Honda Motor - Q3 2024

Transcript

Eiji Fujimura (Executive Officer, CFO)

The breakdown is as follows: sales impacts, a positive profit, sales impacts is positive, and of JPY 360.6 billion, mainly due to an increase in automobile unit sales. Price and cost impacts, although there is an increase in labor cost, positive effects are pricing plus a decline in raw materials, such as precious metals, will lead to an increase of JPY 434 billion. Expenses, negative JPY 353.4 billion, due to an increase in warranty expenses and others. R&D expenses, a negative impact of JPY 51 billion on profits. Currency effects, a positive impact of JPY 79 billion.

Although profit before income taxes expected increase by JPY 565.4 billion, mainly, despite a decrease in equity method profit, mainly from China, offset by increase in interest income and others. Next, changes from the previous forecast. Operating profit and profit before tax forecast is increased by JPY 50 billion. The breakdown is as follows: sales impacts, -JPY 11 billion, mainly due to decrease in consolidated unit sales. A price and cost impact, although there is labor cost increase, pricing relating to the increased product value, plus a decrease in raw materials such as precious metals, will result in a JPY 40 billion increase in profit. Expenses, -JPY 32 billion is forecast, mainly due to an increase in warranty expenses. Currency effects, an increase of JPY 53 billion.

Lastly, the forecast for capital expenditures, depreciation, and amortization, and R&D expenditures for FY 2024 as shown. There are no changes from the previous forecast. This concludes my explanation. Thank you for your attention.

Kohei Takeuchi (Director, Executive VP and Representative Executive Officer)

Thank you very much for your attention. So we'd like to now continue on with the questions and answers. As we have announced before, we are going to take questions on the Zoom. And because of the interest of time, please limit your questions to two questions per person. Thank you very much for your cooperation. So please push the Raise Your Hand button on the system, please, if you have questions.

Operator (participant)

The first question, from the Asahi Shimbun Newspaper, Mr. Wakai, please.

Speaker 6

Wakai speaking from Asahi Shimbun. Can you hear me?

Kohei Takeuchi (Director, Executive VP and Representative Executive Officer)

Yes.

Speaker 6

I have two questions. Question one is, Daihatsu homologation problems. You have many Kei cars by yourself, and what is the impact of sales because of that?

Those fraud in the homologation and development stage, what sort of actions do you take to prevent those non-compliances? And the second question is on Noto earthquakes. There should be some reduction of production ongoing today. What is the prospects going forward as a BCP? How do you address the situations, especially with the suppliers involved?

Eiji Fujimura (Executive Officer, CFO)

Thank you very much for your question, Mr. Wakai. Thank you for those two questions, and let's start with the Daihatsu's fraud. It is of other company matters, and we do not fully understand what actually had happened. Therefore, speaking of the financial status and also what we do to prevent such things, that's the thing we can explain, perhaps. In terms of the results, Daihatsu may have a less number of the sales, and then the sales of those kei cars whether that will be added to our sales of kei cars. In fact, we do not have any reflections as a such effect of additional sales in our account financial result at this time.

However, of course, there should be some impact on the sales to a certain extent. However, their cars and our Kei cars are priced differently, different price range. And also, our Kei cars are not really shipped to the general dealers. Different sales dealer style, therefore, the impact should be restricted, I believe. And also, in terms of our actions to prevent such fraud, at Honda, we have those homologation testing. And we have those homologation departments who does the testing and application of those matters. Actually, these departments is, they're separately organized away from the development and the production.

In order for that department to conduct tests and a process for homologation, they already have the well-documented processes as to, for instance, how many days it should take until the acquisition of those certificates.

Kohei Takeuchi (Director, Executive VP and Representative Executive Officer)

... and of course, those certification has to be given, in order to make the process, to go on to the next, development process. We have the clear rules for that. Therefore, we do not have the R&D system, such that we don't-- we can prevent, the very tight, development schedule, which might, induce, the fraud of those kind. And starting from the April first, new, homologation, department and, quality improvement departments, to be, a part of the R&D functional, department, so that they can have the improved, and fortified quality, governance going forward.

In the EV era coming up now, digital as well, maybe in those areas of electrifications or digital things, we would have additional checks, including the cybersecurity, I suppose. Therefore, we should make sure we would have a good hand on that. And, as a head office, we have a good organization to ensure those control. In terms of the Noto Peninsula earthquakes, as we said right at the beginning, we would like to wish for a quick restoration of the affected areas and people there.

Our situation is that tier one, two, three suppliers those have a very tight lifeline situations and the possibility of the recovery of the production, the stock levels and so on. In fact, every day we are checking out the level of the stocks, their situation of the recovery of those suppliers. Every day, the situation is progressing. In fact, our financial statement at this time do not reflect the impact by the Noto Peninsula earthquakes. However, every day the situation progresses. As for the recent production conditions, specifically with the kei cars, mini cars, so-called shaving, reduction of the production unit per day is actually conducted now.

We had the operations plans on Saturdays, Sundays, holidays too, but we had to cancel those holiday operations in order to adjust the production. We have about 20,000 units affected due to that reason. In terms of the recovery and so forth, we will continue to look into the situation so that we can explain when the situation is clear. In terms of the BCP and the supplier condition, how we control that specifically, the suppliers are operating the affected areas, of course, are making the greatest efforts to recover.

Thanks to them, we are trying to get information of what they do, stock levels and the potential production or alternative manufacturing in other areas globally. In fact, we've had quite a good know-how since the last earthquake event. Therefore, at earlier stage, we could grasp the situation earlier. So, this is the situation today... Semiconductor included as well.

Operator (participant)

Next question. Nikkei. Mr. Okinaga, please. Mr. Okinaga, please. We cannot hear you. Can you check out with your microphone?

Speaker 5

Can you hear me?

Operator (participant)

Yes.

Speaker 5

Thank you for the presentation. I have two questions. Well, we have seen a number of recalls in this fiscal year, and I think it's reached to some tens of thousands. And you say that the warranty is at JPY 353.4 billion. And does this include all the costs for recalls, or is it the case that the warranty expense will increase further from what you have already stated?

Eiji Fujimura (Executive Officer, CFO)

Yes, thank you. And yes, in the third quarter, well, the warranty cost expenses have increased. I did explain that. And so there was a fuel pump impairment this incident. And so this has been added on.

Speaker 5

In the fuel pipe, first of all, I'd like to express my condolence to the person who has passed away. In terms of the accounting, the financial statement, is this reflected in the numbers?

Eiji Fujimura (Executive Officer, CFO)

Well, in terms of the units, as you've mentioned, it is increased to a few million units, and we will respond to this situation. In terms of the financial statement, we believe that this is a failure coming from our supplier side, and therefore, we will have them compensate for the recall expense. This is how we've handled it in our financial statement. In regards to this case, the warranty expense is not that large. That is our understanding.

The reason why it's large, on February first, the U.S. authority, we've already filed notification to... of a recall. There's a seat weight sensor, and there was a failure where the seat was sent up. We have added some JPY 55 billion for that recall, and I think that this is a reason that can be attributed to the increase in warranty cost.

Speaker 5

Thank you. May I ask another? About your buyback of shares, why did you decide to acquire your own shares?

Kohei Takeuchi (Director, Executive VP and Representative Executive Officer)

Well, yes, I think there's still room for an increase in shares given the weak yen, but I think the impact of the interest rate hike in the U.S. and China.

Speaker 5

Is that the reason behind this decision, the resolution?

Kohei Takeuchi (Director, Executive VP and Representative Executive Officer)

Well, about the acquisition of our own shares. Well, we want to improve the capital efficiency. Recently, the issue is the PBR 1x, and we have given this. I'd like to start talking from there. Well, we, the management, we are aware of this PBR issue, and we take it seriously. Therefore, we are thinking of what we need to do. We believe that it is a responsibility for us to take further steps. It's about JPY 1,700. It's about 1.07x right now, and it's less than 1x, 1.0, and I think there are three reasons for this. Well, the three are those accumulated from the past, and the current, and the future.

So these are the threefolds. First, from the past. This, over the past decade, our capital has increased from JPY 6 trillion to JPY 12 trillion. And, so, it, so it's 45% in terms of the ratio. And, so, and we have to deal with this past that we have. And, the current situation is that for a long time, the automobile revenue had dropped, and therefore, the share prices were not increasing because of this situation. But, in regards to this, looking at the financial results here, as we've been saying from the past, we are trying to reduce the fixed cost and also improve the revenue of new models.

Incorporating these measures, plus the shortage, we are starting to recover from the shortage of semiconductor, and therefore, the revenue of automobile business is improving. So this is the current situation. What's more, what's more important is the future. Well, the auto sector on the whole, the share prices are not picking up. This is because, in this age of the ZEV, we really don't know who the winner will be, and therefore, there is this lack of transparency, uncertainty, and I think that this is having an impact on our business.

But we believe that given the age of zero-zero emission, we have to come up with our own strategy and try to improve our resolution, so to say, and try to make investment in the growth sectors and try to reap the profit from those investments. So in order to improve this so-called resolution, the other day, at CES, we communicated that we have a brand strategy in place, plus we have technology investment and other strategies to reap the fruit from our efforts in place. And next fiscal year, we are going to have a president press meeting.

So the way we communicate will be changed so that we can gain more understanding from the market, and we will also try to change our way of communicating our technology to the public. So this is something that we are thinking of right now. So amongst these three, going back to the first one, so in regards to our capital, here, we want to return to our investment. From the beginning, we have had JPY 200 billion acquisition of own shares, and this program has ended in December last year. So just like that, we are going to maintain that pace, and by the end of this fiscal year, we want to complete this process.

And given this, we believe that this time, the JPY 50 billion decision was made, and we've just made this announcement here. Well,

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

... We want to be actively investing in the future. So while we do that, and also, we have to try to continue to earn with the profitability of ICE, internal combustion engine, and we have to invest in growth and have a balanced way, and at the same time, improve our capital efficiency. This is the management message that we want to communicate to you by announcing that we will acquire our own shares. That is all. Thank you.

Operator (participant)

Thank you very much, Mr. Okinaga. Next one, Yomiuri Newspaper, Mr. Nakamura, please.

Speaker 9

Can you hear me?

Operator (participant)

Yes.

Speaker 9

Nakamura from Yomiuri Shimbun. I have two questions. One, about semiconductor procurement status now. The production situation is very well, good now, but do you think that semiconductor supply situations have been recovered fully before the COVID? And the second question was, you said about pre-tax pre-tax profits, and you talked about the precious metal prices. And what is the current status of those prices, including a Forex situation, too?

Kohei Takeuchi (Director, Executive VP and Representative Executive Officer)

You mentioned the reduction of the precious metal prices. So in terms of the semiconductor supply procurements, this year or from the February/March period in 2023, the situation have been on the recovery. We've done a lot of measures, and those actions are getting some fruitful results.

Nowadays, it is not a concern at all. Once in a while, we might face some situation, however, recovered now. Now we have a full scale of production in place after a long while, and till the second quarter or so. In the U.S. or the places like that, there were a shortage of the laborers at the supplier and equipment problem because the winds were not running for quite a long time. We had some situations like that. However, those issues have been resolved. In North America, full scale production continues after a long stretch of not having one, but we have a stable condition.

In terms of the precious metal conditions, actually, those are utilized in the mufflers or catalyst in the mufflers, that is, to purify the air emissions. A few years ago, the precious metal prices were soaring, really, but in the last several years, prices have fallen because in China they have progressed the electrification. That may be the main reason for the precious metal prices dropping down. In addition to that, in the electrification efforts, not just automobiles, but when the economy is booming, precious metals, steels, copper, resin, those material prices are to fluctuate a bit. We have to, of course, look at for Forex currency rates as well.

We would like to keep watching out all those factors as we go. Thank you very much.

Operator (participant)

Thank you, Mr. Nakamura. Next question, please. Toyo Keizai magazine, Mr. Yokoyama, please.

Junya Yokohama (Analyst)

Can you hear me? This is Yokoyama from Toyo Keizai. Thank you. I also have two questions. The first is about the full year forecast. Until the third quarter, I think that you are making good progress, but compared to the third quarter, I think fourth quarter will be showing a slowdown in your operating profit increase. What's the upside and downside? In automobile and motorcycle and power products, I think the situation will be different, but can you share with us your perspective towards the full year forecast? Can I continue? The second question, about China. Currently, I think the unit volume is increasing, as you say, but at the last presentation, I think that there is severe competition. There is a discount race in China.

I understand that is the situation, but how do you see the Chinese market environment? I think you, Mr. Fujimura, talked about the need to cut production capacity. So what are your thoughts on China?

Eiji Fujimura (Executive Officer, CFO)

Mr. Yokoyama, thank you very much. In terms of the numbers, well, the fourth quarter outlook, rather than talking about that, I thought I wasn't asked to talk about this, I would like to give an overview of the financial results of this time. For this third quarter, the October-December three-month actual, we had JPY 380 billion operating profit. And so, the breakdown of the automobile and motorcycle is JPY 160 billion each. And so ROS is 20.1%. It's the highest in terms of the quarterly results for the motorcycle business. And I think the situation is that, well, this is continuation of what I explained.

There's a downturn in Vietnam, and also, there is a greater scrutiny in terms of the quality. But in Brazil and Turkey and Europe are included, the unit volume is increasing or the profitability is increasing. In Asia, likewise, though, there are areas where we see a decline, decrease in unit volume, I think, that we have a proper pricing in place and other efforts, which is trying to show results. So for automobile, meanwhile, last fiscal year, there was the semiconductor issue, and so this was a major challenge. But in North America, it's a plus 120,000 units, this is mostly hybrid. Second quarter, there was a logistics disruption, but this has been cleared already.

Thanks to this, we have a dealer inventory of 30 days, so this is the standard that we have in place now. So 30 days, so we've reached this standard now. And in Japan, it's +20,000, this is because of the semiconductor, the unit sales is in a positive range. Now, China, it's plus. This leads me into the second question, but it is a positive. But the third quarter last year, the inland area, there was a lockdown, and there was impact of semiconductor supply, so it's a quite low number in China. Therefore, year-over-year, it is a positive because of this, but...

So, there is this shift towards NEV, and also the reduction in ICE market, and I think that this situation continues to be tough for us. We have to use the incentives to compete against the others. This is the situation we are putting in place. As for the automobile profit, despite these conditions, as mentioned, the JPY 160 billion, amongst this number, we have a realignment of our supplier, and it's related to Yachiyo. So there was the impairment of the subsidiary, about JPY 50 billion, or should I say JPY 45 billion, that is Yachiyo impairment, plus the warranty of cost, JPY 50 billion. So close to JPY 100 billion yen, factors are included here, but we still have this JPY 160 billion.

As RS is 4.6% and nine months, JPY 460 billion. So it's 4 times the profit compared to last year. And despite this tough condition, the volume increase in North America and the hybrid success and pricing, these factors are all combined together. And despite this one-time impairment and warranty cost issue, we have a RS at 6% level. And so I think that this is the situation that we currently have, at 600 billion. And in nine months, operating profit, 1 trillion, free cash flow at 930 billion. So we are in a situation where we are having a record high. And in December, as an outlook, one...

have a JPY 1.25 trillion RS of 6.2%. And so with excluding the one-time events, if we have 135 yen currency exchange, and we think that we have a RS level of 6.9%, and by 2025, we are aiming towards 7% of the operating margin. But in May, when we close our books for next fiscal year, when we announce our forecast for next fiscal year, I think that we will be able to declare that we've achieved our goal two years earlier. The fourth quarter, as for the decline, I'm just finally coming to your answer.

The fourth quarter, compared to the past three quarters, you say that we will see a decline. Well, Kawaguchi will explain about the details here, but especially the suppliers, we have made cost adjustments, plus in America, U.S.... The wage increase, well, from January, we began this, and so there's that cost. Plus, it's always the case, but we have a fluctuation of our quarterly numbers because of the costs and also R&D. And so these are going down in the fourth quarter. So please, Mr. Kawaguchi.

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

Mr. Yokoyama, thank you for the question. The third quarter versus fourth quarter, and the fluctuation in the profit. Well, as Fujimura has already explained, yes, just as...

Well, to give you some numbers, as was said, the third quarter, just the three month, we have some JPY 380 billion operating profit. And the full year forecast, if you deduct this, according to our current plan, the fourth quarter, we are expecting some JPY 170 billion. So, there is a drop of some JPY 200 billion quarter. But, the reason is because the assumption is the foreign exchange, so this is different. In the fourth quarter, we are estimating 140 yen against the dollar. The third quarter, the average was about 146 yen against the dollar. And therefore, because of this difference, according to our plan, the premise is was 140.

So there is -JPY 80 billion or so. And meanwhile, the third quarter, as was said, the supplier there was an impairment of some JPY 50 billion, and therefore, this part will be netted. And what remains is the fourth quarter skewed a cost and also R&D expense. Well, there will be the model development timing and all the various activities that are underway, which will influence this. But we think that expenses are more skewed towards the fourth quarter, and this is about JPY 220 billion. Compare three to four, it's a negative in the fourth quarter. And as I explained, the cost part. Again, in North America, mainly, the wage increase and or labor cost and inflation impact cost is on the rise.

These things also has aggravated the cost situation, plus some seasonality with the suppliers, so we have some adjustments to be made. These all combined, the cost is about JPY 80 billion of third-to-fourth quarter, negative. So about the upside and downside that you asked, upside is the foreign exchange. It's 146-147 yen. So the... Well, it's difficult to predict the foreign exchange rate, but if it continues until March, then according to our compared to our plan, it will be on the upside. Meanwhile, the downside, North America economy and also the impact of the earthquake, these will be the downside factors. But through our sales activities, we want to minimize the downside as much as possible. That is all from me. Thank you.

Eiji Fujimura (Executive Officer, CFO)

Mr. Yokoyama, about China, about the production capacity, I forgot to mention this, so I have to answer that part of your question. Well, last time, when we make our financial announcement, production situation in China, as I said earlier, we have 1.2 billion units capacity, but with newly we have the new dedicated factory, two factories, so it'll come to 1.7 billion units. And once these new factories are, well... I'm sorry, it's currently 1.49 billion, plus added to there will-- the new will be 1.7. But we think that 1.2 billion is the appropriate level, so the we have to make adjustments for the remaining 0.5 billion.

For China, we are talking with our partners. Now, in terms of how we see the issue, I think our partner sees it the same way. We are on the same page in regards to this issue. However, especially in China, when it comes to employment, they're very sensitive, and so I cannot give you any details here. But, from the second quarter, I've been saying this, so compared to that, we are on the same page with our partner and moving forward. This is a progress report, and we have to make adjustments for 500,000 units, and we have to talk to them about how this will be done. That is all from me. Thank you.

Junya Yokohama (Analyst)

Thank you.

Operator (participant)

Thank you, Mr. Yokoyama. So next question, Nikkei Asia, Taki San please. Mr. Taki? Taki from Nikkei Asia. Can you hear me?

Speaker 8

Yes, please. Thank you. I have two questions.

... I'll go one by one. First question is about current EV sales trend. In our main market, in our Western countries, it is slowing down a bit. Instead of hybrid cars are getting popular, I hear that. How do you see that situation now, will that be a kind of within expectations, or would that be a kind of a tailwind for your businesses? And you have a target of 2040, and what is the impact of that on electrification strategy?

Kohei Takeuchi (Director, Executive VP and Representative Executive Officer)

Thank you very much, Taki-san. And yes, we get this question quite frequently these days.

But in terms of the Western countries markets, the EV growth is kind of slowing bit. In the U.S., EV ratio is about 8% recently. That's my understanding. For us, I think such things can happen, so we were sort of imagining this kind of thing could happen. But in the long run, for 2035 or 2040, in the line with the carbon neutrality trend, we need to push forward our electrification initiatives. Nevertheless, this is our idea as a mobility company. So as of now, 2030, 40%, and 80% in 2035, and 100% in 2040, this is the EV battery EV goals.

And such goals are to stand no change, and we will just simply go on for that. And we are sort of a latecomer in EV area, therefore, we need to make sure that we stay the customer viewpoints to find out and think what is the needs by the customers for the EVs, so that we can provide them to them, and to get a good profit from that. And that is the important point of this game, therefore, we don't change the strategy. We simply go on what we do. And of course, the situation may change from time to time, and of course, there is a kind of a lag of several years and so forth.

In the 2020s, such things can happen. Therefore, of course, for strategic spending, maybe we can adjust the cash out timing, and so on, as we go. In the meantime, unit sales should be supported by some means as well, and we will stay flexible to support the situation like that. But in terms of the hybrid, popularity is quite solid. And for sure, out of the ICE models, hybrid would be the kind of bridging technology up until the Carbon Neutrality goal. Therefore, our hybrid has been already well-appraised so far in the United States. Accord, CR-V hybrid models are available, and we have a very good demands. And already, the...

It's a 50/50, sort of, split between the ICE, petrol-based cars and hybrid. And hybrid demand is very good. And hybrids are available for high-grade models, and it is a profitable model sets. And in terms of the incentives as well, hybrid models would not require much incentive. Because of that, this year, perhaps until around summertime, Civic Hybrid will be launched by then. And after the 27 model onward, hybrid will be the evolution model, such as more compact performance, profitability, body weight. Everything will be of evolution for the hybrid, and of course, we will evolve them further and further.

That much is about North America and Western markets. However, in China, speed is a little bit different. In China, they have the emerging car manufacturers. From China, they enter into the Vietnam, Thailand, where we need to battle in the different ways. And we will keep watching the situation from the global viewpoints and also on the appropriate timeline idea, so that we can compete there, too.

Speaker 8

Thank you very much. Second question, you talked about the challenging market situation in the Asia, and you mentioned that several times. Closing carefully our first half, did you see any changes since the first half closing time?

What is the prospect of our upcoming car situation of our Asian market?

Eiji Fujimura (Executive Officer, CFO)

Maybe I can answer your question based on the motorcycle businesses because of the Asia. Since the last announcement the change of the goals are not really happening. There's some differences, however, differences are always due to some good reasons in Thailand and Indonesia. Maybe in Thailand, as I said before, the loan credit assessment is tougher now, and the economy is a bit slowing down in Thailand. Of course, there are situations like that. However, in at Honda Giorno+ is doing good, and we are getting the shares getting high, and

... Although we have a higher share now, the market itself is tough in Vietnam. The exporter businesses are facing with a tough situation because of the economic stagnation, and I thought the economy would recover quicker. However, maybe this condition may continue to fall this year, 2024. And for Honda Vario 160, that's something we have to compete. And its market share has marked a very high level. Negative thing could be... our own situation, though, in Indonesia. The market itself is growing in Indonesia, but in the second quarter, there was a rust issue of the airframes, because of which we had our unit sales falling down.

We had measures and actions to recover our trust by the customers. We are getting our sales recovery because of that effort. Indonesia sales next term it will be on the positive side, I believe. In terms of the future prospect by different countries, in Thailand first, it will continue with a little bit of the negatives for a while more. I don't know if it is related to the regulations, but there could be some upper limit for loans for the customers starting in April. When that comes in, the Thai situation is a bit tough. In India, if our issues are cleared, it will be fine.

India, Brazil, Turkey, European countries, including Turkey, our positive situation can continue for a while. Thank you for understanding.

Speaker 8

Thank you very much.

Operator (participant)

Thank you very much. I apologize, but in the interest of time. The next will be the last question. Nikkan Kogyo Shimbun. Mizutori, please.

Speaker 7

Can you hear me? This is Mizutori from the Daily Automotive Newspaper. I have two questions. The first is about China. Last time you said that it's about 1.1 million unit in sales that you're expecting for the full year. That was at the midterm. But is your forecast unchanged? Is that understanding correct? I want to double-check this. And having said that, next fiscal year, what is the forecast? Well, well, at the midterm announcement, I think that you were saying that you were thinking that the same trend will continue into next year. Does that remain the same?

And the second, I'm always asking this question, but about the sales price and cost impact, the waterfall chart that you mentioned, and can you explain about the breakdown? So nine months and also the full year. So what is the... What are the factors that comprise these numbers?

Eiji Fujimura (Executive Officer, CFO)

Thank you very much. In regards to China, the 1.1 million units that we're expecting for this year, well, this is what we announced at the middle of the year. Of course, Civic, CR-V, these core models, we have invested a lot in of our resources here. And, if we underperform, then we think that our market performance, as we shift to NEV, will not be good for us, and therefore, we think that, well, we selling at a rather high price. But in order to maintain our presence, then we think that we need to maintain a certain volume for the sake of the future, and that is how we've competed.

As a result of the third quarter, we have slightly overperformed our plan, and it's +30,000 from the 1.1 million. The fourth quarter, there is a dealer inventory that has stocked up, and therefore about 160,000. We have narrowed down on our wholesale plan. Looking at the current situation, maybe the number could be larger. That is the impression that we get right now, as of now. As for next fiscal year, the current 1.1 million units, plus EV will be e:N series. The second of the series will be the first half, and the third series will be coming up in the second half of the next fiscal year.

Therefore, if it turns out to be 1.3 million this year, then we think that we can go beyond that. And about the second question, Mr. Kawaguchi?

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

Thank you for the question. About the selling sales and also the cost impact are what we explained in the waterfall. Let me explain about the first about the nine months. This the waterfall JPY 360 billion plus was what I explained of which the pricing impact of this is about JPY 270 billion or so. It's a plus JPY 270 billion of the plus JPY 360. So that is the one part, and the remaining JPY 90 billion is the impact of the cost. That is the breakdown. About the pricing, well, this is mainly the automotive market.

Well, for each region, there are differences in the inflation rate and also, the customer situation, plus, our model, value-added, situation are different. And therefore, we have to examine these closely in determining our selling price. But, because of this, we have, of the JPY 270 billion, for the automotive, it's about, JPY 200 billion attributable to pricing. The remaining cost, the plus, impact, well, the manufacturing cost, and also, the drop in the precious metal price, this, has an impact. So we have these factors, and cost, the labor cost, is rising, plus, there's the inflationary trend. And, therefore, there is this cost increase pressure.

So minus JPY 27 billion, but meanwhile the precious metal and material cost is going down, and so it's a plus JPY 160 billion. Netting this is about a positive of JPY 80-90 billion. Now annually, in other words, how we see the fourth quarter. Well, throughout the year, the selling price impact, we can think that it will continue to have an impact because we'll continue the change, and also the impact change in selling price will continue to have an impact. So we'll continue to see that impact in the fourth quarter.

Annually, as I showed you in the full year forecast, cost impact is about JPY 430 billion plus, of which, JPY 360 billion, this is full year, is the impact of the pricing. Meanwhile, the cost part, well, the material cost, yes, it is declining, but once, the decline in pace slows down, then in the fourth quarter, we have incorporated that slowdown, the plus impact, will, compared to last fiscal year, will go, come down. Meanwhile, the cost, we think of that the labor cost increase, the wage increase, will continue to have an impact. Cost, the plus nine months is about JPY 80, 80 billion, I said, but for the full year, it will be slightly less.

The cost of the supplier, we are consulting with the suppliers and sharing information and carrying out our activities. That is all. Thank you.

Kohei Takeuchi (Director, Executive VP and Representative Executive Officer)

Thank you very much, Mizutori-san. Today, we did not get this question, but I would like to appeal one point. If you have time, although the time is already finished, however, if you could stay on, please, stay with us. So in terms of the summary of the financial statement, I didn't say it because it would be too long, but now the thing is that why are motorcycle businesses are so strong? That is the frequently asked question recently, and we would like the media people to understand that fully. Maybe you can write an article that for your your own writing. And then, if you have time, please, let me state this.

Before the COVID-19 in 2019, we had 20 million units sales globally. Now, we have 188 billion units in the plans this term. But back in 2019, our OP was at JPY 290 billion, 14% ROAS. Now we have a JPY 500 million businesses, and the OP per unit is about JPY 20,000-JPY 40,000, the profits per one unit of the motorcycle. And then we have nearly 40% global share. In some countries, we have 80% market share of the motorcycles.

Then we have such sales commercial power, and we have a well-trusted brand power that is a fruit of the cumulative efforts of my predecessors. Then since the 2010s, we had a mega module platform strategy in place, power trains, frames. We had a model or we had a commonality initiative across the models, across the regions, and because of that, we improved our profit structures. And we had also improved more contact with the customers, with many more models available to them. And now in South America, in Europe, we have high profit businesses, which is a good positive thing for us.

Therefore, we used to be profiting here from Asia, but now, 60% Asia, the rest are from the rest of the regions, which includes, 20% in Brazil, 20% from Europe. That could be the kind of a split across the world. And then, of course, the volatility can be seen in some countries or regions. However, the 20% ROAS, of course, if we can sustain that level of ROAS could be another story. However, I should say that, we have established a structure to be robust against the volatility or changes and, such efforts, successful efforts in the last 20 years, have fruited this way.

Then the next 20 years of our motorcycle businesses going forward, our technology power to create attractive models with the cost containment, commercial values, powers, financial power. So when everything is in place, first in the automobile area, BEV is shrinking the ICE businesses in China. However, in motorcycle, the growth is still expected. ICE motorcycle will grow, batteries will be add-on, battery EVs will be an add-on to that. Therefore, this business is still a growing business and battery EV know-how ahead of others, and we have a manufacturing capital in place.

And, we have other efforts in our automobile, and we can get a synergy from automobile to the motorcycle business areas, which can grow thanks to the synergy, I think. Therefore, I just wanted to say that we have the motorcycle businesses, like, I, the one I described. Thank you for your time. I said, 20% in the, in Europe, but, 20%, including the, developed countries, including Europe. That includes, U.S., Japan as well. So that's the, precise term. So, please, understand our motorcycle business precisely. Thank you very much. Now we can conclude our press conference. And, our financial statements are available on our website, and thank you very much indeed for your participation. Thank you.