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Honda Motor (HMC 1.86%)
Q4 2024 Earnings Call
May 10, 2024, 2:15 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Thank you very much for taking time to join us here today. And I'd like to begin Honda FY '24 financial results press conference. First, the executives in attendance today are Toshihiro Mibe, director, president, and representative executive officer.
Toshihiro Mibe -- Director, President, and Representative Executive Officer
I'm Mibe. Thank you very much.
Questions & Answers:
Operator
Shinji Aoyama, director, executive vice president, representative executive officer.
Shinji Aoyama -- Director, Executive Vice President, and Representative Executive Officer
I'm Aoyama. Thank you.
Operator
Eiji Fujimura, managing executive officer and CFO.
Eiji Fujimura -- Managing Executive Officer and Chief Financial Officer
I'm Fujimura. Thank you very much.
Operator
First, Mr. Mibe will give a summary of the results, followed by Mr. Aoyama, who will present the FY '24 results and FY '25 forecast and shareholder returns. Mr.
Mibe, please.
Toshihiro Mibe -- Director, President, and Representative Executive Officer
Once again, good afternoon. I'm Mibe. I'd like to first thank all of you for taking time today and providing generous support to Honda's business. As a mobility company, Honda upholds its value proposition of zero environmental impact and absolute safety through the social values of environment and safety.
We aim to realize our vision of future mobility and an attractive mobility society. This will enable us to manifest a new corporate path of growth. We seek for your continuing understanding and support of Honda's initiatives. I would now like to review our FY '24 financial results and explain our forecast for FY '25.
FY '24 operating profit was a historical high, JPY 1,381.9 trillion. Operating profit margin was 6.8%. In FY '25, we will steadily dedicate resources to electrification and aim for an operating profit of JPY 1,420 trillion, operating profit margin of 7%, one year ahead of our original plan. FY '24, cash flows from operating activities, resources for future investment, excluding R&D expenses, was roughly JPY 3 trillion, up JPY 1 trillion year on year.
We have the foundation to support future investment for growth. Shareholder returns is regarded as our top priority. Management issue FY '24 dividend was JPY 68, up JPY 28 year on year. In FY '25, we will acquire a record high JPY 300 billion of the company's shares and realize a stable, continuous dividend policy.
Next, I will review the initiatives we have taken toward establishing earnings base. Motorcycle business, in addition to our dominant position in Asia, we have expanded large motorcycle sales in advanced nations and expanded product lineup in South America to further strengthen our business structure and build a well-balanced global income structure. Regarding automobile business where profitability was an issue, we increased commonality ratio of core models such as CR-V, Civic, and Accord; reduced hybrid system cost; and enhanced product appeal to steadily improve our business structure. We will further evolve performance and cost of a hybrid system targeting the second half of this decade.
Next, initiatives for enhancing corporate value. Currently, the PBR remains less than one-fold. We believe there are three reasons as shown. To address this, we will optimize capital through proactive shareholder returns, build and maintain earning base, and work out granularity of electrification strategy.
As for FY '25, we will acquire JPY 300 billion of our company shares and aim for an operating profit margin of 7%. The details of electrification strategy and capital allocation will be explained at the 2024 Honda Business Briefing on May 16th. Through these initiatives and continuing dialogue with stakeholders, we'll aim for an early achievement of a more than one PBR.
Operator
Next, Mr. Aoyama will present the details of our financial results.
Shinji Aoyama -- Director, Executive Vice President, and Representative Executive Officer
Let me explain about the actual results of FY 2024, followed by FY 2025 outlook and the shareholder returns. With regard to the updates of the main markets of automobiles, the market declined in China, but increased in the United States due to the stable demand has led to the overall sales exceeding same period last year. For motorcycle businesses, the market in Vietnam declined because of the economic slowdown. However, the unit sales increased in India and Brazil due to the solid demands, contributing to the overall market, almost similar to last year.
Regarding Honda's group's unit sales of motorcycles, mainly due to incremental units in Europe as compared to last year, we achieved 18.819 million unit sales, automobiles, 4.109 million units sold are mainly due to the increase in North America. And in power product business, we achieved 3.812 million unit sales due to the decline in North America. This is the summary of the consolidated financial results. On top of the additional automobile in its sales, thanks to the improvements in automobile profitability, we achieved the operating profit of JPY 1.3819 trillion, up by 601.2 billion.
We accomplished the highest-ever results in operating profit before income taxes and profit for the year attributable to owners of the parent. ROIC was 9.1% and ROE, 9.3%. Let me explain. Factors of ups and downs of the profits as compared to the last year.
There were some impacts by inflation and so on. However, due to the effective pricing scheme that reflects the improved commercial value of the products and incremental automobile unit sales, we achieved a JPY 1.3819 trillion operating profit, up by 601.2 billion year on year. Profit before income taxes was JPY 1.6423 trillion, up by 762.8 billion year on year. Regarding operating profits by business segments.
Motorcycle business is JPY 556.2 billion, the highest ever result. Automobile business is JPY 560.6 billion; financial services business, 273.9 billion; and for power products and other businesses, it was a negative JPY 8.8 billion. Free cash flow of business companies excluding financial businesses, was JPY 1.4609 trillion, with JPY 3.7616 trillion of net cash balance at the end of the period. And next, let me explain financial forecast of FY 2025 on consolidated basis.
Regarding expected unit sales of Honda Group compared to the last year for motorcycles, we expect at 19.8 billion units, reflecting the growth mainly in Asia, 4.12 million units of automobiles expected, reflecting the incremental units mainly in Japan and North America. And for power products, we expect 3.66 million units, reflecting the decline mainly in Europe. Unit sales volume on consolidated basis will increase in motorcycles and automobiles businesses. Moving on to the outlook of the consolidated financial results of FY 2025.
Operating profit will be JPY 1.42 trillion, with the operating profit ratio of 7% and the profit for the year attributable to owners of the parent will be JPY 1 trillion. Foreign exchange assumption is set for JPY 140 for a dollar throughout the year. The factors behind those profit before income taxes. Forecasts are as follows.
R&D and other expenses will increase. However, thanks to the pricing scheme that reflects the commercial value of the products, our profit before income taxes will be JPY 1.5 trillion, down by JPY 142.3 billion year on year, and the operating profit will be JPY 1.42 trillion, up by 38 billion year on year. These are the outlook of the capital expenditures and depreciation, amortization, and R&D spending for FY 2025 on the slide. Lastly, let me touch upon shareholder returns.
Annual dividends for FY 2024 is JPY 68 per share, a JPY 28 more from the year before, and JPY 10 higher than our previous projection. Dividends at the end of the year is JPY 39 per share. Annual dividend for FY 2025 is expected to be JPY 68 and per share, same as FY 2024. In the board of directors' meeting today, we made a decision to execute share buybacks up to JPY 300 billion.
That concludes my presentation. Thank you very much.
Operator
Thank you for your listening. And now we'd like to proceed to Q&A. We have provided you with the Zoom function, so please ask the question through Zoom. And in the interest of time, please limit your questions to two per person.
[Operator instructions] The first question comes from. Yomiuri Shimbun newspaper, Mr. Nakamura.
Unknown speaker
Can you hear me?
Yes, please.
Nakamura from Yomiuri Shimbun newspaper. I have two questions. First, about your China business. Each of the manufacturers, they are having difficulty challenging their Chinese EV companies.
Meanwhile, I think that there are a lot of fans for ICE vehicles. So, what is your marketing strategy going forward? And what about the optimization of excessive production capacity? And secondly is to Mr. Mibe, I think it is the first time since you became president that you are attending the financial results presentation meeting. So, what is the reason for your attendance? Is there any message that you would like to deliver directly to us? If so, please introduce them to us.
Toshihiro Mibe -- Director, President, and Representative Executive Officer
Well, first, thank you for your question, Mr. Nakamura. And first, about the Chinese business. I would like to explain, yes, there are a lot of Honda fans and ICE fans, and I do agree with you on that.
And as for future marketing strategy, well, at the Beijing Motor Show and also prior to that, there was an announcement that we made, but the Ye Series, the second of the series, will be introduced and this will be done in the first half of this fiscal year. Furthermore, the second half of this fiscal year, as we've already announced, the Ye Series, the first of the series, will be the first and battery EV platform in China and the P7, S7 will be launched. And therefore, the Ye Series will be expanded. And this is how we want to expand our business in China, especially the battery EV.
We want to introduce competitive motor products. And this is a basic marketing strategy. Meanwhile, about the overall production capacity and excessive capacity, well, with our joint venture partners, we will consult and we are currently examining this, what can be done? And for this fiscal year, within our budget for FY '25, we have included some expenses toward that purpose. About the specifics of how to optimize them, we will like you to wait until we can make the announcement.
And next, I, Mibe, would like to explain why I'm here today at the background. Well, it is my first time, but in the past, there are presidents have not attended this meeting. And so, I'm the very first in the history of Honda that I'm attending as president. Well, this is because we are faced with a lot of challenges at this time of transformation, and I is present.
I wanted to explain about the current management situation and also our short to mid-term plans. I thought it was important that I directly communicate this. As I mentioned today, for FY '25, we want to achieve the same, but one year in advance, I would like to achieve this margin profit, 70%. So, this is something that I personally have led and I want to demonstrate my leadership this fiscal year as well to achieve this goal.
And in my presentation yes, we have a less than one PBR. And I think that this is a major challenge that we currently face. And as of the end of March, about 60% of the prime market companies listed market have exceeded one. But Honda, we have a 0.76-fold.
So, this is a major challenge on the part of Honda. As I said a shareholder returns. We have to look at the investment balance and consider this. But what's most important is for us in order to -- first of all, we have to make clear our growth path.
In particular, we want to make clear what our plans are for electrification, our future vision of electrification. And that included, we would like to update you on the progress we're making. And I think that there will be opportunities at the financial results meetings to present this. I don't know if I'll be attending all the quarterly press meetings, but at the full year announcement, I would like to attend this meeting in the future.
Now, about making clear the granularity of our electrification strategy. Well, on May 16th, we are going to have a meeting, a briefing session to elaborate on our strategy, and I will talk about our outlook for electrification and all the other details. So, please wait until the 16th for the details. And I would like to I continue to attend this meeting.
Thank you.
Unknown speaker
Thank you very much, Mr. Nakamura. Next question, please.
Operator
Nihon Keizai Shimbun, Okinaga-san, please. From Nihon Keizai Shimbun, Mr. Okinaga, please. Please ask your question.
Unknown speaker
[Japanese] that was going to be the highest as well R&D spending in order to strengthen shareholder returns, how do you manage that? And also, what is the backdrop of having to reinforce your R&D efforts?
So, let me explain about its positioning, and overall situation rather than each quarter situation. As we said before, electrification and the software and the intelligent use of that, and we said that we are going to invest JPY 5 trillion by 2030. And then I'm going to explain more of the details on the 16th of May. But in the meantime, we actually changed our strategy a little bit.
For instance, in terms of electrification, specifically, speaking of the batteries, we had explained about Canada before. And we are going to be shifting to the vertical-type system in order to sustain the total electrification businesses. To do that, we need to have the investment development as well. We have to internalize those technology, and that will be on the increase as well.
And for the software, too, core of the software have to be supported by Honda itself. And R&D menus will be toward a more of the internal kind of efforts. Therefore, we have more spending on that. Fujimura-san is going to give us several details about the spending.
Eiji Fujimura -- Managing Executive Officer and Chief Financial Officer
Thank you for the question. As for the R&D spending, it is going to be the highest ever. As we said now, JPY 1 trillion spending. Therefore, that would include the upcoming electrification related to our development expenditures.
And also, in the first place, we have to support our foundation for the electrification going forward. We call it [Japanese], which is the functionality and its evolution. And in our R&D efforts, we have to put more efforts in the process before the development of the vehicles to strengthen that part. And specifically, for the model year 2027, that will be still more efforts of the ICE model based on the hybrid, basically.
And therefore, for those ICE models toward 2030, there will be still a 60% of the ICE model to be run. Therefore, we need to earn from those businesses. Therefore, we need to allocate some resources through that as well. So, we have to spend on both, which will be the next three-year efforts.
And those will be important. And we will keep up with the higher level of R&D spending going forward for the growth going forward, and we will be more aggressive on that part. And the rationale for that effort is such that now, after the R&D adjustment, we have this operations cash flow that is a new kind of indicator. And for this past our fiscal year, we had a JPY 3 trillion.
And three years before, it was a JPY 2 trillion. So, we are adding JPY 1 trillion more to that. But that means we try to improve the profitability of the ICE models that we have supported so far. And that is going to be earning more going forward.
That is why we can justify such spending. And then we are going to spend 1 trillion R&D again and cash flow after the R&D adjustment will be staying around JPY 3 trillion based on the earnings strength. And then we would like to be based on such a stronger earnings structure and then spend more on the R&D. At the same time, we are going to strengthen our shareholder return as well.
That is our financial strategy. And in terms of the capital allocation, as we said, up until 2030, as we said before, we are going to give you more communication in the business update scheduled on the 16th of May, and we will give you more details on that day. Thank you very much.
Operator
One more? Do you have one more question? What is your second question, please, Okinaga-san?
Unknown speaker
May I ask a second question?
Sure, please.
So, the unit tells us for the regions in China, it declined from the previous year. Is that what you expect again? You're going to provide a new series, right? What is the expectations? And you also say that you're expecting a growth in North America. Is that because of the SUV [Inaudible] more?
So, the unit sales per regions, are we speaking? And for China, as we said before, Ye Series is going to be very -- had expected a model, and it is going to be launched in the second year of FY 2025, second half of this year. Therefore, it will be effective after that. And we plan to provide 50,000 units of those in addition to the existing ICE and have products. Therefore, as compared to the previous year, it is going to be on the decline.
And for North America, Civic hybrid, which is not yet launched. However, we are going to add Civic hybrid, which will be added to the growth. And in terms of the incremental units, battery EVs in May and April this year, we are adding a BEV. And that part will be the incremental portions in the North America.
That is the plan.
Thank you. The next question.
Operator
Toyo Kezia. Mr. Yokoyama, please.
Unknown speaker
This is Yokoyama from weekly magazine, Toyo Kezia. Can you hear me?
Yes.
Thank you. I also have two questions. The first, about hybrid and competitiveness and product appeal. I'd like to ask one question about this.
Yes, in your material, Eiji referred to this slightly, but in North America and Europe, your competitors, Japanese competitors are also doing well. But also, you say that you're going to invest in ICE, but the earning base, I think hybrid will be very important contributor. So, within your electrification strategy, what is the positioning of hybrid? That's my first question.
I would like to respond to this question. Yes, hybrid competitiveness. First of all, volume-wise, we believe that in FY '24, about 800,000 units were sold. That is hybrid.
But in FY '25, this fiscal year, we are aiming for 1 million. Well, it's 4.12 million in total. So, one out of four vehicles will be hybrid. That's our plan.
About our earning power, well, I'm currently looking at our current situation. Well, how we position hybrid will make a difference in terms of our profitability. And there's a variance in profitability as how we position hybrid. But I said hybrid, these two are expected to bring about this more or less the same profit.
Well, 2018 model year and 2023 model year, if you compare these two, system-wise, it is more efficient and also the performance is higher. And despite that, we've seen that cost-wise, we are trying to make it more affordable. And therefore, rather the 2027 model, we are currently developing the model. But here again, we want to increase our competitiveness, not just in terms of cost, but also in terms of performance.
That is how we are addressing this. In the second half of this decade, we will increase battery EV, and therefore the volume of all but the earning power per unit will increase, so that we can earn a profit. And this will be happening also in the second half of this decade. And this is going to be the source for injecting resources into electrification of battery EV that is.
Eiji Fujimura -- Managing Executive Officer and Chief Financial Officer
Maybe, if I may add, well, hybrid, yes, we have one hybrid that we are focusing on. So, we have been reducing the cost. But in the past, from the perspective of profit, ICE was a much more competitive as OEM has had. Now, it's at par more or less.
And so, if we had, for example, this fiscal year, in the automotive business, if EV-related development expenses were excluded and if it were only hybrid and ICE alone, if we cover just these two operating profit margin-wise, we can expect 8%. So, competitiveness-wise, including cost, it is quite strong. But in addition to that, in the second half of this decade, it will further evolve. We have one evolution planned.
And therefore, the current hybrid is doing quite well. But up until 2030, we want to be able to compete in North America with the current competitiveness we have. Unit volume is 1 million this fiscal year. By 2030, if things go well, then I think we'll come close to 2 million units.
And that is the one plan that we have, including our suppliers. We are trying to meet this increase so as to be able to achieve a scale of 2 million units. That is how we are preparing for hybrid. And if we can lead this, and then I think we will have more power to generate cash, and thereby, we will be able to make a transition to electrification.
So, hybrid was, to begin with, a strong weapon. And we want to enhance this technology that we are already strong in. And that is how we want to do our business. Thank you.
Unknown speaker
Second question about the profitability of your automotive business. Well, in the fourth quarter, I think the margin compared to the third quarter, I think has gotten worse. I think you mentioned that there's an addition of the expenses here. But looking about the profit margin of the current automobile business, and I think that you will also have to support the suppliers.
So, how about -- you said I think it's about 5% or less of 5%, but including the support to suppliers, how are you going to try to increase the operating margin of your automotive business?
Eiji Fujimura -- Managing Executive Officer and Chief Financial Officer
Thank you. Well, about the fourth quarter, the ESM, there is a tendency for the expenses to increase. And therefore, if you look at the full year, I think it's better to talk about the full year, not just the fourth quarter, as you pointed out. Yes, but there's been a 4% or so.
Well, a ratio at the end of the fiscal year and after the first quarter has been explaining, last fiscal year, there was an increase in the quality related to expenses. But it used to be 1% versus the sales, but we are seeing that the warranty has increased in this fiscal year. Based on that, we were accounting for 1.2% warranty expense ratio. And so that is the ratio and also the support to suppliers because of the restructuring, [Inaudible] there was impairment.
And so, excluding those, it's a little less than 5%. So last fiscal year, rather I've been saying this -- sorry, it's last fiscal year, I think that is the actual result that we obtained. But then going forward, how are we going to improve this? Well, those areas that we have been trying to work on the profitability and also the fixed cost part, we want to continue to work hard on those things. And so, we tightened and therefore, the top line, where possible, will be raised for this fiscal year in the United States and in Japan.
I think these are both the major markets. But in those areas, we want to post a positive. And also, we'll reduce the incentives, etc. I think that our product appeal has increased, and therefore we can do this.
And based on that and also the pricing, though we will be more prudent, we think that in each of the domains, we will try to price in line with the value that we're offering our customers. Now, about the support to suppliers, for our suppliers, especially in Japan and U.S., there is the impact of UAW. And it's not just an in-house production, but also our suppliers at the same time have to give consideration to this. It's on a negotiation basis.
So, it's one by one. But still, there is the inflation part that we have to take into account. So, we have budgeted, so that we can provide support for inflation. Now, what's different from -- prior to COVID, we have stable production and we're doing models inquiry together with our suppliers and manufacturing.
So, we have to think about where we can improve our cost competitiveness together with our suppliers. So, we want to do co-creation with our suppliers. That is the sort of budget that we have compiled this time. That is all.
Thank you.
Unknown speaker
Thank you.
Thank you very much, Mr. Yokoyama. Next question.
Operator
From NHK, Mr. Obi, please.
Unknown speaker
Can you hear me?
Yes. Thank you.
NHK, Obi speaking. Thank you for your presentation today. I have two questions. First one, these sales turnover revenue and OP, you are achieving the highest ever.
And your business is very good. Very well going. And then in this context, what is your impression reaction to this good business today? And the second question is a bit away from the financial results. So, today, speaking about yen depreciation today in Japan, it is quite a commonplace today, JPY 155 per for dollar as of today.
However, that may be good for you. That is quite supportive for the businesses for you. But for Japan on the whole, what is your thinking about current exchange rate situation today? What is your thought about it?
So, first question I'd like to address. In the second part of 2010, we said that we would envision 6 million cars, 6 million units. We were on the expansion of the businesses mainly, and then we needed to shift our directions. And then we said that we would solidify our basic businesses with efficiency.
For instance, we would optimize the surplus capacity by fixed cost reductions and then less derivatives, more commonality of the parts components and system cost reduction of the hybrid cars with the better performance to enjoy the cost reduction effectiveness. This way we could improve value of the commercial vehicles with the appropriate prices, with those initiatives. And the automobile businesses have improved a lot. And if you look at the EV business alone, we are reaching a near 8% today.
In addition to that, for the motorcycles, we were relying on the Asian markets quite heavily. But we now had expanded our profitability in other areas, too, in Europe, 20%; Asia, 80% -- and South America, 20%; and Asia, 60%. And then for both motorcycle and automobile businesses, both together, we have improved our structure of the businesses quite nicely. And then altogether, we were successful in that regard because of that.
Now for 2030, for instance, we can envision 2 million EVs. That is our vision, plus our businesses, 5% EV. That is our targets. And we will keep spending for research and development.
As with that, EV businesses in 2030 will be something like that. And we have solidified our foundation to achieve that vision finally. And in terms of the yen depreciation situation today, of course, we are in the manufacturing businesses. And we reliant on the facilities and equipments heavily.
Therefore, abrupt changes of the forex is not really welcome. But recently, of course, it is related to the policies of the U.S. and the Japan government. Bank of Japan's initiative, U.S.
counterpart, when they are going to move to reduce the rates and so on. Of course, they are all related. And then, the fundamentals behind such ups and downs of the forex situation today is actually related to the actual demand for the yen currency. I think that is my thought.
And the true actual demand for the yen today will be related to the export from Japan because it was export-oriented, so far, heavily. But now, in this situation, we would have a more internal domestic demands meaning that we could repatriate our manufacturing businesses back in Japan and then Japanese stocks, the share prices are now appreciating, too, reflecting that. That probably indicates that the demands for end will be improved going forward. And then, our expectation or assumption is JPY 140 for the time being in this budget.
You might take it quite conservative perhaps. And the reason behind the JPY 140 is maybe in the first half, it will be something like JPY 145 for a dollar in the first half of the year, and then in the second half, JPY 135 because of the interest rates changes and so on. That is the expectations. But in the long run, I as I said before, the power of the Japanese businesses will be appreciated better with the better actual demands within Japan.
Therefore, it would not go to JPY 150 or JPY 160. I wouldn't think it will be the case. However, of course, it is not possible to project however, the abrupt changes of the currency, so difficult for us. The April-May situation of the forex is not really favorable to us.
However, we have to adapt to the changes out there in terms of how we operate everyday basis. Thank you very much.
Thank you very much for your answer. Thank you.
Next question.
Operator
Nikko Japan Automotive Daily, Mr. Misododi. Mr. Misododi, please.
Unknown speaker
This is Misododi or Japan Automotive Daily. Can you hear me?
Yes.
Thank you. I have two questions. So, first, FY '25 forecast, about this forecast, operating profit increase. You say the selling price and cost impact is a positive of 502 billion.
Can you give the breakdown? Is any relation to that? I want to know about the price increase impact. I think it was a positive last fiscal year, but the price increased itself. Has it completed the cycle or is it the case where this fiscal year, again, you want to continue and try to increase the profit through the price increase? And that's the first question. And the second is about the business in Japan.
in FY '25, your forecast says that 660,000 units. I think you said that Honda to begin with in Japan, your annual unit sales is around 700,000. I think that's more or less the target. But the shortage of semiconductors has ended.
And I think the fact that you cannot reach 700,000, what is the reason? And also to Mr. Mibe, once again, how do you position your business in Japan? Can you explain about that as well? Thank you.
Allow me to -- about the operating profit and increase and decrease. And so, there is a impact of 502 billion and what is the breakdown of this? That's your question. But I think that it was mentioned earlier, but in Japan and the United States has an increase in labor costs. I think this is true also for the suppliers.
And so, this is included. We have been working to increase the cost together, and we can reflect this in our motorcycle business. So, we have offset that. But mainly it's a selling price.
The positive impact of the selling price, it's about 407 billion worth. And well, the inflation part but we have to try to introduce a competitive products to increase their price. But there are some special factors included. In the United States, with the upcoming electrification, dealers and we the manufacturers, we have to change the roles that we play.
I think that we have to factor in this change, the dealer margin, therefore. On our part, we have done a lot of consultation, and we have reduced the dealer margin. In other words, the profit allocated to the dealer has been allocated to us. Well, the new car business, it will be like that, but in the future, the maintenance and those parts, as a touch point for the customers that do this, will be a very strong business partner for us.
So, that will continue to be the case. So, that profit, within the 407 billion, I think about 100 billion is included. And therefore, if you subtract that, that will be the price increase. So, that has been budgeted.
Meanwhile, recently in North America, especially, we have been reducing our inventory, and we're trying to reduce the incentives. That's our operation. Well, we have not yet reached the level prior to COVID. And I think that the competition is more fierce these days with competitors, and therefore we have to budget more of the incentive.
And in the operation, the pricing and incentive, we are trying to reduce this down, but we have to offset where needed. So, 500 billion, this is a large number, but these factors are included here. So, please understand this number to mean that. And this fiscal year, whether we can continue to raise our price, as we said earlier, we have to comply with the inflation and also introduce appealing products and try to tap on these strengths that we have.
That's all. But business in Japan, Aoyama will first.
Shinji Aoyama -- Director, Executive Vice President, and Representative Executive Officer
Yes, 700,000 has been the benchmark in the past. That is true. So, 700,000 units. At one time, we were selling that much.
So, that was regarded as more or less the benchmark. So, you are correct in saying so. But the mid to long term, we think that the Japanese automotive market is declining. Unfortunately, we have to admit this overall.
And therefore -- for FY '25 as well. The market itself, there will be a marginal increase. That is how we look at it. And so, we have the 655,000 units listed here, but the registration is about 700,000 units.
As for the share-wise, if you calculate this in terms of share this fiscal year, a 15% or so is what we're aiming toward. And therefore, 15% share is what we want to gain. And this is the highest in in history. So, this is a plan that we have.
Already, we are receiving bookings in advance, the new Freed before launch. And so, we want to sell this. And also, in addition to that, at the end of last fiscal year, we launched WR-V. So, this product, plus the Vezel, minor model change.
So, all these included, we want to introduce some competitive products so as to achieve this 15% high share. That is how we are looking at this fiscal year. And I'd like to Mibe-san to talk about our positioning of our Japanese business.
Toshihiro Mibe -- Director, President, and Representative Executive Officer
But looking at the current situation, as Aoyama has already explained, well, at the beginning of this year at the CES, we announced that Honda 0, this is a new EV, and this also within the global market, we wanted to reduce this to Japan, too, as a global market. The product lineup also, the N series included, we have these smaller minivans, and we are shifting more to the smaller size models. Ad therefore, this is one of the reasons why I was seeing a slightly slow increase in unit volume. Electrification is a key word that we're using.
This is a new direction that we're aiming toward. And this is a good opportunity for us. And within this process of electrification, once again, of course, we are a Japanese company based in Japan. The Japanese market is a very important market for us.
And therefore, in addition to what we were doing in the past and newly, we want to introduce a new lineup, so as to be able to raise the appeal of Honda in Japan. Currently, we are working out the details and therefore we cannot make an announcement today, but it will not be the same as the past. And that is as far as I can say for now. But please expect that we will be making changes and look forward to our strategy in Japan.
Thank you.
Unknown speaker
Thank you. So, next question.
Operator
Reuters, Shiragi-san, please.
Unknown speaker
Thank you for asking me for the question, Shiragi from Reuters. I have two questions. Can you hear me?
Yes, please.
Away from the financial results, because of the president being here, I'd like to ask this opportunity. As of today, what do you think about the status of the battery markets and Honda's position today in terms of your negotiation with the other companies and the development and sales plans of that? Please tell us your frank view on that. And as for the Canadian plant, for instance, recently for your EV sales goal, for instance, you have today, you're probably having those steps done, absolutely. But other companies are facing with a bit of a decelerating trend of their EVs, and also discount is being seen quite in competitive markets.
In that BEV slowing down trended today, minding that, do you think it is a kind of good time for you to take advantage to accelerate yourself away from others being slowdown situations? Or do you think you have to accelerate further the businesses you have today? What is your position today of your company in the current EV situation? And the second question is about collaboration potential with the Nissan. I understand it is still under consideration, but I'd like to ask Mibe-san what is the topics that you are talking about with them today in the negotiation process, maybe as far as you can share with us? And in the topics with them, would you talk about EV sales, goals and so on? Maybe you would tell us about it in the business update opportunity, but do you have changes on your strategy, so on, with regard to their talks with them?
Toshihiro Mibe -- Director, President, and Representative Executive Officer
For the first question, BEV businesses, the EV demand is a little bit down, according to what you said, that of course it is, what we are seeing today globally better. Since I became the president, our goal is to achieve 40% by 2030 and 80% in 2040, have represent FCEV or BEV by 2040. And of course, that is the kind of back-testing goal based in 2050. And it's been three years since I became the president.
And those goals still stand, no change at all. So, for the goals of the 2030 and 2035, of course, EV-related regulations and laws in different countries might change as we go toward those goal years. And that was something we were expecting already. And this is what we experienced today, for instance, to achieve 2 million cars in 2030.
And we'd like to establish the foundation for that businesses in order to be able to achieve it. And then we are making plans now including the investment plans and so on. And based on the current EV situation, we still keep up with our original strategy, no change. And in terms of the investment, maybe the opportunities, the timing of the investments of those might be shifted within the range that we would anticipate.
But there's no change to the goal, no strategy changes at all. And in terms of the hybrid, it is good technology as a tentative solution. And we have the businesses of that today with hybrid. And we did not -- we are not denying a hybrid business at all.
But after 2030, the global regulations and so forth would require be a battery EVs, for sure, in order to achieve a carbon neutrality. And then we have been working on the small mobilities today. The battery EVs could be the best solution for those small mobility ones. And then we have those milestones one after another.
And we like to take on achieving those steps as we go. And in regard to the collaboration with the Nissan, we've done it on the March 15th. And since that time, we've had frequent discussions between the two companies with a different groups of people. And then as was announced by Mr.
Uchida of Nissan the other day, actually I've checked the progress, participating some of those meetings and work through the values that can we provide by this collaboration. We are actually discussing about it right now, and I cannot disclose what is being discussed at the moment. However, we're coming to a good conclusion nearly. And once that is well summarized, we can share with you.
And as we said on the March 15th, basically, it will be in the area of the electrification software and also complementary product supplies and so on. And for the growth in the future, it will be in the electrification software. Those two will be very important for the growth purpose. And then software, especially, with the AA included and the semiconductor together, the development cost will be enormous.
And that area is one of the potential collaborative areas. And also, for the scalability for the electrification, scalability can be quite advantageously obtained with the collaboration, I suppose, with the electrification efforts. And then we are having discussions closely on those points. And once we find and identify the benefits, we will start working together.
And I cannot give you much today, however, we are having discussions in the broader scopes in front of us. And on the 16th of this month, I don't think I can give you the clear answers for our discussion items with you today. But of course, the discussion will not go forever. Sometime very soon, I can give you some ideas about the collaborative talks between the two.
Unknown speaker
So, by summer, maybe can you give us a kind of a first round of the sharing with us of the information by summer time? What is your goal?
I don't think it will be until the end of this year. It is, but long summer time. Maybe by then, I'd like to come up with some sort of idea that we can with you. That is what I think.
And we will focus on the discussions really? So, that, of course, including whether or not we go for that, will not go for that. We will be able to summarize the talks sometime very soon. Thank you.
Thank you.
Operator
Apologize, but in the interest of time, next will be the last question. Asahi Shimbun newspaper, Matsuoka-san, please.
Unknown speaker
Can you hear me?
Yes.
I'm Matsuoka from Asahi Shimbun newspaper. But North America, your automotive business is growing. The unit volume is increasing. Is it because of the foreign exchange rate? Is it because the selling price has been reduced because of the exchange rate? Or is it because people are returning from EV? What is the reason for the increase in unit volume?
Well, the reason why we are seeing an increase in not just volume, but profit, I understand. Sorry, yes. But exchange rate is one factor. But it's not the case where the exchange rate is a dominant factor, especially in FY '24 result.
I'm looking at FY '24 results. FY '23 was the time in which due to the semiconductor shortage, we could not fully supply, but we could not fully produce. And so that was the situation. Therefore FY '24 and FY '25 as well.
In North America, the factory, the utilization rate is 100% or even slightly more than 100%. That is utilization rate at the U.S. factories. And therefore, as a result, we are being able to raise the price, selling price in line with the appeal of our products.
I think that this is the major contributor. Plus, there was also, as I mentioned, in the separate question, hybrid, after the '23 model year, the performance index increased and also the business competitiveness increased, including cost. And therefore, the profit ratio is equal to ICE. But in terms of the profit amount, it is slightly more.
And so that included hybrid is doing very well. And so further boosting our profit.
Page 10, you talk about the historical operating income and give the reasons and selling price cost. I thought that this was a big contributor. Can you elaborate on this?
Page 10, did you say?
Profit before income tax. The change in profit before income tax FY '24 results.
Yes, you're talking about FY '24. Right. OK. So, there is the price cost impact, sales impact and includes the gross profit.
Well, motorcycle and other regions are included here, but yes, for automotive, 317.9. Yes, underneath, it says that, this number of 4,487 for the revenue model mix. And this is coming mainly from North America. Well, the previous fiscal year, we had difficulty acquiring semiconductors.
But this year, we have seen an increase. And there was a 420,000 unit increase in the North America. And I think that this has attributed mainly to North America and about the cost impacts. Well, roughly speaking, of the 524.7 motorcycle or automobile, it's about 328 something.
But the supplier and also the wage increase, these are a negative, included here, but the raw material cost, this is big. So, I said 360 billion for automotive, but still, I think the raw material cost, this includes and precious metal and steel, too, but it's about 190 billion or 200 billion. So, this is the material they did. And so, this is a positive.
And the selling price increase, it's about 360 billion. And so, minus 200 billion. So, it's about 160 billion. That remains the cost increase, the supplier and the wage increase, the cost increase factors are also factored in.
And we believe that the price impact was that much. This is not just North America, by the way, but for automotive, that is the situation. Have I answered your question?
Thank you.
Hi. Thank you, Mr. Matsuoka.
Operator
Thank you very much. And I can conclude the press conference for the financial results presentation today. And those slides and materials will be available on our website. [Operator signoff]
Duration: 0 minutes
Call participants:
Toshihiro Mibe -- Director, President, and Representative Executive Officer
Shinji Aoyama -- Director, Executive Vice President, and Representative Executive Officer
Eiji Fujimura -- Managing Executive Officer and Chief Financial Officer
Unknown speaker
