Honda Motor Co., Ltd. (7267) Earnings Call Transcript & Summary

Thank you for taking time to attend Honda's Financial Results press conference for the fiscal year ended March 31, 2025. First, the executives in attendance. Director, President and Representative Executive Officer, Toshihiro Mibe.

Hello. Thank you.

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

This is Kaihara. Thank you for joining.

Director, Managing Executive Officer, Eiji Fujimura.

This is Fujimura. Thank you.

Mr. Mibe will give a summary of the financial results, followed by Mr. Kaihara's explanation of results of the fiscal year ended March 2025 and 2026 as well as shareholders' return. Mibe-san, please.

Thank you for your continued understanding of Honda's business activities. The financial results for the fiscal year ended or FYE March 2025 and the outlook for FYE March 2026 are as follows: First summary of the financial results. Operating profit for the FYE March '25 was JPY 1,213.4 billion. In the fourth quarter of the same fiscal year, we changed the accounting method for automobile product warranty provisions. This onetime expense excluded operating profit was JPY 1,341 billion. Motorcycle business saw strong unit sales globally, achieving record highs in unit sales, operating profit and operating profit margin. Automobile business saw a decline in unit sales mainly in China and ASEAN and was impacted by increased North American incentives for EVs. However, hybrid EV sales expanded. Operating cash flow after R&D adjustments, which represents the source of future investment remained as high as last fiscal year, reaching JPY 2.8 trillion. On consolidated financial results for FYE March 2026, the impact of tariff policies is huge combined with frequent revisions, making it difficult to formulate an outlook. However, reflecting the full 12-month impact as well as recovery measures, we have set the minimum levels of operating profit at JPY 500 billion and net profit at JPY 250 billion. Motorcycle business plans to sell 21.3 million units, an increase year-on-year. Automobile business, despite significant tariff impact, hybrid EV sales will be boosted mainly in North America. Moving forward, the impact of tariff policies will be carefully assessed, recovery measures enhanced while aiming for increased operating profit. Regarding shareholder returns at today's Board of Directors meeting, a dividend policy change was decided. To improve capital efficiency and ensure stable shareholder dividends despite uncertainties, we will switch from the conventional payout ratio to DOE. Annual dividend will increase JPY 2 from JPY 68 to JPY 70 per share. Next, motorcycle and automobile business initiatives that support a stable revenue base. The motorcycle business is world #1 in market share with annual sales of over 20 million units. Sharing platforms and powertrains combined with scale of merit of dominant unit sales allows for a low-cost structure that surpasses other companies and thereby realize profit expansion. In automobile business, hybrid electric vehicle system costs have been reduced while enhancing marketability. The current model of profitability is 1.5x the previous model. Unit sales have expanded globally, in particular, North America. In the latter half of this decade, we plan to introduce next-generation HEV models to evolve performance and cost efficiency. Next, initiatives for enhancing corporate value. Last fiscal year, at this meeting, I explained our efforts to enhance corporate value in the past, present and future. Regarding past capital optimization efforts, the prospect is in sight as a result of last December's decision to repurchase JPY 1.1 trillion of our shares. Meanwhile, looking at the present and future, the automotive industry environment has changed dramatically, requiring more than ever flexible response. Regarding automobile profitability, we will secure stable revenue through increased unit sales of hybrid EVs with better profitability, especially in North America, plus solid business foundation of our motorcycle and financial business. Looking ahead, the electric vehicle market growth has slowed down more than expected. We reviewed timing of our comprehensive value change project in Canada and decided to postpone our large-scale investments. Details of the electrification strategy trajectory change will be explained in our business update on May 20. Despite the continuing uncertainty in business environment, Honda will maintain stable management through a resilient business portfolio by flexibly revising strategies according to market conditions, thereby enhancing corporate value. Next, Mr. Kaihara will give details on the financial results.

I will explain the results of the fiscal year ending March 2025, the outlook for FYE March 2026 and shareholder returns. First, regarding the group sales volume for FYE March '25. for motorcycle businesses, 20.572 million units sold mainly due to increase in ASEAN year-on-year. For automobile businesses, 3.716 million units sold with a decline of volume in ASEAN or mainly in China. And for power product businesses, 3.7 million units sold with a decline mainly in Europe. Next, regarding the consolidated financial results for FYE March '25. Starting from the FYE March 2025, we changed the method of measuring product warranty provisions to allocate for the sales of major automotive production sites so that they are measured comprehensively at the time of the sale. While this will result in a onetime expense for FYE March 2025, it will allow us to limit the impact of product warranty expenses on earnings volatility from the fiscal year, this fiscal year onward. Such onetime impact has been reflected on the operating profit of the fiscal year, which mapped JPY 1.2134 trillion. That was JPY 168.4 billion short of the previous period. Equity in earnings of affiliates was JPY 900 million, down by JPY 109.8 billion, mainly due to the decline in sales volume in China. Net profit attributable to the owner of the parent decreased by JPY 271.3 billion, totaling JPY 835.8 billion. As Mr. Mibe explained in the beginning, the results excluding the impact of the change in product warranty estimates in automobile businesses are shown on the right-hand side of the slide. Next, regarding factors of ups and downs of operating profit for the FYE March 2025 year-on-year. Operating profit was JPY 1.341 trillion, down by JPY 40.8 billion year-on-year before reflecting the impact of the change in product warranty estimates for the automobiles. The factors behind have been JPY 233.6 billion decline in profit due to sales impact, increase of JPY 525 billion in profit due to price and cost impact, JPY 85 billion decline in profit due to miscellaneous expenses, JPY 153.5 billion decline in profit due to research and development expenses and JPY 93.6 billion decline in profit due to the ForEx impact. Regarding the operating profit by business segment, for motorcycle businesses, operating profit was JPY 663.4 billion. Automobile businesses, JPY 243.8 billion. Financial Services businesses, JPY 315.6 billion. And Power Products and Other businesses, JPY 9.4 billion operating losses. Regarding the factors of ups and downs for motorcycle business performance, the operating profit marked the record highest of JPY 663.4 billion, up by JPY 107.2 billion year-on-year. With factors behind, particularly of the sales impact, additional JPY 48.1 billion was made mainly due to sales volume increase. For price and cost impact, additional JPY 175.3 billion was made due to improved product value and effect of pricing in response to the inflationary impact caused by the depreciating currencies in emerging markets, JPY 20.1 billion decline in profit due to miscellaneous expenses, JPY 21.5 billion decline in profit due to research and development expenses and JPY 74.6 billion decline in profit due to foreign currency. Regarding factors of automobile businesses, operating profit before reflecting the impact of change of the estimates, profit declined by JPY 189.1 billion year-on-year, resulting in JPY 371.5 billion. Sales impact, profit declined by JPY 333.7 billion due to sales volume reduction and the increase of incentives to boost EV sales. For price cost impact, profit increased by JPY 336.5 billion due to pricing effect that commensurate with improved product values. Expenses, profit declined by JPY 38.2 billion. For research and development expenses, profit declined by JPY 127 billion, mainly due to increased resources allocated mainly to EV. Currency exchanges, profit declined by JPY 26.7 billion. Regarding the cash flow situations for FYE March 2025, the free cash flow of the operating companies excluding the Financial Services businesses was JPY 665.8 billion. Net cash balance at the end of the period was JPY 3,215.7 billion. And finally, operating cash flow post R&D adjustment was JPY 2,806.6 billion. And the consolidated earnings forecast for the fiscal year ending March 2026. Regarding the group's sales volume year-on-year, Motorcycle businesses, 21.3 million units are expected, reflecting the increase in ASEAN. Automobile businesses, JPY 3.62 billion units expected reflecting decrease mainly in ASEAN and the Power Products at 3.67 million units expected reflecting the decrease mainly in North America. Regarding the consolidated earnings outlook for the FYE March '26, operating profit is projected to be JPY 500 billion, and the net profit attributable to owner of the parent company is JPY 250 billion. ForEx assumption is set at JPY 135 for U.S. dollar throughout the year. Regarding factors behind expecting operating profit year-on-year, the operating profit is expected to be JPY 1,402 billion, excluding the impact of exchange rate and tariffs, which is to maintain the same level as previous fiscal year. ForEx impact, JPY 452 billion decline in profit is expected anticipating depreciating currencies of the emerging markets to U.S. dollar and the impact of the tariff is still being examined. However, the potential impact to the best of the knowledge as of now incorporated in the forecast. Efforts to mitigate the impact of the tariffs is projected to be JPY 200 billion. And to explain the factors behind apple-to-apple comparison year-on-year, due to sales impact, profit will go up by JPY 156.1 billion with sales volume increase of motorcycles and automobiles in North America. Regarding price cost impact, profit will be up by JPY 250 billion due to price commensurate with improved product values, expenses increased by JPY 219.1 billion, reducing profit. Research and development expenses, it will increase by JPY 126 billion, decreasing the profit. The forecast of the capital investment, depreciation, research and development spending FY '26 is in the slide. Regarding shareholder returns, Honda positions returning value back to its shareholders as a top management priority. Starting FYE March '26, we will change our dividend policy and we will introduce DOE as a return indicator. We will strive to pay out aiming for 40% despite the business environment being uncertain, we will realize a more stable and continuous returns. For FYE March '25, the year-end dividend is determined JPY 34 per share and annual dividend, JPY 68 per share. And for FYE March '26, expected dividend is to be JPY 70 per share, up by JPY 2 from the year before. Regarding the share buyback of JPY 1.1 trillion that we made a decision on December 23, '24, we have acquired the equivalent of about JPY 589.5 billion worth of the shares as of the April 30, 2025. That concludes my explanation. Thank you very much for your attention.

Thank you very much for your listening. And now we would like to proceed to Q&A. [Operator Instructions] First question from Nikkei, [ Okinaga ] please.

This is Okinaga from Nikkei. USMC, about the tariff. But for time being, there were to be an exception, but you have added on JPY 650 billion. So what is the reason for this? And what is the breakdown? Can you explain? That's the first question. And the second question about the postponement in Canada. Can you explain about the reason for that?

Well, first, about the tariff. Yes, we have estimated JPY 650 billion, but finished cars and components included, the tariff is very complicated and the calculation that we have done and the basis for this calculation, I think you've seen this, but for the finished cars from Canada to United States, also from Mexico to U.S. and from Japan to the United States, well, there are different tariff conditions that needed to be taken into consideration and the result is shown on the right-hand side. And also about the components, Well, USMCA, if it is within the USMCA, the components are exempt, but there's from Tier 1, Tier 2 to Tier 3 components. And therefore, we need to have the country of origin certification, and this is not fixed yet. So 25% is being included because we have yet to obtain the certificate. So this included is JPY 650 billion. And the motorcycle business is written under, there is an impact. So it's a JPY 30.6 billion impact and Power Products, again, about JPY 24.3 billion. So all added, it comes to JPY 650 billion. Well, this is the minimum at the bottom. And well, I think the type of impact will continue to change as time goes by, and we have to think about these major changes taking place. Well, in the middle, we talk about the automobile device here in the middle here. And there are parts which are exempt from the tariff, but the amount and volume has not yet to be looked into. So it's included 25%. And this is said to be JPY 220 billion. So these are the amounts that we have calculated. But if we scrutinize and come up with the details, there will be a number of components which will be exempt from the tariff. So against JPY 500 billion, how much can be added on is something that we have to look into. So this -- the operating profit of JPY 500 billion, this is the bottom, the minimum. And so please understand this number to be that way. And how we are going to respond to these tariffs that included, we want to make a recovery from this JPY 500 billion. About the specifics of how we were responding. Well, up until March, Canada, Mexico exports, we want to promote this and build up the inventory in the United States. So we have been taking such measures up to that time. And in the short run, internally, we want to reduce our cost -- thoroughly reduce our costs. And in addition to that, the allocation of the finished products, we want to optimize. So this has been reported in the newspaper. the Civic 5-door hybrid and what is being produced in Yorii, there are other components. So up until June, September, they're being produced in Japan, but then after will be transferred to Indiana. And HCM, the Canada CR-V for the United States, ELP will be producing instead in the United States. So we are thinking about the production allocation, optimizing the allocation where possible. And also for the dealers and suppliers, stakeholders, we are co-creating so as to minimize the impact of tariffs. And about the prices, we have to observe what competitors are doing and think about the revision range and which models for which we will revise our prices. So we want to be careful and carefully observe what is happening. In the midterm, if the tariff measures are to be in place for a long time, and then we will have to increase our production capacity in the United States. We've already begun studies on this. And first, we have to think about the CapEx. Well, in the United States, well, they have a 2 shift but maybe we can increase to 3 shift production and also operating over the weekend. There is room to increase the production capacity in the United States, and we are trying to look into what will happen as a result of that. And then after will be the CapEx, capital expenditure. But at any rate, we have to secure workers and to think about the impact on the supply chain because it will be huge. We want to observe what is happening and at the appropriate timing, think what needs to be done. We want to be prudent in such efforts in dealing with tariff measures. About the Canada case, well, last year, on April 25, we have made the announcement and the EV, the 240,000 battery 36 gigawatt per hour and also the POSCO Future and Asahi Kasei, the joint venture. So CAD 15 billion worth of investment, and it was planned to start operation in 2028. We did make that announcement back then. This was thinking that the EV demand would increase in the future. And we have to think about the upstream resources and the downstream service. And we wanted to enhance our Canada value chain so as to create the electrification business in the future. But as you know, in North America, the EV market growth is slowing down. And so as of now, we think that we should postpone for at least 22 years. This has been decided. USMCA, we are thinking that this will not change USMCA. If the conditions were to change, at that point in time, we have to revisit this. As for the specifics, what happens after 2 years and the starting time of the project, we have to observe what is happening and ultimately make the decision. We are consulting with the Canadian government and Ontario province. And as for this postponement, we have already received their consent. That is all from me. Anything to add?

Well, yes. We have provided some additional information. And we have included the premises for the tariff calculation estimation. Well, we have looked at others competitors' information that have been disclosed. And I think the condition setting is quite different company by company. And so we're wondering how we should be looking at this. And so we've included the summary. Well, the Japanese companies over the past week or so have been announcing different things, including or not including certain factors, GM and Ford, for example, they've disclosed information. And looking at what they're doing, it's a 9-month impact because they closed the books in December, but GM. So they're looking at JPY 4,000, billion, JPY 5,000 billion 9-month impact. And so annually, it will come to some JPY 500 billion. Of the JPY 650 billion, as Mibe has said, we have motorcycle business, excluding it's about JPY 500 billion. So it's more or less -- so I think they are JPY 900 billion, whereas we are JPY 500 billion and Ford also, they have a high ratio of U.S. production. And so likewise, if you calculate in terms of 12 months, it's JPY 450 billion. So it's close to our number. And in Japan, calculating the net impact, it's about JPY 300 billion, but we are JPY 450 billion. So they're saying that ours is high, the impact, but we are high by JPY 150 billion. First is because the motorcycle [ BP ] and also the components tariff impact. As we've explained, well, USMCA, whether we can comply or not on the components level is not clear to us. We have to look into the details. And therefore, we are conservative in terms of including this. And from Mexico, of the imports from Mexico, there's Prologue, the battery EV from GM. And this is also included. So I think that this is the reason for this difference. So JPY 450 billion appears to be quite big. But I think compared to other OEMs or the media analysts, though there is a slight gap, I think we are more or less thinking about the same image. So we've added a summary of our estimation assumptions for your reference.

So next question, Mr. [indiscernible] Newspaper, Mr. [indiscernible].

I have 2 questions. One, as Mr. Fujimura said earlier, competitors estimate or not estimate the impact by the tariff. However, you decided to disclose your estimates in detail. What is your intention by doing that? And second question is about your relationship to Nissan. You had -- they had -- well, those talks were broken up because of business situations, but they have announced to make recovery plans, and it is difficult for them to survive being alone. However, what is the relationship with them going forward? Would that be the collaborative relationship or any business integration talks be back again?

So let's start with the tariff by Mr. Fujimura and Nissan for myself.

So thank you very much for your question. So we decided to disclose our assumption because the ForEx and this is economic environment, many uncertainties in those areas. But despite that, we decided to give you the guideline like this because this is something we should do as a business company. And there are areas which is very, very uncertain. And still, we decided to look into the situation as far as we could assess. And of course, the interpretation of the taxation law is difficult to. And we had our own interpretation with the help of the American Honda representative too and estimated impact on the yearly annual business. We decided to assess that and share that with people outside. And even with -- in the company, we could have a better understanding of the potential impact internally in the short term, midterm, long term, we could come up with the kind of mitigation measures. And then there are things we could do internally as a mitigation or things which can collaborate with the supplier or we could look for the way to speak to the authority, the politics, for instance. And there can be those potential mitigation measures that we could think of and then put them on the table. And then it is a big negative impact really. And that would give negative impressions in a way. to you. However, this is the worst case scenario, then we can then try to find out what we could do going forward. I'm not sure if I answer your question. However, this is what we have in mind in disclosing such estimate to you.

So JPY 500 billion, that's the amount. And in order to make it kind of more reasonably accepted number, we decided to share with you those tables with you to understand better about it. And then with the Nissan, as of the 13th of February, we disclosed to you about our decision not to go forward. And there is no further progress after that. And besides, we had a strategic partnership MOU that was entered in August last year, which include Mitsubishi Automotive, and we continue to work on that to try to maximize the collaboration efforts, anticipating the joint research for the next-generation platforms and the commonized platforms and the environment and circulation, energy resources and so on. And those areas are being assessed as well once again in greater details. And also today, we are in a very different environments, too, including a tariff situation too. And we are thinking about further collaboration potential in the new environment. And again, the business integration talks will not be on the table for more while going forward. However, we need to try to maximize the benefit out of the collaborative efforts besides -- and we'd like to go on with this strategic partnership so that we can find out a new direction for the growth of the businesses so that we can gain the competitiveness to lead the industry going forward, and we will make a progress in that regard. So that is all for Nissan. Thank you very much.

And next question is from Asahi Shimbun newspapers [ Nishiyama ] please.

I'm Nishiyama from Asahi Shimbun Newspaper. I have 2 questions. The first question, for the next fiscal year, your outlook, well, you've given the explanation. But overall, well, I think the profit is quite going to be dropped or decline. But what is your view on this, Mr. Mibe? And you said that you're going to take various measures to make a recovery. Can you talk about the specifics? And secondly, about the unit sales outlook, Well, I think -- well, the motorcycle was a positive, but there will be a drop in demand due to the Trump tariffs. So what about incentives? I think that there is a race for incentives. So what are the measures you're going to take? Well, you said that you don't want to add this on to the prices, but still -- well, I think you have to compare yourself to the competitors, but what are your thoughts on this?

About your first question about our outlook. Well, looking at the previous fiscal year, well, I talked about the new provision, the comprehensive warranty provision and also the EV provision with GM. we have about JPY 1.1 trillion operating profit. So I think it is more or less online. So the automobile, so there is a drop of 43 million units and including the 21,000 in the United States, we think that we can ensure this much profit. And also -- so the motorcycle, JPY 660 billion and Power Product JPY 310 billion. So we are generating JPY 1 trillion profit. For the automobile, it's a little less than JPY 400 billion. But for BEV, the gross profit is minus JPY 200 billion and R&D is minus JPY 400 billion. So BEV is minus JPY 600 billion. And ICE, including hybrid is about JPY 1 trillion profit. So it is such a business. And automobile ICE and motorcycle and financial services, we will earn profit there and continue investment for electrification plus the investors' return. And we have tried to balance this. And this was the case in the previous fiscal year. And now about the [ 102k ] as I said, we are looking at JPY 135 against the dollar. This is quite conservative, but still JPY 135. So is about JPY 450 billion negative from JPY 150 billion. And also, there is the recovery of JPY 200 billion. And so net is JPY 450 billion. And all together, well, there are -- this is based on the information that we have locally. But as Mr. Fujimura-san said, the USMCA compliant parts are zero as of now. And we think that there will be less of an impact as a result of this. In the first quarter, I think that we can enhance the precision of our calculation. And with the recovery measures, we want to try to reduce the impact. So well, it's just if, but the currency and impact, had we not had this, I think it will be more than our previous fiscal year. We do have the capability to generate the same operating profit. So how we exclude and recover from the impact of the tariff policies and to what extent we can do this will determine how much of an improvement we will see for this fiscal year. And about this fiscal year of the JPY 500 billion, well, the BEV market is cooled down, and there's a onetime loss possibility accounting-wise, this could become a discussion. So well, we have JPY 200 billion factored in for that. So that included the JPY 500 billion is thought to be the bottom. And how we can add on to that and improve will be the challenge for our business for this fiscal year. About the U.S. market and so the impact of the tariff policies demand. Well, as of May 20, we will give you a business update, and we'll report on the details at that time. But the EV market, the growth is slowing down. And we have to shift our plant to a certain extent. So put another way, hybrid, which is our strength. I think we can increase to quite an extent our production. Hybrid right now does have product competitiveness to quite an extent. Incentive-wise, hybrid was less than $1,000. So that is the level of -- so we want to expand our hybrid so as to -- in North America, including United States, compete. We think that we can compete there. And so from '25 to '30, the automobile business including preparing for BEV, we want to control well and think about the resources to inject so that from the period from 2025 to 2030, it will be a transitional period, which will be very challenging. But we think our automotive business can expand. That is our current thinking. That's all from me. Anything else? No? Okay.

Yes. Well, just to add to the North America explanation. Well, at the end of last fiscal year, the [indiscernible] we had rather fresh new models in place and it's being well received. So of that plus, as Mr. Mibe has said, the hybrid Accord, Civic, CR-V. Well, these models are still receiving a lot of high appraisal from our customers. And I think we can compete in the marketplace with these models. As of now, North America market on the whole, well, I think just like last fiscal year, we think the market size will be more or less the same, but we have to think about the impact of the tariff policies on the total demand. As Mr. Mibe has said, so we have to adapt flexibly to the changes that take place and support sales. That is all.

Next question. [indiscernible].

Two questions, please. First one is you talked about -- Mr. Mibe about the years from '25 through 2030 and the tariff impact will continue on not just this year, but next fiscal year. And ROS like 8% -- 10%, right, for the ROS. And apparently this year, you have a one-off onetime transient amount. What is the target profitability in mind that you said that investment in Canada is to be suspended, but Mr. Trump is focusing on the tariff. But in the future, there will be the talk about the environment as well. But how much efforts would you like to make for the battery EVs? And would you like to revisit your targets going forward for 2030 or '40 and I'd like you to give us your thoughts for the mid -- long-term span. And the second question is about human resources issue in April, Mr. Aoyama, the Executive Vice President, retired due to inappropriate conduct. And Mr. Aoyama had a very broad area to be looking after. And then this year, he has been gone. And how would you like to address the loss of him? And of course, Kaihara-san is here [indiscernible] have been promoted. And how would you like to address the changes of those human resources?

So Fujimura-san is going to explain the first part and then the rest for myself, by myself.

Thank you very much, Mr. [indiscernible] It is a difficult question in a way because in the business update, we would be able to give you some ideas about it. However, at a high level for the BEV, we are going to delay the resources to invest. And from 2025 to '40 for the carbon neutrality targets, we need to have the battery EVs be prepared in terms of the number of the models or the volume to be appropriate. We will continue to prepare for that. That will be of the level of a certain level of the efforts for the gross margin and R&D efforts and so on. But as for the gross margin up until the 2030, I shouldn't say too much because we anticipate a business update opportunity next round, but we are going to have new technology-based battery EVs, lots of prospective ones. And then the question is how much profitable it can be going forward. And then also, we have made investments for the battery factories so far. And there are some negative areas that we could accept as well from that too. But battery EV, how much of profit we can take. That's one thing. And then as I said earlier, ICE models with the current ForEx of JPY 150, the ICE model can get us JPY 1 trillion revenue. And the ForEx is going to change. However, we are going to continue and have to reduce, of course, the ICE models going forward. And then besides, I'd like to make the BEVs a bit more competitive with the next-generation models be added. And we'll keep getting profit from ICE whilst doing that efforts. And ROIC ideally should be achieved to be greater than the financial cost. 10% ROIC target is no change, and we need to have the 7% to 8% ROCE to achieve that. And then it does not just really for the 2026 and so on. But from 2025 through 2030, we will manage those indicators this way.

And then BEV's efforts and EV, FCEV target for 2040. Your question is about our targets for that. And then in terms of administration, there are environment measures and regulations have been kind of retracted with the [ FCEV 2 ] and so on. However, though it is not finalized, they probably would revisit them quite substantially. And then the plans we had, especially with regard to the volume would not be the that we would have to persist to going forward. However, for carbon neutrality, the BEVs could be the optimal solution to achieve it. That's the starting idea. And Honda have announced 0 Series EVs earlier, and we would like to push forward the plans as we had planned already. Of course, the volume may be a little bit down in terms of the production volume, develop of the models may be a little bit less than we were anticipating, but we need to continue on our efforts launching those products to stay competitive. And those products have to evolve by themselves based on the competitions in the market, we need to allow that. And the BEVs will be, of course, be available from our company continually. We will continue to do that. But in the next 5 years, the U.S. market would have a slower progress of the EV years. And then from 2030 onwards, maybe we can accelerate our actions for the environment. But still, the final goal still stands that is the carbon neutrality 2050. And then how we get there, what route we get there, we need to assess that once again, but our carbon neutrality target in 2050 must stand then we have to again reassess the situations to be in 2040. And we anticipate people would drive the cars for 10 years. And then in 2040, we need to make the carbon neutrality kind of vehicles available. And I wouldn't say that we are revisiting them substantially, but we need to look into the scenario from 2030 to 2040, given the environment in this period. And by 2030, I can say that electrification strategy need to be revisited. And as for Mr. Aoyama, he has resigned from his position and I really feel that we like to extend our apology for troubling people such as customers, suppliers, shareholders and our colleagues, all the stakeholders. And then Mr. Kaihara is going to cover as the Executive Vice President and Mr. [indiscernible] is going to be the Head of the Automobile business division, and he is going to look into the operations of that area. And each business domain is actually supported by the leading persons. And I'm very sure that those human allocation will be good enough to keep going in a good way. Thank you very much.

Are there any other questions? TV Tokyo [indiscernible].

Yes. My name is [indiscernible]. I'm substitute for Mr. [indiscernible] A question to Mr. Mibe, the President. Well, yesterday, the U.S.-China have decided to reduce significantly tariff. But U.S. and Japan negotiations, what are your expectations, if any, towards those negotiations?

Well, about U.S.-Japan negotiations, I mean, still ongoing. On our part, we want to see that there is global free trade because this will be the best for our business. In the case of Honda, we are not exporting from Japan to U.S. in such a large volume. So there is little impact there. But USMCA, well, we have the policy of to produce where the demand exists. And therefore, based on this policy, we have been doing a global business. But in Mexico, Canada and United States, that is the USMCA based on this agreement, we are looking at this North America as one single market and build a supply chain in North America, including these 3 countries. And about the U.S. and Japan tariff negotiation, it's not just limited to the United States. USMCA is the basis of our business. And therefore, we want the USMCA to be in place so that we can do business in a free environment, not just Mexico and Canada, but also for the American auto industry, I think this is the best answer, best solution. So for us, we want to see that the free trade environment can be rebuilt, and we want to approach the government and others so that this will be realized. In the past, we've been doing this, but we will continue to work to try to make this happen. That is all.

Thank you very much, Mr. [indiscernible]. And it's time for us to end. With this, we'd like to conclude the financial results press conference. As for the materials that have been presented, please refer to them on our website. Once again, thank you for your participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]