Honda Motor (HMC) Q2 2025 Earnings Name Transcript

Picture supply: The Motley Idiot.

Honda Motor (HMC 0.10%)
Q2 2025 Earnings Name
Nov 06, 2024, 1:05 a.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Members

Ready Remarks:

Operator

Thanks very a lot certainly in your participation in the present day. I might prefer to now make a begin of the monetary outcomes, the press convention for the second quarter of FY 2025. Let me introduce the members in the present day, director, govt vice chairman, and the consultant govt officer, Mr. Shinji Aoyama; director and managing govt officer, CFO, Mr.

Eiji Fujimura. Mr. Aoyama goes to current the define of the outcomes of the second quarter of FY 2025 and the complete yr outlook of the FY 2025, adopted by Mr. Fujimura to current particulars of the monetary outcomes.

Mr. Aoyama, the ground is yours.

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Thanks very a lot in your understanding of our enterprise actions as traditional. Let me current our second quarter outcomes of FY 2025. Beginning with the highlights. Working revenue of the primary half of the FY 2025 was 742.6 billion yen with working revenue margin at 6.2%.

The unit gross sales on a consolidated car companies loved a gentle gross sales of ICE and HEV fashions in North America, in addition to the full-fledged begin of the EV gross sales sells. We had extra gross sales of the 64,000 items yr on yr. Complete items gross sales throughout the group declined by 155,000 items because of the discount of the unit in China. Concerning bike companies, we had a positive unit gross sales globally and had achieved the cumulative gross sales of two quarters reaching 10 million items.

Working money move after R&D adjustment was 1.2851 trillion yen, the identical stage final yr. Concerning the complete yr consolidated forecast of FY 2025, regardless of the impression by strengthened incentives for EV gross sales in North America with the restoration of bike companies, we are going to maintain the identical forecast from the earlier steering. That could be a 1.42 trillion yen as for the present earnings because of the gross sales decline in China, a revenue decline of home associates inflicting much less funding or earnings based mostly on the fairness strategies, we are going to change the earlier forecast all the way down to 950 billion yen, much less by 50 billion. With regard to the shareholders returns, we decided within the board of administrators assembly in the present day of interim dividend of 34 yen, and annual dividend of 68 yen, which shall be maintained from the identical quantity from the earlier forecast.

As for the share buybacks, along with 300 billion yen, which we decided on, as of the Could tenth, 2024, we now have made a decision so as to add as much as 100 billion of the additional acquisitions. Let me clarify the conditions of important market. For the car companies, unit gross sales elevated in Japan and the U.S. Nevertheless, because of the impression by the rising new power automobile market, intensifying worth competitors in China and so forth, the full unit gross sales declined beneath the extent final yr.

For the bike companies, regardless of unit gross sales decline in Thailand because of the financial slowdown, we had a gentle demand in India, incremental unit gross sales in Vietnam. By financial restoration, complete unit gross sales exceeded yr on yr. And that is the monetary results of the primary two quarters of FY 2025. Working revenue was 742.6 billion yen, up by 46 billion yen yr on yr.

Funding revenue and loss based mostly on the fairness technique was a damaging 20.7 billion yen, down by 87.4 billion yen yr on yr. The revenue attributable to the homeowners of the mother and father for the interim interval was 494.6 billion yen, down by 121.6 billion yen. Subsequent, relating to the consolidated monetary outlook for FY 2025, we are going to keep the forecast of working revenue of 1.42 trillion yen. Earlier steering nonetheless stands.

The revenue attributable to the homeowners of the father or mother for the yr shall be down by 50 billion yen. That’s to be 950 billion yen. Foreign exchange assumption shall be set at 143 and $4 for the second half of the yr, and for the complete yr, 148 yen. Concerning the division’s dividends, interim payouts for FY 2025 is 34 yen per share.

Steerage for annual payout will keep the identical at 68 yen and no change from the earlier steering. Within the board of administrators assembly held in the present day, we decided of a share buybacks. We are going to execute it with the higher restrict of 100 billion yen. Subsequent, Mr.

Fujimura will clarify the monetary particulars.

Eiji Fujimura — Chief Monetary Officer

And subsequent, I’ll clarify the second quarter outcomes particulars. First, the FY 2025 second quarter Honda Group six-month unit gross sales. Motor cycle enterprise at 10,382,000 items, due primarily to year-on-year enhance in Asia. Car enterprise, 1,779,000 items primarily on account of drop in Asia, specifically, China.

Energy merchandise enterprise, 1,653,000 items primarily on account of drop in North America and Europe. The consolidated six-month monetary outcomes have already been defined. Subsequent, the modifications in revenue earlier than earnings taxes for the six months in comparison with the identical interval final fiscal yr. Working revenue elevated 46 billion yen.

The change components are as follows. These gross sales impacts noticed a optimistic impression on revenue due primarily to extend in unit gross sales. Enhance in incentives led to a 28 billion yen decline in revenue. Worth and value impacts was optimistic on account of pricing commensurate with product worth leading to a 268.6 billion yen revenue enhance.

Bills. Enhance in personnel and outsourcing prices had a damaging impression of 105.5 billion yen. R&D bills elevated 80 billion yen, negatively impacting revenue. Forex results was damaging impression of 9 billion yen.

Revenue earlier than earnings taxes declined by 137.3 billion yen on account of a decline in unit gross sales in China, lower in fairness technique revenue on account of drop in domestic-related firms’ revenue, and appraisal lack of overseas currency-denominated belongings on account of stronger yen in comparison with final year-end. Subsequent, working revenue by enterprise phase, 325.8 billion yen in bike enterprise, 258 billion yen in a bike enterprise, 162.7 billion yen in monetary companies enterprise. Energy merchandise enterprise and others noticed a lack of 3.9 billion yen. Subsequent, money move.

The FY 2025 six-month free money move of working firms, excluding monetary enterprise operations, was 372.3 billion yen. Web money stability on the finish of the second quarter was 3,492.3 trillion yen. R&D adjusted working money flows was 1,285.1 trillion. Subsequent, the FY 2025 full yr consolidated monetary forecast.

Honda Group bike unit gross sales forecast is 20.2 million items, a rise in comparison with earlier forecasts on account of enhance in primarily Asia. Car is 3.8 million items reflecting drop in Asia. Energy merchandise enterprise, though we now have reviewed the forecast by area, the final forecast of three.66 million items stays unchanged. FY 2025 consolidated monetary forecast has already been defined.

Subsequent, the change components behind forecasted revenue earlier than earnings taxes. Working revenue, up 39 billion yen from final fiscal yr. The change components are the next: Gross sales impacts, though there is a rise in revenue on account of enhance in unit gross sales. Elevated incentives and different components will lead to a 170.5 billion yen revenue decline.

Worth and value impacts, optimistic impact of pricing reflecting elevated product worth will enhance revenue by 550 billion yen. Bills, damaging 68.5 billion yen. R&D bills will enhance by 125 billion yen. Forex impacts may have a 148 billion yen damaging impression.

Revenue earlier than earnings taxes will fall on account of drop in unit gross sales in China and domestic-related firms’ fairness technique revenue. Since trade charge is assumed to see the yen recognize towards the top of final fiscal yr, there’s appraisal lack of overseas currency-denominated belongings leading to 207.3 billion yen drop in revenue. Subsequent, modifications from earlier forecast. Working revenue forecast stays unchanged.

Breakdown is as follows: Gross sales impacts on account of enhance in incentives amongst others, damaging 99.5 billion yen. Worth and value impacts, optimistic 48 billion yen on account of pricing commensurate to the product worth enhance. Bills, optimistic on account of a 2.5 billion yen reduce. R&D bills, damaging on account of 4 billion yen enhance.

Forex results, a rise of 53 billion yen. Revenue earlier than earnings taxes, down 45 billion yen on account of decline in unit gross sales in China, leading to a damaging fairness technique revenue. Lastly, the forecast for capital expenditures, depreciation, and R&D expenditures for FY 2025 are as proven. This concludes my clarification.

Thanks.

Questions & Solutions:

Operator

Thanks in your consideration. So, now, we wish to take questions from the ground. As we now have defined beforehand, we’re going to take questions on the Zoom. Due to the curiosity of time, please restrict your questions to 2 questions.

[Operator instructions] First query from Yomiuri newspaper, Mr. Nakamura. Please ask questions.

Unknown speaker — Yomiuri Newspaper — Analyst

Are you able to hear me?

Sure.

Thanks. So, I’ve two questions. First one, I’ve a query about — in case you see in North America, the Prologue and the FX have already began on sale, after which the incentives are dragging your efficiency. As in comparison with the start of the yr, what’s the incremental incentives as of now? And on this state of affairs, do you continue to plan to strengthen the EV gross sales over there? And the query two, so it’s about your outlook.

You are altering the foreign exchange assumptions to the yen depreciation route. Please clarify to me the backdrop. After all, the presidential election, different conditions may — and different political state of affairs may change the foreign exchange state of affairs. How do you handle that?

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Thanks very a lot, Mr. Nakamura, in your query. The North America EV web gross sales not too long ago, in these two quarters, first half efficiency of the web gross sales, we had about 20,000 unit gross sales much less, fewer within the U.S., in North America. And within the second half, 60,000 extra items are deliberate, and will probably be about slightly bit lower than 80,000 unit gross sales to be included for the complete yr.

And by way of the incentives, I can not provide the detailed numbers of these incentives. Nevertheless, as in comparison with the unique assumptions, we now have about $7,000 per unit extra spend on the incentives. And for this one — for the second half this yr, we’re going to funds the identical stage of the incentives principally. And the query of strengthening of the gross sales in these conditions, from the ’26 mannequin yr, we’re going to have the Honda EV designed and manufactured by Honda.

These shall be on sale in North America. And with the intention to have good connections for this mannequin at the moment offered, we’re going to maintain the momentum of the gross sales of the present EV fashions. That’s the fundamental thought. After all, we now have to have a look at the essential market state of affairs, incentives state of affairs, plus how we handle the laws.

These components need to be thought-about with the intention to have versatile actions. After which foreign exchange, Fujimura-san goes to handle this query.

Eiji Fujimura — Chief Monetary Officer

Thanks in your query, Nakamura-san. Within the earlier session, in the summertime, we stated 140 yen for the complete yr. That was the idea we had, after which we did not change from the start of the yr. We stated that it will be regular.

However at the moment, there have been like 20 yen ups and downs, fluctuations of the foreign exchange ranges on the time. And the idea that — 140 yen assumption, really — second half, 135 yen. That was the idea we had within the first half interval. However now, 145 yen for the third quarter and 140 yen for the fourth quarter.

Will probably be about 142.5 yen or so for the second half. So, yen depreciation route. After which, as in comparison with the time final time, we had a variety of these charges down in U.S. and Japan as effectively.

These public rates of interest are coming down. And in addition, really these discount of the charges is slightly bit squeezed over time, and we do not know what might occur for the presidential election. It’s now being counted, and we now have not factored within the presidential election matter in our forecast. Nevertheless, these are the assumptions we now have for this time period.

Thanks.

Unknown speaker — Yomiuri Newspaper — Analyst

Thanks very a lot.

Operator

Thanks very a lot, Mr. Nakamura. Subsequent query, Nikkei, Mr. Okinaga, please.

Unknown speaker — Yomiuri Newspaper — Analyst

That is Okinaga from Nikkei. Are you able to hear me?

Sure, we will hear you. Thanks.

Thanks. I’ve two questions. First, about car working earnings, the truth that it is declining. Properly, the North American enterprise, hybrid continues to be — though it is doing effectively, you’ve gotten stock piling up.

So, together with EV, what do you see with reference to car consumption together with inflation? So, what’s the outlook of demand consumption in North America? That is the primary query. And the second query is in regards to the downward revision. So, you’ve gotten the damaging for the fairness technique revenue. So, are you able to discuss in regards to the background? I feel the key issue is China, however gasoline, automobiles, and in addition EVs, the present gross sales, and in addition the forecasted gross sales.

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Sure, Mr. Okinaga. Thanks very a lot for the query. Thanks.

Properly, about North America, even with the — the stock is growing, you say. Properly, it isn’t essentially the case. I feel that wanting on the present state of affairs and in addition as a result of some varied measures have been taken for the market, it might seem as if the stock is barely growing. However this can be a one-time phenomenon.

With regard to HEV, I feel we’re doing very effectively by way of gross sales. Properly, the general market — effectively, the U.S. market is about 60 million items each year. That is the full market that we see.

And so, we expect that it will stay unchanged. However once more — effectively, relying on what occurs with the presidential election, we now have to see what shall be occurring. So, we now have to regulate the market developments. However at the moment, hybrid is doing effectively, we expect.

And I hope you may perceive that to be the case. And we additionally, within the second half, shall be primarily selling our gross sales of hybrid. Now, in regards to the revenue of fairness technique of the damaging quantity that you simply see right here. As I defined earlier, along with the decline in gross sales in China and associated firms in Japan, there was a decline.

So, these two mixed, that we’re seeing this a damaging revenue of fairness technique. If Fujimura has one thing so as to add, I will ask him.

Eiji Fujimura — Chief Monetary Officer

Properly, in regards to the downward revision, effectively, it has been — carried out with revise, the working revenue to 950 billion. Within the second quarter — in case you take a look at the second quarter, effectively, it was 11.42 trillion. And we expect that we will keep this. However in case you take a look at the others beneath that, in regards to the revenue fairness technique, as Aoyama has already defined, there’s the impression of China.

Properly, from the start of the fiscal yr, we now have seen a decline of some 300,000 items or extra. And so, that’s one issue. Plus, one-time, this issue is the domestic-related firms. And once more, that is derived from partially China.

So, there is a damaging coming from them. And so, there are some one-time components concerned right here. And because of this, we now have a 25 billion yen damaging revenue of fairness technique. And aside from that, due to the forex fluctuation that we’re seeing proper now, effectively, for Honda Motor and in addition our subsidiaries abroad, they’ve, for instance, the money owed and bonds and in addition the overseas forex deposits.

They usually appraise — we now have to do the appraisal of those overseas currency-denominated belongings. And so, there have been the legal guidelines pertaining to nonsales components and due to this fact, the working revenue will stay the identical. However we’re seeing 50 billion — these two collectively, ensuing 50 billion or so. And in addition, there’s a distinction in tax programs in numerous international locations.

However I feel that these two mixed has led to a drop of fifty billion in web revenue. Is that OK?

Operator

Thanks very a lot, Mr. Okinaga. Subsequent query from NHK, Mr. Nishizono, please.

Unknown speaker — Yomiuri Newspaper — Analyst

Whats up?

We are able to hear you.

Thanks. I thanks for clarification. I’ve a query to Mr. Aoyama.

So, on this monetary outcomes, how do you conclude the outcomes? What’s your taking? After which Chinese language market impression and your response to that, might you clarify on that, please?

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

I thanks very a lot, Mr. Nishizono. Properly, it’s tough to say in a single phrase the right way to take this example now. However as in comparison with the numbers that we had anticipated, it’s a little bit wanting what we have been anticipating, to be sincere.

Nevertheless, foreign exchange, not {dollars} — not towards the greenback, however the foreign exchange towards the rising currencies or Canada, Mexico, Argentina, Turkey, the currencies of these international locations are sort of concerned right here. That form of had a damaging 30 billion yen or so due to the foreign exchange fluctuation, after which it wasn’t anticipated to start with. It brought on some fluctuation. And we’d say this transient matter for the complete yr foundation, however within the rapid three months for the second quarter, we had a high quality price — guarantee price, which was a fairly excessive guarantee, 110 billion yen damaging impression by the guarantee bills.

And that is how I take it. After which really, it was away from our expectations. And battery EVs incentives elevated as I mentioned earlier. And naturally, we now have factored in a few of them to the damaging aspect.

Nevertheless, we had a sure chance, and we had anticipated to a sure extent for these issues, and it wasn’t actually a shock to me actually. After which, the unit gross sales discount in China as an example, it was really better than we have been anticipating. The discount charge was fairly a quick towards our expectation. After which additionally the enterprise construction across the fastened price.

Yearly, we now have been working to scale back them at a excessive pace as effectively. So, all of these — due to these actions that down form of development for the efficiency has form of alleviated. After which I ought to have — in North America, we now have incentives. And actually, really, we do not spend as a lot as we have been anticipating for the incentives in North America.

Plus, we had a very good tailwind by the bike enterprise restoration. And that’s good, too. And Chinese language market, as I stated earlier, NEVs, BEV, and PHEV, new power automobiles, these varieties of the automobiles are growing very quick. And in the meanwhile, we shouldn’t have a aggressive product on this finish — on this space.

Due to this fact, we needed to — we attempt to scale back the fastened price due to that. Thanks.

Unknown speaker — Yomiuri Newspaper — Analyst

Thanks very a lot.

Operator

Thanks very a lot, Mr. Nishizono. Subsequent, Toyo Keizai, Mr. Yokoyama, please.

Unknown speaker — Yomiuri Newspaper — Analyst

That is Yokoyama from Toyo Keizai Weekly journal. Are you able to hear me? I’ve two questions. Thanks. First is the stability between the primary half and second half.

Properly, in response to your revision and the second half, I feel — effectively, Mr. Fujimura has talked in regards to the bills enhance, the lower within the second half. And with this revision, you’ve gotten, I feel, made some modifications. And Mr.

Aoyama talked in regards to the recall expense. However your pondering towards the stability between the second — first half and second half. And in addition, the gross sales price. So, I wish to hear about this stability.

That is the very first thing. And second query about China. Properly, to start with of the fiscal yr, each of you, you have been speaking a few restructuring and optimizing manufacturing and in addition personnel. However what’s the progress you are seeing to date? And at the moment, I imagine that the tempo of decline in gross sales is sort of fast.

And due to this fact, do you’ve gotten any plans to rationalize? And the way do you consider the manufacturing stability between Guangzhou and Dongfeng?

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Sure, and thanks very a lot. Properly, to start with in regards to the stability between the primary half and the second half of the fiscal yr and the distinction between the 2. Properly, as you identified, sure, by way of the associated fee, it does are usually that there shall be — will probably be skewed extra towards the second half. And this fiscal yr 2025, once more, we expect that the identical is going on.

And particularly, the R&D half, it does have a tendency to extend towards the second half of the yr. This occurs yearly. And this yr, once more, we’re seeing this occurring. Now, earlier, within the different questions, I partially answered what you have requested about by way of guarantee.

Properly, within the second quarter, we expect that this can be a one-time expense. However, sure, we are going to attempt to make this a extra optimistic, the second half coping with the guarantee difficulty. And in regards to the forex setting first half and second half, there’s a 100 billion yen damaging distinction between the primary and second half. And by way of gross sales impression, it is a optimistic.

That’s our understanding. So, gross sales and in addition promoting worth and — effectively seeing the worth, which is commensurate to the worth of the product, will probably be a optimistic. So, within the second half, this shall be an add-on. The damaging would be the forex, 100 billion yen or so.

And different bills aren’t included. That shall be a damaging half. I hope you perceive it to be that means. Now about China — effectively, with reference to China.

Properly, I’ve talked about this in numerous events, however at this time limit — effectively, as you realize, in China — effectively, we now have two joint ventures, and each may have new manufacturing capability, devoted EV manufacturing facility with a capability of 120,000 items each year. One has already began. The others is to be began. And so, this shall be an add-on to our typical capability.

However on the similar time, we had some 1.49 million items manufacturing capability on the two joint ventures mixed. And within the final yr — rather less than a yr, along with our three way partnership companions, we now have been discussing what must be carried out, and 1.49 million — and this shall be decreased to 960,000. Properly, sure, I am together with the traces which have but to be suspended. So, throughout this FY 2025, will probably be dropped to — reduce to 960,000.

So, together with the battery EV devoted, we’re assuming that there shall be 1.2 million capability. And naturally, 1.2 million items is greater than the demand, and so there must be some cuts made sooner or later. And internally, and with our companions, we’re discussing what must be carried out. Properly, about personnel cuts, effectively, sure, we’re making some progress there.

I will not give any particular numbers. However each for Guangzhou, in addition to Dongfeng, for each, we now have some a number of hundreds of personnel reduce, primarily, voluntary resignation. And so, that’s the present standing. Thanks.

Unknown speaker — Yomiuri Newspaper — Analyst

Thanks.

Operator

Thanks very a lot, Mr. Yokoyama. So, subsequent query, from Kyodo Tsushin, Mr. Okuda, please.

Unknown speaker — Yomiuri Newspaper — Analyst

Okuda talking from Kyodo. Are you able to hear me?

Sure.

So, the poll is being counted now within the presidential election, and there was a point out to the foreign exchange assumptions on. Mr. Trump would increase the tariff, and EV promotion will be reviewed and so forth, presumably. And going ahead, in fact, who will win would matter.

However what do you assume is the potential impression to the companies and the way do you handle such a state of affairs? Within the case, as an example, funding plans on EVs sooner or later, would that be impacted by the outcomes of the election? And the opposite query, Nissan and Mitsubishi and your self have collaboration packages. And what’s the state of affairs of the alliances? Mr. Kato from Mitsubishi stated that they’ll form of put collectively the concepts or plans by March subsequent yr. After which what’s the state of affairs? And in addition Mitsubishi, would they supply you the PHEVs to you? What’s the choices with them in the meanwhile? May you share with us as a lot as you possibly can, please?

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Thanks very a lot, Mr. Okuda. So, counting, we’re casting a really eager eye on them, like your self. After which who’s going to win, whichever the case — regardless of the case, we aren’t essentially taking the state of affairs in a short- to mid-term perspective.

We have now a longshot perspective as effectively, particularly with regard to the investments. Whoever the president could possibly be, we shouldn’t be an excessive amount of swayed round by them. We have now our cars, small automobile, passenger automobile areas of the companies. For that, the EV electrification BEV will enhance in the long term.

And in Ohio, within the state of the Ohio, we had the LGES three way partnership, LHV batteries. And in Canada, we now have a complete worth chain packages in Canada. So, these packages shall be pushed ahead principally. Nevertheless, away from the presidential election, we now have to have a look at the EVs market.

After all, we now have a — we might have our, as an example, investments on these equipments and so forth, utilized in EVs. And funding will be checked out. After which in fact, we may have versatile funding plans and executions as per the conditions of the market. Due to this fact, the impression on the funding plans, the presidential election may have no impression on us.

Nevertheless, by way of the affect by giant, as an example, manufacturing in Mexico, fairly a number of moved or transported there from Mexico to the US, which shall be subjected to the tariff for the sure time frame, which would be the space that’s mandatory requiring some actions as a result of we can not relocate the manufacturing websites swiftly. So, we now have to see what occurs, and what we will do. And the collaboration with the Nissan and Mitsubishi. So, we haven’t any specifics like — by when and what.

Nevertheless, PHEV, so on, system provide or the gear provide, really, we now have nothing outlined as but as we merely maintain our discussions in the meanwhile. Sorry, I can not provide the specifics as of now. Thanks very a lot.

Operator

Thanks very a lot, Mr. Okuda. Subsequent query, please. Bloomberg, Mr.

Inajima, please.

Unknown speaker — Yomiuri Newspaper — Analyst

Bloomberg, Inajima talking. Are you able to hear me?

Sure.

Thanks. I’ve two questions. First, effectively, this has already been requested, however — so, in regards to the working revenue, the second quarter. What are the key components of damaging impression? So, you talked about 96.9 billion bills.

Are you able to give the breakdown of the bills, please?

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Mr. Inajima, thanks very a lot. Concerning the second quarter solely, the three months, proper, and year-on-year comparability? Properly, Fujimura has talked in regards to the full yr forecast, however let’s have him discuss in regards to the probability of the forecast included.

Eiji Fujimura — Chief Monetary Officer

Thanks very a lot, Mr. Inajima. Sure, so, year-on-year, your query is in regards to the July, September, and also you have been asking about bills, R&D bills or simply bills?

Unknown speaker — Yomiuri Newspaper — Analyst

Properly, that included. Properly, the large gadgets. Sure, the large gadgets in comparison with the earlier yr, are you able to listing the large gadgets?

Eiji Fujimura — Chief Monetary Officer

Properly, in regards to the bills, that is included in an annual however — sure, so, PR and in addition, personnel price, effectively, these are all included within the three months. And so, I feel we have been at cruising pace, so to say, proper now. And earlier, there was the query in regards to the impression on the annual. And I needed to speak extra about that.

Properly, these three months — taking a look at these three months that is simply ended, effectively, as Aoyama stated, the guarantee is about 80 billion. And yearly — effectively, on the time of this announcement, I can not give any specifics as to which provider, however nonetheless — and we now have not mirrored this. And since we didn’t signal the memorandum of understanding, but it surely’s alleged to has 30 billion. However I feel that we will set this, and so this isn’t included within the forecast.

And in addition, yearly, there’s a damaging listed right here. However I feel, as I stated on the outset due to the yen-dollar forex impact since we reviewed this considerably, it will disappear. And due to this fact, this 250 billion-plus outcome, we expect that 360 billion or so must be the precise as a substitute of 250 billion. Then [inaudible] shall be 6.6%.

And the damaging battery EV — effectively, sure. And we’re going to promote it in China and Asia. The drop in car gross sales with ICE and bikes, we wish to offset that. So, we expect that we will do that all year long.

And so, based mostly on that, we now have the unchanged 1.4 trillion. So, the three months, as I stated, number-wise, we — I feel our precise can be some 100 billion added on to what you see right here is because of varied components that it is decrease. Thanks.

Operator

Subsequent query, Daniel-san from Reuters, please.

Unknown speaker — Yomiuri Newspaper — Analyst

Whats up. Daniel from Reuters. Are you able to hear me?

Sure.

My query can also be in regards to the North American market, and a few of the questions have already raised and I might prefer to proceed from there. Mr. Trump, within the election in the previous few months, he talked about about automobiles imported from Mexico and plans to boost the tariff there. So, he talked about that a variety of instances.

After which if he wins the election and if realizes his plan, what’s its impression in your companies? And the way do you handle on that with the intention to forestall the damaging impression by that? May you add some extra feedback on that time, please?

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Thanks very a lot, Daniel, in your query. And once more, the tariff on the Mexico — import from Mexico, so the car manufacturing in Mexico, we now have about 200,000 items over there in manufacturing, and 80% of these are exported to the U.S., about 160,000 items have been offered. That is the exported to the U.S. and the impression could possibly be — within the enterprise, over 160,000, which shall be subjected to the tariff.

And that could be a massive impression I feel. After which it’s not simply Honda, GM, Ford, and different Japanese firms, Japanese OEMs. All the firms are subjected to the identical state of affairs. And in brief, I would not assume that the tariff shall be imposed quickly.

After a sure discussions, will probably be carried out. And can these firms have the ability to cease the manufacturing in Mexico straight away? No, I do not assume so. So, I would not say the tariff is not going to be realigned. Nevertheless, there shall be lobbying actions and so forth at that time.

And naturally, if the tariff is a everlasting one — I suppose it could possibly be not everlasting, possibly we might go for the manufacturing elsewhere, which isn’t subjected to the U.S. tariff that we might do it. Thanks very a lot.

Operator

Thanks very a lot, Daniel-san. And subsequent query, Nikkan Jidosha, Mr. Mizutori, please.

Unknown speaker — Yomiuri Newspaper — Analyst

Are you able to hear me?

Sure.

Thanks. Properly, I feel it was talked about within the first query in regards to the EV incentives in america. Properly, Mr. Aoyama, you stated that incentives have been $7,000 larger than anticipated I feel you stated.

However the present state of affairs, in case you take a look at the EV solely, effectively the extra you promote, the extra the deficit I feel. And that with the ’26-year mannequin you possibly can generate revenue even with EVs. Is that the right understanding as a result of it is Honda automobile? And in addition, in U.S. the CO2 credit score, like in California, the income and its fee, what’s going to occur if there is a rise within the variety of EVs?

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Mr. Mizutori, thanks very a lot for the query. Properly, sure, the inducement was larger than anticipated. That could be a reality.

So, this fiscal yr ’25, towards the unique assumption, we expect that will probably be 100 billion yen or so incentive enhance. So, that’s what we’re assuming proper now. That’s the present state of affairs vis-a-vis FY ’25. Now, as for subsequent yr and past, effectively, as I stated earlier, principally there would be the environmental laws, so we now have to answer these laws and in addition profitability.

The extra you utilize incentives, it will irritate the profitability. So, we now have to consider how to answer the regulation versus incentives, and we now have to consider these two collectively. However from FY ’26, we predict unit gross sales to extend. And there shall be a gross sales momentum to a sure extent.

So, we now have to consider the unit and in addition the incentives and the way to answer the regulation. So, general, we now have to stability all these three. However with the FY — effectively, the mannequin yr ’26, a brand new mannequin, whether or not we will generate revenue, we’ll work laborious to generate revenue with our new mannequin. Properly, as for the specifics, I can not spell them out proper now, however nonetheless, from mannequin yr ’26, we wish to work laborious on that.

And as for the CO2 credit score, effectively, within the U.S., it’s kind of sophisticated as a result of the general GHG, greenhouse fuel emission, that is on one hand. And in the meantime, there’s some states like California that are ZEV states, Zero-Emission Automobile states. So, there are these two. Now, for the mannequin yr 2025, California, in response to the ZEV Act, ACC 1 is the stage.

And from the mannequin yr ’26, will probably be ACC 2. So, transition to the following stage which is extra stringent. Due to this fact — effectively, for the GHG, Honda meets complies with the requirement ACC 1 regulation, which can proceed till mannequin yr ’25. We have now — we’re already promoting the ’25 mannequin yr.

However up till ACC 1, we’re complying proper now. However ACC 2, effectively, we now have to promote lots of battery EVs to fulfill this ACC 2. And so, we now have to promote, and that can begin from mannequin yr 2026. And all car OEMs are dealing with the identical state of affairs.

So, for this, in fact, we are going to enhance our battery EV gross sales. However as of now, if we do it as is, it will enhance our deficit. So, what are we going to do? We might purchase credit. So, protecting this chance in thoughts, as I stated, if we do this.

After which, the unit gross sales and incentive and in addition regulation compliance plus credit score. The promoting — shopping for of credit additionally need to be considered. So, there shall be lots of components that we now have to work on. Properly, as for the main points, I wish to speak about this at a separate event once I speak about how we’ll reply to those completely different laws.

Thanks.

Unknown speaker — Yomiuri Newspaper — Analyst

Thanks for the detailed reply.

Operator

Thanks very a lot, Mr. Mizutori. Due to the time constraints, the following query goes to be the final one. Nakajima, Minami Jimusho.

Mr. Nakajima, please.

Unknown speaker — Yomiuri Newspaper — Analyst

Nakajima talking. So, working revenue of your organization is supported by the bike companies, however the Japanese bike enterprise shouldn’t be doing effectively, and there are, a while, very quickly, 50 cc. Small automobile — small bikes shall be gone. Can we count on the revenue in a short time within the close to future?

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Thanks for the query. So, let’s speak about these 50 cc bikes. And we could also be slightly bit answerable for the society with regard to the 50 ccs. And truly, this 50cc class, so-called density class, really for this class, will probably be revived away from the 50 cc constraints in particular [inaudible] of 25 cc or much less with a 4 kilowatt or much less form of energy.

And with that sort of the bike, the drivers with the — that class license would proceed to drive with the complete automotive license. Common 1 would permit them to drive the bike beneath 125 cc that’s going to be the identical class going ahead. After which as for the enterprise of that, whereas we now have a so-called Dream 10, the midsize, giant dimension, or 155 cc classes, we now have these areas — companies, which may be very regular and good. Due to the COVID-19, we had a little bit of a rise due to that for individuals who would take a tour driving the bikes.

Such sort of growth had a sort of settled now, however we will do a very good enterprise. And we wish to take a revenue from the enterprise of bikes like that on this space. And in addition, in superior or developed international locations together with Japan, the profitability of the bikes are excessive. And I wish to see the continual — continuity of the earnings.

Unknown speaker — Yomiuri Newspaper — Analyst

Thanks.

Operator

Thanks very a lot, Mr. Nakajima. And with this, we wish to conclude our briefing session. And as for the paperwork, they’re posted on our web site.

[Operator signoff]

Period: 0 minutes

Name members:

Shinji Aoyama — Director, Government Vice President, and Consultant Government Officer

Eiji Fujimura — Chief Monetary Officer

Unknown speaker — Yomiuri Newspaper — Analyst

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