Honda Motor - Earnings Call - Q2 2026
November 7, 2025
Transcript
Masayuki Igarashi (Head of Investor Relations)
I thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Co., Ltd.'s financial results briefing for the second quarter of fiscal year ending March 2026. First of all, allow me to introduce the attendees today: Director, Executive Vice President, and Representative Executive Officer, Mr. Noriya Kaihara. Good to see you. Director, Managing Executive Officer, Mr. Eiji Fujimura. Good to see you, everyone. Operating Executive, Head of Accounting and Finance Unit, Mr. Masao Kawaguchi. Good to see you, everyone. Mr. Kaihara will first present the financial results of the second quarter ended September 30, 2025, and forecasts of consolidated results for the fiscal year ending March 2026. Then, Mr. Fujimura will present the details. Over to you, Mr. Kaihara. I thank you very much for your continued support for Honda's activities.
Noriya Kaihara (Director, Executive VP and Representative Executive Officer)
I would like to present to you the financial results for the second quarter of the financial year to March 2026. I'd like to start with the highlights of the financial results. Our operating profit for the second quarter of the year to March 2026 came to JPY 438.1 billion. Motorcycle operations saw unit sales decline in Vietnam, but global sales trended solidly and strongly, led by Brazil. For results up to the second quarter, we've attained the record high unit sales, operating profit, and operating margin. In automobile operations, though there was some positive profit impact due to price revisions, we saw a decline in profit due to impact from tariffs and one-time expenses related to EV. Operating cash flow after R&D adjustment, which indicates the resource available for future investment, came to JPY 1,281.3 billion on a par with the same period last year.
The forecast for the consolidated results for the term ending in March 2026 is operating profit of JPY 550 billion and profit for the year of JPY 300 billion. We are revising the previous forecast considering the decline in automobile unit sales and the reduction in production volume expected as of now due to semiconductor shortage, though we expect profit growth due to yen depreciation. In motorcycle operations, while we expect declines in unit sales in Vietnam, we hope to recover this in other regions. Thus, we maintain 21.3 million units. For automobiles, in addition to lower sales volume mainly in China and ASEAN, declines due to semiconductor shortage have been taken into consideration for North America. We are revising down from 3.62 million to 3.34 million units.
To give you the consolidated results for the second quarter of the year to March 2026, operating profit was JPY 438.1 billion, lower by JPY 304.4 billion compared to the same period last year. Investment earnings due to the equity method were JPY 10.8 billion, higher by JPY 31.6 billion, and the half-year profit attributable to the owner of the parent was JPY 311.8 billion, lower by JPY 182.8 billion.
Next, I'd like to cover the forecast for the consolidated results for the term ending in March 2026. Compared to the previous forecast, our forecast is operating profit of JPY 550 billion, down by JPY 150 billion, and the profit for the year attributable to the owner of the parent of JPY 300 billion, down by JPY 120 billion. The exchange rate against the U.S. dollar is assumed at JPY 145 for the full-year period.
Forecast for the full-year dividend for the fiscal year ending in March 2026 is JPY 70 per share, unchanged from the previously published forecast. Next, Mr. Fujimura will present the details of the results.
Eiji Fujimura (Director and Managing Executive Officer)
Allow me to present the results. The group unit sales during the six months to the second quarter were as follows. Compared to the same period last year, for motorcycle operations, though there was a decline in Vietnam, with growth mainly in Brazil and the Philippines, it came to JPY 10.763 million. For automobile business, it came to JPY 1.68 million due to declines mainly in China. For power products, though there were declines in Asia, Europe led the growth, and the total came to JPY 1.699 million. The consolidated results during the six months to the second quarter were as explained earlier.
Next, I'd like to present the factor analysis of operating profit for the second quarter compared to the same period last year. Operating profit was JPY 438.1 billion, down by JPY 304.4 billion compared to the same period last year. Factors affecting the operating profit were: first, impact from sales was positive by JPY 83.9 billion due to expanding motorcycle unit sales. Selling price and cost factors were an increase of JPY 162.4 billion due to effective price revision. Expenses gave us a negative impact of JPY 26 billion. R&D expenses led to a profit decline of JPY 20.4 billion. Currency effect resulted in a negative impact of JPY 116.2 billion. EV-related one-time expense led to a negative impact of JPY 223.7 billion, and impact from tariffs led to a profit decline of JPY 164.3 billion.
Our trial calculation, excluding the EV-related one-time expenses and the tariff impact, comes to operating profit of JPY 836.2 billion, on a par with the same period last year. We are getting operating profit by business segment: motorcycles JPY 368.2 billion, automobiles JPY 73 billion of losses, and financial services JPY 143.2 billion profits, and power products and other businesses we put up JPY 200 billion of losses. Operating profit of our motorcycle business was JPY 368.2 billion, up by JPY 42.4 billion year on year due to the following factors. Regarding sales impact, JPY 60.2 billion increase by additional sales volume mainly in Asia and South America. Regarding price and cost impact, profit increased by JPY 32.3 billion due to the effective price revisions and so on.
7 billion decline of the profits due to expenses, JPY 3.5 billion positive profit by R&D, and JPY 41.3 billion profit decline due to the foreign currencies, and JPY 5.3 billion decline of the profit due to tariffs. In automobile businesses, operating profit declined by JPY 331 billion year on year, resulting in JPY 73 billion operating losses due to the following factors. Regarding sales impact, profit declined by JPY 24.5 billion, accounting for the losses associated with the restructuring of the group companies. Price-cost impact, increase of the profit by JPY 130 billion due to the effective price revisions and so on. Expenses, JPY 33.8 billion increase of profits. Research and development, JPY 24.4 billion decline. Foreign currency effect, JPY 64 billion decline. One time EV-related expenses, JPY 223.7 billion decline, and tariff impact. Profit declined by JPY 158.1 billion. Next, regarding the cash flow situations, free cash flow, excluding financial businesses, was JPY 760.6 billion.
Masayuki Igarashi (Head of Investor Relations)
Net cash balance at the end of the first half was JPY 3,053.9 billion, and operating cash flow after R&D adjustment was JPY 1,281.3 billion. Next, I'll explain the consolidated forecast for fiscal year ending March 2026. Regarding the group's unit sales as compared to the previous forecast, in motorcycle businesses, reflecting reduction in volume in Asia and increase in regions mainly in Brazil and others, we will maintain the volume of 21.3 million units. In automobile businesses, in addition to the volume decline mainly in Asia, we reflect a volume reduction by 110,000 units in the North America region due to the impact of the semiconductor shortages. Thus, we would expect the volume to be 3.34 million units. In power product businesses, though some regional reviews to be reflected, we will keep the previous forecast of 3.67 million units. I've explained the consolidated business forecast of the fiscal year ending March 2026.
Eiji Fujimura (Director and Managing Executive Officer)
Next, I'll explain factors of ups and downs of operating profits year on year. The operating profit would decline by JPY 663.4 billion year on year because of the following factors. Regarding the sales impact, although losses were put up in conjunction with the group companies' restructuring, thanks to the unit volume increase of motorcycles and so on, we expect the profit to increase by JPY 3.3 billion. Regarding price and cost impact, JPY 280 billion increase of the profit is expected due to the price revisions and so on. Expenses decline by JPY 91.5 billion. R&D expenses decline of profit by JPY 126 billion. Foreign currency impacts decline by JPY 214 billion, and gross tariff impact decline of profit by JPY 385 billion, and the potential decrease of the production volume due to the semiconductor supply shortages is incorporated in the forecast based on the current assumptions, which would be JPY 150 billion negative.
Next, I'll explain the factors behind operating profit changes in expectations comparing to the previous forecast. Operating profit is expected to decline by JPY 150 billion from the previous guidance because of, regarding the sales impact, incentive hikes, and unit sales decrease of the automobiles and so on, the profit would decline by JPY 83 billion. Regarding price-cost impact, we revisited the recovery from the tariff impact. Thus, the profit would decline by JPY 70 billion. Regarding foreign currency impact, because of changes of the exchange rate to JPY 145 for a dollar, JPY 88 billion positive profit on that. For tariff, we scrutinized the impact in values, and it would be JPY 65 billion positive. And regarding semiconductor shortage, the impact would be JPY 150 billion negative for the profits. Lastly, this is the focus of the capital expenditures, depreciation, amortization, and R&D expenditures. That is all. Thank you very much for your attention.
Masayuki Igarashi (Head of Investor Relations)
Thank you very much for your attention. Then we'd like to proceed to the Q&A session. We will take questions through Zoom, which you have been informed about in advance. Due to the time restriction, we'd like to limit it to two questions per person. And please turn on the camera and the microphone on when you want to ask the question. So please use the raise your hand button to let us know if you have a question.
Okay, the first question, Ms. Ukita from The Yomiuri Shimbun.
Naoko Ukita (Reporter)
I hope you can hear my voice.
Masayuki Igarashi (Head of Investor Relations)
Yes, we can.
Naoko Ukita (Reporter)
My first question is, so the motorcycle is operating rate, and then for automobiles, it's JPY 73 billion losses. So I'm sure there are tariffs and semiconductor impact, but I just want to ask for your input on your general comment and your prospects for the future.
Noriya Kaihara (Director, Executive VP and Representative Executive Officer)
Okay, let me take that question, the overall perception. And then for details, I will ask Mr. Fujimura for some more comments. First of all, so for motorcycle, we had the best record high results. So we had a decline in Vietnam, but in Brazil and Thailand, we were able to maintain our good profit. For the second half, so for the full year, we expect things to proceed fairly well. So we need to be considering about whether we can cover the potential decline in Vietnam, but I think generally speaking, it should be okay. For automobiles, so with the ICE and HEV, gave us some cash so far. Now we need to spend that money into intelligent and hybrid, sorry, electric vehicles. So we have been doing okay.
In North America, we had good HEV sales revenues, so we hope we believe that the profitability has been increasing, improving. However, because of the tariff directive and also due to the changes in environmental regulations, so the business environment has been changing dramatically. For tariffs, I think compared to other OEMs, we have a pretty high local procurement ratio in North America. So in that sense, I think the impact should be limited. Still, we have over JPY 300 billion impact. So for the tariffs, actually, in a sense, as Mr. Fujimura mentioned, we consider this as a new normal, which we believe would continue for some time in the future. While we can maintain the good results in North America, the sales volume in China and Asia has been declining.
Particularly in Asia, the profitability for the HEV and the ICE will worsen beyond our expectations. So we would need some fundamental changes and actions for those. So for future actions, what we are thinking is we need to maintain or build, maintain the build in Asia and Oceania, the profitability structure to make gains from ICE and HEV. So the number of models and volume, so we need to revise our investment plans so that we need to further reinforce the competitiveness of HEV. So we need to further enhance the profitability in ICE and HEV. So we do need to review our product lineup, and then we need to focus our attention in profitable models, and then we need to invest in those. So we need to really bring up the overall volume.
And in particular, in line with the current situation, we need to rationalize the fixed expenses. I think that's something we need to work on quickly. And also for BEV, so far, we have been making quite a lot of expenditures. So for future, by shifting over to our own BEV, so we would need to have a break even at least. So we need to curb the losses, I would say, going forward. And then for tariffs, as I mentioned, we believe this is going to continue into the future as well. So we want to go by the policy of produce where there is demand so that we can combat, through our supply chain, the impact from the tariffs. That's something we'll continue, particularly for the improvement of profitability for automobiles. That's something we need to do. And overall, we need to improve our profitability overall.
Anything you want to add in terms of number? Okay, Ms. Ukita, thank you for your question.
Eiji Fujimura (Director and Managing Executive Officer)
This time, for the we have the JPY 438 billion, so the automobile is JPY 73 billion losses, and then for motorcycle, it's a JPY 370 positive, so for motorcycles, it's the best highest record. So those are pretty peculiar numbers that we've got here, but as we've mentioned from the beginning of the term, there's a lot of noise, kind of external factors, so for the to add a little bit about the JPY 438 billion, we have this impact, this negative of JPY 450 billion. That's the one-time cost, so the JPY 890 billion, that's our normal standardized performance, I'd say. This JPY 450 billion negative, as introduced in the material, we have JPY 160 billion due to tariffs, and then the EV provision for losses, we will allocate JPY 250 billion throughout the year.
We have put it in the budget. And then of that, we allocated JPY 225 billion of that into the first half. And then we have the group restructuring. We have some losses from the transfer of our subsidiary, which is JPY 43 billion. And also in the financial operations, and then the U.S. and the U.K., we had some settlement for like of like JPY 20 billion for litigation. I put them together, it's JPY 890 billion. We have like JPY 20 billion for financials, but most of this was related to automobiles. If we all of those included, we have this JPY 73 billion losses for automobiles. Versus the plans, as I mentioned, those noises or the external factors were had almost been cooperated. What may have been excluded may have been the financial operations, and then also the Asia and China volume decline.
Those were worse than their initial anticipation. So for the full year impact, for the full year, at the beginning of the fiscal year, what I mentioned was that we were thinking of JPY 500 billion. That was our target that we mentioned at the very beginning. But compared to the last fiscal year, we have a negative of JPY 450 billion due to exchange rate, and we need to recover from that. So that's another tariffs, JPY 450 billion, so JPY 900 billion. So all of that put together, so JPY 1.4 trillion, that's our actual performance. But we put it together, the prospects or the forecast for the year is JPY 500 against the JPY 550 billion because of the exchange rate, semiconductors, and the tariffs. It came to like JPY 1.3 trillion. That's about the idea we have. We initially used to say JPY 1.4 trillion.
That we said JPY 1 trillion were the financial operations and automobile motorcycle, and the rest was automobiles. Then the battery EV of JPY 600 billion negative. But for the motorcycles and the finance, we have Vietnam in decline, but we used to say JPY 1 trillion, but we have recovered. It's JPY 1 trillion is okay. But for the JPY 100 billion decline, at that time, we were thinking of BEV losses from JPY 600 billion, but we had a provision of JPY 50 billion. Put that together, JPY 650 billion. We used to say ICE or JPY 1 trillion back then. Now that came down to JPY 900 billion. That's as far as it declined. Putting those together, because of our business structure, as Mr. Kaihara mentioned, first, we need to reboost our profitability in the ICE. Then for battery EV, it's JPY 650 billion.
This is the gross profit of JPY 250 billion. That's all for the provisions. Now we have ended putting in the provision. So we're going to start. We will try to eliminate. We'll try to bring down the negative from the gross profit level, as close to zero as possible. The rest would be for R&D expenditures. So probably we'll come to JPY 450 billion. So that would be the baseline for the next year. And then for the tariffs as well, of course, net. We do have JPY 330 billion or so impact. So we will need to work through those, how much of this recover in a few years. I just mentioned the P&L a little bit, but for the cash expenditure control is well in place. So if you look at the balance sheet and the cash flow, the strength of those are continuing as well.
So particularly for the cash control, we need to have a good monitor over that. And then we need to recover our PL, P&L for the automobiles quickly. And then having said that, of course, we need to put in our resources to prepare ourselves for the future. So we want to put those together. And then we want to do a stable dividend with the DOE. So we want to be able to provide a stable dividend to our shareholders as well. So we want to have a good PL and balance sheet balance. We want to have a good well-balanced structure. And then so we want to recover our profitability for the time being now and also get prepared for the future. For automobiles, as I mentioned, we do have a keen sense of crisis. And then we are ready to take actions. Thank you very much.
Naoko Ukita (Reporter)
Thank you very much. May I ask one more question? You said already perhaps about impact by the chips. It's already incorporated in those values, about JPY 150 billion. And in North America, there is this impact in reality. But what is the prospect for the procurement? And do you think the situation will improve or getting worse? Do you have a risk of such? Please tell us.
Noriya Kaihara (Director, Executive VP and Representative Executive Officer)
I will answer the question then. So for the semiconductors, for the customers, suppliers, we are causing the troubles with that. We are sorry about it. As we said right at the beginning, it's already reported in the media company called Nexperia. The chips from the company have been stopped, suspended. Therefore, we have impact on the procurement.
And then we work together with the tier one manufacturers to try to minimize the impact on the production as of the 27th of October in the production plant in North America. We are just thinking the production situation today. So as of now, we have the impact of 110,000 units. That's reflected. And then I said JPY 250, but operating profit of JPY 150 billion. That is put up in this announcement today. And I heard that shipment has resumed in China now. And we have already studied our communications to the suppliers. And we are trying our best so that we can get supplies of those chips as much as we can. And going forward, it is difficult to tell definitively, but as of now, in the week of the 21st of November, probably in that week, we wish to resume our production eventually.
We are trying to achieve that now. As of today, the parts, those chips are coming up now back in the network. It is getting better. We are seeing some signs. However, it is not definitive as of yet. We try to stay communicating with the suppliers very closely so that we can try our best to resume. That is the situation today. Thank you.
Masayuki Igarashi (Head of Investor Relations)
Thank you so much. Thank you to Mr. Ukita as well. We'd like to take the next question from a Nikkei newspaper. Mr. Okunaga, please.
Taisuke Okunaga (Analyst)
This is Okunaga from Nikkei newspaper. Thank you very much. For the impact from Nexperia, I'd like to ask another follow-up question. So, for Honda has suffered. Why has Honda suffered such a big damage? You said that you hope to start production on the week of November 21st.
But have you considered procuring alternative parts? So do you think that the impact should not go beyond JPY 150 billion?
Noriya Kaihara (Director, Executive VP and Representative Executive Officer)
Okay, thank you very much, Mr. Okunaga. First of all, so the reason why we have this much impact is that this time the components, well, I cannot give you any details about the component, but the components were sourced from one supplier. That was one major factor. And another thing is in the past, for semiconductor, yes, we have had some impacts such as these. So we have worked together with a supplier to hold a kind of interim inventory or appropriate inventory level. We asked them to hold that. That has happened. However, it was single sourced. And then also in North America, the sales have been going very well that we have been producing almost at a full capacity.
In that sense, with the in-transit inventory, it was getting low as well. Because of that, the supplier was impacted. Then promptly, that impact led to impact our production as well. For whether we are considering some alternative sourcing, of course, yes, we have considering alternative, let's say, products or off-the-shelf products. To the extent we are able to find out, yes, we are using them. At an early stage, as early stage as possible, we want to apply whatever we can utilize. That is why sometime during that week of November 21st, we believe we should be able to resume production. For future supplies in China, if in China, if they ever stop shipping shipment again, we will never know the impact. But should that ever happen, if you're asking me, is that going to be another impact?
I cannot say for 100% sure or no. But at this point in time, as far as we know from the intelligence that we have, we should be able to resume operation. And by the date that I mentioned, that concludes my answer. Thank you very much.
Taisuke Okunaga (Analyst)
Thank you very much. I want to ask another question. For the reason for your downward revision. So at August, you said JPY 650 billion EV-related one-time expenses. Has this gotten better? And then for sales in North America, I think, is it difficult to raise prices in North America? So you know that turned out to be negative. So I just want to know the reason. And then you said that you want to bring down the gross profit, gross losses to zero. So I would like to ask about what you plan to do?
Eiji Fujimura (Director and Managing Executive Officer)
Okay, thank you very much for the second question. Let me try to answer that. For the EV-related one-off one-time expenses. Oh, sorry. First, the tariffs impact. Against the number that we gave you last time, we have been able to minimize the impact. So therefore, for our profitability, it is getting better. And then for the EV impact, we have put in some more amounts. So in that sense, the impact has become greater for the price hikes in North America. Initially, for North America, we were assuming that we would be able to raise prices. And then we had been prepared for that. However, price hikes, there's nothing you can do easily by yourself. So we need to evaluate the market situation. What has happened is that in North America, particularly in the US, other OEMs' incentives have been getting higher.
The actual market selling price has not gone up in real terms. Therefore, of course, we have done the annual price revisions. However, looking at the other companies' status, we found it difficult to raise prices due to the tariffs impact. We were not quite able to gain that positive impact due to the price hikes that we had anticipated at the very beginning. Unfortunately, we cannot expect that. For the second half of this year as well, for the price hike, I don't think we can really expect good impacts to come from that at all. That completes my answer. Thank you very much. I'll explain with those numbers in addition. Then last time, the gross. It's JPY 450 billion negative gross tariff impact. Then JPY 100 billion recovery. So JPY 350 billion net impact for tariff.
This time, gross JPY 385 billion. Actually, gross impact is less of JPY 65. Recovery is about JPY 100 to JPY 50. Net impact is about JPY 335 billion. Eventually, that is the net impact. The gross impact, JPY 650. Of course, we had an accurate understanding today. For as much as JPY 500 billion, we have export from Thailand or Asian countries to the U.S. We were concerned about a possible recession as impact over there. We incorporated that in our expectation before. Now we released it. That means we have a less of JPY 650 from gross. We have a net recovery from JPY 100 to JPY 650. Actually, in the automobile market, it is difficult to revise the prices. Therefore, we need to delete that part for the automobiles. That is why we have those numbers.
Thank you very much, Mr. Okunaga. So if you have questions, if you have questions, two questions, please tell us two questions in sequence. Okay, we'll take the next question from Yasunaga-san from NHK.
Hiroshi Yasunaga (Analyst)
This is Yasunaga from NHK. Can you hear my voice?
Noriya Kaihara (Director, Executive VP and Representative Executive Officer)
Yes. Thank you.
Hiroshi Yasunaga (Analyst)
Just one question because others have asked the same question. In the automobile business, China and Asia, you had some declines, you said. But in your company, you are very much struggling with your sales in China. That's the impression. So there was a Ye GT's launch timing has been postponed. I'd like to hear about the facts about it. And then what are you going to do? And then where is the difficulty of the market? So I'd like to hear about that.
Eiji Fujimura (Director and Managing Executive Officer)
Okay, thank you very much, Mr. Yasunaga, for the China market. Let me try to answer that question.
For the Chinese market, overall market, actually, because the incentive has been reduced. So the total market has been declining slightly. But basically, it's sideways movement. That's the total market. And then for this time, for Honda, particularly for ICE, well, actually, the price discount has been staying at a high level. So we have been struggling a lot. So in a sense, value for money, we are behind others. We are aware of that. And then for BEV, BEV, so for the features, the NOA navigation on autopilot, that's not provided on our cars. So people consider our cars pricey. And then other companies put in this, put the Momenta, and then offer it at a lower price. So that is why it's difficult, actually. And then that is the situation in China.
For electric vehicles, as pointed out earlier, the Ye Series — the 1, 2, and 3 — were in our horizon. But we felt the need to completely review this. So we came up with a Ye GT we had assumed. However, we did have to postpone it in reality. So this would be, we were thinking of next year initially for next fiscal year, sorry. However, we will, for the time being, I cannot tell you exactly when that's going to be, but we will postpone that. And then from the planning stage as well, we need to consider right from the planning stage how we want to launch this model. So for electric vehicle, this current situation will continue for some time. And then against that kind of business environment, for ICE, we need to make solid sales from those.
Fortunately, we have completed depreciation of all the factories. So we need to enforce our business structure in the industry and then also optimize our manpower and then do a more precise sales prediction. And then we'll try to make our business more profitable. That is what we are doing right now. And then this is all I can say for now. Thank you very much.
Masayuki Igarashi (Head of Investor Relations)
Thank you very much, Mr. Yasunaga. Next question from Asahi Shimbun, Mr. Miura, please. Miura from Asahi Shimbun.
Miura (Analyst)
Thank you for your explanation. And then for our two questions. One, in the motorcycle businesses, Vietnam, you had a decline of the entire business. And then they had restrictions on the electric vehicles. And how much of those impacts did you incorporate? Do you incorporate in this statement? And then what is your action against it?
Question two is about automobiles, about specifically EVs in China. And you said that you're going to have a radical action. And then what is the reasons why you have a struggle in the Chinese market? What do you think is the cause for that?
Noriya Kaihara (Director, Executive VP and Representative Executive Officer)
Mr. Miura, thank you for your question. To start with Vietnam in motorcycles, in Vietnam, as you know, well, it is not yet implemented in the market. However, ICE motorcycles now would be regulated, especially in the city area. And then they said that they might apply these new regulations starting middle of the next year or so. However, with that in place, actually, when the announcement was made last summer, people started reflecting their buying of the ICE products. And then we were expecting some negative impact on the Vietnamese businesses. However, in October, we are seeing the ICE businesses coming back slightly.
Then probably the things that this regulation is still a talk. Only we don't know if that is practically to be applied in Vietnam. So for some time, probably a current model of the ICE-based vehicles will be sufficed. And then, of course, electrification will start some time later. And then from starting this year, we have already launched the two ICON e: and CUV e:, those two electrified vehicles over there in Vietnam. And the idea is to try to sell more of those EVs over there. And in Thailand, we have a plan to start the production of a new EV model. And we are thinking about accelerating the start of this model production. And sometime earlier next year, probably in March, April time next year, we would like to try to bring over those new EVs to Vietnam.
So even when they have their new regulations practically in place over there, we can offer the EV vehicles over there. So this time, we are expecting unit volume to be a little bit less. However, we have Brazil businesses and Thai businesses quite well. So that will compensate for the situations in Vietnam. So that is motorcycle businesses in Vietnam. China EV,
may I? Please.
So EVs in China, as we said earlier, basically E series are the new products over there. And looking at the vehicle in comparison to others, for instance, the price range, they are higher, more expensive than the other products, CNY 150,000 of other products, whereas ours are CNY 200,000 Chinese RMB. And our product is not price competitive so much. And also we have NOA navigation on autopilot system. This automated driving system, basically. The competitors' products have NOA. However, not on our product yet.
Therefore, going forward, we will change the models in the future and we will try to do that earlier. The Momenta, the local autopilot system, could be obtained so that we can add this autopilot system to our products. Doing so, we can strengthen the intelligence of the products. Also, cost competitiveness, we need to approach too. Currently, we are trying to expand the local procurement in China. That way, we can improve our cost competitiveness of the product. That is what we are trying. Thank you very much.
Miura (Analyst)
Thank you.
Masayuki Igarashi (Head of Investor Relations)
Thank you, Mr. Miura. Okay, then next question from Toyo Keizai Weekly, Yokoyama-san, please.
Yoshihiro Yokoyama (Analyst)
This is Yokoyama from Toyo Keizai.
Masayuki Igarashi (Head of Investor Relations)
Yes, we can hear you all right.
Yoshihiro Yokoyama (Analyst)
Thank you. I have two questions as well.
The first question is about your full year prospects with the impact from a semiconductor 150, and then you have a 450 profit, and then you are thinking of a 550. I guess you do have quite a plan for your profits to suffer in the second half. Can you give me some numbers about what the factors are as to why you see a lower profit for the second half?
My second question is for the profitability in automobile business. Right now, for the automobiles of the ICE, is 8% what you're thinking about for the ICE. For BEV, you're going to have your own battery, and then you start from zero gross profit. But when would it turn into profits? When would it? Also, do you have any additional measures to gain more profits?
So I'm just, I think it might be difficult, sensitive whether you're going to get into the profit for the automobiles this year. So I just want to know. Okay.
Eiji Fujimura (Director and Managing Executive Officer)
So okay, first of all, okay, thank you for the question, Yokoyama-san. For the difference between the first half and the second half, we have this, of course, we have this JPY 150 billion tariff impact that will continue in the second half as well. But on the one-time expense, we have the BEV provision that was in the first half. So those would offset each other. Well, that's what we expected to do. And then for the first half and the second half, there will be a negative of JPY 40 billion about the foreign exchange. And the rest will be the substantial substance portion. Maybe it's better to tell you the numbers.
We have 440, and it goes down to 110. So JPY 320 billion, that will be the difference between the first and the second half. So let me explain that, first of all. So as I said, with the semiconductor and the one-time expenses, those will offset each other. And then so JPY 320 billion, and then we take away JPY 40 billion for the impact. And then JPY 290 billion, that would be the actual substance difference. So concerning this difference between first half and second half, as you can imagine, so the expenses and R&D, there is a difference between the first and the second half. I hope you can see that, which is a pattern. And then for quality-related issues, based on the sales base, there's a bit of a difference in calculation. But anyway, those are mainly those numbers.
Incentives, when it comes to incentive, we have this negative of 110,000 units decline in North America. We don't know how we're going to use this incentive, but going by the original expected volume for North America, if we were able to keep the original target. However, maybe we need to increase the incentive a little bit. But now that accounts for the difference between the first half and the second half, we have not really decided. We need to discuss with American Honda how we're going to make those work, actually. Okay, that's all for the numbers. Thank you. Okay, and then let me try to answer the rest about the EV, the gross profit for EV. For North America, that's the assumption for answering my question. So this year, we do have losses. We have JPY 650 billion. We have that. So this includes one-time expenses as well.
Next business year, I think we'll start from a JPY 400 billion range, that level. And then from there, of course, we won't have the IRA subsidy. So the business environment is very, very challenging. So because of that, we cannot be pursuing a far larger sales volume. However, we do have good prospects for the supply from GM. So now we will have more and more BEV of our own development. So now we need to think about focus on how to reduce the manufacturing cost for our own BEV. And then also, it's important to consider whether we can produce at a very efficient way. And then with those efforts, we need to minimize the losses to the best we can. However, looking at the market, it's very difficult to read how the market would move.
So at the very beginning of mass production, of course, the burden of a fixed cost will be heavy. So we just need to work on how best we can flexibly produce, reduce costs so as to enhance or improve profitability. If you ask me when, I guess all I can say is as soon as we can, we won't make it to profit. Thank you.
Yoshihiro Yokoyama (Analyst)
So the automobile businesses this time, do you have any disclosure for the expectations, the profit or losses?
Eiji Fujimura (Director and Managing Executive Officer)
So we do not disclose as per product levels, JPY 550 billion, and you have to subtract from that level. So for the motorcycles, it will be about JPY 600-700 billion, same as last year, and JPY 300 billion for finance, like last year. And they both together, we would earn JPY 1 trillion. We said that.
Masayuki Igarashi (Head of Investor Relations)
And then you could actually assume from that for the automobiles, we would end up in losses. And battery EV at one time, JPY 250 billion for that. And also chips, one time, JPY 150 billion again. Both together are JPY 400 billion negative altogether, plus. This time, this term, we have a tariff impact as well on the top. So the number will be including all those factors. And then, as we said before, we need to earn money, revenue based on ICE. And losses coming from the BEV should be controlled better. And not just P&L. We have to look into the spending out of the cash flow. We have to control the timeline of our spending too. So that is how I'd like to manage.
Yoshihiro Yokoyama (Analyst)
Thank you very much. This is all.
Masayuki Igarashi (Head of Investor Relations)
Thank you. Thank you very much, Mr. Yokoyama.
I do see a lot of hands raised, but due to the time restriction, we'd like to make the next question the last. From TV Tokyo, Ms. Nagai, can you hear me?
Nagae (Analyst)
Yes, we can hear you.
Masayuki Igarashi (Head of Investor Relations)
Thank you.
Nagae (Analyst)
One question. For this fiscal year's forecast, three months ago, you revised upward, but this time, you're revising downward. So when you make the forecast, I just want to know about the approach. Are you being very conservative? The second is your forecast for the unit sales for, I think you cover a lot of China, but excluding China, for other ASEAN markets, I think there's a bit of a decline. Compared to three months ago, we are struggling in Asia so much. What's the reason? What are the factors?
Noriya Kaihara (Director, Executive VP and Representative Executive Officer)
Thank you very much for your question, Ms. Nagae. So how to put up our plans?
Masayuki Igarashi (Head of Investor Relations)
So I wouldn't say we are conservative about putting together those plans because usually, the idea is that the transparency is our focus. So whatever we get to know, we try to incorporate in those explanations to give you the explanation. And then tariff issue, for instance, we would have those, the alleviation of tariff impact, and then calculating all those returns, refund, we would have that much of a refund included. And then these are the well-calculated impact and exchange rate forex for the JPY 70 billion plus, we include that too. And the chips, that is an extra one, that is a bit of a special one, but JPY 50 billion tariff impact that is included, as we said, and plans put together based on the principle that it is not always conservative. Please be acknowledged about it. And then the forecast of the unit sales in ASEAN regions.
Noriya Kaihara (Director, Executive VP and Representative Executive Officer)
The decline of the unit sales is a bit significant, as what you said is quite right, because in ASEAN region, the unit sales, the volume is expected to be down a bit, 750,000 units less. So it is a significant reduction as compared to the first forecast, and then especially Indonesia, Thailand, in those countries, or Malaysia as well. There are the government policies to be looked at also, and also the market is a bit shrinking too, because of which we have expected the reduction of the volume in Thailand. The competitors' composition is something that accounts for the situation too. For instance, selling prices, we are losing price competitiveness against the others, and so sales are stagnant, and we need to react and take actions against this situation, especially in Asian countries. We need to have radical measures against it.
And then from this term, next term, next year, we do not have a new launch model. Big minor change of the City, that's one thing I can share with you. And then the big minor change of the City, the timing of that could be a kind of opportunity to take advantage of for us to give a kick to the ASEAN market. But nevertheless, the ASEAN market is tough, and because of that, we decided to now revise our expectations. And then again, the conservativeness about the volume expectations, it is rather a solid conservative number, I thought. And also, you mentioned about the composition of the competitors. Would that include the Chinese supplier, That is always the case, is that right? So in terms of the volume of the sales, this is the number that we will commit to achieve.
That is how we set up this volume. And about the competitors, of course, the Chinese suppliers, their accounts as well. But in the ASEAN markets, there are emerging Chinese products coming in. And against them, the existing manufacturers are providing more incentives, prices are kind of discounted against the Chinese. And then that is making the situation more competitive in terms of the prices. That is the market situation over there. Thank you very much. Thank you, Ms. Nagae.
Masayuki Igarashi (Head of Investor Relations)
Okay, thank you very much. We'd like to close now the financial results briefing. The material is listed on our website, so please refer to it. Thank you very much for your participation. Thank you very much.