Thank you very much, everyone, for your participation today. It is time for the schedule and I'd like to make a start of the financial results press conference for the fiscal year ending March 31st, 2026, and 2026 business briefing updates.

My name is Akiba from Corporate Communications, MC today, thank you. Let me introduce the speakers today: Director, President, and Representative Executive Officer, Toshihiro Mibe.

Nice to meet you, my name is Mibe.

Director, Executive Vice President, and Representative Executive Officer, Noriya Kaihara.

Kaihara speaking, nice to meet you.

Executive Officer and Chief Financial Officer, Masao Kawaguchi.

My name is Kawaguchi, nice to meet you.

Mr. Mibe will give you the summary of the financial status now, followed by Mr.

Kaihara to talk about the FYE March '26 results and expectations for March '27. Later, Mr.

Mibe will give you the business updates for Honda. Mibe-san, the floor is yours.

Thank you for showing understanding towards Honda's business activities. Now explain our financial results for the fiscal year ended March 2026 and our outlook for this fiscal year.

First, a summary of our results. In the fiscal year ended 2026, the EV business environment underwent significant change.

In response, we swiftly reorganized our EV business and related investments. By the third quarter, we recorded EV-related losses of ¥267.1 billion, including provisions for losses and impairment losses on EVs already being sold in the United States.

In addition, as explained on March 12th, the North America-produced EV models launch and development were canceled. In the fourth quarter, we posted additional ¥1 trillion 310.6 billion in losses.

As a result, the fiscal year ended March 2026, EV-related losses totaled ¥1 trillion 577.8 billion. Consequently, operating profit for the fiscal year ended March 2026 was a loss of ¥414.3 billion.

Excluding the part of the EV-related losses that correspond to operating profit, i.e. ¥1 trillion 453.6 billion, operating profit was ¥1 trillion 39.3 billion.

Motorcycle business, due to sales increase, mainly India and Brazil, we achieved record high unit sales and operating profit. Automobile business, facing harsh business environment due to higher tariff burden and drop in unit sales, and due to semiconductor supply shortage and others, we made company-wide effort to reduce cost, and consequently, excluding EV-related losses, we were profitable.

Operating cash flow after R&D adjustments, which represents the source of future investments, came to ¥2 trillion 657.9 billion, maintaining strong cash-generating capability as was the case in the previous fiscal year. Next, consolidated earnings outlook for FY ending March 2027.

Regarding EV-related losses, while it is difficult at this point to give a precise amount, we reviewed details to our best means and set the EV-related losses at ¥500 billion for the fiscal year ending March 2027. Though there is concern over the current Middle East situation and impact of rising material prices, operating profit excluding EV-related losses is forecast to be ¥1 trillion.

Operating profit including EV-related losses is forecasted to be a surplus of ¥500 billion. By business segment: motorcycle business, with the expansion of production capacity in India to capture the strong demand, we will aim for record unit sales of 22.8 million units.

Automobile business, in Asia, due to model change, unit sales will be maintained, while gasoline hybrid model sales will be enhanced mainly in North America to boost profitability. Shareholder returns in the fiscal year ending March 2027 will be an annual dividend of ¥70, the same year on year.

About our financial soundness: as explained, R&D-adjusted operating cash flow will maintain a strong cash-generating capability. The operating company's net cash balance at the end of March 2026 was ¥3.3 trillion, meaning we have ample cash at hand.

Regarding equity to asset ratio, supported by retained earnings accumulated from the past, the financial position of our operating companies, excluding financial services business, maintains a equity ratio of 55%, showing a high level of financial soundness. Next, the details of our financial results will be explained by Mr.

Kaihara.

First, the results of the fiscal year ended March 2026, followed by the outlook for the fiscal year ending March 2027. Fiscal year ending March 2026 total group unit sales year on year were: motorcycles, mainly due to the increase in Asia and South America, 22,101,000 units; automobile business, due to drop in Asia, mainly China, 3,387,000 units; power products, mainly due to decline in Asia, 3,589,000 units.

The consolidated financial results of the fiscal year ended March 2026: both fiscal years ending March 2026 and '27 will post EV-related losses due to revising Honda's automobile electrification strategy. This makes it difficult to see the underlying business performance.

Therefore, we are disclosing operating profit before reflecting EV losses is referred to as adjusted profit. The consolidated results of the fiscal year ended March 2026 compared to the previous year are as follows: operating profit, a loss of ¥414.3 billion, down ¥1 trillion 627.8 billion; share of profit/loss of investments accounted for by equity method, a loss of ¥162 billion, down ¥163 billion; net profit/loss attributable to owners of the parent was a loss of ¥423.9 billion, down ¥1 trillion 259.7 billion.

Excluding EV-related losses, adjusted operating profit was ¥1 trillion 39.3 billion. Adjusted net profit attributable to owners of the parent, ¥795.5 billion.

Next, the change in operating profit compared to the previous fiscal year: operating profit, a loss of ¥414.3 billion, down ¥1 trillion 627.8 billion. Contributing factors are: sales impacts due to mainly semiconductor supply shortage, though automobile unit sales declined, motorcycle unit sales increased, reaching an increase of ¥117.8 billion; price and cost impact, price revision effect up ¥292.3 billion; expenses down ¥118.5 billion; R&D down ¥41.7 billion; foreign currency effect down ¥77 billion; tariff impacts down ¥346.9 billion.

Adjusted operating profit excluding EV-related losses, ¥1 trillion 39.3 billion. Next, regarding operating profits by business segments: for motorcycles, operating profit was ¥731.9 billion, achieving the record highest.

Automobiles, due to the impact of EV-related losses of ¥1.4536 trillion, we put up the losses of ¥1.4111 trillion. However, adjusted operating profit excluding EV-related losses marked ¥42.5 billion.

Financial service businesses marked operating profit of ¥275.5 billion, and power products and other businesses, ¥10.6 billion losses. Operating profit of motorcycle businesses was ¥731.9 billion, up by ¥68.4 billion year on year.

Breakdown of factors for changes are: sales impact positive by ¥86 billion due to sales unit increase mainly in Asia and South America; price and cost impact was positive by ¥70.4 billion due to effective price revisions and so on; expenses impact was negative by ¥51.5 billion; R&D impact was positive by ¥3.6 billion; foreign currency impact negative by ¥28 billion; and tariff impact was negative by ¥12.1 billion. Operating profit of businesses dropped by ¥1.6549 trillion, ended up in operating losses of ¥1.4111 trillion year on year.

Breakdown of the factors for changes: sales impact, due to the impact mainly of supply shortages of the semiconductors and resultant drop of sales volume and increase of incentives, impact was negative by ¥47.8 billion; price/cost impact was positive by ¥222 billion due to effective price revisions and so on; expenses impact positive by ¥44.1 billion; R&D impact was negative by ¥47.3 billion; foreign currency impact negative by ¥41.6 billion; and tariff impact was negative by ¥331.6 billion. The adjusted operating profit excluding EV-related losses was ¥42.5 billion.

Let me move on to the cash flow situations. Free cash flows excluding financial service businesses was ¥1.58 trillion as of the fiscal year ended March '26.

Net cash balance at the end of the fiscal year was ¥3.3245 trillion, and operating cash flow after R&D adjustment was ¥2.6579 trillion. Let me explain consolidated forecast for FYE March 2027.

Regarding group sales volume year on year, unit sales of the motorcycle business is expected to be 22.8 million units, reflecting incremental businesses mainly in Asia. Automobiles, reflecting increase mainly in North America and reduction mainly in China and Asia, it will be 3.39 million units.

Power products and businesses, 3.65 million units expected, mainly reflecting incremental businesses in Asia. Regarding consolidated financial forecast for FYE March '27, operating profit, it will be ¥500 billion.

Profit for the period attributable to the owners of the parent is expected to be ¥260 billion. Operating profit after adjustment will be equivalent to the one of the previous fiscal year, ¥1 trillion.

Profit for the period attributable to the owners of the parent after adjustment will be ¥620 billion. Currency assumption for the full year is set at ¥145 for a dollar.

Let me explain factors for changes of adjusted operating profit year on year. The adjusted operating profit is down by ¥39.3 billion year on year, for which the factors for changes: the sales impact will be positive by ¥266.7 billion due to increase of sales unit of motorcycles and automobiles; price and cost impact, the positive effect by cost reduction and price revisions will be expected because of soaring material prices due to the impact including Middle Eastern situations, ¥313 billion negative effect is expected; expenses negative by ¥8 billion; R&D impact positive by ¥10 billion; foreign currency negative impact by ¥142 billion; and tariff impact will be positive by ¥147 billion.

Expected capital expenditures, depreciation, amortization, and R&D spending for FYE March '27 will be as follows on the slide, reflecting increase in capex for acquisition of factory buildings and so on of the battery production JV with LG Energy Solution. Those are the numbers we would put up.

Regarding payouts, end of the fiscal year dividend will be ¥35 for a share for FYE March 2026, with annual payouts to be ¥70. Expected annual dividend of FYE March '27 will be ¥70 for a share, same as the preceding year.

Thank you very much for your attention.

Now we'd like to proceed to the 2026 business update, but please wait until we arrange the stage. Thank you for waiting, we would now like to resume.

Mibe-san, please.

Now, in light of the financial results explained, I would like to introduce the future direction of Honda's automobile business. With the aim of carbon neutrality by 2050, Honda had been taking initiatives towards the popularization phase of EVs.

Yet, we decided to discontinue launch of three EV models in North America, as we have already announced. This, however, by no means is an indication that Honda is withdrawing from the EV business.

We'll continue EV sales in regions such as Japan and Asia to meet local customer needs in line with EV adoption speed. In North America as well, we will carefully monitor market conditions, customer demand, and lay the groundwork to deliver compelling products when the timing is right.

That said, the fundamental issue facing our automobile business is not simply the slowdown in the EV market. In the past, Honda's automobile business underwent deep structural transformations to the point where gasoline, ICE, and hybrid models alone generated close to ¥1 trillion in operating profit excluding EV-related losses.

However, in North America, Honda's principal market currently, our profit is down due to failure to fully absorb tariff cost burden. In China and ASEAN countries where competition is increasingly intense with emerging OEMs, a loss of competitiveness in sales prices and speed of offering new value to market is pushing down unit sales.

We therefore believe the key to restructuring our automobile business is to: one, improve our cost structure; two, increase our development efficiency; and three, concentrate corporate resources in regions where we choose to take a more proactive approach and enhance the lineup with compelling products. Going forward, we will first focus on rebuilding automobile business structure over the next three years.

Combined with the continued growth of our motorcycle and financial service businesses, which enjoy solid profit structure, we will strive to recover operating profit to record high by the fiscal year ending March 31st, 2029. In parallel, starting in 2027, we will begin introducing next-generation hybrid models in North America, Japan, and India, our priority regions, and introduce new products in underserved product categories while carefully assessing customer needs, thereby expand our product lineups.

We'll not rely fully on ourselves, but we will adopt a flexible approach that also leverages external resources in implementing these initiatives. In line with this direction, we have defined three key pillars: strategic reallocation of corporate resources; two, a thorough strengthening of our manufacturing structure; three, strategic utilization of external resources.

Let me explain one by one. The first pillar is strategic allocation of corporate resources.

Our initiatives will be broadly divided into two. First is the reassessment of the powertrain portfolio with an eye on future demand trends.

To be more specific, we will reallocate more development and production resources into hybrid models. In doing so, we will accelerate the market launch of hybrid models ahead of the original schedule and increase compelling products.

Based on our belief that hybrid models, where Honda has strength, will continue to be the key to addressing environmental challenges until around 2030, when EVs will be more popular, from 2027, we will begin launching our next-generation hybrid models featuring both an all-new hybrid system and platform. We plan to launch 15 next-generation hybrid models globally by the end of the fiscal year ending March 2030, primarily in North America.

In this hall are two prototypes: the Honda hybrid sedan prototype and Acura hybrid SUV prototype. Both are scheduled to be launched within the next two years.

We'll continue to roll out new models equipped with our next-generation hybrid technology across both the Honda and Acura brands to further strengthen our hybrid vehicle lineup. To meet strong demand for large-size hybrid vehicles in North America, in 2029, we will launch large-size hybrid models in the D-segment or above, featuring powerful driving and towing capability with high environmental performance.

Our next-generation hybrid system will realize the world's most efficient powertrain through advancements such as an expansion of engine high-efficiency range and increased driving efficiency of the hybrid unit. By combining our next-generation platforms, all-around evolution such as steering stability, crash safety, and further weight reduction with the electric AWD unit, Honda will strive to improve the fuel economy by more than 10% and further evolve driving experience unique to Honda.

Also, to reduce cost of many key components such as batteries and motors, we will engage in various co-creation activities with suppliers, further improve production efficiency, and pursue commonalization of parts and components. We aim to reduce cost of our next-generation hybrid system by more than 30% vis-a-vis our 2023 models.

We will also offer new mobility experience to our customers with models equipped with our next-generation ADAS under development from 2028. We plan to start introducing the next-generation ADAS into more than 15 models over a five-year period.

By installing Honda's next-generation ADAS to our affordable hybrid models, we want more customers to experience Honda's unique value proposition that combines the joy of driving at will and a stress-free and comfortable mobility experience. To consistently meet demand, we will strengthen our production and parts supply operations for hybrid models.

At our auto plants in Ohio, we will reallocate all of the excess capacity to production of gasoline, ICE, and hybrid models. Furthermore, we will make all auto plants in North America capable of producing hybrid models.

Next, batteries, the key to increase in production: we are working towards the production and supply of highly competitive batteries by converting part of the EV battery production lines at L-H Battery Company, our joint venture with LG Energy Solution, to hybrid battery production. As for motor and inverters, we will further increase the local content of assy and component parts by more than four times to reduce risk of supply shortage and mitigate impacts of tariffs.

Our second initiative, the enhancement of product lineup in each of our priority regions: we have positioned rather North America, Japan, and India as priority markets for our future growth strategy and will strategically allocate our resources to these markets. Since I have already covered North America, let me explain initiatives we will take in other regions.

Japan: first, Japan, the home market of Honda, is not merely a market where Honda seeks volume and share. Rather, it plays a critical role as a market where we refine new technologies and value propositions and demonstrate their level of maturity to global market.

First is EV: in Japan, we will expand our EV model lineup, starting from the minivehicle, kei car category. Minivehicles are popular in Japan and align well with EVs, which are clean and quiet.

To be more specific, following the market launch of the Honda N-VAN e: in 2024 and the N-ONE e: in 2025, we are preparing to launch in 2028 the EV version of the N-BOX, which has been the best-selling new vehicle in Japan for 11 consecutive years. For registered cars, the all-new EV INSIGHT was launched in April, and the Super ONE compact EV will go on sale later this month.

In Japan, we'll focus on offering a broad EV lineup and amass know-how for the future popularization of EVs. Moreover, in addition to the sports line and trial line models announced at the Tokyo Auto Salon this January, starting in 2027, we will introduce next-generation hybrid models, mostly in the SUV category.

Then, from 2028 onward, starting with the all-new Vezel, we will equip our new models with our new next-generation ADAS. Through these initiatives, we will enhance the lineup of high value-added products in all vehicle categories.

We will strive to, one, achieve new vehicle sales greater than the current unit sales, and two, establish a solid business foundation. Next is India: India is one of the few markets in the world where growth is expected.

However, currently Honda has presence in only a limited range of product segments and has not been able to fully expand unit sales due to an insufficient number of competitive models in each segment. One contributing factor is that we have not been able to deliver products that meet customer characteristics and preferences in India.

It has been our standard practice to develop and sell all products based on global standard performance specifications, regardless of target countries and regions. However, climate conditions, vehicle usage, customer preferences, and others vary significantly from country to country and region to region.

Environmental and other regulations are different. Our global standard approach may have been somewhat excessive.

Therefore, we will redefine the best specifications that fully match the market environment and customer needs in India. Then, in 2028, we will begin introducing strategic models tailored to the Indian market, seeking optimal balance of performance and price to satisfy customers in India.

More specifically, we will launch our strategic models in two categories: vehicles under 4 meters in length, the largest volume segment, and mid-size category. We will proactively utilize local development resources, including external resources, and introduce new models as quickly as possible.

The solid motorcycle business will be our key strength in this market. In India, Honda's annual motorcycle sales nears 6 million units and has the largest UIO, units in operation, and sales network.

Honda has also a robust supply chain. In India, the price range of motorcycles is close to the price range of entry-level automobiles.

We will fully utilize our competitiveness in motorcycle business and strive to grow by steadily capturing customers upgrading from motorcycles to automobiles. Moreover, this April, we established Honda Digital Innovation India, a digital platform company which will utilize the Honda Digital Foundation to address the diverse needs of our customers.

We will enhance synergies between our motorcycle and automobile business in India. In addition, our captive finance company in India is scheduled to become operational before the end of the current fiscal year ending March 2027.

Strengthening our financial services business will help expand sales opportunities for our motorcycles and automobile products. The last part of our regional strategy is China, where we need to fundamentally strengthen our competitiveness.

As competition in the Chinese market is intensifying, and Honda is facing a very challenging business environment, including a decline in production and unit sales. Here are some initiatives we are taking to continue competing in the market: first, for the China domestic market, we will pursue cost reduction using locally sourced standard components, while incorporating local technologies for next-generation technologies such as ADAS to keep pace with the overwhelming speed of advancement of intelligent technologies in China.

Furthermore, by introducing NEVs built on platforms provided by local partners, we will better serve the needs of customers in China. We will also apply initiatives to improve development efficiency in China, such as the use of standard components to market outside China to strengthen our products and cost competitiveness in ASEAN and other regions.

The second pillar: in order to deliver competitive products, we will focus on strengthening our lean and agile manufacturing structure. I will introduce three specific initiatives we are undertaking.

First is a fundamental cost reduction. Particularly with the cost of outsourced parts, we will improve our cost structure on a global basis: one, by reassessing Honda-specific standards and utilizing standardized components; and two, by incorporating the competitiveness of local businesses in China and India.

The second is a thorough improvement in development efficiency. This initiative addresses three challenges we face in competition with emerging OEMs: they are, one, development cost; two, development duration; and three, development man-hours or workload.

We will reassess the so-called engineering chain management and increase our production efficiency by reducing each of the three items by half vis-a-vis 2025, and we call this triple half. In addition to improving efficiency in the design, testing, and production preparation through the use of digital environment and AI, we will transform our development process by reassessing development requirements as well as product planning and development management to reduce development costs and man-hours and shorten the development time.

Starting this fiscal year, we will reduce the development time for minor model change by half. Full model change development time will also be halved, starting with development projects that start in 2028.

This will enable us to introduce up-to-date products more quickly and continuously. Finally, the building a manufacturing structure resilient to business environment changes: to establish a robust manufacturing structure capable of securing profitability even when market conditions call for reduced production, we'll aim for a 20% improvement in production efficiency over the next five years by: one, efficiently injecting and allocating resource investment in new models and equipment; and two, increased efficiency and speed through the use of digital technologies.

The third pillar is the strategic use of external resources. To build the future competitiveness, in-house sourcing of the technologies, resources, and parts can be one of the effective approaches.

However, it will require substantial investments and allocation of resources, and in an increasingly uncertain market environment, it might lead to the loss of the competitive advantage. Therefore, as I mentioned already, we will strategically leverage the cost competitiveness and speed of local businesses in China and India and other countries, or the use of industry-standard components and so on, so that we can improve our competitiveness by flexible and the strategic use of the external resources.

As for batteries, we will not pursue complete in-house sourcing for the time being. Instead, we will maximize the use of the L-H battery facilities.

Keeping an eye on future demand growth for EVs, we will push forward the operational efficiencies catering for highly demanded hybrid vehicles and other applications for some time, so that our battery procurement strategy will be formulated, focusing on the competitiveness in North America. Based on such a strategy, we have decided of indefinite suspension of the project to build a comprehensive value chain in Canada, which we announced last year for its postponement about two years.

We will carefully monitor the market conditions and will continue to reassess our procurement strategies. While working on to further refine the core of our corporate advantage, we will proactively leverage external competitiveness and resources in the areas where we determined that they can increase speed, flexibility, and cost competitiveness, thereby strengthening our overall competitiveness.

Up to this point, I have explained the three pillars of our strategy to rebuild our automobile business structure for 2030. From here, I'd like to explain the directions beyond 2030.

In the mid- and long-term and in even more uncertain business environments, we must lay a solid technological groundwork while ensuring greater flexibility and wider range of options so that we will be well-prepared to meet a demand when it emerges. Our directions to achieve a carbon neutrality by 2050 remains unchanged because we believe it is a responsibility we must pursue as long as Honda conducts businesses as a comprehensive mobility company.

Besides, we will carefully assess the market environment, demands, trends in each region and take a multi-faceted approach to achieving carbon neutrality, which we will include not only EVs, but also various other technologies such as hybrid vehicles, carbon-neutral fuels, carbon offset technologies, and so on. As I mentioned in the beginning, we continue laying groundwork for the sake of the EV demands that may expand again.

In order to launch compelling products in the timely manner when the time comes, we are continuing to work to prepare for highly competitive EV hardware platforms as well as the research and development of all-solid-state batteries for the future. Furthermore, we continue to pursue initiatives to enhance application of intelligent technology in order to offer new mobility experiences on board.

Looking ahead, we will apply ASIMO OS, the original vehicle OS of Honda, to a wide range of Honda vehicles from ICE to BEVs, so that value of across-domain mobilities will improve. Moreover, for the E&E architecture, the key to embody the initiative, we adopted a domain-based architecture that can flexibly address changes in customer needs and market conditions as well as utilization of the external resources.

With the adoption of a unified software architecture, we will be able to achieve highly efficient development. This will enable us to continually deliver new value to customers in a timely manner while pursuing both flexibility and competitiveness.

Far, I have explained the initiatives we are taking for automobile businesses. Now let me move on to the motorcycle business that shows a remarkable growth.

As I mentioned earlier in the financial results announcement, our motorcycle sales for the fiscal year ended March '26 reached 22.1 million units, which is approximately 40% share of the global market. The global motorcycle market is expected to grow from the current scale of 50 million units to 60 million units by 2030.

We will further increase our market share and enhance our presence in the market by introducing products well-aligned with the increasingly diverse customer needs and by optimizing production capabilities. For example, India, largest market: our market share is approximately 28% at the end of the fiscal year ended March '26, delivering approximately 5.8 million units.

However, customer demand is showing a trend stepping up from the current most popular 100cc class to 125 or 160 classes. The similar trend is observed in Central, South America, too.

We will steadily address the shift of demands by implementing initiatives to launch attractive products and to enhance our sales network and service capabilities. In Central and South America, emerging motorcycle OEMs from India and China are beginning to strengthen their presence.

We will be definitely taking aggressive approach by taking advantage of the competitive resources leveraged from India and China, just like the automobile segments. Moreover, we will further strengthen production operations to accommodate for global expanding demands.

In India, we plan to expand our actual production capacity from the current 6.25 million units to approximately 8 million in 2028, further to evolve facilities there as an export hub. Through various initiatives such as in-house production of parts, modularization of the chassis, acceleration of the local procurement, and so on, cost competitiveness and speed will be enhanced.

Thereby, we can expand exports to Central, South America where the conditions of the roads and the customer preferences are close to India. Indonesia, Philippines, Brazil, we will progressively strengthen the motorcycle production supply operations to establish business environment to accommodate demands over there.

In addition, we will further sophisticate the commercial value of the products with the development of the dual-clutch transmission, Honda E-Clutch, and number of original technologies. Honda continues to offer joy of riding and joy of maneuvering for customers.

Going forward, we will create new values with noble technologies unique to Honda to differentiate from other emerging competitors. Regarding EVs, growth momentum of the electrification market is slowing as compared to the initial projection.

Nevertheless, we are observing the case like Vietnam where the shift to electric models progresses rapidly because of the environmental regulation changes. The outlook of the motorcycle market is still uncertain.

In India, we will introduce electric motorcycle models that meet customer needs as planned, and proceed with the construction of a factory dedicated to EV models. The development of EV models will proceed relentlessly, and we will capture changes in the market environment and customer demands and take a flexible and agile approach to product launches and establishment of production operations.

Now, I'll explain our financial strategy in light of what I discussed so far. As I mentioned earlier, over the next three years, we will focus on rebuilding our automobile business's structure and transform the business into a stable and profitable business.

In the meantime, we will continue to make investments for future growth. EV-related investments will be controlled at a certain level while ensuring a readiness to respond quickly to future EV demands.

In addition, for hybrid vehicles, we will prepare to enhance our product lineups to the priority markets explained today. As a result of those initiatives, our financial targets of FYE March 2029, three years from now, we will achieve operating profit beyond ¥1.4 trillion, the all-time high, that is our aim.

During two years after that, based on the rebuilt business structure, we will introduce compelling products prepared for the priority markets on the basis of such business structure as established. That way, we can enhance automobile business for a growth strategy.

In March 2031, five years from now, new model launches in new model segments in North America, India, Japan will take effect. Initiatives like triple half in development domain will be actively showing the results, and thus our business efficiency will enhance dramatically to aim for ROCE target of 10% as have been pursuing for long.

Now, let me explain our capital allocation plans until FYE March '29. In those three years, we will reallocate resources originally scheduled for EVs to the hybrid vehicles instead.

Regarding resource allocation for EVs, though we will continue to prepare for the recovery of the EV demands in the future, for the time being, it will be kept controlled to approximately ¥0.8 trillion level over three years. For the software, given the software application essential for all, including hybrid models, we plan to allocate resources approximately ¥1 trillion, that is consistent with the original plan.

ICE and hybrid models, we will make a strategic investment for future growth in the priority market, we can plan to invest a total of ¥4.4 trillion for the three years. The investment for those three years will be ¥6.2 billion, ¥6.2 trillion in total.

As for operating cash flow after R&D adjustment, due to turnaround of the automobile segment and powerful cash generation of the motorcycle businesses, it will be expected to be more than ¥7 trillion, excluding EV-related losses. Consequently, we will continue to invest for the future growth while steadily securing the funds for shareholder returns.

After FYE March 2030, we will carefully assess the trend of EV demands in North America and make decisions for EV investment further. Regarding investment decisions in highly uncertain business environments, we will utilize assets of the past investments or leverage external resources, not persisting on our internal resources only, so that investment efficiencies will be much improved.

Finally, regarding dividends: as what you can see here, since 2008 global financial crisis, Honda has faced with a challenging business environment: Great East Japan Earthquake, COVID-19, but we have positioned the stable and continuous dividend payouts as one of our key corporate management priorities. Our payouts have never been reduced, and going forward, we will aim to maintain stable and continuous payouts with the target of DOE 3%.

Through well-balanced realization of rebuilding of business structure, efficient investment for future growth, and shareholder returns, we will make sure to lead enhanced corporate values in mid- and long-term perspective. Lastly, I'd like to explain the evolution of the corporate governance structures.

Since transitioning to company to three committees in 2021, Honda has significantly expanded the scope of authority delegated from the board of directors to executive officers, aiming for to ensure greater agility in management led by the executive officers. We have strengthened supervisory functions of each committee and the board of directors through various measures.

By appointing chairpersons of the three committees from independent directors, we have advanced our governance structures according to the external environment. However, our management team recognized the importance of continuously and consistently seeking institutionalizing optimal corporate governance structure in the light of the expectations by the shareholders and customers.

We expect our business environment will continue to be uncertain for the foreseeable future. We decided to once again reassess our governance structure to accelerate advancement, and in order to ensure steady execution of each business strategy as well as bold and transparent decision-making necessary for such strategy execution.

First, to strengthen the supervisory function of the board of directors and enable more transparent decision-making, board of directors will be composed of a majority of outside directors, aiming to further enhance the effectiveness of the board. Chair of the board will be assumed by outside person.

Finally, to ensure more transparent decision-making regarding the appointment and dismissal of directors, evaluation and compensation of the directors and executive officers, all the members of the nominating and compensation committees will be composing of the outside directors. The business environment surrounding Honda is unprecedentedly uncertain and tough.

Even under such circumstances, we will sincerely and steadily execute initiatives for rebuilding our automotive business that we outlined today. We are committed to achieve a stronger growth strategy.

With the strong motorcycle business and solid financial foundation, we would like to set up another opportunity before the end of the current fiscal year to share more details about the technologies and strategies for our next-generation hybrid models. Please keep an eye on to our announcements.

Thank you for your attention.

Thank you for listening. Now we would like to proceed to Q&A, but please wait while we prepare the stage.

Thank you for waiting, ladies and gentlemen. Now we would like to proceed to Q&A.

Those who have questions, please wait until the microphone is brought to you. Please raise your hand if you have a question.

Please state your name and affiliation before you ask your question. [unclear] And also, because of limited time, please limit your questions to two per person.

If possible, please make clear whether it's a question in regards to the business update or the financial results. Those who have questions, please raise your hand.

First is closest to me, the person in the second row here.

Yasunaga from NHK, thank you very much. To Mr.

Mibe, about the business update, I'd like to ask questions. First, 2050, your carbon neutrality target, you said that this is in place, but up until you were talking about the EV, FCV 100% by 2040.

What happened to this target?

Mr. Yasunaga, thank you very much.

Yes, well, carbon neutrality by 2050, as I've already explained in my presentation, well, this is something that the society on the whole has to engage in. As corporate responsibility, we will not change this target.

Now, as a means in the past, we were saying EV, FCV sales ratio will be managed, but we have been given numbers, but because of the uncertainty in the business environment and also the customer demand is changing beyond our expectation, and therefore, we have judged that it'll be difficult to achieve. About the sales ratio target, we've decided to withdraw this.

Now, going forward, hybrid, battery EV included, electrification and carbon-neutral fuel, carbon offset technology, well, combining all these, well, the total CO2 reduction will be our target. About the sales ratio target, well, the reason why we set this out was because it was easy to understand for both people inside and outside our company.

Therefore, we set this sales ratio target, but at this opportunity, well, I think it's more important for us to look at the CO2 reduction, and this should be the objective. Therefore, we have decided to change our target aligned with this.

It's a very difficult to predict because of uncertainty, and it's difficult to set out specific milestones. I cannot communicate to you any specific milestones, but at 2035, we are working on numbers that we would like to achieve by 2035.

Once this is finalized, I think that we can announce this to you. By 2040, [unclear] EV 100%, well, that ratio, I think is not realistic as of now.

As I've said at the outset, we have withdrawn this target, and instead we are going to set our target based on the total CO2 emission. That's all from me.

Thank you. You will not present any sales ratio?

The next target will not be sales ratio, but instead total CO2 emission? Another question: about we were trying to break away from engine and in 5 years or so, well the environment, as you've said, has changed significantly and you had to revise your plan.

What is your take on this, Mr. Mibe?

About the outlook, I think there's a lot of uncertainty going ahead. Can you share your thoughts on the outlook?

Honda, the North American market is our main market. Significant changes in the market does impact us a great deal, just as we've seen this case.

The electrification strategy was made under the Obama-Biden administration that was in line with the administration's environmental policies. A year ago, there has been a drastic change and we have seen a shift from environment to the opposite.

Therefore, the major reason for this massive impairment is because the Zero Series that we're planning for, well, we had been developing it, and as of 2024, we had the development phase completed and we had been entering into phase where we're producing the dies. Seeing this major change in the US administration, we were not able to flexibly respond.

Now, what we explained today is due to the change in geopolitics and also environmental policies, but going forward, we want to be able to have a strategy in place which can even endure such challenges. Rather than just focusing on EV, we want to be flexible whether we need to head towards EV or the other direction.

Once we see what direction we have to head towards, I think we can focus at first and be more focused in injecting our resources. At this point in time, because it is uncertain and we think that uncertainty will continue, we want to have a more flexible strategy.

This is the change that we want to make. This was the gist of today's business update.

Thank you.

Next question, please. Please in this area.

Thank you. Nikkei Shimbun, my name is Mukano.

I have two questions. First question: China and India, the cost competitiveness and speed now to be utilized by yourself, and you had reverse import, let's say, from there until now.

What is the changes going forward? You had supply chain already there, and are you going to destroy the supply chain over there from now?

Or in China, you're saying that you're going to utilize local partner platform. They are going to use their Dongfeng or GAC, well, their partner company platform?

When are you going to start with that?

Thank you for your question. China and India, cost and suppliers: and in India and China, we've developed our businesses so far, and as I said today, Honda has global requirements, and we protected them and we prioritized the quality to compensate for that in our production activities.

It was not probably good enough in this business today for EV. Now, in China and India, there are some standard parts that are suitable for their markets, and there are some track record of utilizing them over there.

We can build vehicles based on their standard parts. If that is not a problem, we can expand the use of those standard parts components from there to build more big vehicles.

We can change idea of Honda a little bit now, and then we can try to look at the cost and the local requirements in a good balance so that we can reduce the cost overall. Like to check its effectiveness in India and China, and then if that works, we can expand globally.

What happens to the Japan suppliers, I think that's your question. We not necessarily defining to work with Chinese suppliers or Indian suppliers only and so on, there's no definite way, because 40% of the market is supported by the emerging competitors.

Then they're sort of setting up the competitiveness standard, and we need to change a bit to against that. Therefore, as long as they meet the standard, whoever the supplier of whichever the country we'd work together so that we can improve our commercial value of the products.

I don't want to mislead. We don't mean that we are going to use more Chinese and Indian suppliers more and more going forward.

It does not really mean only that way. They would be giving a kind of the standard as well.

Platforms: we are still in the discussions with the partner company, I cannot give you the details today. There are two companies only, I suppose.

With the partners, we can utilize their platform to build a new products. That is all I can say today,

thank you. One more question.

About a HEV, in 2030, you had a target of 2.2 million units. Are you going to keep that target or do you set a new targets?

Also, the fuel efficiency improvement and the intelligence use, do you have profitability target as well, not just those volume targets?

I said that we will strengthen our business in hybrid. I'm not sure if I should talk about a volume target specifically, but based on our plans, 2.2 million that was the number we had, for which our intend is to try to go and reach 2.5 million.

Hybrid plus, of course, we need to get a profits based on the new hybrid system. We have the hybrid system of 2023, and we are trying to reduce the cost of that by 30% against that year.

I think we could have a 50% cost reduction against that in '27 also, I suppose, and then a new platform will be coming in. Therefore, cost-wise, 10%, and by weight, 90 kg reduction expected.

Therefore, platform, new hybrid system both together will give us a good businesses and ensure the good Honda vehicle performance. Would that be all right?

Thank you.

Next questioner, please. The person in the middle, second row.

Please ask the two questions at once.

Best Car, Terasaki, thank you. About the business update, for the next three years, ICE, hybrid investment, ¥4.4 trillion, this is a huge amount.

This means that you'll have an internal combustion engine, but a new engine? Are you going to develop a new internal combustion engine?

Is that the correct understanding? That's the first question.

The next question, no one's going to ask this, I'm going to: ever since you've been listed, it's the first time that Honda is posting a deficit. Mr.

Mibe, as president, how do you take your responsibility? Please share with us your thoughts about your responsibility.

Your first question about hybrid, the engine: up until 2030, we were thinking the business will be mainly focused on hybrid. Putting aside the deficit this time, we were continuing our development of hybrid, and the first is going to be launched next year, '27.

Performance, cost included, I think we are going to see a major advancement. The engine to be installed, well, it's not a new framework.

It's going to be the conventional engine series, but the heat efficiency will be better. Hybrid, the area in which the engine is used is limited, within that range, the heat efficiency is improved.

That sort of development is underway. To have a new system and with the engine heat efficiency improvement, the fuel economy will be improved by around 10%.

It's not just cost, I think that this will be a powerful tool and weapon for us. About EV development cancellation and this huge and massive deficit: well, I repeat myself, but we are facing a very harsh business environment.

The automotive industry itself is entering into a major structural transformation period. We also have been prudent, and been investing in EV with prudency, but as of 2024 already, the Zero Series, the EV development, well, the dies were already ordered and we were preparing at the beginning of '25 to the extent where we could not go back.

The impact of the tariffs and the easing of the environmental restriction and also the change in policy has had a major impact on our business. It was either cancel or sell, and we were following carefully our business environment.

Ultimately, GHG regulation was to be abolished, and the EV market, well, at this time, the EV market in the United States was thought to reach 15%, but last month, it was 5.6% or 5.8%, it was less than half of the originally anticipated size. Therefore, it was far below the planned unit sales that we had in mind.

If we were to go ahead with this, we knew that in the future we will generate loss. As Honda Motor on the whole, we did not, even with those difficulties, have any deficit, but we understood that we needed as management to decide to go back on a growth trajectory and post this massive loss to make that happen.

About this deficit, I take this very seriously as management, and based on that, we have come up with that recovery plan that I've just explained. What I've explained today, we have to try to stop the bleeding as soon as possible, and try to pave the way for future growth.

Amidst uncertainty, we have to establish a structure where we can tolerate such changes. We quickly have to work on this, and I believe that that is the biggest responsibility that I currently have.

At this point in time, I would like to focus my attention and effort on this point.

That's all, thank you.

Thank you. Next question, please.

Then, third row from the left, the front table, please. Asahi Shimbun,

my name is Miura. I have a question about the financial results.

Earlier, you talked about EV deficit, and then in the specific terms, what are included according to your presentation in March? You talked about your compensation for the suppliers and revisiting your development projects and so on.

Do you have a gaps of what we assess now and what you assessed at that time? Is it possible to complete all of those deficits put up by March '27?

Second question is about business updates to Mr. Mibe.

You talked about external resource utilization. Since you became the president, you talked about going away from the all-internalizing or all internal-based resource strategy.

When you say utilization of external resources, how do you explain the issues especially as to the Honda's policy for getting the internal resources only, for instance?

Thank you for your question, Mr. Miura.

For your question about the EV deficit: on March 12th, as we said before, we had three EV developments for the US to be withdrawn, and then the largest possible deficit to be ¥2.5 trillion, as we said at that time. Out of those 2.5, we announced the one for the March '26 in the past term.

Idea was ¥1.3 trillion to be recognized for March '26 as according to our announcement last month in March. Then reality now is that for the March '26, we are now finding out there are some to be putting up in the current fiscal year, not the March '27, but now some of those we were expecting to put up in March '27 is now brought forward to March '26.

That means we have higher deficit for March '26. Then out of the deficit for March '26, there are some which are assessed to be lower in terms of their value.

Therefore, we have those ups and downs quite equally. Therefore, in March '26, we are ending up with the ¥1.3 trillion deficit recognized in March '26, that is starting point, let's say.

In the announcement of the financial results earlier, Mibe-san explained about ¥500 billion deficit to be expected now. One thing is that originally we were trying to recognize the amount, we actually recognized that in earlier previous term.

Then we at the same time have the supplier negotiations and so on, and it's already in the beginning, and we couldn't see how the outcome would be that time. Then finally, we believe that we would be having ¥500 billion that covers all that.

And ¥1.3 trillion deficit is now putting up for March '26, that's impaired and that's it. The remainder is ¥1.8 trillion, and ¥700 billion still remaining.

Your question may be, would that be impaired as much as that value, or would that be put up in March '27, or when, and so on?

Actually, we have to let you know later on when all those things are sorted out, and then we are clear about those values and financial status. The external resource utilization and our Honda's internal resource utilization: so external resources meaning alliances and so on, which is one of the things I would think we would need, as we said before, we have to work on that.

Of course, within Honda, there are, of course, have our basic idea where we want to get our own sources for everything we could support. Then in the businesses like in China, where we have a struggle, we would have a Honda drawings for ICE, and we working on the cost reduction based on that drawing in China, utilizing resources are there, and we are trying to assess how much cost reduction we could achieve with that.

We know how much we could reduce based on that. We could use a platform with the partner.

We have a good understanding of how much we could reduce based on that platform with the partner. Now we recognize that we perceive is the standard today in the businesses, and then as long as we're happy with those, that we don't have to stick to our principle of getting only Honda-sourced the technology.

Of course, if we are not winning, we have to work harder, and then we have to grab the technology and so forth that is ready that way to win. We already have the measures in place, and now we have to involve those in the field to fight further to win.

Of course, depending on the regions, but we are now thinking about positive utilization of the external resources at different places. Then in North America, the question is, could we use that standard from elsewhere in North America?

That's another question. We have to formulate the strategy for the supplies and supplier value chains and so on, and we're working on that.

Then we haven't really touched upon specific strategy outside of China. We talked about India a bit today, where the parts prices in India is formulated in a different way from that of China.

Away from that, we could try to find out and identify the quality standard that can be utilized in our all different regions. If that is acceptable for the cost perspective, of course we will take it, and then utilize that going for.

That is what we wanted to say. Thank you.

Next question, please. Please raise your hand.

Right. The row that is furthest away, the person in the third row.

I'm freelancer Watanabe. About the business update, I have two questions.

About the domestic market, you say that we will launch new models more than the current unit sales. How many are you thinking of, and what specific measures do you have in mind?

How are you planning to increase unit sales? This is my first question.

Also, the kei ratio is 43%, and the Japan average is 36%, it's above the average. The kei-centered sales approach, are you going to maintain this or are you going to reduce the portion of kei minicars and are you going to introduce more the registered regular passenger cars?

I'd like to ask you about domestic sales and marketing.

Kaihara will respond.

Currently, as you say in regards to Japan, the minicar ratio is high. Even compared to the Japanese average, we believe that we are high.

This is because we have the strong model and the dealers are succeeding, and therefore they're relying on this single model. This time in Japan, the registered cars, we want to try to expand our lineup, strengthen our lineup of registered cars and increase our presence in this category.

For this, currently unit sales is low, but we want to introduce a model to boost this, we have a plan for that. Before that, I'm trying to establish a strong dealer network, and we want to rebuild or reorganize our dealer network.

I think through integration, we can strengthen our marketing capability and thereby have better customer touch. We want to strengthen our digital sales and marketing, too.

On the EV front, already in the mini category, we have three EVs launched, and going forward, INSIGHT will be coming up, and Super ONE, too. For EV, too, we are going to strengthen our lineup.

Therefore, for the future EV Japanese market, we want to lay the groundwork so that in the future we'll have EV and hybrid to support our presence in Japan. About the kei minicar category, we will also strengthen our presence and add on to kei the registered cars.

With EV, we want to offer to as many customers to increase unit sales. That is all.

Thank you.

Because of the interest of time, I could take only two, three questions for the rest, thank you. From here, please.

A second row from the left, the front table, please.

Yomiuri Shimbun, Akita, thank you for your explanation today. Question one, about financial results, EV-related losses: you said that ¥1.3 trillion losses, and some of them have been brought forward to recognize, and then you talked about your compensation for the suppliers.

I'd like to know which part is actually brought forward to recognize? Second question: hybrid vehicles to be focused going forward, and then you of course had quite a bit of investment in EVs, I wouldn't say that you were behind.

However, you had a different focus, I suppose, because other companies had many hybrid cars, and competitors did. As compared to the competitors, what is the Honda's winning strength?

What is your strength in this field with hybrid?

Thank you for your question. For EV-related losses, some of them have been brought forward to recognize in the financial statements, and then contents of that is development assets and right-off of the facilities and also additional cost associated with the impairments and so on.

I can't really say which part is really corresponding to the suppliers' compensation and so on, because we have the other party involved. Writing off the equipment's facilities, those are to be done according to the accounting standard.

Therefore, it would not really have a totally different kind of practice of recognizing them, it's just that way. Hybrid vehicle strength: we have a long history of hybrid vehicles.

Three-motor hybrid we used to have long ago, and we have the two-motor hybrid that is more efficient now. Now we have a compact size and mid-size, and we have hybrid cars in those segments for the global markets.

This time, 2029 or so, or late 2028 and so on, we are going to offer or launch the large-size hybrid models. Several years ago, we said that we would strengthen the hybrid as well, not just EV, especially on the large-size hybrid, which we didn't have at the time.

We studied the development of that, and now we have a full-fledged effort on them, and we want to launch those models as soon as we can. Now once it's there, we are having all sizes for all segments.

Then you have to give it a try, drive it to have a feel, because there are different kind of hybrid feel, and we are really confident in our hybrid one. We have S Series, you can enjoy the driving nicely, and also the ADAS is a good affinity to hybrid model, because CPU, SoC be driven with a lot of power consumption in fact.

EVs and plug-in hybrid could be the mainstream for those CPU things, some hybrid, of course. We have a strength in the hybrid, especially for the power generation part, we have a strength as well.

We can supply the power, too, without any problems. Therefore, that could be the good strength to offer starting with the Vezel 2028.

With that, we can combine the next-generation ADAS as well, and we are quite able to do that. That's the strength, and I wouldn't talk about competitors' products.

However, we have absolute confidence in our hybrid models, and we try to appeal our products so that customers understand its appeal.

Thank you very much.

Thank you. I see a lot of hands, but I'm sorry.

The next person will be the last, and please raise your hand. The person in the middle, the third row, with a white jacket.

Magazine X, Shindo. Thank you for this opportunity.

It might be a tough question. About Mr.

Ozawa-san, as far as I know, being the Nissan partnership or Sony was playing a leading role. Mibe-san, I think this is a person that you mostly trusted.

Aoyama-san also quit. Mibe-san only is staying in Honda.

Then you lost your two close aides, and yet can you carry out your Mibe reform? This is what I want to confirm with you.

About the personal issues, I think this has been announced. About Ozawa, well, this change in our strategy over the past three years, this has been a very challenging reform.

In addition, this was not mentioned today, but when it comes to management and operation, DX, AI included, we have been having to do a massive reform. In Honda, we had few people capable of doing so.

Initially, I was taking the lead, and so I was the corporate reform leader. In carrying out this reform, I wanted to focus on this part, and when it came to the digital and others, well strategy-wise and also operation-wise, digital, AI is something that we cannot avoid.

To strengthen digital, AI, Ashikawa, who has knowledge, is at the top of corporate planning. In addition to what was explained today, the company's operation will also be changed, and that is the reason why we have made this HR decision.

Ozawa will step down following the shareholders meeting. We have a lot of talent at Honda, and with a new lineup, we would like to continue to strive.

Thank you.

Thank you very much.

With this, we would like to conclude today's meeting, the financial results and business update. Thank you for your attendance.