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 third quarter of fiscal year to March '26.

Allow me to introduce the attendees today. Mr.

Noriya Kaihara, Director, Executive Vice President and Representative Executive Officer. Good to see you, everyone.

We have Mr. Eiji Fujimura, Director, Managing Executive Officer.

Thank you. Mr.

Masao Kawaguchi, Operating Executive, Head of Accounting and Finance Unit. This is Kawaguchi, good to see you everyone.

Mr. Kaihara will first present the financial results of third quarter ended December of '25 and forecast of consolidated results for the fiscal year ending in March '26.

Then Mr. Fujimura will present the details.

Over to you, Mr. Kaihara.

Thank you.

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 third quarter of fiscal year to March 2026.

I would like to start with the highlights of the financial results. Our operating profit for the third quarter of the year to March '26 was ¥591.5 billion.

Motorcycle operations saw solid unit sale global unit sales led by India and Brazil, and in and in addition, the restriction on ICE vehicles in Vietnam, which was a concern, had only limited impact to sales compared to our assumption. For results up to third quarter, we've attained a record-high unit sales, operating profit, and operating margin.

Automobile operations saw declines in profit due to non-recurring expenses related to EV in addition to impact from tariffs. Operating cash flow after R&D adjustment, which indicates the resource available for future investments, came to ¥1 trillion 855.8 billion, generating cash on a par with same period last year.

The forecast for the consolidated results for the term ending in March '26 is operating profit of ¥550 billion and profit for the year of ¥300 billion, unchanged from the previous forecast. Impact from tariffs were initially forecast at ¥450 billion at the beginning of the term, but our prospects are now that it would be reduced to ¥310 billion.

Toward the end of the term, though we expect growth in profit due to yen depreciation, the competitiveness competitive environment for automobiles in Asia will intensify, requiring incentives. Taking into consideration uncertain business environment, we are maintaining the previous forecast.

Going by business segments, for motorcycle operations, with the tailwind of solid sales in India and Brazil, we continue to aim for 21.3 million units, the highest record sales. For automobiles, we will remain the maintained the forecast of 3.34 million units, unchanged from last forecast.

The shortage of semiconductor supply experienced in third quarter now has good prospects for preventing recurrence. On the other hand, we are beginning to see signs to signs of, sorry, supply risk for other materials such as rare earth metals and memories, and we will closely monitor the situation and take actions as needed.

To give you the consolidated results for the third quarter of the year to March '26, operating profit was ¥591.5 billion, lower by ¥548.4 billion compared to the same period last year. Investment earnings due to equity method was 200 ¥24.0 billion, sorry, ¥24.0 billion, higher by ¥51.3 billion.

The quarter profit attributable to the owner of the parent was ¥465.4 billion, lower by ¥339.8 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, we maintain maintain our forecast of operating profit of ¥550 billion, and then the profit of the year attributable to the owner of the parent of ¥300 billion, which is unchanged. The exchange rate against the US dollar is assumed at 140 ¥140 for the full-year period.

Next, for shareholder returns, forecast for the full-year dividend for the fiscal year ending in March '26 is ¥70 per share, unchanged from the previously published forecast. In addition, the Board of Directors meeting held today has resolved on cancellation of treasury stocks.

We will execute cancellation of 747 million treasury stocks. Let me explain about the details of the financial performance, and Mr.

Fujimura is going to explain. Let me start.

Regarding cumulative group unit sales for three months up to the third quarter year on year, for motorcycles, 16.44 million units sold due to increase in India, Pakistan, and Brazil. For automobiles, 2.561 million units due to decline in Asia, mainly in China.

For power products business, 2.507 million units sold due to some incremental sales in Europe and decline mainly in Asia. We have explained the consolidated performance up to that third quarter already.

Next, I will explain factors for changes of operating profit year on year. Operating profit was ¥591.5 billion, down by ¥548.4 billion year on year.

Factors behind for changes: sales made a positive impact by ¥38.1 billion because of the increase in motorcycle units sales as well as in profit in financial businesses, though automobile unit sales declined due to the shortage of semiconductor supplies. Price and cost impact were positive by ¥225.9 billion due to effective price revisions.

Expenses impact was a negative on profit by ¥108.6 billion. R&D impact, a negative by ¥35.7 billion.

Foreign currency impact, a negative by ¥111 billion. One-time EV-related expenses impact, negative by ¥267.1 billion.

Tariff impact squeezed the profit by ¥289.8 billion. Excluding one-time EV-related expenses and the tariff impact, the operating profit would be ¥1 trillion and 145 ¥148.5 billion.

Regarding operating profit by business segments: motorcycle businesses, ¥446.5 billion yen operating profit; automobile businesses, ¥166.4 billion losses; financial service businesses, ¥218 billion profit; and power products and other businesses, ¥6.5 billion losses. Operating profit of motorcycle business increased by ¥44.8 billion year on year due to mark ¥546.5 billion.

Factors for changes: sales impact was a positive and ¥61.2 billion due to incremental sales units mainly in Asia and South America. Price cost impacts were positive by ¥48.6 billion due to effective price revisions, and so on.

Expenses impact, negative by ¥24.1 billion. R&D impact was positive by ¥4.6 billion.

Foreign currency impact, negative by ¥37.7 billion, and tariff impact, negative by ¥7.7 billion. Operating profit of automobile business went down by ¥569 billion year on year, resulting in the operating losses of ¥166.4 billion.

Breakdown of factors for changes: sales had a negative impact by ¥82.8 billion due to unit sales decline mainly due to semiconductor supply shortage, losses associated with the reorganizing of the affiliate company of the group, and so on. Price and cost impact had a positive impact by ¥177.3 billion due to effective price revisions.

Expenses had a negative impact by ¥11.7 billion. R&D impact, negative by ¥42.1 billion.

Foreign currency impact, negative by ¥62.9 billion. One-time EV-related expenses had a negative impact by ¥267.1 billion, and tariff impact was a negative by ¥279.5 billion.

Cash flow situations now: free cash flows excluding financial service businesses was ¥917.4 billion; net cash as of the end of third quarter was ¥3 trillion and ¥170.7 billion; and operating cash flows after R&D adjustment was ¥1 trillion and ¥855.8 billion. Next, let me explain consolidated forecast for FY ending March 2026.

Regarding group unit sales, we will keep the previous forecast of 21.3 million units of motorcycles, 3.34 million units for automobiles, and 3.67 million units for power products volume. We have already explained the consolidated financial forecast for FYE March 2026.

As for factors for changes in operating profit year on year for this forecast: operating profit would be down by ¥663.4 billion year on year. With factors for changes: sales would have a negative impact by ¥162 billion due to semiconductor supply shortage, and so on.

Price cost impact will be a positive by ¥330 billion due to effective price revisions, and so on. Expenses impact, ¥106.5 billion negative; R&D impact, ¥166 billion negative; foreign currency impact for ¥149 billion negative; and tariff impact, negative by ¥310 billion.

Regarding factors for changes in the forecast of the operating profits, we will keep the previous forecast of the operating profit for which sales impact will be negative by ¥10 billion; expenses impact, negative by ¥15 billion; R&D expenses impact, negative by ¥40 billion; and foreign currency will make a positive impact by ¥65 billion due to the change of the exchange rate assumption to ¥148 for a dollar. Expected capital expenditures, depreciation, amortization, and R&D spending of FYE March 2026 will be as follows, reflecting increase in CapEx for acquisition of factory buildings and so on of the battery production JV with LG Energy Solution.

Lastly, I would like to speak about the future direction of our operations in view of the current business environment. For automobiles operations, with the expertise we have accumulated on internal combustion engines and hybrid technologies, our results of third quarter confirmed that we are maintaining our business characteristic that continually give us profit if we exclude the non-recurring impact from EV and impact from tariffs.

On the other hand, we are faced with issues, including stagnated growth of EV market, less stringent environmental regulations in different country markets, retreat of multilateral free trade system due to protectionism policies, heightened supply chain risk due to expansion of global procurement, further exacerbated by intensifying global competition from emerging OEMs. Thereby, we need to conduct a fundamental review of our strategies to rebuild our competitive strength.

In this situation, we believe that our current tasks are to build lean business characteristics to enable flexible actions against changing business environment, and to realize product features and cost-competitiveness that overwhelm those of emerging OEMs. To address those issues, firstly, we are working to completely settle within this fiscal year the losses related to EVs currently sold in North America.

In addition, we are striving to make prompt management decision in line with EV markets, such as disciplined expenditure control, EV product range, and review of CapEx plans aligned with the business environment. At the same time, to further enhance earning capability of hybrid models, we are preparing to launch next-generation hybrid system as well as equipping the hybrid models with next-generation ADAS.

We will communicate our review of fundamental medium- to long-term strategies at an appropriate timing sometime during the coming fiscal year. Honda has multiple business domains, including motorcycle and finance business operations, forming a well-balanced business portfolio, each of which help us to generate cash flow and to maintain a sound balance sheet.

Because of this, we have adopted DOE indicator, which allows us to ensure stable returns and dividends aligned with the company's growth, even in an uncertain and extremely volatile business environment. Through these initiative, we'll continue to strive to enhance corporate values so that we will remain a company expected to exist in the eyes of our stakeholders.

This completes my presentation. I thank you very much for your attention.

Thank you very much for your attention. Now I'd like to take questions from the audience.

We have already introduced you with the Zoom for the questions. Please limit your questions to two questions due to the interest of time.

If you are to ask questions, please turn on your microphone and the camera from your end. Thank you for your cooperation.

Please push the raise your hand button if you have questions, please. Then the first question,

this is from Mr. Yokoyama of Toyo Keizai

paper. This is Yokoyama from Toyo Keizai.

Can you hear me? Yes.

Thank you. I have two questions.

First question is, just would like to check your outlook for the full year. You are progressing beyond your budget already.

It is true that the fourth quarter you tend to get a lot of expenses, but you have been saying that the expenses would be ¥2650 for the full year. There was one gap, I just wanted to check that.

Then for the automobile profitability, I would just like to check on the tariffs impact. If we exclude that, that would be ROS of 3.6%.

If you include hybrid, I think earlier you mentioned 8% of profitability. If you say 3.6%, I thought it was kind of sounds lower.

I would like to ask for your evaluation of the profitability of automobiles, and then would like to see what your real values are. Thank you.

Thank you very much for your question, Mr. Yokoyama.

For the specific numbers for that, this will be covered later. This time for the fourth quarter, we slided the results from third quarter.

Let me try to answer how we expect the financial results would land toward the end of the year. Compare with our third-quarter results, the tariff impact will be work on the positive side.

Then the motorcycle and automobile unit sales, because we had favorable results in Vietnam motorcycle—well, I should not say favorable, but the damage was less than we had assumed in Vietnam. I think motorcycle, it will go positive compared to our budget.

That is our assumption as well. However, for North America automobile market, if we look at that and then going forward, I believe there would be further impact from BEV.

The sales will become difficult, we will have to increase a bit of the incentive. That's one thing we're considering.

As a downside, another downside is that so far we had the BEV with GM. Mr.

Fujimura will explain this later, but we need to do this negotiation with GM considering the compensation. Depending on how that comes out, we might have a little bit more expenses to be covered.

With that, that is why we're giving those numbers as the forecast. Then as the BEV environment how it develops, maybe the GHG's credit and then in the finance, we might have our losses from residual value on the lease.

In basis of those, we believe we are just assuming for fourth quarter the outlook is still maintained. I would like to ask Mr.

Fujimura to give a little bit more of details then. Thank you very much for questions, Mr.

Yokoyama. As you mentioned, the -¥650 billion, so far we had a negative battery EV of -¥650, battery EV, that's what we have been saying.

When we talked about the ¥650 billion, the GM-related issues that we talked about, and then of the models that we are developing, we were doing a review of those models so as to write off certain assets. With that, we recognized ¥250 billion, and then ¥400 billion of R&D.

We put total ¥650 billion in a budget. This time in the results, this is not for the GM portion, but for models in China, because according to the discussions with the partner, we have reviewed our product lineup.

Some of the models or some of the development assets, those have been written off. Up until nine month of this year, we have a ¥270 billion, and then so that's ¥270 billion for the nine month.

If we turned it into budgeted amount, this would come to ¥290 billion plus ¥400 billion for R&D. It is getting close to ¥700 billion range.

Those are the numbers that we have put into the budget. This ¥270 has already been incurred, and then the ¥290 billion for the full year.

The ¥20 billion remaining, the difference, this is up to the negotiation with GM. The negotiation with them is still has not been established.

We have not been offered any number concerning that. We are assuming we don't know if the 20 ¥20 billion is sufficient or not.

Because of that, looking at the sales situation, and then maybe if you think about the exchange rate, that might be upside, but this could be a downside factor. That is why we are keeping the outlook forecast unchanged.

This ¥700 BEV portion next year, well, if this ¥200 billion is no longer there next year, then it will only be ¥400 billion R&D. That would be the starting line for next fiscal year.

At the end, as Mr. Kaihara explained to you, currently, considering the current EV market, I think we need to rebuild our framework of our strategy.

Are we going to really take this ¥400 billion as a starting point, or are we going to review this? We don't know how much of that the disciplined cost control is going to be.

We are still in the process of formulating those plans, we hope to be able to issue prospect of that sometime in the future. When it comes to ICE, it was ¥900 billion or close to ¥1 trillion earnings is something we have.

However, we do see declines in unit sales in Asia, and we see some impact from exchange rate. Then the semiconductor impact, we are recovering a little bit of that even though this is one time.

Without the tariff, that's 700, and then let's say if there's no tariff, it will be ¥400 billion. So ¥400 billion probably would be the starting line.

So ¥300 billion tariff impact, it cannot be recovered just immediately next fiscal year. We want to closely monitor the cost, we might proceed with more expanding of a local procurement and try to control cost more closely.

I hope that answers your question. When it talks about the upside, you are assuming the exchange rate at 140 ¥148 per dollar, but I think this would go toward the upside, right?

I think if things progress as things are going right now, yes? As I might have mentioned, per dollar, ¥1 would have give us an earning plus of ¥10 billion or so throughout the year, that is, of course.

Slash that by four to get a quarter quarter number per yen of per ¥1 against the dollar fluctuation. Thank you very much, Mr.

Yokoyama. Next question, please, from Asahi Shimbun newspaper, Mr.

Miura, please. Asahi Shimbun newspaper, Miura.

Thank you for explanation today. I have two questions.

One, page 20, EV market trends with the model lineup prioritization and focus as you mentioned here, could you elaborate on that, please, the basic idea and the directions? Please explain about that to me.

Another question is also on the page 20 about the reorganizing the long and mid-term strategies, and please tell us about the directions of those strategies. Thank you for your question, Mr.

Miura. EV market and our attitude for that: basically, BEV market for us are in the North America and in China.

For North America, the market environments, for instance, there is ACC now invalidated and credit for BEV, we cannot really see the values anymore today. Demand environments for EVs quite negative today for us.

Recent EV situation today would be leading to the idea of reorganizing the EV strategies for that market. Then last year, we had some tax credits and we had accelerated some prior to the September period.

However, now the market is slowing down in descent. In that regard, EV strategies in the future have to be revisited.

Then for China, EV market is, last year, for instance, the half of the market share in the China are supported by the NEVs or BEV in China. Then in terms of Honda EVs, unfortunately, there are local EV manufacturers over there, and in terms of the prices, UI/UX perspectives, we are not there.

We are behind those companies. Then in terms of the competition in the software environments, we are still behind other companies.

Unfortunately, we do not have the established image of the business in EV area over there. We have to go back to a scratch and then rebuild our strategies for EV.

For the cost perspective, the local suppliers over there or engineering companies over there, we would have to make use of those presence. That way, we have to turn our direction dramatically so that we can then gain our cost-competitiveness utilizing them.

NOA, ADAS, those will be updated with them so that we can be competitive again to challenge the markets once again. In that regard, as I mentioned the other day, the timing of the launches will be revisited in order to have our entry once again in the EV market over there.

Thank you very much. Thank you very much.

Thank you very much, Mr. Miura.

Next question comes from Nikkei paper, Mr. Okinaga.

This is Okinaga from Nikkei newspaper. Yes, I can hear you.

I'd like to ask about the EV again. Throughout the year, you said ¥2090 billion for the year.

Is there a possibility of let's say further posting of impairment losses? That's one question.

The other question is concerning semiconductor. You said that you have a good prospects for preventing recurrence of this shortage problem happening.

I just would like to know what you have been doing. Then a ¥150 billion negative for China, any impact for Japan and China?

I would like to know how the situation has been for China and Japan. Thank you very much, Mr.

Okinaga. First, about the EV, the impairment losses for the non-recurring one: well, we don't know what's going to happen, but we have been processing this in accordance with accounting principles.

Whatever we know, we have incorporated into our books. However, as mentioned by Mr.

Fujimura, we don't know what kind of compensation issues might come up with GM, there's a bit of an unclear future prospects. Then actually, as I've explained, because the EV market is dramatically changing, we would need to monitor our sales volume trends, and then we might have to take some actions if needed.

Any details you can add? Okay.

Then if the intention of your question is about the impairment losses for the EV business in general, like at other OEMs, because we are not sure what's happening at other companies, I would like to refrain from mentioning anything about other companies. What we're saying is that with the models that we have developed, it's the die and tooling, and then the development R&D assets, some of those had to be written off.

Then this is not really impairment, but we would need to do some compensation. Because of the review that we have conducted as a product lineup, we are booking some temporary losses, those expenses that are incurred.

You ask about the impairment, but impairment means that this is CGU, whether this lead to cash generation in the future, and then how the business environment has been doing, and what management decision have been in view of those. Then in view of all of those, we are getting audited, and then with the auditors included, we discuss.

We are not recognizing any impairment like that have happened in other companies. We have been talking with the accounting.

We have been discussing on a continuous basis, and then we have been discussing how we at management should assess those costs and expenses. I just wanted to mention that whatever that were incurred up until three quarters, those are only those associated with the product lineup review.

We don't know as if it's going to be enough, but we have included whatever we can so far. Then the second question, you ask about semiconductor.

Last year in North America, from the end of October, we had to go into production adjustment and production suspension in Mexico. The impact actually is I think I mentioned the 120,000 units affected.

We hope that we are able to recover a bit, the affected will be 110,000 units. It would be a 150 ¥150 billion impact, we assume.

Of that, this is unfortunately. For Japan and China, we have had some disruptions in our production.

In China, we had about three weeks or so from the end of the year. Then for Japan, we have had it to suspend our production like at Suzuka for two or three days, and then did some production adjustment for a few days after that.

Because of that, even though there was an impact once, but for Japan and China, we have the capacity to sufficiently recover, we will be able to complete the recovery of those lost production before the end of this fiscal year. In terms of business impact, it is very limited, we have not considered that into our business.

Anyway, we have faced those problems. Basically, to the suppliers, let's say we are trying to do a multi-sourcing of the suppliers, and then we have been asking them to keep an appropriate inventory levels.

However, some of the suppliers, unfortunately, have not provided us with that much of details. To be blunt, we have been relying heavily on our suppliers.

That's something we are reviewing fundamentally so that we will keep a close watch over our supply chain all the way up to upstream, and then see what kind of risk there may be, and then we will do our appropriate risk assessment and then keep appropriate inventory management or go multi-sourcing as well. Then that needs to be done from the development stage as well.

At earlier development stage, we have been looking at the cost sourcing. In view of that, there are some single-sourcing strategy as well, but in terms of business continuity strategy, if we go single-sourcing, we will pay a careful attention to upstream of each of those components containing semiconductor, and then we will decide how much of an inventory we will hold, and then we will do a review about what is going to happen if we go multiple sourcing, and then take actions accordingly.

Currently, as you may know, the semiconductor issue in addition to what we have experienced so far, for the memory, and then, of course, the rare earth issues are there. We are aware of those.

When those issues arise, we would, of course, at this point in time, I don't think there's anything that would lead to immediate problems right now. In the future, of course, it is, well, it is not very clear.

We will work closely together with the suppliers and take actions as needed. However, for the rare earth metals, it is nothing that one single corporate entity can do anything about.

As you may know, at the JAMA level as well, this is being discussed, and also with the governmental agencies included, this needs to be reviewed. We would like to deepen our collaboration with different entities.

Thank you very much. This concludes my answer.

Thank you very much, Mr. Okinaga.

Next question, Mr. Ukita from Yomiuri newspaper, please.

Ukita from Yomiuri newspaper. Hello?

Thank you for all the explanation. I have two questions.

One is about tariff impact. Little by little, as compared to the start of the year, it is coming down.

It is down from the ¥386 billion from the beginning now. Could you tell me more about the reasons behind this?

Then the other question is about sales situation of the automobiles. Your target is not achieved.

In order to achieve the target volume of the sales, what are going to do with the Japan and North American market? Tariff, Mr.

Fujimura is to address. Thank you very much for your question, Miss Ukita.

As you said, until last time, a gross impact in the first half, ¥385 billion impact expected because of tariff, and the recovery of the cost expected ¥50 billion, and then ¥338 billion net impact. Then 110,000 unit reduced in the US because of the semiconductor situation.

Then including that, ¥338 billion net actually is because of the foreign exchange and so on, it will be about ¥360 billion. That's the actual gross.

The 50 recoveries, net was ¥310 billion, in fact, incorporated in the accounting. Then recovery part, they were realized.

Therefore, ¥310 billion, this is the number finalized, let's say, for this. What kind of recovery plans incorporated in the 50 billion?

With the suppliers and others, we had made adjustments looking at the logistics and so forth. Then additional local procurements were progressed as well to achieve USMCA, and we're more confident in achieving that.

Plus, within the US, credit utilizations is also to be added. We scrutinized how far we can incorporate from that.

We had a broad consideration, and then eventually ¥50 billion recovery plan is realized into the 310 ¥310 billion figure. As for the sales strategy, let me address that question for the North America.

As I mentioned a little earlier, IRA credits were pushed toward the end of the period, and it was included. Then BEV drops quite dramatically.

Therefore, going forward, it will be staying at a very low level. Then going forward, we have to be focusing on the hybrid brand, taking advantage of the brand to make sure that those models will be selling more.

Then as of today in North America, various companies had the impact of the tariff, and then we were thinking that they will be increasing the selling prices. However, we do not see the dramatic selling price increases.

Then we had seeing some incentives utilized in the different areas. Then the actual prices on the decreasing trend, practically speaking.

Therefore, we have to use incentives. At the same time, we have to appeal the hybrid models.

Customers who are looking for the affordable models, the ICE models can be provided too. We try to cater for the needs of the customers to try to get by this situation here.

Together with the dealers, we have to do the marketing activities. We were not really focusing too much, however, in the area of the fleet, which was not really focused before.

We have to work on that to sell more cars in the fleet customer field. Japan, hybrid models, that is the very focus in the Japanese market.

In Japan, rather than the competition, I think it is more of the customers and how we can increase and support those customers. The dealers will make sure that they have a close contact with the customers.

For instance, one-on-one strategy, one person looking at one customer, a one-on-one strategy to try to satisfy their needs for sure. That is a very down-to-the-ground activity, let's say, but it is what we are up to.

Then next year onward, MMC and other campaigns expected to try to maintain the market share or improve the market share with those plans. Thank you very much.

That is all from me. Thank you.

Thank you very much, Ms. Ukita.

The next question come from NHK, Mr. Yasunaga.

Over to you. Looks like he's not connected.

Maybe we proceed to the next reporter first for the time being. Oh, okay.

Now we got your voice. Yes, you're coming through now.

Sorry about that. This is Yasunaga from NHK.

Thank you very much for the presentation. One question.

The rare earth metals supply concern, concerning that explanation: so there is a export restriction on China. Is my understanding correct?

Also about the diversification of supply chains: so for rare earth metals, you have no choice but to rely on China, but what would be your appropriate action in response to the situation? Thank you very much, Mr.

Yasunaga. For the rare earth metal concern, yes, as you said, currently, rare earth metal, those are subjected to export restriction from China.

Currently, are the exports stopped? All we can do is apply for exports, and we do see those exports coming through, but sometimes it just takes some time, a longer time.

If you ask us, can we get the exports coming through as expected? Not really.

As rare earth metals, those are used in various components. If the supply stopped, the risk is high.

We need to ensure, as I mentioned, we need to apply, without any delay, for permission for exports. Then of course, when it comes to fundamental countermeasure is to go without use of rare earth, but that would take a longer time for development.

Currently, we'll take some parts that are difficult to switch over or take a longer development, all we can do is to simply hold inventory. Currently, we don't have any actual problem in the supply.

How is it going to be in the future? We don't know.

It is very uncertain, as I mentioned. The supply, we need to work closely together with our suppliers, interview them, and then ask them what kind of supply chain our supplier have for rare earth that's needed for their components.

We will continue to consider our permanent, long-term countermeasure, and this would be for more medium term, but we will consider development of parts and components that do not use rare earth. For the time being, the first thing we can do is to secure our inventory, and then also secondly, to apply for export permissions on a timely manner.

Those are the things that we can do currently. I hope that answers your question.

Thank you very much. If not, this rare earth-free components, specifically, what kind of components do you have in mind?

Where would be the real critical point? There are different components, but there are different types of rare earth.

There are some used in motor, some used in meters, for each and every component that uses rare earth, for every one of them, we are looking into what can be done to replace them without rare earth. Thank you very much from Mr.

Yasunaga. Ms.

Nagai from TV Tokyo. Yes, thank you.

Question one about the third quarter alone sales in that period for automobiles: excluding the automobile sales, you had reduction of the volume, and excluding the impact by the semiconductor, what is the situation as compared to the expectations in the beginning of the year? Second question is about page 20, as Kaihara said, the direction of the businesses going forward.

You said that it is going to be a dramatic revisiting of that. As I heard about incentives in North America, there could be kind of limitations to improve the profitability by itself alone.

I suppose that you're still speaking to Nissan or Mitsubishi, and not just those two, are you thinking about a possibility of the collaboration with other companies other than those two? Thank you very much, Ms.

Nagai, for your question. Three months question volume, right?

That's your question, right? Yes, correct.

Then volume, you mentioned that the volume had declined for that period year on year, I suppose. For the automobiles, actually the volume sales increased as compared to the plan for the automobile businesses for the third quarter.

You're comparing from last year, same time last year, right? For the original plans, third quarter, we had actually overachieved the plan for the third quarter automobile.

As compared to last year, it declined because of the next period semiconductor impact. That is the largest, and also Chinese market for ICE.

EV/NEV market is increasing, expanding in China, and ICE market is shrinking in China, because of which volume in China is in a tough situation. Year on year, it dropped.

That is about the volume. What was the next question?

Alliance question, right? Nissan alliance: well, actually with Nissan, the integration possibility, we do not talk about that at all now.

I have to say that. Another thing is that as you said now, development cost will be needed in the future, for instance, software, E/E architecture, forth would require investments.

For the future EVs, batteries, e-axle, if we can commonize those or have a co-development together, that will help reduce the development cost or cost itself may reduce thanks to that. However, for those matters, we continue to discuss with Nissan.

However, not just Nissan, if it is possible to build a relationship like that with other alternative companies, of course, as long as we can expect a win-win results all together, of course, for those, we will continue to consider other possibilities, and that is all for your question. Thank you very much.

Thank you, Ms. Nagai.

Next question comes from Mr. Fujiwara from Nikkan Jidosha Shimbun, Daily Automotive Newspaper.

This is Fujiwara from Daily Automotive Newspaper. Yes, we can hear you.

I have two questions as well. My first question is about the factors for plus.

You had a big contribution from the selling cost that helped to grow your revenues. I wanted to know what region and what products.

Then this was second question, this may have been covered by Toyo Keizai's news question, but the hybrid volume has grown by about 5% in the third quarter. I'd like to know what kind of contribution this 5% growth of HEV volume in the third quarter.

Okay. Thank you for your questions.

This is from year-on-year comparison, I believe. There was a bit of a plus in the selling price and cost impact.

If you look at the total graph, it's about ¥60 billion. There was about ¥40 billion for automobiles.

Because this is from selling price impact, when we say selling price, per year, at the beginning of the term or in fall, we do go through price hikes. Of the ¥40 billion or so, about half of it happens in the States.

Then for the other regions, those are just pro-rated, if you can pro-rate it to different regions by the volume. Then the hybrid volume for the third quarter, for the hybrid, the unit sales in the States, particularly in the States, hybrid is doing very well.

Then how we do the incentive: incentive can be kept low relative to the ICEs. However, the competitors are coming into the hybrid market, our favorable condition, of course, is not going to last forever.

On our part, we will be getting into the transition period for different models. Competitors are going to come up with new models, we need to kind of maybe spend some more incentives.

The hybrid requires relatively lower incentive compared to petrol engines, but in the future, we might have to spend some more incentives in the future. On the other hand, for the petrol, the gasoline engine vehicles, we do need incentives more than hybrid for ICE.

However, if you look at the content of the components, gasoline engine require less tariff impact. In that sense, petrol engine, gasoline engine contribute better.

We need to strike a good balance between those two groups. Then recently, if you look at one of the reasons why transaction price is deteriorating in the States is that the model-type variants, which cost lower, attracting customers.

Because we do have both gasoline and hybrid, we need to strike a good balance, and then we need to, well, survive through this transition period between those different models using those good mix. Thank you very much.

Thank you very much, Ms. Fujiwara.

Sorry, due to a time, the next question will be the last one for the day. Mr.

Tsurumi from Mainichi newspaper, please. Can you hear me?

Sorry about my internet connection, but my face may not be shown, sorry. Earlier you talked about the alliances with Nissan, and based on the reports, the models in the US with Nissan and powertrain commonization, forth, you talked about that earlier, and what is the progress today?

Are there any updates for us as much as you could share with us? That is all from me.

Thank you for your question. In conclusion, there is no specific information that I can share with you today, but with Nissan, as I said earlier, in many different fields or areas, we try to explore different possibilities, and as you said, the complementary supply of the models or production, the models from each other, if those are complementary to the other company, we could look for the possibility, and also one company produce a model of cars and then provide or make supplies.

We have discussion about it. However, we have not decided on any specific plans yet.

We simply continue our discussion. Then as I said earlier, the commonization of the software or architectures, such topics are, of course, one of the discussion topics for the development.

However, both of us have made progresses in individual projects, therefore it is not yet the time to make a conclusion yet, but we continue to discuss positively with each other. Once any output or plans are solidified, we will make sure that we will share with you.

Thank you very much. That is all from me.

Thank you. Thank you very much.

Thank you. Now that concludes our press conference for the business performance results, and those materials and handouts are available from our website of Honda.

Thank you very much for your participation, everyone. Thank you.