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Presentation

Operator: 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 fiscal first quarter ended June 30, 2025. First of all, allow me to introduce the attendees today. Mr. Eiji Fujimura, Director, Managing Executive Officer, CFO. Good to see you. Mr. Masao Kawaguchi, Operating Executive, Head of Accounting and Finance Unit. Good to see you. First, Mr. Fujimura will present the financial results of first quarter ended June 30, 2025, and consolidated results forecast for full year to March 2026. Then Mr. Kawaguchi will present the details. Over to you, Mr. Fujimura.

Eiji Fujimura: I thank you very much for your continued support for Honda’s activities. I would now like to present to you the financial results for the first fiscal quarter ended June 30, 2025. I’d like to start with a summary. Our operating profit for the fiscal first quarter came to JPY 244.1 billion. Motorcycle operations saw sales expansion in Brazil and Vietnam, and we’ve attained the record high operating profit for a quarter period. In automobile operations, we needed to post impact from tariffs and nonrecurring expenses related to EV, while sales in North America were strong. The forecast for the full year results to March 2026 has been revised up to operating profit of JPY 700 billion and net profit for the year of JPY 420 billion.

Due to a review of our tariff impacts and changes in exchange rate assumptions, this means JPY 200 billion increase versus the previous forecast. An examination of the impact due to tariffs led to a revision of our gross impact to JPY 400 billion. And for exchange rate, in view of the recent developments, we are revising our assumption against the U.S. dollar from JPY 135 to JPY 140. While uncertainty persists surrounding policy changes, including tariffs, we will improve our earnings structure, and we aim to expand our profit further. Concerning the share buyback, which we announced on — resolved on December 23, 2024, for the JPY 1.1 trillion. As of July 31 of this year, shares worth JPY 936.5 billion have been acquired. To give you the consolidated results for the first quarter ended June 2025, our operating profit was JPY 244.1 billion, lower by JPY 240.5 billion compared to the same period last year.

Equity method earnings were JPY 4.2 billion, higher by JPY 2.7 billion. And the quarter profit attributable to the owner of the parent was JPY 196.6 billion, lower by JPY 197.9 billion. Next, I’d like to cover the forecast for the consolidated results for the full year. Again, compared to the previous forecast, our forecast is operating profit of JPY 700.0 billion, up by — sorry, up by JPY 200 billion and the profit for the year attributable to the owner of the parent of JPY 420.0 billion, up by JPY 170 billion. The exchange rate against the U.S. dollar is assumed at JPY 140 for the year. The forecast for the full year dividend for the fiscal year ending in March 2026 is JPY 70 per share, unchanged from the previous published forecast. The acquisition of owned shares resolved on December 23, 2024, for the amount of JPY 1.1 trillion is explained earlier.

Next, Mr. Kawaguchi will present the details of the results.

Masao Kawaguchi: Okay. Then I will present the results for the first quarter. To give you the group unit sales during the 3 months of the first quarter, for motorcycle operations compared to the same quarter last year, with growth mainly in Brazil and other regions, it came to 5.143 million. For Automobile business due to declines mainly in China and other Asian regions, it came to 839,000 units. And for Power Products, though there were declines in North America and Asia, Europe led the growth, the results, the total came to 828,000 units. The consolidated results during the 3 months of the first quarter are as explained earlier. Next, I’d like to explain the factor analysis of operating profit for the first quarter compared to the same period last year.

Operating profit was JPY 244.1 billion, down by JPY 240.5 billion compared to the same period last year. Factors affecting the operating profit were impact from sales was positive by JPY 109.1 billion due to unit sales increase in North America. Selling price and cost factors was an increase of JPY 68.5 billion due to effect of pricing revision. Expenses gave us a negative impact of JPY 69.4 billion. R&D expenses led to a profit decline of JPY 24.5 billion. Currency effect results in a negative impact of JPY 86.1 billion. EV-related nonrecurring expenses led to the negative impact of JPY 113.4 billion, and the tariffs impact led to a profit decline of JPY 124.6 billion. Our trial calculation, excluding the EV-related nonrecurring expenses and the tariff impact comes to operating profit of JPY 482.1 billion on par with the same quarter last year.

This EV-related nonrecurring expenses include the provision for losses on EVs currently sold in the U.S. and the impact from write-off of development asset of EV models due to the change in our product range. Regarding operating profit per business segments. For Motorcycles, OP was JPY 189 billion. Automobiles, JPY 29.6 billion of operating losses. Financial Services, JPY 85 billion of operating profits, and the Power Products and other businesses, JPY 200 million of operating losses. Operating profit of the Motorcycle businesses marked JPY 189 billion, up by JPY 11.3 billion year-on- year. As for the factors behind the differences, the sales impact was positive by JPY 41 billion due to increased sales volume in South America and so on. Pricing cost impact was positive by JPY 14.2 billion due to the effect of price revision and so on.

Expenses squeezed the profit by JPY 12.7 billion. R&D increased the profit by JPY 1.3 billion. And currency effect reduced profit by JPY 30.6 billion and the tariff effect squeezed profit by JPY 1.8 billion. For the Automobile businesses, sales impact was positive by JPY 46.4 billion due to increase of the sales volume in North America. Price and cost impact was positive by JPY 53.5 billion due to the effect of the price revision and so on. Expenses negative for the profit by JPY 43.1 billion. R&D was negative by JPY 26.4 billion and the foreign currency effect also negative by JPY 47.3 billion. As I mentioned earlier, excluding onetime EV-related expenses and the tariff impact, the operating profit would have been JPY 205.8 billion. Regarding cash flows, free cash flows of the businesses other than Financial Service businesses was JPY 294 billion.

Net cash balance at the end of the quarter was JPY 2,907.9 billion. Operating cash flow after R&D adjustment was JPY 583 billion. Moving on to the consolidated financial forecast of FY ending March ’26. Regarding the forecast of the sales volume of the group, motorcycle unit sales will keep 21.3 million units, reflecting the volume decline in Europe and increase in Brazil and other regions. For automobiles, we will keep the previous forecast of 3.62 million units. And for power products, we will keep the previous forecast of 3.67 million units. Consolidated earnings forecast for FY March 2026 has been already explained. Next, I will explain the factors behind the changes of operating profit forecast year-on-year. Operating profit is expected to decline by JPY 513.4 billion year-on-year because of the factors of sales impact being positive for the profit by JPY 106 billion due to incremental volume of the motorcycles and automobiles in North America.

Price and cost impact will be positive for profit by JPY 350 billion due to effect of the price revisions and so on. Expenses will be negative for the profit by JPY 91.5 billion, R&D be negative by JPY 126 billion and foreign currency impact to be negative by JPY 302 billion and the gross impact of the tariff to be negative by JPY 450 billion. I’ll explain the changes of the operating profit forecast comparing to the previous guidance. Operating profit is to be up by JPY 200 billion from the previous forecast because of the sales impact being negative by JPY 50 billion due to onetime expenses related to EVs. Price and cost impact to be negative by JPY 100 billion, JPY 100 billion as we reviewed recovery of the tariff impact. And foreign currency impact will be positive by JPY 150 billion as we changed currency exchange rate JPY 240 for dollar.

We examined the tariff impact in values, which will be expected to be positive by JPY 200 billion. Lastly, expected spending on capital expenditures, depreciation, amortization and R&D expenditures for fiscal year ending March 2026 as shown on the slide. And that concludes my presentation. Thank you very much for your attention.

Operator: [Operator Instructions] The first question will be by Mr. Okinaga from Nikkei Newspaper.

Shoya Okinaga: This is Okinaga from Nikkei Newspaper. My first question is about the impact from tariffs. So between the U.S. and Japan agreement, the automobile tariffs has been changed from 25% to 15%. So it looks like higher tariff has come down. That means your negative impact to the profit has been fixed now. So what’s your take on that? And then for Mexico and Canada, well, still the view is not clear. So what is your take on what might happen to the Canada and Mexico? Okay. So that’s the second question. And then accompanying — in line with that, for the production, you’ve expressed transferring production from Japan to Canada. So I guess your take on emphasizing production in the States, that will remain unchanged. So do you — are you still in the sense — are you holding the sense of crisis for the Trump’s tariff situation? Is that correct to say that your stance does not change?

Eiji Fujimura: Okay. Thank you for the questions. Okay. So both your questions are related to tariffs. So between — due to the 25% has come down to 15% between the States and Japan. Concerning that point, yes, for us, for our business, the change from 25% to 15% means that is — should — it brings us a positive impact and also for — to the customers and then also, we do have a lot of non-Japanese shareholders. So for our company, of course, this agreement for reducing the tariff is a positive. And then it’s just that what has not been established is now clearly identified, which is a good turn of events. So I’d like to — we’d like to pay our respects to all the related parties. And then on the other hand, as your question suggested, for example, if I think about the short-term view, so if there’s going to — what’s going to be happening with the retroactive application of the tariff or when it’s going to go into effect.

So details have not been worked out. So I hope that there will be early decision and then disclosure between the governments, and we have communicated our wish to the Japanese government. And then so it used to be — what used to be 2.5%, now that’s been up to 15%. So as our general stance is that it doesn’t affect just Honda, but to other OEMs as well, I think we are trying to do a free trade and competition around the globe. So that has really developed foster the competitiveness of the auto industries in different countries and then which led to providing good quality products to different country markets. And then this must have been contributing to the local communities. And then that stance remains unchanged, and I hope that will continue.

However, now that it is a possibility, we need to assume that this will become the new normal. We would need to take that stance. So now that direction, I believe, relates to the second question that you’ve asked. As you know, we have the production in the U.S., like 60% or 70% are produced in the U.S. So the local production manufacturing ratio is high to begin with. So our stance is to produce where there is demand. That has been our ongoing approach. I believe Mr. Mibe mentioned this in the previous briefing. We have a 2-shift operation in the States. We might change it to 3-shift operation in the states so that the production equipment uptime will be — might be increased so that we can increase the production volume without spending too much on the capital investment.

That’s something we’d like to continue to do. And then, of course, our suppliers need to keep up with those changes. So we need to engage in discussions with our suppliers to take actions carefully. I guess the key highlights here would be that in the States, hybrid vehicles — for hybrid vehicles, many of the core parts are coming from Japan. So I believe we call that Sankei — sorry, the 3 major components, the motor, battery and ECU, how we can localize the production there will be the critical point. So concerning those, we are holding discussions. This concludes my answer. Thank you.

Operator: Next question from NHK, Mr. Nishizono, please.

Nishizono Koki: Nishizono speaking. Can you hear me?

Operator: Yes, please.

Nishizono Koki: So thank you for your presentation today. And one question. So the forecast for this fiscal year regarding the tariff, what is your assumptions for your forecast other than the automotive tariff, there will be other kind of tariffs involved as well? And this time, parts automotive tariff, when are you going to — with that to start, what is your assumption there? And what’s your assumption to come up with those forecasts? That’s all.

Eiji Fujimura: So details will be provided by my colleague, Mr. Kawaguchi, but at the beginning of the fiscal year, what is our assumptions to be for the tariff and its calculations and so forth. Actually, the appendix of presentation materials includes all those explanations. So please have a look at those materials later on. But basically, CBU and parts and the raw materials and motorcycle power products. So we have the assumptions of tariff in values in those categories. And in the first quarter, American Honda had a standard tariff amount for the tariff. Actually, they worked out on the breakdowns, how much for the U.S. part, U.S. portions, what is the [ area ] for the import and so on. So eventually, we changed the gross impact from JPY 650 billion to JPY 450 billion after those calculation. And what kind of breakdown involved to have those numbers down? And Kawaguchi-san is going to give us the details about it now.

Masao Kawaguchi: So thank you for your question. So with regard to the assumptions for the tariff, as Fujimura-san said earlier, the main part is the automotive tariff. That is the main area of the thing. And then for the CBUs, we have plants in Canada and Mexico and those CBU completed vehicles imported from there to the U.S., there will be the tariff imposed there. So that is the main area plus the assumption of that part has been already explained in the beginning of this fiscal year, we have not changed so much about it. However, probably we will change the production allocations slightly. For instance, instead of exporting from other countries to U.S., we can produce in Indiana instead or the U.S.-made ones were exported to South America.

And then instead, we could use and sell those U.S.-made product within the U.S. and we sort of organized the reallocation again. And then in terms of the import of the CBUs, there will be the tariff imposed on them. And if the parts and components are manufactured in the U.S., those will be exempted from the tariff. And then the question is the portion of those kind of the parts. We examined how much of those are in that area. And then actually CBU that we have in the value like that reflects all those exercises. And then parts, raw materials, steel, aluminum and those coppers. And of course, there will be tariff involved, not just U.S. and Japan, the Canada-Mexico involvement, there is not much advancements so far, no progress. However, right from the beginning of the year, the parts imported from Canada and Mexico, that could be in the jurisdiction of MCA, and we joined with suppliers to scrutinize how much will be in the area of the jurisdiction — excuse me, the MCA.

And then we couldn’t finish the exercise yet. However, at this moment, at the time of the beginning of the year, we applied 15% for them because we couldn’t examine all of them with the supplier. But we are still working together with the suppliers to check one by one those breakdowns of the tariff. And then from Canada, Mexico, the parts from there could be actually under the rule of MCA. So we have been working on how much of them like that. And then, of course, we have parts components imported from other countries other than Mexico and Canada, Tier 3, 4 included. So we need to go down that level of the details in order to have a precise understanding, and we’ve done a bit of the work so far. And of course, JPY 450 billion gross impact is made and estimated based on such exercise up until now.

And we have this tariff between the U.S., Japan agreement. And then at the moment, we do not know when exactly the automotive tariff would start to apply. But at the moment, our assumption is to start the 15% of the tariff to start from September. That is the assumption for the calculation this time.

Operator: Okay. The next question from Yomiuri Newspaper from Mr. Narahashi.

Daisuke Narahashi: Okay. This is Narahashi from Yomiuri Newspaper. I have one kind of detailed questions we’d like to check on, and then ask 2 questions. The automobile operation have an operating loss from May to June. After how many — since how many years has it been that you got the red losses? Now I have 2 questions. First, about the tariffs. So from — if you do CBU exports from Mexico or Canada to the states, that’s 25%. I thought that a lot of it might be exempted. So the actual amount that Honda would have to bear, how much would it be? So is it going to be lower than the 15%? Or is it going to be greater than that? That’s something I’d like to know. My second question about the sales — unit sales for Asia, Europe and Japan, so you’ve seen decline year-on-year.

So I’d like to know about — more about the detail about the causes. So is it that the sales competition outside the U.S. must be — could be intensifying because of the tariff impact in the U.S.? So I’d like to know specifically if there’s any region where the competition is getting worse.

Eiji Fujimura: Okay. To answer — so let me look into the first question that you said you wanted to — a clarification on. Okay. So to answer your first question, the CBU coming in from Mexico and Canada, concerning the parts as well, this also applies but quite a bit of amount will be exempted. I believe Mr. Kawaguchi mentioned it earlier a little bit. Concerning CBU, are quite — there is quite of a cost for the States. We have done a closer review and the effective tax amount has been reduced quite a bit. I cannot give you the number right now, but it has gotten a little bit somewhat close — smaller. And for the parts as well, for those parts coming in from Mexico and Canada, which I’ve mentioned at the beginning of the term, the USMCA contents will be outside the scope if it’s co-applied.

So that regulation was out there already. It’s just that it’s going to take a little bit longer time because it might take to do a better scrutiny. But we see that, that would be — can be reduced by JPY 100 billion or so. So not all of it, but we have been able to reduce this out of the JPY 100 billion, we have been able to reduce it by like 70% of this. That is the position. For Asian, Oceania and Japan, about the unit sales, different markets, regions have different regions, I must say. First of all, for Asia, so in different countries, markets, we did have strong shares in each of the Asian markets. But in the past few years, Chinese OEM have participated into some of those markets, and then we are struggling some of those countries, the markets.

And in addition to that, hybrid vehicles are popular in some markets and in some other markets, not at all, because this is related to actually the subsidies from the government. So I need to actually — I should be talking about different markets separately. But when we try to come up with the hybrid models, we — there are some markets where we have not been able to launch some — into some market. So in ICE, we are losing against Toyota, for example. So this might take some time, but we would reinforce launching hybrid models into some of those markets, try to compete. For Europe, we have always — we have been struggling several years ago, U.K. and Turkey production sites had to be closed. We had to do that. When it comes to unit sales, I think it’s only around — it’s been trending around 100,000 units or so, just a slight decline since then.

But within that trend, for Automobiles business in general, we are putting a lot of efforts into markets like U.S., Japan and India. We still do need to revisit internally what we want to do with the European market. That is the situation for Europe. So there are some areas where competition is intensifying. And then there are some other areas where we need to put a lot more efforts. So we want to be clear about our selection and then make further efforts going forward.

Daisuke Narahashi: That closes my question on that. For about the April to June losses, since how many years it’s been?

Eiji Fujimura: The last time this happened was the 2020 fiscal year. Due to the pandemic, we had some losses. So this is the first time we had losses since then.

Operator: Next question Toyo Keizai Magazine, [ Mr. Yokoyama ], please.

Unidentified Analyst: Yokoyama speaking. Can you hear me?

Operator: Please.

Unidentified Analyst: I have 2 questions. One is first quarter results and the full year forecast, you are changing a bit the operating losses put up for the Automobile businesses. And Fujimura-san, Mr. Mibe already said that there will be some EV expenses to be put for the first half. And then we have about JPY 100 billion or so. And then for the full year, JPY 600 billion or so already put up previously. And is your situation today in line with your expectations back then? And then if you kind of multiply the quarter results by 4 quarters amount, I think you should have the forecast a little higher than that. What is your expectation assumption and so on? And then 19.9% operating profit margin for the Motorcycle businesses, that is quite a very outstanding way of the businesses.

And then you’ve grown the businesses in Europe and South America. South America and you were quite aware of the importance of the profitability there. And what is the real capability in the first quarter? What is the reason behind such a good results of the Motorcycle businesses?

Eiji Fujimura: Thank you. And to start with a conclusion of the results, financial results and EVs implication. And then starting from the 3 months, JPY 240 billion for 3 months. That is actually the half of the amount from the previous year. And then in the graph, we have those tariff about tariff impact of JPY 120 billion or so. And as we have been saying so far, out of JPY 120 billion in the first quarter, we had some recovery plus refund expected after the imports, and we had handled those based on cash. In fact, because of such situation, we have more put up for the first quarter. And EV, one time. And then in the beginning of the year, JPY 200 billion were expected, anticipating some to be added later. That is why we budgeted JPY 200 billion for the EV related.

And then we have about JPY 60 billion plus JPY 50 billion that was unexpected part out of the EV-related ones, and then that amounts to JPY 110 billion eventually. And then out of the JPY 60 billion, as we expected, as I said, we decided that situation would tell us that we need to have a bold decision that is to suspend some of the development efforts of some of the EV models, and we needed to have some write-offs for some of the efforts. And the remainder is JPY 120 billion. And out of JPY 50 billion, which is not the expected ones. Regarding that, in the end of the term, we had the NEV, we had to put up for the reserves for as much as JPY 50 billion at the end of the year. And that was the reserve to be used for the future losses. However, we would have the IRA subsidies and the California ACC II related credit values.

And actually, those were included in the losses that we were calculating for the future. However, those are now gone. Therefore, it is not necessary anymore to do that. And then we now have JPY 50 billion future loss expectations. And then again, for the full year, it’s a bit complicated. We anticipated JPY 600 billion. That is in line with what we thought. And then we have JPY 50 billion higher than that. Because of the IRA subsidies cancellation, ACC II invalidity anymore. And then those are actually negative for that. And then JPY 600 billion is now JPY 650 billion instead. And then for the Motorcycles, 19.9% operating profit margin, you said is too good. And of course, we’ve made a good result and then with that is getting better. And this time, if you look at the plans, in India, for instance, there’s a little bit of slowing down.

However, we’re not worried about it because we can bring it back again recovery. So we don’t have the things going on as planned in India. However, we have South America, Vietnam, we have a good recovery instead. And then so far, it’s been like when we have some issues in one place, one region, we have other regions, which is good to compensate for the other part. That is the situation we’ve been seeing for some time. And then we have a very high profitability in Vietnam. South America, we have a high profitability as well for the businesses. And then — so in Brazil, for instance, we have a lot of shares. Therefore, the number of those vehicles running there is almost all Honda. So we actually are supplying only to satisfy the demands, however, not enough.

And then we had 1.3 million car capacity of the production. Now we are going to increase it to 1.6 million production capacity. So the demand is higher than the supply at the moment. And pricing is healthily down, too. Because of that, profitability in South American market is very good. So — as I usually say repeatedly, the region there is of a high volatility. So I have to remind you that the result is perhaps too good. But that was what happened in the first quarter for the Motorcycle businesses. Thank you very much.

Operator: Okay. Then we’ll take the next question. From Bloomberg, Mr. Inajima, please.

Tsuyoshi Inajima: This is Inajima from Bloomberg. I’d like to ask about sales in China. Up until June, it has been declining for 17th consecutive month. So what kind of initiatives do you have to rebuild the sales? And then how — when do you think it’s going to recover? So still the decline continues even after the launch this year. So I think we’d like to know about it. And then another question is that there will be — there was talks about — report about discussions that you’re trying to get supply from Nissan and then sell in the States. So I’d like to ask about any update if there’s any discussions with Nissan.

Eiji Fujimura: Okay. Mr. Inajima, thank you for the questions. Concerning China, yes, the situation is very — continuing to be very difficult. So talk about the total market, it will be under 24 million. So this will be on a par with last year. So for the NEV market condition will still continue to stay this way. Maybe over 50% of those is what I’m assuming over 50%. For the past several years, we have been trying to adjust our capacity. And then over the past 2 or 3 years, we have adjusted the capacity by 0.5 million. Well, we have 1.24 million capacity. And then 1 million is about the ICE and then 0.2 million is a battery EV. That’s our factory capacity. But with these results, so we have not changed it from the beginning of the year, but 0.7 million units capacity.

So we still have available capacity. But concerning the available capacity, the direct reasons is that we have been matching our manpower for the — in line with the capacity. Actually, we do have a remaining very old equipment, old production line. So I don’t think we have that much impact from depreciation. That’s the situation in the factory. But we will continue to take — make adjustments. But this is a very sensitive topic and nothing has been decided yet. But we will need to monitor the production models, and then we need to discuss with our partners and take very careful actions. For EV, we are struggling with the sales of EV, this e:N Series. This is something that we made some investments from the end of last fiscal year to the beginning of this year.

But against the original plan, we are underachieving the initial plan. When it comes to the actual driving performance of the vehicle, we have received quite a certain level of good assessment. But within this market where there is a discount strategy continues, even looking at the price that we initially launched, it was not in line with the market expectations. And also for the intelligent functionality, the market expectations were not met by our vehicles. So we need to expedite to taking actions. So we might put the deep seek with OTA or we might work with Momenta in the area of ADAS. So we want to promptly proceed to take action to address that issue. And then when it comes to the talks with Nissan, yes, I am aware that a lot has been reported, but nothing has been decided and nothing has been announced by ourselves.

So please take note of that. We have been saying since some time ago that business-related collaboration, we are exploring the different formats of a collaboration of Nissan and Mitsubishi Moto. That is something we are discussing, continuing to discuss. So as soon as something gets finalized, we would like to talk to you about it.

Operator: Next question from TV Tokyo, Ms. [ Naga ], please.

Unidentified Analyst: Naga from TV Tokyo. I have 2 questions. One is tariff. Tariff, they won’t, of course, pass through the prices, 100% for that much. And then with that plus the retail prices of the vehicles should be needed. And what is your idea about price increases of the cars or the vehicles? And then next one is forecast. Just like Toyo Keizai’s colleagues said, the progress level is quite fast as compared to the forecast so far. The forecast 3 months ago was rather conservative. But what is the concept behind — for instance, volume not changing. However, what is your idea about environment of the businesses? What is your assumptions or the ideas behind those forecasts and the guidance?

Eiji Fujimura: So as for the price increases, price hikes. I talked about JPY 650 billion gross tariff impact now down to JPY 450 billion. And we have about JPY 200 billion recovery plans included in that process. And that includes JPY 100 billion for that much. Recovery part is now JPY 100 billion, is about JPY 200 billion this time. And half of that is actually related to the price hikes. And U.S. economy, not just cars, what is the inflationary trend in the U.S. plus other OEMs pricing situations. So we need to cautiously watch out to put up our forecast. That was what we were like. And then in the first half this year, already August, however, for the price hike situation, apparently other companies, other OEMs are not doing price increases.

We had annual ones. But with respect to the tariff response, we are still cautious. And in the first half, we couldn’t reflect such part in our expectations and price hikes of the vehicles. It’s decided that way based on the position like that. And the recovery, JPY 100 billion might have them, but we have to still cautiously watching out the situation to make a final decision. And then — so JPY 700 billion in about JPY 240 billion, that is the progress today, as you said. And then, of course, that comes largely from the volume. And then the exchange rate is now set JPY 140. And JPY 145 and JPY 135 in the first and second half. Average is JPY 140. That is the assumption of the ForEx, and that is why we have that recovery part. And then usually, we tend to have more expenses put up in the second half, such as SG&A and R&D, those expenses are skewed put up in the second half, and that is another reason behind.

Unidentified Analyst: And 3 months ago, you were very conservative and that is stressed on that, but are you still that way? What do you think about it?

Eiji Fujimura: Well, I said we were conservative because, one, ForEx exchange rate, of course, that is just the assumption and also that is as per the way we think about it. So I don’t know if I should say that conservative. But at that time, 3 months ago, we told you about those tariff as on the assumption at that time. And then now JPY 650 billion to JPY 450 million impact based on the well-progressed scrutinizing exercise of the tariff impact. And out of JPY 450 billion, JPY 350 billion for automobile and JPY 100 billion for motorcycle, that is the breakdown. And JPY 100 billion motorcycle includes direct impact by tariff. However, not that it has a direct increase of the prices because of that, but rather the potential recession was something we were thinking about at that time.

And because of that, we still have a JPY 50 billion or so impact by that. So recession-related concerns, JPY 50 billion. However, although we had anticipated some like that, however, it is not materialized yet. It is not realized at this time for the first half. Therefore, you could say we were conservative. However, this was the assumption we had.

Operator: We’d like to take the next question from Automotive, I’d like to ask Mr. Hans Greimel.

Hans Greimel: This is Hans from Automotive News. Can you hear me?

Operator: Yes.

Hans Greimel: Is it okay I ask in simple English? I would just like to confirm 2 things about the price hikes and the EV losses in the United States. Can you — the price hikes in the United States, are they still — it seems that there are still many — much of the price hikes still to come later in the fiscal year. Are you still baking in those price hikes? And can you give us an average percentage increase that you expect to charge for vehicles in the U.S.? And regarding EV losses, can you give us a clear breakdown of the EV losses in the U.S. for the first quarter and how much you expect for the full year? And does that change your strategy or time line for rolling out EV production of the 0 Series in the U.S?

Operator: [Foreign Language]

Eiji Fujimura: Thank you very much, Hans-san. Okay. About the price hikes, so exactly what kind of a hike per — what kind of model, that is something strategically sensitive and then that would affect the sales. So I would like to refrain from the details. But for example, last year or 2 years ago, in the recent years, we have made some hikes. That was in line with the inflation. So of course, this reflects the strength of the U.S. economy and then also depends on the features and attractiveness of our vehicles. So those are the factors that went into our pricing decisions. The price hikes that we are talking about is referring to those normal annual price hikes in our annual price hikes, not particularly related to the tariffs, but we are talking about those annual ones that we would raise in MMC and the annual price hikes.

So during those first quarter, during April to June, we have raised some prices for some models. But — so please refer to those as the — for your information. Sorry, details cannot be given out because this will affect our sales going forward. elated to the EV losses, I don’t have any details about the first quarter, the breakdown by quarter. But just to give you a general image, I told you that the JPY 650 billion of that, generally speaking, of the JPY 650 billion, I mentioned JPY 200 billion at the beginning of the first term. Those — we assume that kind of losses of the JPY 200 billion. So we did some write-off on certain models, JPY 50 billion for certain models in the first quarter. So that is part of it. So we would say JPY 250 billion would be the losses — kind of nonrecurring losses.

So I mentioned the JPY 200 billion we mentioned at the very beginning of the term. And then now the IRA that went away. So those are the losses — additional losses of like JPY 250 billion. So of the JPY 650 billion, JPY 250 billion would be about the losses for this term. So we still have about JPY 400 billion remaining. So R&D would be JPY 300 billion, gross profit of JPY 100 billion. Please take it that way. So we have a gross margin of JPY 100 billion. I think we had about JPY 150 billion last year that was larger than that. But we are narrowing down on the volume compared to last year. So that’s why we are positioning that JPY 100 billion. For 0 Series, as mentioned, the — because of the impact from IRA expenditures and also the cooling down of the market, we are not very optimistic to put a plane, but we would like to be fully prepared and then launch next term.

So when it comes to good timing, I will give you more information about it.

Operator: We are very sorry that — and we know that many hands still up for making questions. However, because of the time, next one is going to be the last question from Reuters, at Daniel, please.

Daniel Leussink: Can you hear me?

Operator: Yes, I can hear you.

Daniel Leussink: So earlier, USMCA discussions, I’d like to confirm a few things. So especially in the first half for this year, what is the real actual tariff rate to be? If that cannot be publicly open, do you have examples citing some particular parts or components? For instance, a lower tariff rate is applied, like expensive ones, parts and so on. Are there any alleviated — the tariff alleviated kind of parts or components you could cite, if there are any?

Eiji Fujimura: Thank you. I’m sorry, I should refrain from publicly saying too much. However, maybe I can talk about CBU. The question is about CBU related to the USMCA. And if I say that too, well, it would reveal our cost structures. Therefore, I cannot say too much. However, rather the examples for the high rates rather than low, like hybrid. Hybrid system, the critical hybrid systems, there are quite a few sent from Japan. So it is the area where the high rate is applied. And for that area, next gen, next generation hybrid like the 27 series we are going to launch in that year with the new gen systems and specifically for them battery motors, PCUs. The thing is how can we produce those areas in the U.S. That is one of the focus area of the discussion today. Would that be right? Thank you.

Operator: Thank you very much, Daniel. So now that concludes our presentation for the financial results. And those slides and materials and the presentation package is available from our website. Thank you very much for your participation today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]