Honda Motor : FYE202603 2Q financial minutes e

Investors and Analyst Session for Fiscal First Half Year Ended September 30, 2025 Financial Results Q&A

Date/Time：November 7, 2025, 17:00-18:00 Speakers：

Noriya Kaihara Director, Executive Vice President and Representative Executive Officer Eiji Fujimura Director, Managing Executive Officer

Masao Kawaguchi Operating Executive, Head of Accounting and Finance Supervisory Unit

Q：Analyst A

1.

As a premise for the impact of the semiconductor supply shortage, please explain in detail what is currently happening and what environment the reduction of 110,000 units in North America was assumed under and reflected in this situation.

2.

To confirm your full-year performance, please provide specific figures detailing the impact of the semiconductor supply shortage that occurred in the second quarter and other one-time expenses such as EV-related costs.

A：Kaihara

1.

Regarding the semiconductor company Nexperia, export restrictions from China have created supply challenges for semiconductors. This occurred in early October, and since then, supply has been delayed.

While I cannot specify the exact component names, they are used in components, and because these semiconductors are not being shipped from China, as of October 27,

1

restrictions and adjustments have been made to the production operations in North America.

In Mexico, operations have been halted since October 28, while in Canada and the United States, production adjustments have been made, reducing the daily production volume.

After the occurrence of supply issues, we began discussions with suppliers, including actions such as going directly to suppliers to pick up parts or simultaneously developing alternative parts. Recently, there has been information about resuming shipments from China, so at this point, shipments from China are expected to begin gradually after this week. With those shipments swiftly reaching North America, it is anticipated that production could resume in the week of November 24. Based on this forecast, we are looking at a reduction of 110,000 units this time.

A：Fujimura

2.

Regarding tariffs, approximately 40 billion yen was reported in the second quarter over a three-month period. For six months, it amounts to about 160 billion yen. Refunds from the scrutinization of US content in complete built units (CBU) for the first half and the reduction/exemption measures have been applied in the second quarter, reducing the impact over the three-month period of the second quarter.

Regarding EVs, we have decided on an impairment for the Acura ZDX this time. As a result, we have undertaken reductions such as in fixed assets, amounting to about 100 billion yen. For the first half of the fiscal year, the total is approximately 220 billion yen. During the quarterly financial results, we explained that we expected 250 billion yen in one-time EV expenses, but this time, most of the loss provision related to GM's EV has been resolved.

Moving forward, we will negotiate with GM about the compensation that will be our share of the burden.

As for other one-time expenses, there is a loss of approximately 43 billion yen due to the reorganization of group companies and approximately 23 billion yen related to litigation and settlement costs of financial subsidiaries, both incurred in the second quarter.

In total, one-time expenses including tariff impacts for the second quarter over three months amounted to approximately 207 billion yen, and for the total of the first half-year, approximately 450 billion yen.

In addition, although it is not at the operating profit stage, the corporate tax rate for the second quarter was quite high. While I will refrain from specifying the countries, following tax negotiations with the authorities, a degree of certainty emerged. As a result, we made a provision as part of the accounting process, amounting to a negative 37 billion yen in the second quarter.

Following question on 1.

Regarding semiconductors, if shipments from China do not proceed smoothly, is there some plan for alternatives? If the resumption of shipments is delayed, is there a possibility that the impact could expand beyond the reduction of 110,000 units?

A：Kaihara

1.

While we are progressing with alternatives, if shipment is halted again, currently there is no sure or immediate solution. Therefore, we recognize that there is a possibility of impacting production.

Following question on 2.

As for the full-year outlook of one-time expenses, are we to add the impact of the semiconductor supply shortage here, with everything else already factored in?

A：Fujimura

2.

Expenses related to EV transient costs and group reorganization costs were originally factored in. Regarding tariffs, the initial forecast was 650-billion-yen gross, decreasing to 450 billion yen in the first quarter, and now 385 billion yen, progressively increasing in accuracy.

Q：Analyst B

1.

Compared to the previous outlook, if there is a reduction in production due to a semiconductor shortage, supply and demand should tighten. Please explain the reasons for the increase in expenses due to incentives.

2.

I asked a similar question during the COVID-19 situation, but it seems that every time a disaster occurs, like the Great East Japan Earthquake or the floods in Ayutthaya, your company is particularly quickly and heavily affected. Based on these past experiences, could you explain how your company is trying to avoid situations that would have a significant impact on the supply chain this time, and share your efforts in crisis management?

Your company is advancing the standardization of parts, so if there is any issue with those parts, the impact tends to manifest quickly and significantly. Why does it appear that your company always seems to suffer disadvantages compared to others?

A：Fujimura 1.

Compared to the previous forecast, there is an impact from sales incentives of minus 48 billion 500 million yen on sales, but regarding the production reduction decision, there is a

situation where the numbers have been changing daily in terms of the period affected from the week of October 26 onwards. The impact from the semiconductor supply shortage of minus 150 billion yen came in at the last minute, and I would like you to view the sales incentive of minus 48 billion 500 million yen as being based on the situation before the 110,000-unit production reduction impact becomes apparent.

Therefore, before the impact becomes evident, we were aiming to maintain 1.68 million units in North America. Since we were slightly behind schedule in the first half results, we planned to slightly increase incentives to achieve the target. The incentives used in August and September were restrained more than planned. However, considering that other companies are expected to raise prices to some extent due to tariff impacts, they aimed to achieve the target number of units by adding a bit more incentive to ICE and HEV in comparison with other companies.

This time, due to the sudden reflection of the impact of 150 billion yen, we will be coordinating with the local area. However, we believe that incentives will decrease due to the reduction in sales volume by 110,000 units.

A：Kaihara

2.

The semiconductor in question was sourced from a single company. Based on the reflections from the previous semiconductor supply shortage, we undertook measures to ensure a reliable intermediary stock when dealing with single-source arrangements.

However, it is undeniable that the effects of standardizing parts across multiple models have led to insufficient response after supply ceased.

Moving forward, we aim to avoid single-source arrangements as much as possible, but there might still be cases due to cost competitiveness and technical perspectives. In such instances, we will revisit our stock management approach to ensure we can respond with sufficient reliability. Furthermore, when such supply challenges occur for any given part, it is essential to thoroughly consider the arrangements for when an alternative part can be procured. Of course, we are concurrently considering alternatives this time as well, but if

the supply stoppage period extends, it must not happen that the development of alternative parts does not meet the timeline. Therefore, we need to determine for each part the lead time required to procure an alternative part. Based on that assessment, we believe it's necessary to have adequate stock, or to hold intermediate stocks even in small quantities, as part of an appropriate response.

Following question on 1.

Is it correct to understand that the competitiveness of HEVs like the CR-V is solid? I think other companies will release competitive models next year, but could you share your thoughts on how well the aging CR-V can compete against them?

A：Fujimura

1.

Regarding HEV, it has reached its maximum capacity. For the first and second quarters, we have kept incentives at a low level, so we understand that the potential remains strong.

Q：Analyst C

1.

Please update the situation regarding recent months' policies and changes in your company's sales in the motorcycle business in Vietnam.

2.

Regarding the profit of motorcycles, please provide the outlook for the difference between the first half and the second half of this fiscal year. While the motorcycle segment performed well in the first half of this fiscal year, if the performance declines in Vietnam in the second half, wouldn't the profit decrease due to worsening mix, even if the unit sales forecast remains unchanged?

A：Kaihara

1.

First, there was a report stating that, from next summer, regulations will be imposed on the entry of ICE motorcycles around Hanoi. In response to this, customers postponed purchases of ICE vehicles, particularly in August and September, with results showing a decrease of 10 to 15% compared to the same period last year. Therefore, we have reflected approximately 200,000 units in the full-year sales expected to decline in Vietnam. On the other hand, given the current situation, it's unclear whether the regulations will be implemented, so sales in October have been almost the same as the previous year with customers returning, and we will closely monitor future developments.

Additionally, in preparation for the possibility that the traffic restrictions are enforced, we have launched two EV models in Vietnam this year, the ICON e: and the CUV e:. We also consider that these two models alone are not sufficient, so we are advancing the production start of the new EV model planned to be manufactured in Thailand and will export it to Vietnam. We are preparing to fight with these three models for the time being, aiming to be able to produce that model locally in Vietnam by next year.

A：Fujimura

2.

Regarding the overall profit for the motorcycle business, we believe it will be at the same level as last year. As for Vietnam, as explained earlier, we are taking various measures, but we are incorporating a decrease of 200,000 units for the full year. Additionally, the consolidated sales volume for the entire Asia region is forecasted to be 7.1 million units for both the first and second halves of the year. While there are influences from expenses and exchange rates in emerging countries, the profit gap between the first and second half is mainly due to the decrease in the number of units, particularly in Vietnam, which has a high profit margin.

Following question on 2.

Considering that the performance of the second half of the current term will be the basis for the next term's profits, would it be correct to assume that the profit from motorcycles in the next term will remain flat or slightly decrease? Since we cannot expect EV models to cover the sales volume and their contribution to profits is small, I believe the profit will not increase unless local battery production is initiated. What do you think?

A：Fujimura

2.

First, regarding Vietnam, we will introduce EVs based on the market share situation. Vietnam is a country that holds a large portion of profits, so it is certain that the introduction of EVs will somewhat decrease profitability.

On the other hand, South America is growing in terms of contribution to profits, and currently, due to a situation where production capacity is insufficient, we have restored capacity to over 1.4 million units over the past two to three years, and plan to increase it further.

Furthermore, in India, there was a holdback in purchases due to the GST tax reduction in September, but sales rebounded significantly in October. Of course, there is still a gap compared to Vietnam and others, but it has secured a double-digit profit margin.

The motorcycle segment is showing a very high profit margin of 18% to 19%. We are achieving this amidst significant volatility in different countries. We will skillfully balance by covering the decrease in units in Vietnam with other regions.

Q：Analyst D

1.

Has there been any change in the perspective that the EV losses for the current term are 650 billion yen? Please provide an update, including the outlook for the next term.

2.

The tariff impact has been reduced to 385 billion yen in gross terms. Please provide an update on the outlook and countermeasures.

A：Fujimura 1.

The deficit of 650 billion yen for EV remains unchanged this time as well. Specifically, it is divided into approximately 250 billion yen in one-time expenses and approximately 400 billion yen in development costs.

The allowance for losses related to GM, which is considered a one-time cost, is almost completed except for the compensation burden. From the next fiscal year onwards, the Honda 0 Series will be launched, so it will be important to minimize the gross profit deficit while controlling cash based on the development cost of approximately 400 billion yen.

A：Kaihara

2.

As a basic perspective, we do not think this situation will change immediately. We need to consider the current situation as a type of new normal, and we operate under the assumption that it will continue into the next fiscal year and beyond.

Initially, we intended to raise prices to a certain extent, but in the current market in North America, particularly in the United States, actual sales prices have tended to decrease compared to before the impact of tariffs. Each company significantly increased incentives, making it quite challenging, in practice, to pass on costs to sale prices. Of course, we also

carry out annual price revisions, so there is some increase, but we have not been able to make price revisions that cover tariffs.

Therefore, under this situation, with the cooperation of suppliers, we have begun efforts to reduce costs as much as possible, and we are starting to see some results.

However, we believe it is fundamentally necessary to increase the local procurement rate. Therefore, in the future, especially for parts and similar items currently sent from Japan, we will thoroughly engage in activities to raise the local procurement rate and minimize the impact as much as possible.

Following question on 1.

Reducing the deficit to 400 billion yen is not an easy task given the current environment, is it?

A：Fujimura

1.

Depending on the market situation, the business environment is not favorable due to the end of IRA subsidies, and since our EV plant will not be starting at full capacity, we are considering combining our P/L and cash flow. Currently, we are planning our operations with a target of 400 billion yen.

Q：Analyst E

Regarding the current state and outlook of the automobile business in the Asian market, the sales situation seems tough, but please explain separately for China and ASEAN.

A：Kaihara

First, regarding the overall market in China, there is a perception of slight stagnation due to reductions in subsidies, but even considering this situation, we see the market remaining almost flat in terms of a significant number of production units moving forward.

In the second quarter, we continue to struggle with an approximately 13% decrease in sales volume, and substantial discounts have been made on ICE vehicles. When considering discounts and value for money, we believe competitiveness has been lost. In the EV sector, we have released the Ye series, but its price range is positioned higher compared to competitors, and it lacks the NoA autonomous driving feature, which is considered one of the factors for its weak competitiveness.

As a response going forward, regarding EVs, we plan to distinguish the differences from other companies and apply China's most advanced NoA produced by Momenta. Furthermore, this Ye series was originally planned in three stages, but after the currently available Ye7 as the first release, we planned to launch the GT, explained at the previous China Motor Show, in the next fiscal year or later. However, instead of releasing it in its current state without competitiveness, we will postpone, refine the planning, and take time to enhance competitiveness. Regarding ICE vehicles, even as they lack competitiveness, we plan to apply Momenta's NoA to ICE vehicles in the future by determining the pricing with value for money.

From a structural perspective, the factories have already been streamlined by idling two lines and closing one out of both factories, so we will work on further improving profitability, including improving our structure even more.

Next, about Asia, the overall market, particularly in Indonesia or Malaysia, is significantly shrinking due to increased taxes and other factors from a policy perspective. In this context, we are also seeing a drop in both unit sales and market share. Regarding the Thai market, as you are aware, Chinese manufacturers have entered, intensifying the sales competition. The use of incentives is extremely aggressive, not only among Chinese manufacturers but also the price competition with Japanese manufacturers has become severe due to other companies lowering their prices.

Considering this situation, we have revised downward the full-year group sales forecast for Asia, from 390,000 units to 315,000 units.

Looking ahead, for the time being, there are no plans for new models, so strengthening sales strategies is the priority to support the market. However, for the next fiscal year, there are models anticipated to undergo significant minor changes, which we hope will be a trigger to boost sales.

Furthermore, as a future strategic consideration, we aim to develop our business by investing resources in next-generation HEV systems that are anticipated to meet future market needs. This will involve carefully considering market development and revenue balance.

A：Fujimura

Regarding the profit situation of the joint venture in China, it also operates businesses in motorcycles and parts after-sales service, positioning the entire China business at break-even.

In terms of current production capacity, it can produce 1.2 million units, but plans to sell 610,000 units this fiscal year. So far, as a structural reform, we have managed to constrain the production level capacity to 700,000 units through direct personnel. As for the ICE factory, depreciation is mostly complete, so moving forward, we will promote the reduction of fixed costs in the sales and marketing areas. As for further measures towards cost reduction, discussions and examinations with partners have begun. We will inform you as soon as decisions are made.