Honda Motor Q3 2025 Earnings Report

Honda Motor EPS Results

• Actual EPS: $1.31
• Consensus EPS: $0.94
• Beat/Miss: Beat by +$0.37
• One Year Ago EPS: N/A

Honda Motor Revenue Results

• Actual Revenue: $36.31 billion
• Expected Revenue: $35.31 billion
• Beat/Miss: Beat by +$996.72 million
• YoY Revenue Growth: N/A

Honda Motor Announcement Details

• Quarter: Q3 2025
• Date: 2/13/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 13, 2025
• Conference Call Time: 3:35AM ET

Honda Motor (NYSE:HMC) Co., Ltd. is a Japanese mobility and manufacturing company founded in 1948 by Soichiro Honda and Takeo Fujisawa. The company is best known for developing and manufacturing automobiles and motorcycles, and it has built a global presence through research, production and sales operations in Japan and international markets.

Honda’s automotive business includes passenger cars, light trucks, hybrid-electric vehicles and battery-electric vehicles under the Honda and Acura brands. The company also produces motorcycles and related power products, including engines, generators, pumps, lawn and garden equipment, and other products used by consumers and businesses. Its broader mobility activities include marine engines and small aircraft through Honda Aircraft Company, which develops the HondaJet.

In addition to its manufacturing operations, Honda provides financing and other financial services to support vehicle purchases and leasing. The company continues to invest in electrification, fuel-cell technology, advanced safety systems and other forms of next-generation mobility. Toshihiro Mibe serves as Honda’s Representative Director, President and Chief Executive Officer.

Honda Motor Q3 2025 Earnings Call Transcript

Key Takeaways

• FY2025 Q3 cumulative operating profit was ¥1.14 trillion with a 7% margin, and operating cash flow after R&D adjustment held steady at ¥1.945 trillion year-on-year.
• Motorcycle unit sales remained robust at 15.5 million in Q3, prompting an upward revision of full-year motorcycle sales to a record 20.6 million units.
• Automotive sales fell by 297,000 units year-on-year, mainly due to a steep decline in Asia (particularly China), leading to a lowered full-year forecast of 3.75 million vehicle sales.
• Equity method investment profits swung to a loss of ¥27.2 billion, largely reflecting weaker partner performance in China, which weighed on profit before income taxes.
• Honda approved a ¥1.1 trillion share repurchase program, acquiring ¥184.9 billion worth of stock by January 31, 2025, to optimize its equity ratio and return capital to shareholders.

Presentation

[Operator]

The results briefing.

[Operator]

Thank you.

[Operator]

I'm first to introduce the executives in attendance: the Director, Executive Vice President, and Representative Executive Officer, Shinji Aoyama. How do you do? The Director, Managing Executive Director, and CFO, Eiji Fujimura. Thank you very much. First, Mr. Aoyama will overview the FY25 Q3 Financial Results and FY25 Full-Year Consolidated Forecasts, followed by Mr. Fujimura's explanation on the details. Mr. Aoyama, the floor is yours.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you for your continued support for Honda's business activities. Thank you very much. Let me explain the financial results for the FY2025 Q3. First, let me highlight the key points. The FY2025 Q3 cumulative operating profit was JPY 1,139.9 billion, with an operating profit margin of 7.0%. In motorcycle business, sales volume remained strong globally, and Q3 cumulative total was 15.5 million units.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

In automobile business, consolidated unit sales volume decreased by 297,000 units year-on-year, despite solid sales in North America, due to a drop in Asia, mainly China. Operating cash flow, after R&D adjustment representing funding for future investments, remained at the same level year-on-year at JPY 1,945 billion. The FY25 consolidated financial forecasts are unchanged: operating profit JPY 1,420 billion, profit for the year JPY 950 billion. Motorcycle unit sales have been revised upward to a record high due to strong global sales. Automobile operations, mainly due to decline in Japan, are revised downward to 3.75 million units. However, due to a rise in motorcycle sales and exchange rate, operating profit and profit for the year forecasts remain unchanged. A resolution was made on December 23rd 2024, to repurchase JPY 1.1 trillion worth of company shares. JPY 184.9 billion has been acquired as of January 31st, 2025.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

We will work to complete the repurchase of JPY 1.1 trillion in shares. Next, the situation in the major markets. Regarding motorcycle operations, due to strong demand in India and Brazil, combined with economic recovery in Vietnam, sales exceeded the same period last year. Automobile business saw an increase in Japan and the U.S., but due to the severe market environment in China, total sales dropped year-on-year. In Japan, sales volume in the Q3 was lower than the same period last year due to fierce competition, among others. The cumulative consolidated financial results for FY25 Q3 are as follows: Operating profit increased by JPY 63.5 billion year-on-year, totaling JPY 1,139.9 billion. Equity method investment profit decreased by JPY 94.5 billion, a loss of JPY 27.2 billion. Profit for the period attributable to owners of the parent company was JPY 805.2 billion, down JPY 64.3 billion.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Consolidated financial forecast for the fiscal year ending March 2025: We maintain our previous forecast for both operating profit at JPY 1,420 billion and current profit attributable to owner of the parent company JPY 950 billion. Exchange rate assumption is 152 JPY against the dollar for the Q4 and full year. The forecast for the annual dividend remains at 68 JPY, unchanged from the previous announcement. Additionally, a resolution was made on December 23, 2024, to repurchase JPY 1.1 trillion worth of company shares. As of January 31, 2025, JPY 184.9 billion has been acquired. Cumulative FY2025 total of acquired shares is JPY 472 billion. Mr. Fujimura will present the details of the financial results.

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

I'll explain the results of the Q3. Regarding the cumulative unit sales until the Q3 FY March 2025 of the group, for the motorcycle segment, due to the year-on-year increase mainly in Asia, 15,508,000 units sold; for automobile segments, due to a decrease in Asia, mainly China, 2,817,000 units sold, and for power products segment, due to a decrease mainly in Europe, 2,516,000 units were sold. Consolidated financial results of the cumulative three quarters were explained already. Next, I'll explain factors of ups and downs of profit before income taxes of a cumulative nine months year-on-year. Operating profit increased by JPY 63.5 billion year-on-year because of the following factors. Regarding sales impact, profit increased due to the rise in sales unit. However, incentives went up. Thus, the profit was squeezed by JPY 104.3 billion.

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

Regarding price cost impact, thanks to the pricing that commensurate improved the product values, profit increased by JPY 376 billion. Regarding expenses, due to incremental labor and subcontractor costs, profit squeezed by JPY 54.3 billion. R&D cost increased JPY 97.5 billion downward impact on profit, and the currency effects squeezed the profit by JPY 56.3 billion. Profit before income taxes were down by JPY 38.9 billion because of the profit of equity method declined due to a drop of the unit sales in China and so on, although operating profit itself increased. Regarding the operating profit by segments, JPY 501.6 billion for motorcycle business and JPY 402.6 billion for automotive and JPY 244.9 billion for financial service businesses and power products and other businesses made losses of JPY 9.3 billion. Next are the cash flows.

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

Free cash flows from the businesses, excluding financial services businesses, were JPY 693.7 billion during the first nine months cumulative of the FY March 2025. Net cash at the end of the quarter was JPY 3.7789 trillion. Operating cash flows after R&D adjustment were JPY 1.945 trillion. Next, I'll explain consolidated business forecast of FY March 2025. Regarding the projection of the group's unit sales versus the previous forecast, unit sales of the motorcycle will be 20.6 million, mainly reflecting the increase in Asia. Units of the automobiles will be 3.75 million, mainly reflecting the decline in Japan. Those of power products businesses will stay at 3.66 million, same as the last forecast. I've covered the forecast of the consolidated performance of FY March 2025. Next, let me explain factors behind changes in profit before income taxes year-on-year basis.

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

Operating profit will be up by JPY 38 billion year-on-year. The breakdown of the differences will be regarding the sales impact, although the incremental unit sales will push up the profit. However, the higher incentives and so forth will squeeze the profit by JPY 198 billion. Regarding price cost impact, pricing reflecting product value improvement and so on will add profits by JPY 535 billion. Expenses will increase by JPY 73.5 billion, squeezing the profit, and R&D cost will increase by JPY 125 billion, squeezing the profit too, and the currency effects will impact negatively on profit by JPY 100.5 billion. Although operating profit itself increased, the profit before income taxes will drop by JPY 177.3 billion, reflecting a declining profit of Equity Method because of the reduction in unit sales in China. Next, let me explain the differences in comparison to the previous forecast.

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

We will keep the same operating profit of the previous guidance, of which the breakdowns will be motorcycle sales will increase. However, the unit of automobiles will reduce. Thus, the sales impact will squeeze the profit by JPY 27.5 billion. Price cost will squeeze the profit by JPY 15 billion. Expenses will increase by JPY 5 billion, reducing the profit. And the currency effects will push up the profit by JPY 47.5 billion. Profit before income taxes will be expected to be higher by JPY 30 billion, reflecting yen depreciation causing forex gains. Lastly, this is a forecast for capital expenditures, depreciation, and our R&D spending. And that concludes my presentation. Thank you very much.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you for your listening. And now I would like to proceed to Q&A. As we have pre-informed, we will be taking questions via Zoom. Currently, we are receiving a number of inquiries regarding our business integration. However, those questions will be addressed when our president holds a news conference from 4:50 P.M. So we would like you to refrain from asking questions related to business integration and focus solely on the financial results-related questions. We ask for your understanding and cooperation. Those of you who have questions, please use the raise hand button. And due to the time limitation, we would like you to limit your questions to two per person. When asking a question, please turn on both your camera and microphone.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

それでは最初のご質問です。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

First question.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

週刊東洋経済。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

From Toyo Keizai, Mr. Yokoyama, please.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Toyo Keizaiの横山です。聞こえますでしょうか。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

This is Yokoyama from Toyo Keizai. Can you hear me now? Yes.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

はい、よろしくお願いします。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

二点。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Have two questions.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

一点目が。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

First?

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

通期の。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

About the full year, the four quarters plan.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

The Q3 is about operating profit JPY 410 billion, and you deduct the JPY 280 billion for the Q4. So what is the reason for the decline? And I'm asking the same question. I think it's related to the expenses. But compared to the past plans, please talk about the risk and opportunities. And so that is my question. And I'd like to proceed to the next question. But in the interim announcement, you talked about the EV incentives to quite an extent. And I think there was a JPY 100 billion increase from the original plan. And the Q3 after the Q3 ends of February right now, North American incentive, how much increase are you seeing? And are you seeing that the incentive costs are increasing? And I think that the consolidated for automotive is declining. So please explain about the incentives in North America.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you. Mr. Yokoyama, I think you've asked two questions, but first, about the Q4 plan. Well, the Q3 actual, compared to the actual Q3, we are asking about what about the Q4.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

That was my understanding of the question here. But basically speaking, the Q4, well, it's the end of our fiscal year. And so what increases is especially the R&D area and also SG&A. And because it's the end of the fiscal year, there are a number of things that are paid out and delivered to us. And so there's an increase in expenditure. And therefore, in the Q4, it tends to be the SG&A and R&D. They tend to be, well, roughly speaking, one stage higher. Well, it's JPY 390 billion or a little less than JPY 400 billion for the Q3 operating profit. But most of that is SG&A and R&D.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

So I think that those are the main ones. But North American incentive-related items, well, slightly, the procurement cost is, in some cases, in other words, the finance business I'm talking about here, the procurement cost is increasing. But that's included. But it's mostly the SG&A and R&D that will explain the numbers for the Q4. Now, about North America and the incentives in North America. Well, it has increased slightly now, but the procurement cost is slightly higher. And this is also reflected partially. And in total, I think that is just a marginal increase as a total, that is.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Because we're talking about North America on the whole and the incentives of North America on the whole, but the EV incentives, if you just focus on EV incentives, in the Q2, in the first half, I said there will be for full year an impact of JPY 100 billion. Just talking about that part, I do think that the number has slightly declined. In other words, we were able to reduce the incentives. But because of the sales unit volume and also the production, well, these are products being produced at GM. And the production, there is an adjustment in the supply. And therefore, the final, vis-à-vis the supply, we have tried to reduce the supply. And therefore, there is the need to make payments or discuss the possibility of making payments for compensation, etc.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Therefore, in the Q4, these things could turn out to be on the negative side. But right now, we don't have any numbers at hand. And therefore, they're not reflected right now. But there is the possibility of such negative factors in the Q4.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Is there any additional explanation?

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Well, yes, about the Q4. Well, to begin with, compared to the original plan, I think you were asking what it looks like right now. But for the full year forecast, the exchange rate, we've changed it to JPY 152. But we still have JPY 1.42 trillion operating profit. And it has been covered, offset by the motorcycle. But it has not been fully offset for the automotive. And therefore, for the full year, it, in fact, subsidies will be negative. But the Q3, the motorcycle business did offset the automotive business.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

There was the weakening of the yen. There was about JPY 30 billion compared to the budget add-on in the Q3. The full year negative has more been skewed to the Q4. That is the difference between the last time and this time. That is all. Thank you.

[Operator]

はい、横山様。

[Operator]

Thank you very much, Mr. Yokoyama. Next question. Asahi Shimbun newspaper, Mr. Nishiyama, please.

[Operator]

はい、朝日新聞、西山です。

[Operator]

Nishiyama from Asahi Shimbun, can you hear me? Yes, please.

[Operator]

ありがとうございます。ご説明ありがとうございました。

[Operator]

Thank you for the explanation. I have two questions. First one, earlier, the question was already covering this point, which is automotive business profitability as compared to motorcycles. In a way, the motorcycle business is very good. That is the factor behind. However, in order to improve the profitability of the automotive businesses, of course, there could be another separate discussion about business integration and so forth. But what are your measures for improving profitability of the cars? In the last presentation, that time around, there was a Trump administration topics talked about a lot. A tariff for Canada and Mexico is to be raised. Of course, it is frozen for a month, but we don't know when it will be coming back again. What is your measure against that?

[Operator]

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

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you very much, Mr. Nishiyama. So profitability of the automotive businesses. To start with our recent situation, the revenue for this year, looking at that revenue, of course, that may look a little lower, especially in comparison to that of motorcycle businesses. However, in order to give you the precise answer, for instance, battery EV development cost and battery EVs sales volume is not so high in North America and in China. However, if battery EV businesses and those investments in the development for that is deducted from that, the remainder will be the ICE and hybrid businesses. And for that part alone, actually, the situation for that part is not so different from the previous term. The profitability is about 8% for that part.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Therefore, hybrid and then gasoline-based engine cars have profitability that is far improved from the previous situation. That is a kind of overall picture, and battery EVs, we are preparing for the business of battery EVs now. For instance, GM production, that was the starting point for North America, and then right next fiscal year, we are going to produce and launch the cars that we developed by ourselves in North America and the US, and as of today, I wouldn't say that that will be making a very good business right at the start. However, including the preparation for the next-gen cars, we are going to improve the businesses of the upcoming models, and we will spend the development efforts with investment, which will improve the situation furthermore.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Then profitability of the automotive businesses from this model year 27 onward, we already explained that in December last year, next-generation hybrid starting around model year 26 or 27. And the hybrid in those years will be of a much higher profitability. And also commercial values of those will be much better. And with them in place, it will improve the profitability of the entire businesses, including ICE cars and the hybrid. And then Trump administration, after the March 1st, the question is still hypothetical, I should say. However, if I want to try to answer your question squarely, thank you for your question, of course. So suppose in March 1st, 25% tariff is started, if that comes in place, so the impact on the business up until March this year, there could be perhaps a JPY 20 billion-plus impact. That is the assumption as of today.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

However, it is a super short-term impact, right? Production in Mexico, Canada, we have those productions in there. And we will try to bring over those products from those two areas to the U.S. earlier, perhaps in February. And that is our actions in the short term. And in terms of tariff increase, again, in the big picture, of course, every year the situation is rather different. However, about one-third or higher than one-third of the businesses are using the components or products brought down from Canada and Mexico. The remainder of two quarters, two-thirds, are produced in the U.S. Therefore, our second highest local content of the production of the vehicles next to Ford in the U.S.. And the question is, how effective would that policy become? In fact, it is very difficult to visualize it.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

So at this moment, what we can do is to do something in the short term, which is about current production based on the current model mix and production in Mexico and Canadian factories. We could reorganize the product mix of the production that was there. This is something we can do short term. But in a midterm perspective, we could change the allocation of the model mix in different ways. We are preparing for that too. However, we have possible actions and consideration for short term, midterm, long term, so forth. But we don't really give a go at this moment for any of the actions on the table today. So Fujimura-san, anything to add, please?

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

はい、今の関税の。

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

So, again, the tariff. So, what is the approximate estimate of the impact based on the simple calculation, based on the CBU complementary supplies? In the U.S., we have the next to Ford sort of local content of the productions, meaning 60% of the products are produced in the U.S. We have some input from Japan as well, but 40% of those are supported by the production in Mexico and Canada. And, of course, those two countries are also dependent on the U.S. too. And at the moment, we are talking about the sales in the U.S., which pertains to the production in Mexico and Canada. Last year, it was about 550,000. And Canada is dependent on the U.S. for 40,000. And Mexico is dependent on 20,000. That adds up to 610,000 units. And, of course, that depends on the type of models.

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

But suppose [the] cost [is] $30,000 for the cost of those cars, and then 25% of the tariff to that amount of the money where you can calculate impact on the cars. Plus, you can think about others like steel and aluminum, other miscellaneous materials, and so forth. But that could be like a four-digit, high end of the four-digit figures, I suppose, as much as I could expect as an impact. My colleague Aoyama-san said about our short-, mid-, long-term measures, actions. When should we trigger to start those actions? Of course, we have to watch carefully what's going on, then decide when to start with that. Thank you.

[Operator]

はい、西山様、ありがとうございました。

[Operator]

Thank you very much, Mr. Nishiyama. And next question, please. 読売新聞、奈良橋さん、 please.

[Operator]

読売新聞の奈良橋です。

[Operator]

Narahashi from Yomiuri Shimbun newspaper, thank you.

[Operator]

About the motorcycle sales in Thailand. It's declining from the last quarter. I think it's due to market conditions, and what impact does this have on your automobile business? That's my first question, and the second question about repurchasing your shares. Well, as of December, yes, there was the talk of the business integration with Nissan, and based on that, well, now that this has been scrapped, what is the reason for continuing to do the repurchase?

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you. Mr. Narahashi.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

About your first question, the impact on automotive business, right?

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Yes.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Okay. Yes. What is your outlook of the Thai market? Okay, I understand. Motorcycle sales in Thailand this year's numbers compared to last year is quite low. That's for sure. This apparently is because of the credit, the difficulty in financing. So that is the cause. That is clear. About the motorcycle sales in Thailand, just looking at that towards the end of last year, the Thai motorcycle sales was better. Still, it's quite significantly low year-on-year. Now, about automobile and related to the financing and difficulty to secure loans, I think this is continuing. Therefore, the market, both in the motorcycle and automobile market in Thailand, it has been on the decline for the past year or so.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

So given such circumstances, however, as for the motorcycle business, well, the Thai market, we have an 80% market share. And therefore, we want to maintain this share and wait for the market to recover, should I say. And as for the automotive business, on a macroscopic level, the loan screening is very tough. And it's difficult to secure loans. But in addition to that, for the automotive business, there are the Chinese OEM, which are introducing EVs. And I think that this has had an impact. But for battery EV, within the market, about 20% or so are in the passenger vehicle segment, EVs, battery EVs. So it's not increasing, but it's rather sluggish in Thailand, the battery EVs. But we also have been making effort to sell BEVs, and we want to work harder next fiscal year.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

About your second question about the repurchase of our shares and why we're continuing to do so, well, to begin with, on December 23rd, we announced that we will start consultation for possible business integration, and at the same time, this resolution was made and decided, but while the talks continue, we try to ensure that this will not comprise any insider trading, and therefore, that is the reason why we had that resolution and made the announcement, but it was just a matter of timing, and so I'm talking about the size of the repurchase. This is accumulation from the past, and we want to optimize our equity ratio, and therefore, we believe that the timing at which this was resolved was just at the time when we were starting the business integration talks with Nissan.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

But the size of the repurchase and the schedule of the buybacks, well, it was high time for us to do it. So it was just a matter of timing. But this was due to the need to optimize. And that was something coming from the past. And we will continue to buy back. And nothing will change. Mr. Fujimura?

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

Well, let me add some numbers here. As of the end of December, net cash, it was JPY 3.8 trillion. And so it's about 2.5 months' worth from the beginning of the month. Due to the Lehman crisis and others we have experienced, from that experience, one month's worth of cash is something that we want to hold normally. But against that, it was 1.5 months' worth, rather. And so we want to make appropriate our equity ratio.

[Eiji Fujimura, Managing Director and CFO at Honda Motor Co]

PBR, one-fold, that was our target. Instead of holding cash at hand, we want to return it to our shareholders. Therefore, we have decided for a buyback of JPY 1.1 trillion. As Mr. Aoyama has explained, this was not because of the business integration talks with Nissan. This JPY 1.1 trillion program, once it is completed, we will have a one-month level of cash at hand. We think that this is the appropriate level. Thank you. Thank you.

[Operator]

So thank you, Mr. Narahashi.

[Operator]

続いてのご質問です。 Next, a question from Nikkei Shimbun, Nikkei Shimbun, Mr. Noguchi, please.

[Operator]

日経新聞の野口です。

[Operator]

Noguchi from Nikkei.

[Operator]

聞こえてますでしょうか。

[Operator]

Can you hear me?

[Operator]

はい、聞こえております。よろしくお願いします。

[Operator]

Thank you.

[Operator]

ありがとうございます。今後の。

[Operator]

So, motorcycle and automobile businesses going forward, what is the concept or ideas for the operating profit for them? For the time being, EV development and SG&A cost is prioritized, and automobile profitability is not growing. Maybe suppressed a bit. Also with the motorcycle businesses, we have electrification going on, so how much would that grow, given the good marketplace too? However, overall, if you have a mixture of the two businesses, do you think you can grow them together continually going forward, or would that be suppressed a bit, or are there any opportunities to grow too? That is the question.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you, Mr. Noguchi. To start with the motorcycle businesses. In fact, it is for the automobile too. The progress of our battery EVs and the progress toward that. I think the assumption of that speed is one thing that we have to mind about.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

However, it is kind of difficult to anticipate the speed of that at this moment because of the North America policy situation, and the things are quite unclear now. However, let's start with the motorcycle businesses. Electrification of the motorcycles is, as compared to that of automobiles, we have investment on those for motorcycles, and the amount of the investment is not very big as compared to that of automobiles. With that, we are successfully electrifying motorcycles based on the past technologies of the engines and frames, and we are working on similarly with the battery EVs. We best combine the technologies and so forth. That way, we can have the restricted development cost those successful, and then, as we said with the automobiles, the battery EV cost for the cars is quite a lot, but motorcycle, and it is not that much.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Looking at the global motorcycle market today, I think we still have the leeway, the growth potential too in India, Brazil in a short while. We still have markets there. The Philippines, Pakistan, Bangladesh, for instance, we still have lots of market to grow into. In that regard, even with the ICE engine-based vehicles, we will be able to maintain a high level of the profitability for the motorcycle businesses for quite a while. For the automobiles, we covered that a bit in the first question. We have the gasoline-based engines, including hybrids, which have the 8% profitability today. With the next generation hybrid comes in 2029 or 2027 or 2028, excuse me, those profitability will be growing into the two digits, above 10%. Therefore, profitability or business of the battery EV, what would the business be like at this situation?

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

We are going to launch battery EVs newly going forward. Of course, we will have improvement as compared to the current situation in the U.S.. However, as I said, currently, the visibility is quite poor. For instance, IRA, income tax deductions, so forth. We thought about LGES battery plants and so forth would be utilized with the assumption of a $7,500 reduction of the taxes based on IRA. That was the original assumption. Now the question is what will become of eventually in this picture. We can't really say what's going to happen. Therefore, it is very difficult to tell you the business outlook. Nevertheless, we'd like to maintain the high level of profitability with the ICE and current gasoline-based vehicles.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

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

[Operator]

Thank you very much, Mr. Noguchi. Next question, please. From Mr. Mizutori from Japan Automotive Daily, please.

[Operator]

日刊自動車新聞の水鳥です。聞こえますか。

[Operator]

Mizutori speaking. Can you hear me? Yes.

[Operator]

お願いします。ありがとうございます。

[Operator]

Thank you.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

ちょっとミュートになってしまいました。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you. Muted now.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

お待ちください。まだ聞こえてないです。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

We cannot hear you.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

すいません。聞こえてますでしょうか。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Can you hear me now? Yes.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

よろしくお願いします。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

一点目は。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

The first question about China.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

42月期の販売の実績も。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

We see that there is a 40% year-on-year decline from April to December. The Ye Series, that was thought to be promising, but there has been a bit longer time required for ensuring the quality. Therefore, locally, the HEV market seems to be developing. But how are you trying to make a recovery in China? That's my first question. About the number, I want to make some confirmation. The full-year capital expenditure is JPY 70 billion or so less, I think. So is this due to the revisiting of the exchange rate? Is there anything that you postponed in terms of your CapEx?

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Mizutori-san, first of all, thank you very much for the question. Now, first about the Ye Series.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Yes, the quality, well, yes, in the preparation for mass production, I think that we were a month or two behind schedule. That is for sure. But there wasn't any significant problem. So from March to April, we will be launching. So I think that this is the current plan. But the MSRP, the final decision has not been made, MSRP. And the current market, including the incentives, the situation is quite tough. And what pricing we should adopt, et cetera, these are things that we're still looking into right now. But about the competitiveness, whether there is or is not competitiveness, as we are making announcements locally, the styling, the appearance, the interior space design have all won high appraisal. So we have a high expectation for our models. But yes, first, the Ye series. Well, as we've been announcing the past, the S7, the Ye series S7.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

We'll start with that model and then the Sedan GT will be launched and then after S7, we'll have a three-row seat large SUV launched so we are preparing this model too so this will be the series and therefore, with this, we want to establish and expand the Ye Series. That is for the current battery EV plan. Meanwhile, as you know, the NEV ratio in 2024 calendar year, it was more than 46%. Next year, what will happen? Well, there are different views on this, but still, in that case, we are thinking 55% or more so there will be an increase of new energy vehicles, but for the premier hybrid, we want to go ahead with that. We want to use the current Accord and CR-V and the sister plug-in hybrid vehicles and well, we have an intense race right now, which is quite tough.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

So it's not selling that much. But other than that, we think that basically next fiscal year, no, maybe the year after, as I said, the next generation hybrid will start mass production in China. So it's FY2027. Yes, FY2027. So at that time, it will start. And we want to sell these models. But the NEV ratio is increasing. And therefore, well, if there's a 10% increase, then the non-NEV vehicles will decline. The gasoline vehicle market will decline by more than 10%. This is something that we cannot deny. So next fiscal year, depending, well, looking at our unit sales, well, we have to assume what market changes will take place and put together our business plan. Well, yes. And I think that with the NEV ratio increasing, we want to sell our NEVs. That is the opportunity that we want to capture. About the second CapEx.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

So yes, the decline of JPY 70 billion is not really a delay, but instead, it has been postponed slightly. Well, what we are planning for the end of the fiscal year will be carried over to the next fiscal year, the beginning of next fiscal year. So that's about the change that we are seeing. The specifics, can I disclose the specifics? Well, the battery EV related investment, Canada related, well, there has been not really a delay, but we've just changed the timing.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Okay, thank you.

[Operator]

はい、水鳥様。

[Operator]

Thank you very much, Mr. Mizutori. Next question from Nikkei Asia. Mr. Takei, please.

[Operator]

こんにちは。日経アジアの森です。聞こえておりますでしょうか。

[Operator]

Can you hear me?

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Yes.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

よろしくお願いいたします。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

私からも2点お願いいたします。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Two questions.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

1点目が。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

First one is the U.S. market, automobiles.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

まずアメリカの方で。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

In the U.S., Trump administration has started upcoming BEV sales. What do you think how it would be? And well, hybrid demand is good today. But how do you assess the current EV and hybrid sales situation? How would you address current situation? And the other question is Southeast Asian region, hybrid and plug-in hybrid, well accepted, very popular there, I heard. And do you have a plan to be more engaged in the businesses for them? So please share with us your assessment and how you are going to do about your businesses in there.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you very much, Takei-san, for your question. So Trump's administration started eventually. And then as of now, well, the things keep changing minute by minute. But our stance is to stay flexible and be able to be agile in reacting to the situation.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

But as of now, Canada and Mexico and its tariff situation, the current interest point is around that. And aluminum and steel, tariff about 25% on those would provide some impact, of course. However, those materials like aluminum or steel, it is not too difficult to find out our solution because we have quite a bit of procurement within the country, in the U.S. A part of the supplies could be from Canada, from Japan as well for aluminum and steel. However, I don't think it is very difficult to address that situation of the tariff for those two materials. But 25% of this on CBU from Mexico and Canada, if that tariff policy continues for a year, two, three years, for instance, it will be a difficult situation. So our action might be different depending on how we would assess the upcoming situations like that.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

And as of now, like I said before, $7,500 things. How would that be eventually? And also the state of California is having this ZEV regulation. And how would that be changing under Trump administration, the ZEV and other regulation in California? In fact, from the model year 26, we are to incorporate the ZEV requirements. And then under this regulation, we need to sell more battery EVs. However, given the current situation, it is quite difficult to achieve that requirement for the regulation. And I wouldn't say this is perfectly linked with Trump's administration intention. However, the ZEV-related regulation will have to change accordingly, perhaps. But as for the hybrid, affordably priced hybrid can be available with more variety for the choice of the consumers. That is what's happening today, as a fact.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

In case of Honda, this year, about 400,000 hybrid cars are to be sold in this fiscal year ending March 31, 2025. Next year, it will be a little more, maybe a little less than 500,000 units of a hybrid we expect. Therefore, this year, we have 25% of hybrid cars out of all types. That is our prospect for this year. Next year, 500,000 units in North America for hybrid. Therefore, in a global context, this year, the volume will be a bit less than China, a bit less hybrid over there too. This year, I would say 900,000 hybrid cars for this current year. Next year, it will be more than 1 million. That's our assessment as of today. What is the benefit for Honda? I think that was your first question, I suppose. I didn't understand the intent of your question, really.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

But about Southeast Asian countries, the demands for hybrid in Thailand and in the Indonesian market, the demands for that is mounting. In Thailand, the hybrid ratio is growing, let's say 30% or so hybrid, I suppose. Indonesia, the competitor is going ahead, and we are a little behind. However, the ratio out of the entire market will be like, of course, with the battery EVs a bit growing, 6% in Indonesia. Hybrid is about 8%. So out of the entire market, they are still a small percentage, and Honda is a little behind as of now. But next year, we will be more aggressive launching and selling the hybrid cars in Indonesia. Thank you.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

ありがとうございます。すみません、ちょっと質問の中で。

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Thank you. I apologize for the unclear question. But when I talked about benefit, I was saying that we are seeing an increase in demand for HEV, hybrid. And therefore, I thought that there might be an opportunity for Honda to sell more hybrids. So in that context, well, you said that there will be an increase in the U.S. of some 100,000 units. So I think that you've answered my question. Thank you. And one clarification, if I may, about the North America market. You said the ZEV regulation will become reality. But what is the realistic number? And also, the hybrid ratio for this fiscal year is 25%, I think. But next fiscal year, if it were to increase, what will be the ratio for next fiscal year? Can you add that explanation, please?

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Yes. About the hybrid ratio. Well, this year is about 25%.

[Shinji Aoyama, Director, EVP, and Representative Executive Officer at Honda Motor Co]

Next fiscal year, there will be an increase of 100,000 in North America. But I think the ratio will be 35%, a little more, maybe. About 35%, I guess. And about the ZEV regulation, I was talking about the industry on the whole. I think it will be difficult to achieve that regulation standard. But currently, looking at the situation, the regulation itself might become something more realistic. That was what I was trying to say here. So I really don't have any specifics to talk about here. We're just thinking that the regulation might be loosened to a more realistic number. Thank you.

Participants

Executives

• Eiji Fujimura, Managing Director and CFO
• Shinji Aoyama, Director, EVP, and Representative Executive Officer

Analysts

• Analyst at Nikkei Shimbun
• Analyst at Japan Automotive Daily
• Analyst at Toyo Keizai
• Analyst at Yomiuri Shimbun
• Analyst at Asahi Shimbun
• Analyst at Nikkei Asia