Earnings Call Transcript - HMC Q1 2026

Operator, 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, CFO

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 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 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, Operating Executive, Head of Accounting and Finance Unit

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 one-time 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 one-time expenses related to EVs. Price and cost impact to be negative by JPY 100 billion, as we reviewed the 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 a 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 the fiscal year ending March 2026 as shown on the slide. And that concludes my presentation. Thank you very much for your attention.

Operator, Operator

The first question will be from Mr. Okinaga from Nikkei Newspaper.

Shoya Okinaga, Analyst

This is Okinaga from Nikkei Newspaper. My first question is about the impact of tariffs. With the recent agreement between the U.S. and Japan, automobile tariffs have been reduced from 25% to 15%. This suggests that the negative impact on profits has been mitigated. What are your thoughts on this? Regarding Mexico and Canada, the outlook remains uncertain. What are your views on the potential developments in those regions? Additionally, you mentioned transitioning production from Japan to Canada. I assume your focus on production in the U.S. will remain the same. Are you still concerned about the situation with tariffs under Trump? Is it accurate to say that your position has not changed?

Eiji Fujimura, CFO

Thank you for your questions. Both are about tariffs. The reduction from 25% to 15% between the States and Japan is beneficial for our business and for our customers. We have many non-Japanese shareholders, so this agreement to lower tariffs positively impacts our company. The previous uncertainties are now clarified, which is a positive development, and we appreciate everyone involved. However, regarding the retroactive application of tariffs and when they will take effect, the details are still pending. We hope for a quick decision and communication between the governments, as we previously expressed to the Japanese government. The previous tariff was 2.5%, and now it has increased to 15%. This change affects not just Honda but also other manufacturers, and we aim for free trade and competition globally, which benefits the auto industry and provides high-quality products to various markets. We must now consider this as the new normal. In terms of production, we produce 60% to 70% in the U.S., so our approach is to manufacture where there is demand. Mr. Mibe discussed this in a previous briefing. We currently have a 2-shift operation in the States and may consider moving to a 3-shift operation, which could increase production volume without significant capital investment. We are also in discussions with our suppliers to ensure they can keep pace with these changes. A key point is that for hybrid vehicles, many core parts come from Japan, including the motor, battery, and ECU. The localization of these components is crucial, and we are actively discussing this. Thank you.

Operator, Operator

Next question from NHK, Mr. Nishizono, please.

Nishizono Koki, Analyst

Nishizono speaking. Can you hear me?

Operator, Operator

Yes, please.

Nishizono Koki, Analyst

Thank you for your presentation today. I have a question regarding the forecast for this fiscal year related to tariffs. What assumptions are you making for your forecast beyond the automotive tariff? Are there other types of tariffs to consider as well? Also, regarding the parts automotive tariff, when do you plan to implement that, and what assumptions are you using to develop those forecasts? That's all.

Eiji Fujimura, CFO

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 calculations. 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, Operating Executive, Head of Accounting and Finance Unit

Thank you for your question. Regarding the assumptions for the tariff, as stated earlier, the primary focus is on the automotive tariff. This is the main aspect we are addressing. For Completely Built Units (CBUs), we have production facilities in Canada and Mexico, and tariffs will be applied to vehicles imported into the U.S. from those locations. The initial assumptions have not significantly changed since the beginning of the fiscal year. However, we may adjust production allocations slightly. For example, we could switch from exporting from other countries to manufacturing in Indiana or export U.S.-produced vehicles to South America, while also selling those U.S.-made products in the U.S. We have reorganized the allocation process accordingly. Regarding the import of CBUs, tariffs will apply, but parts and components made in the U.S. will be exempt. We are currently analyzing the portion of these components to determine their impact. The CBU value includes these considerations, along with parts, raw materials such as steel, aluminum, and copper, which may also incur tariffs. There hasn’t been much progress on Canada-Mexico involvement yet. Since the start of the year, we have been looking into parts imported from Canada and Mexico that could fall under the jurisdiction of the MCA, working with suppliers to assess the applicable tariffs. Though we still have more analysis to complete, we initially applied a 15% tariff assumption for those parts since we haven’t fully examined them with suppliers. We continue to collaborate with them to break down the tariff details. Additionally, we import components from other countries beyond just Mexico and Canada, including Tier 3 and 4 suppliers. We need to delve deeper into the specifics to gain a better understanding, and we have made some progress in this area. Consequently, we estimate the gross impact at JPY 450 billion based on our current analysis. There is also an automotive tariff agreement between the U.S. and Japan, but we are unsure when this tariff will begin to apply. Currently, our assumption is that the 15% tariff will be effective starting in September, which is the basis for our calculations.

Operator, Operator

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

Daisuke Narahashi, Analyst

This is Narahashi from Yomiuri Newspaper. I have a detailed question to check on, followed by two questions. The automobile operation has reported an operating loss from May to June. How many years has it been since you experienced such losses? Now, my first question is about tariffs. If you export complete built-up units from Mexico or Canada to the U.S., the tariff is 25%. I thought many of these might be exempt. How much will Honda actually have to pay? Will it be less than 15% or more? My second question pertains to unit sales in Asia, Europe, and Japan, which have seen a year-on-year decline. Can you provide more details on the reasons behind this? Is the sales competition outside the U.S. intensifying due to tariff impacts in the U.S.? I would like to know if there are specific regions where competition is becoming more challenging.

Eiji Fujimura, CFO

To address your first question regarding the CBU from Mexico and Canada, there are some exemptions applicable to the parts as well, although a significant amount will still be exempted. Mr. Kawaguchi mentioned this earlier. The costs associated with CBU in the U.S. have been reviewed closely, and we have managed to reduce the effective tax amount considerably, though I can't provide a specific number at the moment. For parts coming in from Mexico and Canada, as I mentioned earlier, if USMCA contents are co-applied, these will fall outside the scope of that regulation. While this regulation has been in place, we anticipate that it may take longer for thorough scrutiny. We estimate that costs can be reduced by about JPY 100 billion or so, though it's important to note that we have achieved around a 70% reduction of this sum. Regarding unit sales in Asia, Oceania, and Japan, each market presents unique conditions. Despite having strong market shares in various Asian countries, we have faced challenges due to increased participation from Chinese OEMs over the past few years. Additionally, the popularity of hybrid vehicles varies significantly across markets and is often linked to government subsidies, which means I need to discuss these markets individually. We have encountered difficulties launching hybrid models in some areas and are currently losing ground to competitors like Toyota in the ICE segment. While this process may take time, we are committed to introducing hybrid models in select markets to enhance competitiveness. In Europe, we have struggled for several years due to the closure of our production sites in the U.K. and Turkey. Unit sales have been trending around 100,000, reflecting a slight decline since those closures. However, we are focusing our efforts on markets in the U.S., Japan, and India for our automobile business. We do need to reevaluate our strategy for the European market. Overall, competition is intensifying in some regions, and we recognize the need for increased efforts in others, thus clarifying our selection will be essential as we move forward.

Daisuke Narahashi, Analyst

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

Eiji Fujimura, CFO

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, Operator

Next question from Toyo Keizai Magazine, Mr. Yokoyama, please.

Unidentified Analyst, Analyst

Yokoyama speaking. Can you hear me?

Operator, Operator

Please.

Unidentified Analyst, 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, CFO

Thank you. To summarize the financial results and the implications for electric vehicles, in the past three months, we reported JPY 240 billion, which is half of what we achieved the previous year. The graph indicates a tariff impact of around JPY 120 billion. As previously mentioned, we anticipated some recovery and refunds related to imports, which we managed on a cash basis. Due to this, we prepared more for the first quarter. Initially, we expected JPY 200 billion for electric vehicles, with an understanding that additional amounts might be allocated later. We ultimately ended up with JPY 110 billion from the EV-related figures, which includes JPY 60 billion of expected figures and an unexpected JPY 50 billion. We realized that we needed to make a critical decision to suspend the development of some EV models, which required write-offs for certain efforts. The remaining total was JPY 120 billion, and from the unexpected JPY 50 billion, we set aside reserves for future losses, which amounted to JPY 50 billion at the term's end. The IRA subsidies and California ACC II credits previously factored into our loss calculations are no longer relevant, so we now anticipate JPY 50 billion in future loss expectations. For the full year, our earlier forecast of JPY 600 billion has risen to JPY 650 billion due to the cancellation of IRA subsidies and invalid ACC II values. Regarding motorcycles, we achieved a 19.9% operating profit margin, which indicates strong performance. Performance in India has slowed slightly, but we're not overly concerned as we expect a recovery. While challenges in India are apparent, we see good recovery in South America and Vietnam to compensate. Both regions are showing excellent profitability, especially in Brazil, where our market share is significant. The demand for vehicles there exceeds supply; our production capacity will increase from 1.3 million to 1.6 million units. This demand-supply dynamic, coupled with decent pricing, is enhancing our profitability in the South American market. That said, I want to emphasize the volatility of the region. Overall, our motorcycle business saw remarkable results in the first quarter. Thank you.

Operator, Operator

Okay. Then we'll take the next question. From Bloomberg, Mr. Inajima, please.

Tsuyoshi Inajima, Analyst

This is Inajima from Bloomberg. I'd like to ask about sales in China. Up until June, it has been declining for the 17th consecutive month. What initiatives do you have to rebuild sales, and when do you think it will recover? The decline continues even after the launch this year, so we would like to know more about it. Additionally, there have been reports about discussions regarding supply from Nissan to sell in the States. Can you provide any updates on those discussions?

Eiji Fujimura, CFO

Thank you for the questions. Regarding China, the situation remains very challenging. The total market is expected to be under 24 million, similar to last year. The conditions for the NEV market will continue to be as they are, with over 50% anticipated for that segment. Over the past few years, we have been adjusting our production capacity, reducing it by 0.5 million units over the last 2 or 3 years. Our current factory capacity stands at 1.24 million, with 1 million allocated for ICE vehicles and 0.2 million for battery EVs. We have not changed this since the start of the year, but we still have 0.7 million units of available capacity. The reason for this available capacity is that we have aligned our workforce with our production capacity. However, we still have some outdated equipment and production lines, which limits our impact from depreciation. While we will continue to make adjustments, this remains a sensitive topic with no decisions made yet. We need to monitor our production models closely, engage in discussions with our partners, and proceed with caution. For the EV sector, we're facing challenges with the sales of the e:N Series. We made investments from the end of last fiscal year into this year, but we are not meeting our initial targets. Although the actual driving performance has received positive feedback, our launch prices and intelligent functionalities did not meet market expectations. We need to take prompt actions, potentially through deep seeking with OTA or collaboration with Momenta in the ADAS area. Regarding discussions with Nissan, I know there have been many reports, but nothing has been finalized or publicly announced by us. We've mentioned before that we are exploring various collaboration formats with Nissan and Mitsubishi Motors, and we will update you once there are firm developments.

Operator, Operator

Next question from TV Tokyo, Ms. Naga, please.

Unidentified Analyst, Analyst

I have two questions. First, regarding tariffs, they won't pass through the prices completely. What are your views on potential price increases for the vehicles? Secondly, about the forecast, your progress so far seems faster than the forecast from three months ago, which was rather conservative. Can you share your thoughts on the business environment, as well as the assumptions or reasoning behind those forecasts and guidance?

Eiji Fujimura, CFO

Regarding the price increases, I previously mentioned that the gross tariff impact has decreased from JPY 650 billion to JPY 450 billion. We have included about JPY 200 billion in our recovery plans, which encompasses JPY 100 billion specifically for recovery. Half of this amount is related to the price hikes. Additionally, we must closely monitor the U.S. economy, including inflation trends and pricing actions from other manufacturers. In the first half of this year, despite it being August, other companies have not implemented price increases like we have. While we accounted for annual price adjustments, we remain cautious about our response to tariff issues. Consequently, we did not factor significant price increases for vehicles into our expectations for the first half. Although the recovery figure of JPY 100 billion is promising, we need to approach the situation carefully before making any final decisions. Currently, progress stands at JPY 240 billion, largely due to volume. The exchange rate is set at JPY 140, with predictions of JPY 145 in the first half and JPY 135 in the second half, resulting in an average of JPY 140. This forms the basis for our recovery calculations. Typically, we anticipate higher expenses in the second half, particularly for selling, general, and administrative costs, as well as research and development, which further justifies our cautious stance.

Unidentified Analyst, 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, CFO

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, Operator

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

Hans Greimel, Analyst

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

Operator, Operator

Yes.

Hans Greimel, Analyst

Could I ask in simple terms? I want to confirm two things about the price increases and the electric vehicle losses in the United States. Regarding the price increases, are there still many hikes expected later in the fiscal year? Are you factoring those price increases in? Could you also provide an average percentage increase that you expect to charge for vehicles in the U.S.? As for the electric vehicle losses, could you provide a clear breakdown of the EV losses in the U.S. for the first quarter and your expectations for the entire year? Does this affect your strategy or timeline for launching the 0 Series EV production in the U.S.?

Eiji Fujimura, CFO

Thank you very much, Hans. Regarding the price increases, I cannot disclose specific details since they are strategically sensitive and could impact sales. However, in the past few years, we have implemented price hikes in response to inflation, which reflects the strength of the U.S. economy and depends on our vehicles' features and appeal. The price hikes we are discussing are the normal annual increases and are not specifically tied to tariffs. During the first quarter, from April to June, we did raise prices on some models, but I cannot provide further details as it could affect future sales. Concerning the EV losses, while I cannot provide a quarterly breakdown for the first quarter, I did mention a total estimate of JPY 650 billion, with JPY 200 billion expected as nonrecurring losses. We accounted for JPY 50 billion in write-offs for certain models in the first quarter. Therefore, we anticipate JPY 250 billion of losses for this term, leaving us with JPY 400 billion remaining, which includes JPY 300 billion for R&D and a gross profit of JPY 100 billion. Last year, our gross margin was about JPY 150 billion, but this year we are adjusting our expectations due to reduced volume. As for the 0 Series, due to the impact of IRA expenditures and a cooling market, we remain cautious but aim to be ready for a launch in the next term. I will share more details when the timing is right.

Operator, Operator

We are very sorry, and we know there are many people still wanting to ask questions. However, due to time constraints, the next question will be the last one from Reuters. Daniel, please go ahead.

Daniel Leussink, Analyst

Can you hear me?

Operator, Operator

Yes, I can hear you.

Daniel Leussink, Analyst

I would like to confirm a few details regarding USMCA discussions. Specifically, in the first half of this year, what will the actual tariff rate be? If that information cannot be made public, can you provide examples of specific parts or components? For instance, are there any parts that benefit from a lower tariff rate, like more expensive items? Are there any specific alleviated tariff parts or components you could mention, if there are any?

Eiji Fujimura, CFO

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 focal points of the discussion today. Would that be right? Thank you.

Operator, Operator

Thank you very much, Daniel. That concludes our presentation on the financial results. The slides, materials, and presentation package are available on our website. Thank you for your participation today.