Honda Motor Co Ltd Q2 FY2026 Earnings Call

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 the second quarter of the fiscal year ending March '26. First of all, allow me to introduce the attendees today. Director, Executive Vice President and Representative Executive Officer, Mr. Noriya Kaihara.

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 for the second quarter ended September 30 of 2025, and forecast consolidated results for the fiscal year ending in March '26. Then Mr. 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 the financial year ending in 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 438.1 billion. Motorcycle operations saw unit sales decline in Vietnam, but global sales trended solidly and strongly, led by Brazil. For results up to the second quarter, we've attained a record high in unit sales, operating profit, and operating margin. In Automobile operations, though there was some positive profit impact due to price revisions, we saw a decline in profit due to impacts from tariffs and one-time expenses related to EVs. Operating cash flow after R&D adjustments, which indicates the resources available for future investment, came to JPY 1,281.3 billion, on par with the same period last year. The forecast for the consolidated results for the term ending in March '26 is an operating profit of JPY 550 billion and a profit for the year of JPY 300 billion. 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 shortages, though we expect profit growth due to yen depreciation. In Motorcycle operations, while we expect declines in unit sales in Vietnam, we hope to recover this in other regions; thus, we maintained 21.3 million units. For Automobiles, in addition to lower sales volume, mainly in China and ASEAN, declines due to semiconductor shortages have been taken into consideration for North America. We are revising down from 3.62 million to 3.34 million units. To give you the consolidated results for the second quarter of the year to March '26, Operating profit was JPY 438.1 billion, lower by JPY 304.4 billion compared to the same period last year. Investment earnings due to the equity method were JPY 10.8 billion, higher by JPY 31.6 billion. And the half-year profit attributable to the owner of the parent was JPY 311.8 billion, lower by JPY 182.8 billion. 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 an operating profit of JPY 550 billion, down by JPY 150 billion, and the profit for the year attributable to the owner of the parent of JPY 300 billion, down by JPY 120 billion. The exchange rate against the U.S. dollar is assumed at JPY 145 for the full year period. The forecast for the full year dividend for the fiscal year ending March '26 is JPY 70 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 6 months 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 million units. For Automobile business, it came to 1.68 million 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 million units. The consolidated results during the 6 months to the second quarter were as explained earlier. Next, I'd like to present the factor analysis of operating profit for the second quarter compared to the same period last year. Operating profit was JPY 438.1 billion, down by JPY 304.4 billion compared to the same period last year. Factors affecting the operating profit were: first, impact from sales was positive by JPY 83.9 billion due to expanding motorcycle unit sales. Selling price and cost factors led to an increase of JPY 162.4 billion due to effective price revisions. Expenses gave us a negative impact of JPY 26 billion. R&D expenses led to a profit decline of JPY 20.4 billion. Currency effects resulted in a negative impact of JPY 116.2 billion. EV-related and one-time expenses led to a negative impact of JPY 223.7 billion, and impact from tariffs led to a profit decline of JPY 164.3 billion. Our trial calculation, excluding the EV-related one-time expenses and the tariff impact, comes to an operating profit of JPY 826.2 billion, on par with the same period last year. Regarding operating profit by business segment, Motorcycles, JPY 368.2 billion; Automobiles, JPY 72 billion of losses; and Financial Services, JPY 143.2 billion profit; and the Power Products and other businesses, we put up JPY 200 billion of losses. Operating profit of the Motorcycles business was JPY 368.2 billion, up by JPY 42.4 billion year-on-year due to the following factors. Regarding sales impact, there was a JPY 60.2 billion increase due to additional sales volume mainly in Asia and South America. Regarding price and cost impact, profit increased by JPY 32.3 billion due to effective price revisions and so on, with a JPY 7 billion decline in profit due to expenses, a JPY 3.5 billion positive profit by R&D, a JPY 41.3 billion profit decline due to foreign currencies, and a JPY 5.3 billion decline in profit due to tariffs. In the Automobiles business, operating profit declined by JPY 351 billion year-on-year, resulting in JPY 72 billion operating losses due to the following factors. Regarding sales impact, profit declined by JPY 24.5 billion, accounting for the losses associated with the restructuring of the group companies. Price cost impact showed an increase in profit by JPY 130 billion due to effective price revisions and so on. Expenses showed a JPY 33.8 billion increase in profits. Research and development led to a decline of JPY 24.4 billion. The foreign currency effect led to a decline of JPY 64 billion. One-time EV-related expenses led to a decline of JPY 223.7 billion, and tariff impact resulted in a profit decline of JPY 158.1 billion. Next, regarding the cash flow situation. Free cash flow, excluding Financial Services business, was JPY 760.6 billion. The net cash balance at the end of the first half was JPY 3,053.9 billion, and operating cash flow after R&D adjustments was JPY 1,281.3 billion. Next, I'll explain consolidated forecasts for the fiscal year ending March 2026. Regarding the group's unit sales as compared to the previous forecast, in the Motorcycles business, reflecting a reduction in volume in Asia and an increase in regions mainly in Brazil and others, we will maintain the volume of 21.3 million units. In the Automobiles business, in addition to the volume decline mainly in Asia, we reflect a volume reduction of 110,000 units in the North American region due to the impact of semiconductor shortages. Thus, we would expect the volume to be 3.34 million units. In the Power Products business, there are some regional reviews to be reflected; we will keep the previous forecast of 3.67 million units. I've explained the consolidated business forecast for the fiscal year ending March 2026. Next, I'll explain the factors of ups and downs of operating profits year-on-year. The operating profit would decline by JPY 663.4 billion year-on-year because of the following factors. Regarding the sales impact, although losses were put up in conjunction with the group company's restructuring, thanks to the unit volume increase of Motorcycles and so on, we expect the profit to increase by JPY 3.3 billion. Regarding price and cost impact, JPY 280 billion increase in profit is expected due to the price revisions. Expenses declined by JPY 91.5 billion. R&D expenses declined profit by JPY 126 billion. Foreign currency impacts declined by JPY 214 billion, and gross tariff impact decline of profit by JPY 385 billion. The potential decrease in production volume due to semiconductor supply shortages is incorporated in the forecast based on current assumptions, which would be JPY 150 billion negative. Next, I'll explain the factors behind the operating profit changes in expectations compared to the previous forecast. Operating profit is expected to decline by JPY 150 billion from the previous guidance due to the following factors: regarding the sales impact, incentive hikes and unit sales decrease in Automobiles and so on, the profit would decline by JPY 83 billion. Regarding price cost impact, we revised our recovery from the tariff impact; thus, the profit would decline by JPY 70 billion. Regarding foreign currency impact, because of changes in the exchange rate to JPY 145 for $1, JPY 88 billion positive profit is expected. For tariff, we scrutinized the impact in values, and it will be JPY 65 billion positive. Regarding semiconductor shortages, the impact will be JPY 150 billion negative for profits. Lastly, this is the forecast of the capital expenditures, depreciation and amortization, and R&D expenditures. That is all. Thank you very much for your attention.

Thank you very much for your attention. We would now like to move on to the Q&A session. The first question comes from Ms. Ukita from Yomiuri Newspaper.

I hope you can hear my voice. My first question is, so the Motorcycles are operating great. And then for Automobiles, it's JPY 73 billion losses. So I'm sure there are tariffs and semiconductor impacts. But I just want to ask for your input or your general comment on your prospects for the future.

Okay. Let me address that question and then Mr. Fujimura will provide additional comments. Firstly, our Motorcycles division achieved record-high results. Although we experienced a decline in Vietnam, we were able to maintain strong profits in Brazil and Thailand. For the second half and the full year, we anticipate positive progress overall, though we will need to assess our ability to offset the decline in Vietnam. Generally, I believe we should be fine. In the Automobiles sector, both ICE and HEV have generated cash for us so far, which we now need to invest in electric vehicles. We have seen good sales revenues from HEVs in North America, and profitability appears to be improving. However, the business environment is shifting dramatically due to tariff changes and new environmental regulations. Compared to other OEMs, we maintain a relatively high local procurement ratio in North America, which should limit the impact of tariffs, but we still face an over JPY 300 billion effect. As Mr. Fujimura noted, we view this as a new normal that will persist for some time. While we can sustain good results in North America, we are witnessing a decline in sales volume in China and Asia. Particularly in Asia, the profitability for ICE has decreased more than we expected, necessitating fundamental changes in our approach. Moving forward, we plan to maintain our production in Asia and Oceania, focusing on enhancing the profitability of ICE and HEV. We need to revise our investment plans to strengthen the competitiveness of HEV and improve profitability in both ICE and HEV. A review of our product lineup is essential, centering on our profitable models and increasing overall volume. In line with current conditions, we must also rationalize fixed expenses, which is urgent. Regarding BEVs, we have invested significantly, and for the future, transitioning to our BEV will require us to reach breakeven at a minimum, so we need to manage losses going forward. The tariff situation, as mentioned, is expected to persist, and we will pursue a policy of producing where there is demand to mitigate the tariff impact through our supply chain. This is crucial for improving profitability in the Automobile sector, and we must focus on enhancing our overall profitability.

Thank you for your question, Ms. Ukita. Currently, we have recorded JPY 438 billion. In terms of our performance, the Automobiles sector has incurred losses of JPY 73 billion, while Motorcycles have yielded a positive result of JPY 370 billion, reaching a record high for this segment. These numbers highlight some unusual circumstances we've faced. As we noted at the start of the term, we have been impacted by numerous external factors. Specifically regarding the JPY 438 billion, we also have a one-time cost of JPY 450 billion affecting our results. Our normalized performance is around JPY 890 billion. This JPY 450 billion consists of JPY 160 billion associated with tariffs and a provision of JPY 250 billion allocated throughout the year for potential losses in the EV segment. We have already budgeted for this and allocated JPY 225 billion in the first half of the year. Moreover, we have experienced additional losses of JPY 43 billion due to the restructuring from the transfer of a subsidiary and JPY 20 billion from litigation settlements in the U.S. and the U.K. When we combine all these figures, we arrive at JPY 890 billion. Although the financials show a loss of JPY 20 billion, the majority are related to the Automobiles sector, leading to the reported JPY 73 billion loss. Comparing this against our plans, external factors were largely accounted for, however, the financial operations and volume declines in Asia and China were more severe than we initially expected. For the full year, we initially projected a target of JPY 500 billion, but we saw a decline of JPY 450 billion compared to the last fiscal year primarily due to exchange rates, which we need to address. Taking everything into consideration, our performance actually reflects a total of JPY 1.4 trillion. Our year-end forecast stands at approximately JPY 1.3 trillion, after accounting for factors like exchange rates, semiconductor shortages, and tariffs. Initially, we had anticipated JPY 1.4 trillion but refined our expectations to JPY 1 trillion in the Financial operations and Motorcycles, with the remaining attributed to Automobiles, and a negative impact in battery EV of JPY 600 billion. Despite a drop in our Vietnam operations, we remain optimistic about maintaining JPY 1 trillion. Considering projected BEV losses of JPY 600 billion, we have made a provision of JPY 50 billion, leading to a combined loss expectation of JPY 650 billion. Previously, we anticipated ICE losses at JPY 1 trillion which have adjusted to JPY 900 billion. Thus, addressing our business structure, as highlighted by Mr. Kaihara, we must first enhance our profitability in the ICE sector, while for battery EV, the loss is currently noted at JPY 650 billion, with gross profit at JPY 250 billion. Having completed our provisions, we are poised to minimize losses as close to zero as possible. The remaining expenditures will focus on R&D, with a forecast baseline around JPY 450 billion moving forward. Additionally, we expect a net impact of roughly JPY 330 billion due to tariffs, which we will need to work on recovering over the next few years. On the financial side, we have effective cash expenditure controls in place. Our balance sheet and cash flow remain robust, and strong cash control will be essential. We aim to restore profitability in our Automobiles sector quickly while also allocating resources for future growth. We intend to establish a stable dividend for our shareholders and maintain a balanced structure between P&L and balance sheet. We recognize the urgency in improving profitability now while preparing for what lies ahead. In our Automobiles division, we are keenly aware of the challenges and are ready to take decisive actions. Thank you.

One more question, may I? You said already perhaps about the impact by the chips. It's already incorporated in those values, about JPY 150 billion. 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 get 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. Sorry about it. As we said right at the beginning, it's already reported in the media, a company called Nexperia. The chips from the company have been stopped, suspended. Therefore, we have impacts on the procurement. And then we work together with the Tier 1 manufacturers to try to minimize the impact on the production. As for the 27th of October, in the production plant in North America, we are adjusting the production situation today. As of now, we have an impact of 110,000 units that's reflected. I said JPY 250 billion, but operating profit of JPY 150 billion is put up in this announcement today. I heard that shipment has resumed in China now. We have already started our communications with the suppliers, and we are trying our best so that we can get supplies of those chips as much as we can. Going forward, it is difficult to tell definitively. But as of now, in the week of 21st of November, probably in that week, we wish to resume our production eventually, and we are trying to achieve that now. As of today, the parts that are coming back in the network are getting better, and we are seeing some signs. However, it is not definitive as of yet. So we are communicating closely so that we can try to resume, and that is the situation today. Thank you.

Thank you. Thank you to Ms. Ukita as well. We'd like to take the next question from Nikkei Newspaper, Mr. Okinaga, please.

This is Okinaga from Nikkei Newspaper. For the impact from Nexperia, I'd like to ask another follow-up question. So 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 do you think that the impact should not go beyond JPY 150 billion?

First of all, the significant impact we experienced was primarily due to sourcing components from a single supplier. While I can't share specific details about the components, this was a key factor. In the past, we’ve faced similar challenges with semiconductors, and we collaborated with the supplier to maintain appropriate inventory levels. However, since it was single-sourced, we saw our interim inventory decrease as North American sales performed very well and we operated close to full capacity. This led to an impact on the supplier, which subsequently affected our production. Regarding alternative sourcing, we are indeed exploring options, including other products or off-the-shelf alternatives. Once we're able to identify suitable options, we will implement them quickly. We anticipate being able to resume production during the week of November 21. If shipments from China are halted again, we can't predict the impact, but it could have further repercussions. While I can't guarantee anything, we hope to resume operations as planned. That concludes my response. Thank you.

I have another question regarding your downward revision. In August, you mentioned JPY 650 billion in one-time expenses related to EVs. Has this improved? Also, regarding sales in North America, it seems challenging to increase prices there, which has had a negative outcome. I'd like to understand the reasons behind this. Additionally, you mentioned your goal to reduce gross losses to zero. Could you share your plans for achieving that?

Thank you for the second question. Let me address that. Regarding the one-time expenses related to EVs, first, on the impact of tariffs, we have managed to reduce that impact compared to our previous estimate, which has improved our profitability. However, our spending on EVs has increased, which means the overall impact is now larger. Concerning price increases in North America, we initially believed we could raise prices, but that is not a straightforward process and requires a thorough assessment of market conditions. In the U.S., for instance, other manufacturers have been boosting incentives, which has kept actual market prices from rising significantly. While we have implemented annual price adjustments, the status of other companies has made it challenging to increase prices amidst tariff concerns. Consequently, we weren't able to experience the positive effects from the anticipated price hikes. Unfortunately, looking ahead to the second half of the year, I don't expect any significant positive impacts from price increases. That concludes my response.

So I'll explain those numbers in addition. Last time, JPY 450 billion negative gross tariff impact and then JPY 100 billion recovery; so JPY 350 billion net impact from the tariff. This time, gross JPY 385 billion. Actually, gross impact is less of JPY 685 billion. Then recovery is about JPY 150 billion, and the net impact is about JPY 335 billion. Eventually, that is the net impact. The gross impact, JPY 650 billion. Of course, we had an accurate understanding today. But for as much as JPY 500 billion, we have export from Thailand or Asian countries to the 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 released it. That means we have less of JPY 650 billion from gross. We need to delete that part for the Automobiles, and that is why we have those numbers.

Thank you very much, Mr. Okinaga. If you have questions, please tell us 2 questions in sequence. Okay. We'll take the next question from Yasunaga-san from NHK.

This is Yasunaga from NHK. Can you hear my voice?

Yes.

Just one question because others have asked the same questions. In the Automobiles 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. GT's launch timing has been postponed. 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.

Thank you very much, Mr. Yasunaga. Regarding the Chinese market, the overall market has been experiencing a slight decline due to reduced incentives, but it is mostly stable. For Honda, specifically in the internal combustion engine segment, we are facing significant challenges with price discounts remaining high. We recognize that we are not providing good value compared to competitors. Additionally, our vehicles lack features like navigate on autopilot, making them seem expensive to consumers, while other companies are offering these features at lower prices, which complicates our situation. As for electric vehicles, we previously considered launching the E-Series, but we realized we needed to reassess our strategy and introduced the GT instead. However, we have had to delay its launch. While we initially planned for the next fiscal year, I cannot provide a specific timeline for when it will be released. We need to carefully plan the launch of this model, and the current market conditions for electric vehicles are expected to persist. In light of the challenging business environment, it’s crucial for us to generate solid sales from our internal combustion engine vehicles. Fortunately, we have finished depreciating all our factories and now need to strengthen our business structure by optimizing manpower and improving our sales forecasting to enhance profitability. That’s our focus at this moment.

Thank you very much, Mr. Yasunaga. Next question from Asahi Shimbun, Mr. Miura, please.

Miura from Asahi Newspaper. I have 2 questions. One, in the Motorcycles business, Vietnam, you had a decline in their businesses. And then they had restrictions on electrification vehicles. How much of those impacts did you incorporate in this statement? And what is your action against it? And question 2 is about Automobiles, specifically EVs in China. You said that you're going to have a radical action. What do you think is the reason for your struggle in the Chinese market? What do you think is the cause of that?

Thank you for your question, Mr. Miura. Regarding the Motorcycles business in Vietnam, while the new regulations on ICE motorcycles are not yet in effect, we anticipate they will be implemented in the urban areas starting mid-next year. Following the announcement last summer, we noticed a decline in consumer purchases. We expected some negative effects on our business there, but in October, we observed a slight recovery. It's important to note that the practical application of this regulation is still uncertain, and for now, existing ICE models will continue to suffice. We have also initiated the launch of two electrified vehicles, the ICON e and CUV e, in Vietnam and aim to increase sales of EVs in the market. In Thailand, we are planning to commence production of a new EV model and hope to accelerate its rollout, possibly introducing it to Vietnam by March or April next year, even with the new regulations in place. While we expect slightly lower unit volumes, our operations in Brazil and Thailand are performing well, which should help offset the challenges in Vietnam. That sums up our Motorcycles business in Vietnam.

For China EV, may I?

Sure. For EVs in China, as we said earlier, basically, Ye series, the new products are over there. Looking at the vehicle comparison to others, for instance, the price range, they are higher, more expensive than the other products; CNY 150,000 for other products, whereas ours is CNY 200,000. Our product is not price competitive. Also, we have NOA, navigation on autopilot system, which is an automated driving system; competitors' products have NOA, however not on our products yet. Therefore, going forward, we will change the models in the future and try to do that earlier. At the moment, we need to aim for the local autopilot system to be added to our products. Doing so, we can strengthen the intelligence of the products and improve cost competitiveness; we need to approach that as well. Currently, we are trying to expand local procurement in China. That way, we can improve the competitiveness of the product, and that is what we are trying.

The next question from Toyo Keizai Weekly, Yokoyama-san, please.

This is Yokoyama from Toyo Keizai.

Yes, we can hear you all right.

I have 2 questions as well. The first question is your full-year prospects with the impact from semiconductors of JPY 150 billion, and then you have JPY 450 billion profit; you are thinking of JPY 550 billion. So I guess you do have quite a plan for your profit to suffer in the second half. Can you give me some numbers about what the factors are causing you to see a lower profit for the second half? And my second question is for the profitability in the Automobiles business. So right now, for the Automobiles, the ICE IOS, you think 8% is what you're thinking about for the ICE. For BEV, you're going to have your own battery and start from a gross profit of zero. But when would it turn into profits? Do you have any additional measures to gain more profits? It might be difficult to tell whether you're going to get into profit for the Automobiles this year. So I just want to know.

Thank you for the question, Yokoyama-san. Regarding the difference between the first half and the second half, we anticipate a JPY 150 billion tariff impact that will persist into the second half. In the first half, there was a one-time expense related to the BEV provision, which we expect to offset the tariff impact. Additionally, we forecast a negative JPY 40 billion from foreign exchange fluctuations, with the remainder making up a significant portion of the difference. We expect to see a reduction from JPY 440 billion to JPY 110 billion, amounting to a JPY 320 billion difference between the two halves. Specifically, with the influence of semiconductors and the one-time expenses, the actual difference comes down to JPY 290 billion after adjusting for the foreign exchange impact. There will also be variations in expenses and R&D between the two halves, which I hope is clear. In North America, we anticipate a decline of 110,000 units affecting our incentives. We are still determining how to manage this incentive, but we have maintained our original volume target. We may need to adjust the incentives slightly. We have not finalized our strategy and need further discussions with American Honda on this matter. That's all for the numbers.

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. This year, we do have losses. We have JPY 650 billion, we have that. So this includes one-time expenses as well. Next business year, I think we will start from a JPY 400 billion range 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 pursue a far larger sales volume. However, we do have good prospects for the supply from GM. So now we will have more BEVs of our own development. So now we need to think about how to reduce the manufacturing cost for our own BEV, and it is important to consider whether we can produce in a very efficient way. 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 need to work on how best we can flexibly produce, reduce costs, and improve profitability. If you ask me when, I guess all I can say is that as soon as we can, we want to make it profitable. Thank you.

So the Automobiles business, at this time do you have any disclosure for the expectations, the profit or losses?

So we do not disclose figures at the product level. JPY 550 billion, and we have to subtract from that level. So for the Motorcycles, it will be about JPY 600 billion to JPY 700 billion, same as last year; and JPY 300 billion for Finance, like last year. Both together, we would earn JPY 1 trillion. We said that, and then we could actually assume from that. For Automobiles, we would end up in losses. But for EV, onetime JPY 250 billion; for chips, one-time JPY 150 billion again. Both together JPY 400 billion negative altogether. Plus this term, we have a tariff impact on the top. So the number will be including all those factors. As we said before, we need to earn money based on ICE; and losses coming from the BEV should be controlled better. Not just P&L, we have to look into the spending out of cash flow. We have to control the timeline of spending too. So that is how I'd like to manage.

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. Nagaya.

Can you hear me?

Yes, we can hear you.

I have a question. For this fiscal year's forecast, three months ago, you revised it upward, but now you're making a downward revision. When you create the forecast, I would like to understand your approach. Are you being very conservative? Additionally, your forecast for unit sales in China seems comprehensive, but for the other ASEAN markets, there appears to be a decline. Compared to three months ago, we are facing significant challenges in Asia. What are the reasons behind this? What factors are at play?

Thank you for your question, Ms. Nagaya. Regarding our plans, I wouldn't describe them as conservative; rather, our focus is on transparency. We aim to incorporate all relevant explanations for you. For example, concerning the tariff issue, we will factor in the alleviation of its impact and calculate returns and refunds accordingly, with a significant refund included. We also account for well-calculated impacts and exchange rates, including JPY 70 billion. The additional impacts from chips are unique, but we are including a JPY 50 billion tariff impact as previously mentioned. Our plans are based on the understanding that we're not always conservative. As for the forecast of unit sales in the ASEAN regions, the expected decline is significant. You are correct that unit sales volume is anticipated to decrease by about 750,000 units compared to our initial forecast. This decline is particularly notable in Indonesia, Thailand, and Malaysia, where government policies and a shrinking market are factors to consider. We also face increased competition, impacting our selling prices and resulting in stagnant sales. We need to respond urgently to this situation, especially in the ASEAN markets. Next year, we do not plan any new model launches, only minor revisions of existing models. This timing could present an opportunity for us to recover our position in the ASEAN market, but it's important to recognize that conditions there are tough, which has led us to revise our expectations.

And then again, the conservativeness about the volume expectations. It is rather a solid conservative number, I thought. Also, you mentioned about the competition from competitors. Would that include the Chinese suppliers? 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. About the competitors, of course, Chinese suppliers account as well. But in the ASEAN markets, there are emerging Chinese products coming in. Against them, the existing manufacturers are providing more incentives, and prices are discounted against Chinese products. That is making the situation more competitive in terms of prices. That is the market situation over there. Thank you very much. Thank you, Ms. Nagaya.

Okay. Thank you very much. We would like to close now the financial results briefing. The material is listed on our website. Please refer to it. Thank you very much for your participation.

Thank you very much.