or not we go for that or not go for that, We will be able to summarize the talks sometime very soon.

Speaker 1

Thank you. Thank you.

Operator

I apologize, but in the interest of time, next will be the last question. Asahi Shimbu Newspaper, Matsoka san, please. From EV? What is the reason for the increase in unit volume? The reason why we're seeing an increase in not just volume by profit, I understand.

Operator

Sorry, yes. Well, exchange rate is one factor, but it's not the case where the exchange rate is the dominant factor, especially in FY 'twenty four results. I'm looking at FY 'twenty four results. FY 'twenty three was a time in which, due to the semiconductor shortage, we could not fully supply or we could not fully produce. And so that was the situation.

Operator

Therefore, FY 'twenty four or FY 'twenty five as well. In North America, the factory, the utilization rate is on well, 100% or even slightly more than 100%. That is the utilization rate at the U. S. Factories.

Operator

And therefore, as a result, we are able to raise the price selling price in line with the appeal of our products. I think that this is the major contributor. Plus, there was also, as I've answered in a separate question, hybrid. After the 'twenty three model year, the performance has increased and also the business competitiveness increased, including cost. And therefore, the profit ratio is equal to ICE.

Operator

But in terms of the profit amount, it is slightly more. And so that included hybrid is doing very well and so further boosting our profit, I think. Page 10. You talk about the historical operating income and give the reasons and selling price cost. I thought that this was a big contributor.

Operator

Can you elaborate on this? Page 10, did you say? Profit before income tax, The change in profit before income tax FY 'twenty four results? Yes. So you're talking about FY 'twenty four, right?

Operator

Okay. So there is the price cost impact, sales impact and includes the gross profit. Well, motorcycle and other regions are included here, but yes, for automotive, 3,17,900,000,000. Yes, underneath it says that the and there is this number of 4,487 for the revenue model mix. And this is coming mainly from North America.

Operator

Well, in the previous fiscal year, we had difficulty acquiring semiconductors. But this year, we have seen an increase. And there was a 420,000 unit increase in North America, and I think that this has contributed mainly to North America. And above the some price cost impacts, roughly speaking, of the $524,700,000 motorcycle or automobile, is about $300,000,000 something. But the supplier and also the wage increase, these are negative here.

Operator

But the raw material cost, this is big. So I said JPY 360,000,000,000 for automotive, but still, I think the raw material cost, this includes some precious metal and steel, too, but it's about €490,000,000,000 or €200,000,000,000 So this is material related. And so this is a positive. And the selling price increase is about $360,000,000 And so minus $200,000,000 So it's about $160,000,000 that remains. The cost increase, the supplier and the wage increase, the cost increase factors are also factored in.

Operator

And we believe that the price impact was that much. This is not just North America, by the way, but for automotive, that is the situation. Have I answered your question?

Speaker 1

Thank

Operator

you. Thank you, Mr. Mazzoka.

Speaker 1

Thank you very much. Now I can conclude the press conference for the financial results presentation today. And those two slides and the figures will be available on our website. Thank you very much for your participation today.

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Earnings Conference Call
Honda Motor Q4 2024
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