Stephen Ma: On China, yes. Thank you, Uchida. I think you said most of it, but as we mentioned, in the Q1 January, there was, as you know, increase in COVID cases in China, so we got affected by that. And then no more seasonally, like, Chinese New Year in February. And then as you all know, the big price war started in end of February and March was intensified with many extreme measures taken by some automakers. In Q2, I see the market has calmed down a little bit. You can see that our sales decline percentage lowered. It’s still a decline, but it’s not as severe as it was in Q1. So, based on what we see in Q2, we have projected into Q3 and Q4 and all of those assumptions are fully baked into our revised outlook for the full-year.
So, all the economic consequences are now considered. As Uchida mentioned, we have several new models that we are bringing to the market of which one is EV and one another one is hybrid, and then we have couple of other vehicle, so these four new models are very attractive. So, hopefully, we will see some improvement in the sales in second half versus first half. Thank you.
Operator: Okay. Thank you so much. Okay. Moving on to the next question, Automotive News, [Hans Sun] (ph).
Unidentified Analyst: Hello. This is [Hans Crimmel] (ph) from Automotive News. Thanks for taking my question. I would like to ask a little bit about the inventory status and the production and the idea of maybe using the production capacity in China to export maybe to other markets. I see that according to your inventory analysis or a status, the inventory keeps climbing over the last couple quarters, and it’s still about half the pre — let’s say, pre-COVID inventory. What is the optimal level of inventory that you want to achieve? Are we getting there? Are we close? And I’m concerned a little bit about the fact that production seems used to be balanced with sales. Now production seems a little bit more than sales. How do you plan to use China then to — as it perhaps an export based other markets, what other markets might you export to. And is the United States possibly a destination for some of those exports.
Makoto Uchida: Thank you for your question, [Hans Sun] (ph). With regards to possibility to export from China. That’s what we are considering. We haven’t — we are not ready to talk about the details. We are just considering the possibility of exporting from China. In other destinations, for example, in fiscal year 2023 in Q1, Japan, U.S. and Mexico and UK, utilization rate in these plants are increasing. And in the second quarter, by the way, the shift. If you look at the current shifts, work shifts, utilization rate will largely increase. Therefore, there’s an unmet demand. So, we are we’ll be adjusting the production of each location and inventory that you asked about. Today, in Q1, inventory is piling up and there are some reasons behind it.
As you can see in the slide, 470,000 units is the number we have. Because in the first quarter, since last year, this was the case, by the way. Logistics constraint is what we are facing. Therefore, we are unable — some of the vehicles are in transit. And compared to the prior year, excluding China, in many regions, we have increased the sales, but we plan for more. So, there are many customers who are waiting for this in some of the destinations. For example, vessel shortage, for example, is one constraint. And North America inter outbound is short of supplies for some of the models. So that is why the inventory is growing a little bit this fiscal term Q1. We will continue optimizing the inventory and adapt to the needs of the customers and make adjustments accordingly.
This is very important. China, needless to say, capacity in China remains low in terms of utilization rate. So, for the destinations with unmet needs, we are just considering possibility of exporting. We haven’t determined the directionality. I hope you understand this. Inventories looks like it’s piling up because of these reasons that I described. Going forward, we would like to optimize the inventories. This is my answer. Thank you.
