Eiji Fujimura: Mr. Yokohama, about China, about the production capacity, I forgot to mention this, so I have to answer that part of your question. Last time, when we made our financial announcement, production situation in China, as I said earlier, we have 1.2 billion units capacity, about double yearly. We have the dedicated factory, two factories. So it’ll come to 1.7 million units. And once these new factories are — I’m sorry, is currently 1.49 million plus. And then there will be 1.7 million. We think of that 1.2 million is the appropriate level. We have to make adjustments for the remaining 0.5 billion. And for the China, we are talking with our partners. You know, in terms of how we see the issue, I think our partner sees the same way.
We are 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 for the second quarter, we’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 0.5 million units, and we have to talk to them about how this will be done. That is all from me. Thank you.
Operator: Thank you, Mr. Yokohama. So next question. [indiscernible] Mr. Taki.
Unidentified Analyst: Taki from [indiscernible] Can you hear me?
Unidentified Company Representative: Yes, please.
Unidentified Analyst: Thank you. I have two questions. I’ll go one by one. First question is about a current EV sales trend in our main market in Western countries, it is slowing down a bit, instead of hybrid cars getting popular, I hear that. How do you see that situation now? Would that be within expectations or would that be a kind of a tailwind for your businesses? And do you have a target of 2040? And what is the impact of that on the electrification strategy?
Unidentified Company Representative: 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 a bit. And in the U.S., EV ratio is about 8% recently. That’s my understanding. And 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 line with the carbon neutrality trend, we need to push forward electrification initiatives. Nevertheless, this is our idea as a mobility company. So as of now, 20%, 30%, 40% and 80% are in 2035 and 100% in 2040. This is the battery EV goals. And such goals, 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 to them, 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’s a kind of a lag of several years and so forth. And then into 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. For sure, out of the ICE models, hybrid would be the kind of bridging technology up until the carbon neutrality goal there. For our hybrid has been really well appraised so far in the United States called CRV. Hybrid models are available. And we have a very good demand. And already, it’s a 50-50 sort of a split between the ICE petrol-based cars and hybrids, 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 summertime around, Civic hybrid will be launched by then. And after the 2027 model onward, hybrid will be the evolution model such as more compact performance, profitability, body weight.
Everything will be evolution for the hybrid. And of course, we will evolve them further and further. And that much is about North America and Western markets. However, in China, as speed is a little bit different. Tn 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.
Unidentified Analyst: Thank you very much. Second question, you talked about the challenging market situation in Asia, and you mentioned that several times. And closing for the first half, did you see any changes since the first half closing time? And what is the prospect of our upcoming situation of Asian markets?
Unidentified Company Representative: Maybe I can answer your question based on the motorcycle businesses because of 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, at Honda Duo Plus, it’s doing good, and we are getting the shares really high. And although we have a higher share now, the market itself is tough. And in Vietnam, the export 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 ’24. And for Honda Value 160, that’s something we have to compete. And its market share has marked other 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 rushed issue of the airframes because of which we had a unit sales falling down. But we had measures and actions to recover our trust by the customers, and we are leading the sales recovery because of that efforts. And Indonesia sales next term, it will be on the positive side, I believe. And in terms of the future prospects, about different countries in Thailand, first, it will continue with a little bit of negatives for a more while.
And I don’t know it is related to the regulations, but there could be some upper limit for loans for the customers, starting in April. And when that comes in, Thai situation is be tough. And in India, if issues are cleared, it will be fine. India, Brazil, Turkey, European countries, including Turkey, our positive situation can continue for a while. So, thank you for your understanding.
Unidentified Analyst: Thank you very much.
Operator: Thank you very much. For the interest of time, the next will be the last question. Nikkan Jidosha, Misatori, please.
Unidentified Analyst: Can you hear me? This is Misatori 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 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 at the mid-term 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 am going to asking this question, about the sales price and cost impact, the wonderful chart that you mentioned. Can you explain about the breakdown? So, nine months and also the full year. So, what are the factors that comprise these numbers? Thank you very much.
Eiji Fujimura: 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, the big CRV, these core models, we have invested a lot of our resources here. And if we underperform, then we think that our market performance, as we shift to that, will not be good for us. And therefore, we think that we are selling at around the high price, but in order to maintain our presence, we think that we need to maintain a certain volume for the sake of the future. And then that is how we’ve competed. And as a result of the third quarter, we have slightly overperformed our plan. And it’s plus 30,000 from the 1.1 million. The fourth quarter, there is a dealer inventory, that has stocked up and therefore about 160,000.
So, we have narrowed down on our wholesale plan. But 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, the EN series, the second of the series will be the first step and the third series, that will be coming up in the second half of the next fiscal year. And therefore, if it turns out to be 1.3 million this year, then we think that we could go beyond that. And about the second question, Mr. Kawaguchi.
Masao Kawaguchi: Thank you for the question. About the sales and also the cost impact of what we explained in the waterfall. Let me explain about that. First, about the nine months, the waterfall. The 360 billion plus was what I explained. Of which the pricing impact, this is about 270 billion or so. It’s a plus 270 billion, of the plus 360 billion. So, that is the one part. And the remaining 90 billion is the impact of the cost. That is the breakdown. About that pricing, this is mainly the automotive market. 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 270 billion for the automotive, it’s about 200 billion attributable to pricing. The remaining cost of the plus impact, the manufacturing cost and also the drop in the precious metal price, this has an impact. So, we have these factors. And 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 660 billion. Meeting this, it’s about a positive of JPY 80 billion to JPY 90 billion. Now, annually, in other words, how we see the fourth quarter and throughout the year, the selling price impact, we could think that it will continue to have an impact because we’ll continue the change, and also the change in selling price will continue to have an impact.
