Honda Motor Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2024

There are 2 speakers on the call.

Operator

Thank you very much indeed for your participation despite your business schedule today. And I would now like to start our press conference financial results press conference for the fiscal Q1 ended June 30, 2024. To start with, I'd like to introduce the speakers today. Managing Executive Officer, CFO, Mr. Eiji Fujimura.

Operator

Operating Executive, Head of Accounting and Finance Supervisory Unit, Mr. Masa Okawaguchi. Nice to meet you. So let's start with the IRR. IRR.

Operator

Mr. Fujimura's presentation about the quarter 1 of the AFI 2025 results and the forecast of the AFI 2025 full year. And Mr. Kawabe, she will elaborate on this a little bit later. Thank you very much for your understanding of our business activities as usual.

Operator

Let me present our Q1 business results of FY 2025. Starting with the highlights of the financial results, Unit sales in the motorcycle business in the Q1 increased globally, mainly in India and Brazil. In the Automotive business as well, we had robust sales of hybrid models. And thanks to the pricing scheme that reflects improved commercial values, the profits increased year on year in both motorcycle and automobile businesses. As a result, operating profit of the entire company marked the highest ever quarterly profit of JPY484,700,000,000 or 9% of the operating profit margin.

Operator

For China, where a tough market environment still continues, we will revise the volume forecast down by 220,000 units, Whereas we will maintain our previous guidance of the operating profit margin and the profit for the period attributable to the owner of the parents. Forex assumption will stay the same because the recent fluctuation of the currency is substantial. Then let me explain the outline of the financial results. Speaking of the main market situation of the main market situation of the automobile businesses, hybrid models have been successful, making the unit sales increased in Japan and in the United States. In China, due to expanding new energy vehicle market and aggressive price competition, the unit sales declined year on year.

Operator

In the motorcycle businesses, unit sales declined due to economic slowdown in Thailand. However, the unit sales increased year on year due to steady demands in India and Brazil. Thus, on the whole, the total business increased year on year in this segment. Regarding the financial results of the Q1 FY 20 25, operating profit marked JPY 4,700,000,000 up by 90,200,000,000 yen year on year. Shares of profit of investments accounted for using the equity method was 1,400,000,000 yen which was down by 41,400,000,000.

Operator

Profit for the quarter attributable to owners of the parent was 394 600,000,000, up by 31,100,000,000. Operating profit marked the highest ever as quarterly results. With regard to the consolidated business outlook for the FY 2025, operating profit will be 1,420,000,000,000 yen Our previous forecast will stand the same. Shares of profit of investment accounted for using the liquidity method will decline due to the unit sales in China being revisited. However, profit for the financial year attributable to the owners of the parents will be 1,000,000,000,000 yen for which the previous forecast will be maintained.

Operator

Full year ForEx assumption will stay the same at 140 yen for our dollar, no change of our previous guidance. Annual dividends for FY 2025 is expected to be JPY 68 per share, no change of the previous guidance. We announced their share buybacks in the press conference on May 10, for which the progress as of 31st July was that we have acquired a total of 12,360,000 shares worth 20,000,000,000 altogether. By the way, Honda is working on the improvements of the corporate governance as one of the priority issues of our business management. Recently, in the stock market, we are seeing the trends of reviewing the cross holding of the shares.

Operator

Honda will aim to unwind the cross holding practice soon in order to enhance our disciplines on corporate management furthermore. In July this year, Honda shares owned by non life insurance or banking institutions have been sold off in the public as much as 500,000,000,000 worth. Having those shares available in public will help broaden our shareholders' base, and a wider range of our shareholders can support us for medium- and long term perspective. Bringing them in co creation with us, Honda will aim to build a stronger brand and a business foundation in order to realize further improvements of our corporate values. In addition, Honda sold the shares that we have been holding for those non life and non life insurance and banking institutions as well.

Operator

Honda will take the lead to unwind cross holding policy so that we can improve our corporate governance further on. Next, Mr. Kaguchi will explain the details of the financial results.

Speaker 1

At this time, I'd like to explain the details of our results. First of all, Honda Group sales volume for the 1st 3 months is as follows: Compared to the same period last year, sales in motorcycle business operations rose to 5,062,000 units, mainly due to an increase in Asia. Due to a decline in China, automobile sales totaled 869,000 units. Sales in Power Product Business Operations totaled 822,000 units, mainly due to sales declines in North America and Europe. The 1st quarter consolidated financial results for fiscal year 2025 is as explained earlier.

Speaker 1

I would like to explain the factors increase or decrease in profit before tax compared to the same period last year. Operating profit increased by JPY 90,200,000,000 compared to the same period last year and totaled JPY 484,700,000,000. As for the increase and decrease factors behind this change, sales impact, although there was an increase in profit due to an increase in unit sales, an increase in incentives led to a negative impact of JPY 28,400,000,000. Selling prices and cost impact due to the effect of selling prices commensurate with the improvement of product value, a positive impact of JPY 159,800,000,000 was realized. Expenses negatively impacted profit by JPY 61,500,000,000 R and D expenses, likewise, JPY 27,000,000,000.

Speaker 1

The positive impact of exchange rates resulted in an increase of JPY 47,500,000,000. Now profit before income taxes. Due to a decrease in sales volume in China, there was a decrease in equity method profit. However, operating profit for the quarter increased by 44,500,000,000 compared to the same period last year and totaled 5,594,000,000,000 yen Now operating profit by business segment. Motorcycle business achieved a record high of JPY 177,600,000,000 for a quarter.

Speaker 1

For automobile business, the total was 222,800,000,000 yen The total for potential services business was JPY 84,900,000,000. The result for power products Business and Others was an operating loss of JPY 700,000,000. Free cash flow of operating companies, excluding financial business operations, was JPY 73,900,000,000 The quarter end balance of net cash was 3,744,300,000,000 yen Operating cash flow, excluding R and D, which represents the source of future investments, totaled 435,000,000,000. Next, let me explain the details of the consolidated forecast for FY 'twenty five. Group sales volume for Motorcycle Business Operations is 19,800,000 units, unchanged from our previous forecast.

Speaker 1

The automobile business forecast has been revised downwards to 3,900,000 units, reflecting a decline in China as well as other changes compared to the previous forecast. Power Products Business Operations' previous forecast of 3,660,000 units remains unchanged. The consolidated financial forecast for FY 'twenty five is as explained earlier. The outlook for capital investment, depreciation and amortization and R and D expenditures for FY 'twenty five remains unchanged. This concludes my pleasant presentation.

Speaker 1

Thank you very much for your attention. Thank you for your attention. We'll now proceed to the Q and A session. We will take questions via Zoom system as previously informed to media participants. Due to time constraints, each person is limited to 2 questions.

Speaker 1

When asking your questions, please turn on your camera and microphone. We appreciate your cooperation. If you have any questions, please use the raise hand button to let us know. Thank you.

Operator

First question from NHK Mr. Loguchi, please. Two questions, please. First, Chinese situations, Chinese business. In China, the market situation is very tough now.

Operator

And in this fiscal year, you're revising your unit sales by 200 and 20,000, but you also have a plan to start a new plant for EV production. And what is your forecast to outline of upcoming production structures in China? Please explain. And can I explain the second question, too? Yes, please.

Operator

Question 2, it is about ForEx, foreign currency exchange. And we have assumption of $144 that is 146, JPY 147, JPY 147 as of today, which is very different from what was yesterday. And in addition, the Nikkei share price is also fluctuating very dramatically. And how do you take this fluctuation? Thank you very much, Mr.

Operator

Noguchi. Speaking of Chinese situation, as we mentioned in the start of the fiscal year, we are thinking about 1,200,000 capacity, 1,200,000 cars, production capacity in China. And by the end of this fiscal year, new EV plant with 2 new joint venture programs with the 1 and the other 2 stats in sequence. And then we are trying to bring it down to about 1,200,000 capacity

Speaker 1

in the

Operator

end, and we will try to reduce by 1 100,000 units reduction also. That was what we said in the beginning. And 1,000,000,000 in ICE and 200,000 units for EV. That was the plan for the reduction as we explained. But as of today, in the Q1 end of July, we have set the plan of JPY 100 1.06 1,000,000, and then we are making it down to 140,000 units.

Operator

That is the planned of the capacity as of now. And we are going to have the 500,000 units to be adjusted that is associated with the fixed cost. And in China, such is has been a very sensitive issue, and we couldn't explain too well about it. We couldn't disclose too much. But now the Chinese headquarters have agreed with the partner company eventually.

Operator

And then as far as we can make we could make a decision, we have addressed 100 1,500,000 worth of the air capacity, and the rest of the 200,000,000 200,000 will be addressed sometime sooner. So 1,000,000 or less a bit less than 1,000,000 ice production capacity, that is what we are going to aim. And we have done whatever we could do for the end of the year fiscal year this year. And ice market has shrunk as more than we expected, and the NAV market is growing more than our expectations. And also, discount competition is going continual.

Operator

And then JPY 400,000 reduction of the actual selling prices because of the discount practice today. Therefore, the commercial effort is very difficult over there. And going forward, as of now, we have not decided fully, but we will watch out the situations, and then we'll make a decision. And then of course, we have to watch out our ICE market, ICE market going forward. And so BEV, a dedicated platform, is being prepared for the upcoming winter.

Operator

And with that, we will try to improve our presence in the market. So we will try hard on that. In conclusion, we explained in the beginning about optimization of the capacity. We are working on the resources and the EV part with the more attractive products for EVs. We are preparing for that, too.

Operator

Though the situation is tough, as we said in the start of the fiscal year, we are going to do make our efforts as we explained before. And ForEx, as we mentioned earlier, JPY 140 for the full year assumption. We thought it would be a very conservative assumption as some people said. However, in retrospect, in the Golden Week holiday period, we had a swing to the yen depreciation end. And we say JPY 140 with JPY 145 and JPY135 for dollar in the first half and second half, respectively.

Operator

And now the price is approaching JPY 245 as we anticipated. And practically speaking, in the Q1 press conference like today, we discussed and then thought we could say the FX forecast could be set, 4.45 as we would disclose. But now we had a yen 20 down already in July. And last week onwards, we've had 10 year differences already. And now not just dollars, but including emerging market currencies, the ForEx is going to be more difficult to handle.

Operator

And EUR 145,000,000, EUR135,000,000 are first and second half split. That was some thinker the situation is actually realizing itself. And then we decided eventually that we could keep the previous guidance. Our staff made great efforts to try to keep it that way. I'm thankful for their efforts, too.

Operator

But today, the currency is around JPY 145. Going forward, we don't know. As second half, JPY 135, I'm not too sure if that is good enough to contain the yen depreciation potential. But in the Q1 as of July, we have the yen depreciation and then 12 yen effect for 4 month period, a 3 yen for 1 month, let's say. And then if that goes that way, maybe 3 yen depreciation further on based on this assumption.

Operator

And then we have about a €30,000,000,000 effect on our business for a dollar change of the currency. And then again, for this currency matters, our principle is to produce the air products where the air demand exists. Therefore, apart from those currency and money matters, we always find the place where the customer exists, and that is the place for activities of production and sales. And then we can earn money, and then we can reinvest the money earned there in the same place again for the investment. So this way, Honda can become the growing company, growing market locally, too.

Operator

And that is our principle since our founding time. And eventually, we found that we have a very good precurrency toughness, so to say, thanks to that principle. But now your question will also pertain to the stock market fluctuation. But I'm afraid I might when that goes, some impact on the actual economy and then leading to more anxiety kind of mind set for the currency. But in the motorcycle businesses, we have businesses in Asia where the volatility is really high.

Operator

Therefore, we have been tightening up our structure so that we can bring down the breakeven points to be resilient and tough against such fluctuation in the market. The business structure have to be made that way. And also, if the finance situation in the market changes, we have a finance businesses that accounts for half of the balance sheet. The bad debt, for instance, or the residual value losses or the improvement situation, they get confused, so on. If such things would happen, that might impact on our operation.

Operator

However, the residual values, for instance, if we handle that too much, it would disrupt short term business operations. So that is not something we would do. But we have a very tough structure, a very stronger structure against financial fluctuation already. We have heightened our resilience for the economic fluctuation, and we've made our business structure to withstand such a fluctuation already. So I think we can withstand again.

Operator

However, 'twenty and fluctuation in month period will be, of course, a very tough situation. Although we believe that stability is good, however, we need to try to be equipped with the resilient and tough business structure of Honda.

Speaker 1

Thank you very much, Mr. Noguchi. Next question? Mr. Okinaga.

Speaker 1

Thank you. Thank you very much. So my first question is regarding North American market. With the increase in interest rate, the incentive has been raised by other companies' manufacturers, and they're selling more units. However, they're not seeing more profits.

Speaker 1

So what is the outlook of the business? Is it growing? Can you please elaborate on that? And my question number 2, that is regarding the partnership with Mitsubishi and Nissan. What the positive impact from that is not reflected in the business plan for now.

Speaker 1

However, is there any possibility of positivity coming out from this term? Or would that be from next term onward? Mr. Kinaga, thank you very much for your question. As for the North American market, As Mr.

Speaker 1

Noguchi mentioned earlier in his question, from now on, due to the labor situation as well, I think their economy is declining slightly. And also, the interest rate decline reduction will be happening in September by FRB, and the recession will be supported. And soft landing is also forecasted. So the presumptions those conditions will impact the future situation. And currently, we can say that our schedule our plan is going according to schedule.

Speaker 1

1st quarter, as for the market, the situation is about the same as last year. However, as for our retail section, that is positive 1%. Back in June, other manufacturers were impacted a little bit, and our dealership and management system was went through a cyber attack. And we did have some impact as well at Honda. And that has been resolved as well.

Speaker 1

However, due to the impact from the Q1, The positive in retail by 10,000 units was impacted by 1%. So as for the resale, in Mexico, for example, we had a confusion in logistics. So there is actually a negative 20,000 units. However, this can be recouped as well. What's leading this is hybrid vehicles.

Speaker 1

As for the hybrid vehicles such as CRV, Accord, the sales is going well. And since June, we have launched Civic Hybrid on top of that. So because of that, for consolidated term, we are aiming for 430 units or beyond. And for example, CRV and Accord, about 50% is hybrid, and the demand is there. However, we had to also consider the production capacity, so it will be hard for us to further increase the production there.

Speaker 1

However, from next term onward, it will take time, but we aim for increase our production capacity for those models. As for the inventory, other manufacturers are increasing and also their incentive level has come back to before corona level. However, as I have mentioned repeatedly, since corona era, before corona or COVID, the inventory is standard days or 60 days, and we were in collaboration with our dealers and working with the inventory. And we decided to control the inventory situation based on 30 days instead. Due to the dealership system problem that I mentioned, it had some negative impact on the situation.

Speaker 1

However, excluding that, we have been able to control based on 30 days. So as for incentive level, ours is the lowest level in the industry. And we are spending some cash at a total of $1600 And Acura is having a hard time. But as Honda, overall, we have been able to limit that to a lowest level. So our assumption is to is for us to be able to go forward throughout the term, throughout this year, at the same level.

Speaker 1

And as for the partnership with Nissan and Mitsubishi, I'm not positive about seeing any positive impact from that in this term, as Mibe mentioned and explained, we are looking at the EV models coming in the future. Complementarity of models might happen even after that, but software development, investment, those things we have been discussing. So we are at the phase of MOU. So it's not like we will see anything positive from this term. That's it from me.

Speaker 1

Thank you very much. Thank you, Mr. Okinaga.

Operator

Next question, Mr. Nakamere from Yomi Uli, Sengoku News. Can you hear me? Yes. Nakamura speaking from Yomiuri Newspaper.

Operator

Interest rate. The Bank of Japan is voicing today that they cannot raise the interest rate if the market is not really good. And how do you take those policy? And U. S.

Operator

Presidential election today, including your U. S. Businesses, what is your forecast or outlook about your businesses in the U. S. With regard to the election?

Operator

Thank you very much, Mr. Nakamura. So Mr. Uchida, the Air Vice President of the Air Bank of Japan. Because of his statement, the market kind of stabilized or settled down in a way.

Operator

But we are not really looking for very drastic changes that is almost causing sort of a panic reactions. It is not something we would wish, of course. And if the market reacts with that sort of attitude in place that is good, JPY 155 was the level from 2 weeks before or last week even. At that time, we thought that the interest rate hikes by the Bank of Japan was already factored in. And we were surprised after all.

Operator

And to manage our operations, it was a bit of a surprise. Of course, we are subjected to any changes that could happen at any given time, and we will try to toughen up our business structure to be able to withstand. However, if the changes are too dramatic and too fast, it is not easy to catch up, of course. And the impact of the presidential election, I don't think it is appropriate to say who would win then. But based on the current situation in the United States, Before the election presidency election things coming up already, we've had AV market in the United States sort of stalling, kind of coming to a kind of a stagnant stage.

Operator

And the used car prices of EVs in the U. S. Is staying very low. That means the EV users,

Speaker 1

the customers who

Operator

bought EVs, then see that the same type of the car he they bought sold at a very cheap prices. They thought they bought EVs because it is one of their kind. But now the prices are not high, And they don't find the EVs have a good value as one of the assets they should own. So that then relate to the confidence in the companies like ours. And we need to we want to respect our customer loyalty as well, and that is something being impacted maybe.

Operator

And in the presidential election questions, you may like to hear from us how we would take the regulations and so on going forward. Mr. Trump or the Republicans would have a certain tendency for the regulation matters. And this is something you already know of, so I'm not going to explain for myself today. But by 2028 or no matter about the presidential election till 'twenty eight or so on, our aim is business aim is going over the longer perspective, 2,035 or so, that is to try to resolve the social issues, and those have to be handled and addressed by the society on the whole.

Operator

And we want to realize our targets in the long run, and we want to focus on such long term target without being distracted. And then of course, politics matters in some cases. And However, those changes or impact will be within a 4 year period of their tenure. And then we will have to try to craft our business management way so that we can go and withstand the period.

Speaker 1

Next question Excuse me. It seems that the connection is not going well. So we'd like to go for the next questioner. Mr. Yokoyama, thank you very much.

Speaker 1

Thank you. I'm Yokoyama from Toyoke Eisai. I have two questions as well. The first one is regarding the consolidated outlook. I would like to confirm something.

Speaker 1

So the profit progress seems like it's going well on the based on the operation profit. As for motorcycles and automobile builds, you said you're not making any projectional change. And so the risk and opportunities based on those 2, I was wondering why you did not change anything there. Maybe you were looking at the second half of the year. And because you said you mentioned earlier that expenses are expected to increase in the second half.

Speaker 1

So please elaborate on that. Question number

Operator

2,

Speaker 1

this is regarding supplier support. The incentive or cost of sheltering for the inflation and against inflation. What kind of support or initiatives are in place, if you know, including figures? If you could elaborate on that, that would be great. Thank you very much.

Speaker 1

Thank you, Mr. Yokoyama. So for question number 2, maybe Kagutsan can answer, including concrete figures. So the financial results for the Q1 as for motorcycles and 4 wheel drives or automobiles rather, both performing very well. RRS, 9%, which is the highest level in the history.

Speaker 1

So our history and in Thailand, there is some fluctuations there and also some problems in Vietnam. But overall, we are seeing upward trend. Brazil, India and Turkey are leading that trend. As for India, until July, the top share has been achieved in the past 4 months. And for this month, they were aiming for achieving the 1st place.

Speaker 1

So that's what's happening in India. And since 2018, their target or they have achieved 5,000,000 yen per term per quarter. They have achieved that. So it's going strong. And for the consolidated year, it's still 1st 3 months, so we want to monitor a little more.

Speaker 1

However, we are expecting that they will surpass 20,000,000. And as for Motorola builds, Centering around the head, it's going well in North America, and incentive increase is naturally there. However, we are only leveraging it slightly as for the price hike and pricing as well. We are going according plan from the onset of this fiscal year. For each model, we have we cannot increase the production capacity in North America any further.

Speaker 1

So it's not like we can adjust much more in line in this area. On the other hand, we have China's impact at 220,000 units, and we have negative of several 100,000,000. So including automobiles or motorcycles rather, we would like to recoup the negative of JPY 1,480,000,000 or JPY 48,000,000 through our efforts corporate efforts. And also, our outlook for the profit is also going down, unfortunately. However, the interest rate to shareholders as for the first quarter, the tentative impact is seen on the corporate taxation system.

Speaker 1

So we can offset our negativity through that. And the KRW 1,000,000,000,000 that we mentioned at the onset of the fiscal year or the term, we would like to maintain that because this is only the Q1. So the progress is going well. And like I said, there is some negativity from China. So from that perspective, it looks like it is going well.

Speaker 1

However, we do have to make more effort to maintain the high level that we are aiming for throughout the year. So I believe I answered both of your questions. So Mr. Kaguchi will answer your question number 2 regarding the support for suppliers. So basically, of course, we have to have suppliers' support in order for us to do our manufacturing activity in order to deliver our products to our customers.

Speaker 1

So of course, each supplier has their own reasons and background for their performance. So we would like to collaborate well, and we are collaborating with each supplier in order for them to be able to perform well. And there is also inflation impact, including labor costs. There is some burden on the supplier some suppliers. And if that's the case, we are ready to help them.

Speaker 1

Especially last year, we had a semiconductor problem, and our production was not stable. It was not only in Japan. However, in North America, where inflation is quite significant, we have been discussing with suppliers, and we have been shouldering partially their costs as well. So that is the current situation. And this situation will continue on in a similar manner this year.

Speaker 1

And it is hard to forecast the inflation trend, But we cannot tell you specific numbers, but our cost is reflecting such a situation. And for the Q1 and the documents that we shared with you today, there is a profit fluctuation of factors compared to the same period last year. And there was an impact of selling price and cost Explained in all material, one document, and there is a 150,000,000,000 yen impact, as I explained here. And this is an impact of selling price, and this is slightly a positive impact. However, this is the market situation of materials, including metals, and that has loosened compared to last year.

Speaker 1

So excluding that, our cost is almost even. Not much change is happening there. So the suppliers' activity to counter inflation, we are supporting them in such an activity in the similar way as last year. Thank you very much.

Operator

Next question, Mr. Inajima from Bloomberg, please. So some of the answers until now have already resolved my question. But as a follow-up question, especially that you don't change the full year forecast, The forex exchange volatility is still high. Is that one of the reasons why you didn't change the forecast?

Operator

And also, U. S. Presidential election related question, if Mr. Trump is back in the office, they say that they're going to have that might affect on the U. S.

Operator

Excuse me, Japanese OEMs who has the likelier high impact by the tariff increase, Honda as well. And maybe other companies might have to pass on or pass through those incremental tariff to the crises that might kind of work positively for the businesses, I thought. If you have a kind of a similar view, please clarify. Thank you very much, Mr. Inajima.

Operator

So the reason why we didn't change the operating profit focus for the full year, The reason is one of the reason is the forex currency because it is not a clear cut trend we see. Therefore, we didn't change our outlook in the recent around 2 weeks changes. We couldn't make our decision for U. S. Dollar.

Operator

And also, we have other currencies involved because we have a rather complicated price components transactions in different regions. The cross transaction with the different currencies involved, quite complicated. Therefore, change of the forecast within a 3 month situation would not be really justified, we thought. And then we have other segment businesses and regional businesses.

Speaker 1

And

Operator

quite a few of those can be or are being going on in line with our expectations, like Chinese yuan, the equity based businesses, for instance. However, your question is operating profit related, right? So the forecast of the OP with regard to the Chinese impact, The Honda Motor received a royalty money from the parent company in China, and we send a KG parts or components to China as well where we get some profit as well. But where we have less fewer number of the vehicles in China, we would have impact. It will be like lows of some tens of 1,000,000,000 yen sort of impact.

Operator

However, 1.2 4,000,000,000,000 forecast still stands because we could absorb such impact with some efforts still. And again, presidential election? In the previous Trump administration, we had a USMCA. We had a tariff in place, and then we still have an impact by that even today in relation to the Mexico business's involvement. The impact still is in place.

Operator

So we don't know what sort of regulations they would impose. For instance, local content ratio, that may be one of the impact area. However, we need to know the details of what is coming up. And in comparison, CBU, complete unit, we don't have bigger portions of a CBU transactions. However, what is the impact on that?

Operator

That's another question because we don't send to many CBUs from the U. S. Or from Asia to the U. S. So depending on the origin and the destination of those CBUs, impact will be variable.

Operator

And from Canada to U. S, from Mexico to the U. S. And other routes, The U. S.

Operator

Headquarters have like a 3 country or 3 party trading, which is sort of complementary to each other. And it might have some impact, but we could try to sustain our business. And from Mexico to America, maybe less impact to that perhaps. But without details known to us, it is very difficult to explain.

Speaker 1

Thank you. I apologize, but due to time constraints, the next question will be the last one. The last question? Mr. Mizutori, please.

Speaker 1

So I have two questions regarding hybrid. The first one is regarding last page on the PowerPoint. The per previous number of sales is there, I believe. So looking at the number, the hybrid sales units, it looks like it's increasing. You said it's going well in North America.

Speaker 1

But overall, there is a reason for sales unit reduction, actually. So can you please elaborate on that? And also, the second question is related to this as well. The overall sales is going not so well in China. So what is the positioning of HEV in China?

Speaker 1

Toyota is enhancing HEV in China, and they're trying to improve the situation even further. So how are you going to deal with HEV positioning in China? Thank you, Mr. Mizutori. So as for the sales units of HEV in China, the 5% reduction in the passenger car category is what's being planned.

Speaker 1

So the change in the category, including hybrid, we have seen a 30% reduction in eyes, including hybrid. And on the contrary, in NEV is increasing. So the hybrid included in ICE is decreasing in China slightly. Last year, it was 60,000, but now it's less than half of that. So that's impact from China situation.

Speaker 1

So excluding that, Chinese factors, the HEV for this quarter, about 60% increase is absorbed compared to last year. So how it's going? In China, we have to still monitor. But as we mentioned at the onset of the term, last year, global model of a hybrid at 800,000, we are aiming for 1,000,000,000 this year. That is our plan currently.

Speaker 1

So the production unit sales in China is going down at the moment, so we are still struggling in that area. But either way, this year, our target is to increase the production volume to 1,000,000. In the ICE presence, including hybrid, in some way or another, we are going to have to support. So in China, as market is strangling, we have to consider how to fight under such circumstances within ICE, the V segment SUV. For example, we are losing in ICE market as well with those models, so we also have to make effort in such categories as well.

Speaker 1

Either way, as I mentioned earlier, on top of that, the battery EV exclusive platform is what we are planning for and the full fledged production in China for those models. So we will be focusing on that category. Does that answer your question?

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Honda Motor Q1 2025
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