Honda Motor Co. reported its financial results for the second quarter of 2025, revealing a mixed performance across its business segments. While the company achieved record-high motorcycle sales, its automobile operations faced significant losses. The stock price surged by 13.94% following the announcement, reflecting investor optimism despite challenges in the automotive sector. Currently trading at $10.34, Honda appears undervalued according to InvestingPro analysis, with the stock still 9% below its 52-week high of $11.28 despite a strong 14.7% return over the past year.
Key Takeaways
* Record high motorcycle unit sales at 10.76 million.
* Automobile operations incurred a loss of ¥73 billion.
* Semiconductor shortages impacted production by 110,000 units.
* Stock price surged 13.94% post-earnings announcement.
Company Performance
Honda’s performance in Q2 2025 was characterized by a stark contrast between its motorcycle and automobile divisions. The motorcycle segment reached new heights with unit sales of 10.76 million, driven by strong demand in markets like Brazil. However, the automobile division struggled, posting a loss of ¥73 billion, partly due to production disruptions caused by semiconductor shortages. The company is actively addressing these challenges by optimizing its supply chain and focusing on cost rationalization.
Financial Highlights
* Operating profit: ¥438.1 billion
* Half-year profit attributable to parent: ¥311.8 billion
* Full-year operating profit forecast: ¥550 billion
* Full-year profit forecast: ¥300 billion
Outlook & Guidance
Honda maintains a cautious yet optimistic outlook for the remainder of the fiscal year. The company aims to minimize losses in its electric vehicle (EV) segment and bring EV gross profit to near-zero. Despite the challenges, Honda has maintained its full-year dividend at ¥70 per share, signaling confidence in its financial stability.
Executive Commentary
Noriya Kaihara, Director, acknowledged the prolonged challenges in the EV sector, stating, “For electric vehicle, this current situation will continue for some time.” Eiji Fujimura, Managing Executive Officer, emphasized the need for innovation, saying, “We need to enhance the intelligence of the products and also cost competitiveness.”
Risks and Challenges
* Semiconductor shortages continue to disrupt production.
* Competitive pressures in the Asian automotive market.
* Decline in the Chinese automotive market.
* Tariff impacts requiring supply chain adjustments.
* Challenges in the Chinese EV market due to pricing and product positioning.
Honda’s Q2 2025 earnings call highlighted the company’s resilience in the face of industry-wide challenges, with a strong performance in the motorcycle segment offsetting difficulties in automobile production. The market’s positive reaction underscores investor confidence in Honda’s strategic initiatives and future growth prospects.
Full transcript – Honda Motor Co Ltd (7267) Q2 2026:
Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer, Honda Motor Company: I thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Company Limited’s financial results briefing for second quarter of fiscal year to March 26. First of all, allow me to introduce the attendees today: Director, Executive Vice President and Representative Executive Officer, Mr. Noriya Kahehara. Good to see you.
Director, Managing Executive Officer, Mr. Eiji Fujimura. Good to see you, everyone. Operating Executive, Head of Accounting and Finance Unit, Mr. Masao Kawaguchi.
Good to see you, everyone. Mr. Kaihara will first present the financial results of second quarter ended 09/30/2025, and forecast of consolidated results for the fiscal year ending in March 26. Fujimura will present the details.
Over to you, Mr. Kaihara. I thank you very much for your continued support for Honda’s activities. I would like to present to you the financial results for the second quarter of financial year to March 26. I’d like to start with the highlights of the financial results.
Our operating profit for the second quarter of the year to March 26 came to JPY 4 and 38,100,000,000.0. Motorcycle operations saw unit sales decline in Vietnam, but global sales trended solidly and strongly, led by Brazil. For results up to second quarter, we’ve attained the record high unit sales, operating profit and operating margin. In automobile operations, though there were some positive profit impact due to price revisions, we saw a decline in profit due to impact from tariffs and onetime expenses related to EV. Operating cash flow after R and D adjustment, which indicates the resource available for future investment, came to 1,281,000,000,000.000 yen on par with the same period last year.
The forecast for the consolidated results for the term ending in March 26 is operating profit of $550,000,000,000 yen and profit for the year of 300,000,000,000 yen We are revising the previous forecast considering the decline in automobile unit sales and the reduction in production volume expected as of now due to semiconductor shortage, though we expect profit growth due to yen depreciation. In motorcycle operations, while we expect declines in unit sales in Vietnam, we have we hope to recover this in other regions. Thus, we maintain 21,300,000 units. For automobiles, in addition to lower sales volume mainly in China and ASEAN, declines due to semiconductor shortage has been taken into consideration for North America. We are revising down from 3,620,000 to 3,340,000 units.
To give you the consolidated results for the second quarter of the year to March 26, operating profit was JPY 4 and 38,100,000,000.0, lower by JPY 304,400,000,000.0 in compared to the same period last year. Investment earnings due to the equity method were JPY 10,800,000,000.0, higher by JPY 31,600,000,000.0. And the half year profit attributable to the owner of the parent was JPY 3 and 11,800,000,000.0, lower by JPY 182,800,000,000.0. Next, I’d like to cover the forecast for the consolidated results for the term ending in March 26. Compared to the previous forecast, our forecast is operating profit of $550,000,000,000 yen down by 150,000,000,000 yen and the profit for the year attributable to the owner of the parent of 300,000,000,000 yen down by 120,000,000,000 yen The exchange rate against the U.
S. Dollar is assumed at 145 yen for the full year period. Forecast for the full year dividend for the fiscal year ending in March 26 is 70 yen per share, unchanged from the previously published forecast. Next, Mr. Fujimura will present the details of the results.
Allow me to present the results. The group unit sales during the six month to the second quarter were as follows: Compared to the same period last year, for motorcycle operations, though there was a decline in Vietnam, with growth mainly in Brazil and The Philippines, it came to 10,763,000 units. And for automobile business, it came to 1,680,000 units due to declines mainly in China. For power products, though there were declines in Asia, Europe led the growth, and the total came to 1,699,000 units. The consolidated results during the six months to the second quarter were as explained earlier.
Next, I’d like to present the factor analysis of operating profit for second quarter compared to the same period last year. Operating profit was JPY 4 and 38,100,000,000.0, down by JPY 304,400,000,000.0 compared to the same period last year. Factors affecting the operating profit were: first, impact from sales was positive by JPY 83,900,000,000.0 due to expanding motorcycle unit sales. Selling price and cost factors was an increase of JPY 162,400,000,000.0 due to effective price revision. Expenses gave us a negative impact of JPY 26,000,000,000.
R and D expenses led to a profit decline of JPY 20,400,000,000.0. Currency effect resulted in a negative impact of JPY 116,200,000,000.0. EV related onetime expense led to a negative impact of 223,700,000,000.0 yen and the impact from tariffs led to profit decline of 164,300,000,000.0 yen Our trial calculation excluding the EV related onetime expenses and the tariff impact comes to operating profit of JPY 8,362,000,000.000 on a par with the same period last year.
Eiji Fujimura, Director, Managing Executive Officer, Honda Motor Company: Regarding operating profit by business segment, Motorcycles JPY 3 and 68,200,000,000.0, Automobile 73,000,000,000 of losses and Financial Services, 143,200,000,000.0 profit and Power Products and Other businesses, we put up JPY 200,000,000,000 of losses. Operating profit of our Motorcycle business was 3 and 68,200,000,000.0 yen up by 42,400,000,000.0 yen year on year due to the following factors. Regarding sales impact, yen 60,200,000,000.0 increased by additional sales volume mainly in Asia and South America. Regarding price and cost impact, profit increased by 32,300,000,000.0 yen due to the effective price revisions and so on. Yen 7,000,000,000 decline of the profit due to expenses, 3,500,000,000.0, positive profit by R and D and 41,300,000,000.0 yen profit declined due to the foreign currencies and a 5,300,000,000.0 yen decline of the profit due to tariffs.
In Automobile Businesses, operating profit declined by $331,000,000,000 yen year on year, resulting in 72,000,000,000 yen operating losses due to the following factors. Regarding sales impact, profit declined by 24,500,000,000 accounting for the losses associated restructuring of the group companies. Price cost impact, increase of the profit by 130,000,000,000 yen due to the effective price provisions and so on. Expenses, yen 33,800,000,000.0 increase of profits. Research and development, a 24,400,000,000.0 yen decline foreign currency effect, a 64,000,000,000 yen decline onetime IV related expenses, a 2 and 23,700,000,000.0 yen decline and a tariff impact.
Profit declined by 158,100,000,000.0 yen Next, regarding the cash flow situations. Our free cash flow excluding our financial services was 760,600,000,000.0 yen Net cash balance at the end of the first half was 3,053,900,000,000.0 yen and operating cash flow after R and D adjustment was 1,281,300,000,000 Next, I’ll explain consolidated forecast for fiscal year ending March 2026. Regarding the group’s unit sales as compared to the previous forecast, in motorcycle businesses, reflecting reduction in value in Asia and increase in regions, mainly in Brazil and others, we will maintain the volume of 21,300,000 units. In automobile businesses, in addition to the volume decline in mainly in Asia, we reflect a volume reduction by 110,000 units in North American region due to the impact of the semiconductor shortages. Thus, we would expect the volume to be 3,340,000,000 units.
In power products businesses, there were some regional reviews to be reflected and we will keep the previous forecast of 3,670,000,000 units. I have explained our consolidated business forecast of the fiscal year ending March 2026. Next, I’ll explain factors of ups and downs of operating profits year on year. The operating profit would decline by 6 and 63,400,000,000.0 yen year on year because of the following factors. Regarding the sales impact, although losses were put up in conjunction with the group companies restructuring, thanks to the unit volume increase of motorcycles and so on, we expect the profit to increase by 2,300,000,000.0 yen Regarding pricing cost impact, yen $280,000,000,000, an increase of the profit is expected due to the price revisions and so on.
Expenses declined by 91,500,000,000.0 yen R and D expenses declined profit by 126,000,000,000 yen Foreign currency impacts declined by $214,000,000,000 yen and gross tariff impact declined a profit by $385,000,000,000 yen And the potential decrease of the production volume due to the semiconductor supply shortages is incorporated in the forecast based on the current assumptions, which would be 150,000,000,000 yen negative. Next, I’ll explain the factors behind operating profit changes and expectations comparing to the previous forecast. Operating profit is expected to decline by 150,000,000,000 yen from the previous guidance because of the regarding the sales impact, incentive hikes and unit sales decrease of automobiles and so on, the profit would decline by €83,000,000,000 Regarding pricecost impact, we revisited the recovery from the tariff impact. Thus, the profit would decline by 70,000,000,000 yen Regarding foreign currency impact, because of changes of the exchange rate to 145 yen for $1.88000000000 yen positive profit on that. For tariff, we scrutinized the impact of in values and it will be 65,000,000,000 yen positive.
And regarding semiconductor shortage, the impact will be 150,000,000,000 yen negative for the profits. Lastly, this is the focus of the capital expenditures, depreciation and amortization and R and D expenditures. That is all. Thank you very much for your attention.
Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer, Honda Motor Company: Thank you very much for your attention. Then we’d like to proceed to the Q and A session. We will take questions through Zoom, which you have been informed about in advance. Due to the time restriction, we’d like to limit it to two questions per person. And please turn on the camera and the microphone on when you want to ask the question.
So please use the raise your hand button to let us know if you have a question. Okay. The first question. Ms. Ukita from Yomiuri newspaper.
I hope you can hear my voice. Yes, we can. My first question is so the motorcycle is operating great. And then for automobiles, it’s JPY 73,000,000,000 losses. So I’m sure there are tariffs on semiconductor impact, but I just want to ask for your input or your general comment on your prospects for the future?
Okay. Let me take that question, the overall perception. And then for details, I will ask Mr. Fujimura for some more comments. First of all, so for Motorcycle, we had the best record high results.
So we had decline in Vietnam. But in Brazil and Thailand, we were able to maintain our good profit for the second half. So for the full year, we believe we expect things to proceed fairly well. So we are we need to be consider considering about whether we can cover the potential decline in Vietnam. But I think generally speaking, it should be okay.
For automobiles, so with the ICE and have gave us some cash so far, now we need to spend that money into intelligence and hydro hybrid sorry, electric vehicles. So we have been doing okay. In North America, we had good sales revenues. So we hope we believe that the profitability has been increasing improving. However, because of the tariff directive and also due to the changes in environmental regulations, the business environment has been changing dramatically.
For tariffs, I think compared to other OEMs, we have a pretty high local procurement ratio in North America. So in that sense, I think the impact should be limited. Still, we have over JPY 300,000,000,000 impact. So for the tariffs, actually, in a sense, as Mr. Fujimura mentioned, we consider this as new normal, which we believe would continue for some time in the future.
And while we can maintain the good results in North America, but the sales volume in China and Asia has been declining. Particularly in Asia, the profitability for the HEV and ICE will worsen beyond our expectations. So we would need some fundamental changes and actions for those. So for future actions, what we are thinking is we need to maintain or build maintain the build in Asia and Oceania, the world’s profitability structure to gain make gains from ICE and MEV. So the number of models and the number of volume, so we need to revise our investment plans so that we need to further reinforce the competitiveness of HEP.
So we need to further enhance the profitability in ICE and HEP. So we do need to review our product lineup and then we need to focus our attention in profitable models and then we need to invest in those. So we need to really bring up the overall volume. And in particular, in line with the current situation, we need to rationalize the fixed expenses. I think that’s something we need to work on quickly.
And also for BEV, so far, we have been well, making quite a lot of expenditures. So for future, by shifting over to our own BEV, so we would need to have a breakeven at this. So we need to keep curb the losses, I would say, going forward. And then for tariffs, as I mentioned, we believe this is going to continue into the future as well. So we want to go by the policy of produce where there is demand so that we can combat through our supply chain the impact from the tariffs.
That’s something we’ll continue. Particularly for the improvement of profitability for automobiles, that’s something we need to do. And overall, we need to improve our profitability overall. Anything you want to add in terms of number? Okay.
Ms. Ukita, thank you for your question. This time for the we have the JPY $438,000,000,000. So the automobile is JPY 73,000,000,000 losses. And then for motorcycle, it’s $370,000,000,000 yen positive.
So for motorcycles, it’s the best highest record. So those are pretty peculiar numbers that we’ve got here. But as we’ve mentioned from the beginning of the term, there’s a lot of noise kind of external factors for so for the to add a little bit about the JPY $438,000,000,000. We have this impact, this negative of JPY $450,000,000,000. That’s the onetime cost.
So the JPY $890,000,000,000, that’s our normal standardized performance, I’d say. This JPY $450,000,000,000 negative as introduced in the material, we have the we have JPY 160,000,000,000 due to tariffs. And then the EV provision for losses, we will allocate JPY $250,000,000,000 throughout the year. So we have put it in the budget. And then of that, we allocated JPY $225,000,000,000 of that into the first half.
And then we have the group restructuring, So we have some losses from the transfer of our subsidiary, which is JPY 43,000,000,000. And also in the financial operations and then The U. S. And The U. K, we had some settlement for like of like JPY 20,000,000,000 for litigation.
So put them together, it’s JPY $890,000,000,000. So we have like JPY 20,000,000,000 for financials, but most of this was related to automobiles. So if we well, with all of those included, we have this 73,000,000,000 yen losses for automobiles. So versus the plans, as I mentioned, those noises or the external factors were had almost been uncooperated. What may have been excluded may have been the financial operations and then also the Asia and China volume decline, those were worse than our initial anticipation.
So for the full year impact for the full year, at the beginning of the fiscal year, what I mentioned was that we were thinking of JPY 500,000,000,000. That was the that was our target that we mentioned at the very beginning. But compared to the last fiscal year, it’s we have a negative JPY $4.50 due to exchange rate, and we need to recover from that. So that’s the another tariff, $450,000,000,000, so JPY 900,000,000,000. So all of that put together.
So 1,400,000,000,000.0 yen that’s our actual performance. But we put it together, the prospects or the forecast for the year is 500 against the $550,000,000,000 because of the exchange rate semiconductors and the tariffs, it came to like JPY 1,300,000,000,000.0. That’s about the idea we have. Initially, we used to say JPY 1,400,000,000,000.0. That we said 1,000,000,000,000 yen were the financial financial operations and automobile motorcycle and the rest was automobiles and then the battery EV of 6,000,000,000 negative.
But for the motorcycles and finance, we have the Vietnam in decline, but they were used to say JPY1 trillion, but we have recovered. So it’s JPY1 trillion is okay. But for the 100,000,000,000 yen decline, at that time, we were thinking of BEV losses from 600,000,000,000 yen but we had a provision of 50,000,000,000 yen So put that together, yen $650,000,000,000. We used to say ICE or 1,000,000,000,000 yen back then. Now that came down to 900,000,000,000 yen That’s as far as the decline.
So putting those together because of our business structure, as Mr. Kai Hao mentioned, first, we need to reboost our profitability in the ICE. And then for battery EV, it’s $650,000,000,000. This is the gross profit of JPY $250,000,000,000. Yen That’s all for the provisions.
Now we have ended putting in the provision. So we’re going to start the we will try to eliminate we’ll try to bring down the negative from the gross profit level because as close as zero to possible. The rest will be for R and D expenditures. So probably we’ll come to JPY $450,000,000,000. So that will be the baseline for the next year.
And then for the tariffs as well, of course, net we do have $330,000,000,000 yen or so impact, so we will need to work through those how much of this will recover in a few years. I just mentioned the PL a little bit, but the for the cash expenditure control is well in place. So if you look at the balance sheet and the cash flow, the strength of those are continuing as well. So particularly for the cash control, we need to have a good monitor over that. And then we need to recover our P and L for the automobiles quickly.
And then having said that, of course, we need to put in our resources to prepare ourselves for the future. So we want to put those together, and then we want to do a stable dividend with the DOE. So we want to be able to provide a stable dividend to our shareholders as well. So we want to have a good PL and balance sheet balance. We want to have a good well balanced structure.
And then so we want to again recover our profitability for the time being now and also get prepared for the future. For automobiles, as I mentioned, we do have a keen sense of crisis and then we are ready to take actions. Thank you very much.
Eiji Fujimura, Director, Managing Executive Officer, Honda Motor Company: Thank you very much. One more question, may I? You said already perhaps about It’s already incorporated in those values, about JPY 150,000,000,000. And in North America, there is this impact in reality, but what is the prospect for the procurement?
And do you think the situation will improve or getting worse? Do you have a risk of such? Please tell us. I will answer the question then. So for the semiconductors, for the customers, suppliers, we are causing the troubles with that.
We sorry about it. As we said right at the beginning, it’s already reported in the media company called Nexperior. The chips from the company has been stopped, suspended. Therefore, we have impact on the procurement. And then we work together with the Tier one manufacturers to try to minimize the impact on the production.
And as of the October 27 in the production plant in North America, we adjusting the production situation today. So as of now, we have an impact of 110,000 units that’s reflected. And then I said two fifty, but operating profit of 150,000,000,000 yen that is put up in this announcement today. And I heard that shipment has resumed in China now. And we have already studied our communications to the suppliers, and we are trying our best so that we can get supplies of those ships as much as we can.
And going forward, is difficult to tell definitively. But as of now, in the week of November 21, probably in that week, we wish to resume our production eventually and we are trying to achieve that now. And as of today, the parts those are chips are coming up now back in the network. And then it is getting better, and we are seeing some signs. However, it is not definitive as of yet.
So we try to stay communicating with the suppliers very closely so that we can try our best to resume and that is the situation today. Thank you.
Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer, Honda Motor Company: Thank you. Thank you to Ms. Ruquita as well. We’d like to take the next question. From Nikkei newspaper, Mr.
Okunaga, please. This is Okinaga from Nikkei newspaper. Thank you very much. For the impact from Nexperia, I’d like to ask another follow-up question. So for Honda has suffered why has Honda suffered such a big damage?
And then you said that you hope to start production on the week of November 21, but have you considered procuring alternative parts? So any do you think that the impact should not go beyond 150,000,000,000 yen Okay. Thank you very much, Mr. Okinaga. First of all, so the reason why we have this much impact is that this time the components well, I cannot give you any details about the component, but the components was sourced from one supplier.
That was one major factor. And another thing is in the past for semiconductor, yes, we have had some impacts such as these. So we have worked together with the supplier to hold the kind of interim inventory or appropriate inventory level. We asked them to hold that. That’s all that has happened.
However, it was single sourced. And then also in North America, the sales have been going very well that the we have been producing almost at full capacity. So in that sense, well, with the interim inventory was getting low as well. So because of that, the supplier was impacted. Then promptly that impact led to impact our production as well.
For whether we are considering some alternative sourcing, of course, yes, we have are considering alternative, let’s say, products or off the shelf products. So to the extent we are able to find out, yes, we are using them. So at an early stage as early stage as possible, we want to apply whatever we can utilize. So that is why sometime during that week of November 21, we believe we should be able to resume production. So for future supplies in China, if in China, if they ever stop shipping shipment again, we will never know the impact.
But should that ever happen, if you’re asking me is that going to be another impact, I cannot say for 100% sure, no. But at this point in time, as far as we know from the intelligence that we have, we should be able to resume operation and by the date that I mentioned. That concludes my answer. Thank you very much. I would ask another question.
For your the reason for your downward revision, so at March, you said a JPY $650,000,000,000 EV related onetime expenses. Was that this has this gotten better? And then for sales, in North America, I think is it difficult to raise prices in North America? So that turned out to be negative. So I just want to know the reason.
And then you said that you want to bring down the gross profit gross losses to zero. So I would like to ask about what you plan to do. Okay. Thank you very much for the second question. Let me try to answer that.
For the EV related one off on time expenses sorry, first the tariffs impact against the number that we gave you last time, we have been able to minimize the impact. So therefore, for our profitability, it is getting better. And then for the EV impact, we have put in some more amount. So in that sense, the impact has become greater. For the price hikes in North America, initially for North America, we were assuming that we will be able to raise prices and then we have been prepared for that.
However, price hikes is there’s nothing you can do easily by ourselves. So we need to evaluate the market situation. What has happened is that in North America, in The U. S, other OEMs’ incentives have been getting higher. So the actual market selling price has not gone up in real terms.
Therefore, of course, we have been we have done the annual price revisions. However, looking at the other companies’ status, we can we found it difficult to raise prices due to the tariffs impact. So we were not quite able to gain that positive impact due to the price hikes that we had anticipated at the very beginning. Unfortunately, we cannot expect that. So for the second half of this year as well, for the price hike, I don’t think we can really expect good impacts to come from that at all.
That completes my answer. Thank you very much.
Eiji Fujimura, Director, Managing Executive Officer, Honda Motor Company: So I’ll explain with those numbers in addition. And then last time, the gross it’s JPY $450,000,000,000 negative gross tariff impact and then JPY 100,000,000,000 recovery, so JPY $350,000,000,000 net impact for tariff. And then this time gross JPY $385,000,000,000 and actually gross impact is less of JPY $685,000,000,000 and then recovery is about JPY 100 to JPY 50,000,000,000 and net impact is about $335,000,000,000 yen Eventually, that is the net impact. And then the gross impact, yen $650,000,000,000. Of course, we had an accurate understanding today, but for as much as 500,000,000,000 yen we have export from Thailand or Asian countries to U.
S. And we were concerned about a possible recession and its impact over there. So we incorporated that in our expectation before, but now we reduced it. And that means we have a less of €650,000,000 from gross and then we have a net recovery from 100,000,000 to $650,000,000 Actually, in the automobile market, is difficult to revise the price issue. So therefore, we need to delete that part for the automobiles and that is why we have those numbers.
Thank you very much, Mr. Okinawa. So if you have questions two questions, please tell us two questions in sequence.
Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer, Honda Motor Company: Okay. We’ll take the next question from Yasunaga san from NHK. This is Yasunaga from NHK. Can you hear my voice? Yes.
Thank you. Just one question because others have asked the same question. In the automobile business, China and Asia, you had some declines, you said. But in your company, you are very much struggling with your sales in China. That’s the impression.
So there was GT’s launch timing has been postponed as I’d like to hear about the facts about it. And then what are you going to do? And then where is the difficulty of the market? So I’d like to hear about that. Okay.
Thank you very much, Mr. Yashina. For the China market, let me try to answer that question. For Chinese market, overall market actually, because of the incentive has been reduced, so the total market has been declining slightly. But basically, it’s a sideways movement.
That’s the total market. And then for this time, for Honda, particularly for ICE, we well, actually the price discount has been staying at a high level, so we have been struggling a lot. So in a sense, value for money, we are behind others. We are aware of that. And then for BEV, BEV, so for the features, the NOA navigation on navigate on autopilot, that’s not provided on our cars.
So people consider our cars pricey. And then other companies put in this to put the momentum and then offer it at a lower price. So that is why it’s difficult actually. And then that is the situation in China. And then for electric vehicle, as pointed out earlier, the EA Series, the one, two and three were in our horizon, but we needed to we felt the need to completely review this.
So we came up with the GT we had assumed. However, we did have to postpone it in reality. So this will be we were thinking of next year initially for next fiscal year, sorry. However, we will for the time being, I cannot tell you exactly when that’s going to be, but we will postpone that. And then from the planning stage as well, you we need to consider right from the planning stage how we want to launch this model.
So for electric vehicle, this current situation will continue for some time. And then against that kind of business environment for ICE, we need to make solid sales from those. Fortunately, we have completed depreciation of all the factories, so we need to enforce our business structure in the indirect and then also optimize our manpower and then do a more precise sales prediction. And then we’ll try to make our business more profitable. That is what we are doing right now, and then this is all I can say for now.
Eiji Fujimura, Director, Managing Executive Officer, Honda Motor Company: Next question from Asahi Shimbu. Mr. Miura, please. Miele from ASAHE newspaper. Thank you for your explanation.
And I have two questions. One, in the motorcycle businesses, Vietnam, you had a decline of the air businesses and then they had restrictions on the electrification vehicles. And how much of those impact did you incorporate in this statement? And then what is your action against it? And question two is about automobiles, about specifically EVs in China and you said that you’re going to have a radical action.
And then what is the reasons why you have a struggle in the Chinese market? What do you think is the cause for that? Mr. Mira, thank you for your question. To start with Vietnam for motorcycles.
Vietnam, as you know, well, is not yet implemented in the market. However, ICE motorcycles now would be regulated especially in the city area. And then when they said that they might apply these new regulations starting middle of the next year or so. However, with that in place, actually when the announcement was made last summer, people started with FlankGate their buying of their products. And then we were expecting some negative impact on the Vietnamese businesses.
However, in October, we are seeing the air businesses coming back slightly. And then probably other things that this regulation is still a talk only, we don’t know if that is practically to be applied in Vietnam. So for some time, probably a current model of the ice based vehicles will be suffice. And then, of course, electrification will start sometime later. And then from starting this year, we have already launched the two ICON E and CV E, those two electrified vehicles over there in Vietnam.
And idea is to try to sell more of those EV over there. And in Thailand, we have a plan to start production of a new EV model, and we are thinking about accelerating the start of this model production. And sometime earlier next year, probably in March, April time next year, we would like to try to bring over these new EVs to Vietnam.
Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer, Honda Motor Company: So
Eiji Fujimura, Director, Managing Executive Officer, Honda Motor Company: even when they have the new regulations practically in place over there, we can offer the EV vehicles over there. So this time, we are expecting unit volume be a little bit less. However, we have Brazil businesses and tire businesses quite well, so that will compensate for the situations in Vietnam. So that is our motorcycle business is in Vietnam. China EV, may I please?
So EVs in China, as we said earlier, basically, Yen series, the new products are over there. And looking at the vehicle incorporated to others, for instance, the price range, they are higher, more expensive than the other products, 150,000 of other products, whereas ours JPY 200,000 Chinese RMB and our product is not price competitive so much. And also we have NOA, navigation on autopilot system. It’s automated driving system basically. The competitors’ products have NOA.
However, not on our product yet. Therefore, going forward, we will change the models in the future, and we will try to do that earlier. And the momentum, the local autopilot system could be obtained so that we can add this autopilot system to our products. Doing so, we can strengthen the intelligence of the products and also cost competitiveness we need to approach too. So current, we are trying to expand the local procurement in China.
That way we can improve our the competitiveness of the product and that is what we are trying. Thank you very much. Thank you. Thank you, Mr. Miller.
Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer, Honda Motor Company: The next question from Toyo Keizai, Weekly, Yokoyama san, please. This is Yokoyama from Toyo Keizai. Yes, we can hear you all right. Thank you. I have two questions as well.
The first question, your full year prospects with the impact from a semiconductor €150,000,000 and then you have a $450,000,000 profit and then you are thinking of a $550,000,000 So I guess you do have quite a plan for your profits to suffer in the second half. So can you give me some numbers about what the factors why you see a lower profit for the second half? And my second question is for the profitability in automobile business. So right now, for the automobiles, the ICE, iOS 8% is what you’re thinking about for the ICE. For BEV, you’re going to have your own battery and then you start from zero gross profit.
But when would it turn into profits? When would it? And also, do you have any additional measures to gain more profits? So I’m just I think it might be difficult sensitive whether you’re going to get into the profit for the automobiles this year. So I just want to know.
Okay. Okay, first of all, okay, thank you for the question. Yokoyama san, for the difference between the first half and the second half, This we have this of course, this JPY 150,000,000,000 tariff impact that will continue in the second half as well. But on the onetime expense, we have the BEV provision that was in the first half. So those would offset each other.
Well, that’s what we expected to do. And then for the first half and the second half, there will be a negative of 40,000,000,000 yen about the foreign exchange and the rest will be the substantial substance portion. Maybe it’s better to tell you the numbers. We have four forty and it goes down to 110,000,000,000 So $320,000,000,000 yen that will be the difference between the first and the second half. So let me explain that, first of all.
So as I said, with the semiconductor and the onetime expenses, those will offset each other. And then so $320,000,000,000 and then we take away 40,000,000,000 for the impact and then $290,000,000,000 yen that would be the actual substance difference. So concerning this difference between first half and second half, as you can imagine, so the expenses and R and D, there is a difference between the first and the second half. I hope you can see that, which is the pattern. And then for quality related issues based on the sales base.
There’s a bit of a difference in calculation. But anyway, those are the mainly those numbers. Incentives, when it comes to incentive, we have this negative of 110,000 units decline in North America. We don’t know what’s we how we’re to use this incentive, but going by the original expected volume for North America, if we were able to keep the original target. However, maybe we need to increase the incentive a little bit.
But now that accounts for the difference between the first half and the second half. We have not really decided we need to discuss with American Honda how we’re going to make those work actually. Okay. That’s all for the numbers. Thank you.
Okay. And then let me try to answer the rest about the EV, the gross profit for EV. For North America, that’s the assumption for answering my question. So this year, we do have losses. We have $650,000,000,000 yen We have that.
So this includes onetime expenses as well. So next business year, I think we will start from a 400,000,000,000 yen range level that level. And then from there, of course, we won’t have the IRA subsidy. So the business environment is very, very challenging. So because of that, we cannot be pursuing far larger sales volume.
However, we do have good prospects for the supply from GM. So now we will have more and more BEV of our own development. So now we need to think about focus on how to reduce the manufacturing cost for own bev. And then also, it’s important to consider whether we can produce at a very efficient way. And then with those efforts, we need to minimize the losses to the best we can.
However, looking at the market, it’s very difficult to read how the market would move. So at the very beginning of mass production, of course, the burden of fixed costs will be heavy. So we just need to work on how best we can flexibly produce, reduce costs and so as to enhance or improve our profitability. If you ask me when, I guess all I can say is as soon as we can, we won’t make it to profit. Thank you.
Eiji Fujimura, Director, Managing Executive Officer, Honda Motor Company: So the automobile business at this time, do you have any disclosure for the expectations the year’s profit or losses? So we do not disclose as per our product levels, $550,000,000,000 and you have to subtract from that level. So for the motorcycles, it will be about 600,000,000,000 to 700,000,000,000 yen same as last year and 300,000,000,000 yen for finance like last year and they both together we would earn 1,000,000,000,000 yen We said that and then you could actually assume from that. For the automobiles, we would end up in losses and battery EV at one time $250,000,000,000 yen put up and also chips one time 150,000,000,000 yen again, both together are 400,000,000,000 negative altogether plus. This time this term we have a tariff impact as well on the top.
So the number will be including all those factors. And then as we said before, we need to earn money revenue based on ICE and losses coming from the BEV should be controlled better and not just PL. We have to look into the spending out of the cash flow. We have to control the time line of our spending too. So that is how we’d like to manage.
Thank you very much. This is all. Thank you.
Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer, Honda Motor Company: Thank you very much, Mr. Yokoyama. I do see a lot of hands raised, but due to the time restriction, we’d like to make the next question, the last from TV Tokyo. Ms. Nagae, can you hear me?
Yes, we can hear you. Thank you. One question. For the this year’s this fiscal year’s forecast, three months ago, you revised up word, but this time, you’re revising downward. So when you make the forecast, are you I just want to know about the approach.
Are you being very conservative? The second is your forecast for the unit sales for I think you cover a lot of China. But excluding China, for other ASEAN markets, think there’s a bit of a decline. Compared to three months ago, we are struggling in Asia so much. What’s the reason?
What are the factors?
Eiji Fujimura, Director, Managing Executive Officer, Honda Motor Company: Thank you very much for your question, Ms. Nakae. So how to put up our plans? So I wouldn’t say we are conservative putting together those plans because usually the idea is that the transparency is our focus. So whatever we get to know, we try to incorporate in those explanation to give you the explanation.
And then tariff issue for instance, we would have those the alleviation of tariff impact and then calculating all those returns refund, we would have those that much of a refund included. And then these are the well calculated impact. And exchange rate ForEx for JPY 70,000,000,000 plus, we include that too. And the chips, that is extra one. That is a bit of a special one, but 50,000,000,000 yen tariff impact that is included as we said.
And plans are put together based on the principle like that. It is not always conservative. Please be acknowledged about it. And then the forecast of the unit sales in Asset and Regions. The decline of the unit sales is a bit significant as what you said is quite right because in asset and region the unit sales the volume is expected to be down a bit seven and fifty thousand units less.
So it is a significant reduction as compared to the first forecast. And then especially Indonesia, Thailand in those countries or Malaysia as well, there are the government policies to be looked at also. And also, the market is a bit shrinking too because of which we have expected the reduction of the volume in Thailand. The competitors’ competition is something that accounts for the situation too. For instance, selling prices, we are losing price competitiveness against the others.
And so sales are stagnant and we need to react and take actions against this situation, especially in Asian countries. We need to have a radical measures against it. And then from this term next term, next year, we do not have a new launch models. Big minor change of the city, that’s one thing I can share with you. And then the big minor change of the city, the timing of that could be a kind of opportunity to take advantage of force to be back to the Asia market.
But nevertheless, the Asia market is tough and because of that we decided to revise our expectations. And then again, the conservativeness about our value expectations, it is rather a solid conservative number, I thought. And also you mentioned about the competition of the competitors. Would that include the Chinese supplier? That is always the case.
Is that right? So in terms of the volume of the sales, this is the number that we will commit to achieve. That is how we set up this volume. And about the competitors, of course, the Chinese suppliers, their accounts as well. But in Asian markets, there are emerging Chinese products coming in.
And against them, the existing manufacturers are providing more incentives. Prices are kind of discounted against Chinese. And then that is making the situation more competitive in terms of the prices. That is the market situation over there. Thank you very much.
Thank you, Ms. Nagoya.
Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer, Honda Motor Company: Okay. Thank you very much. I would like to close now the financial results briefing. The material will be is listed on our website, so please refer to it. Thank you very much for your participation.
Thank you very much.
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