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Honda Update November 2007

2008 Accord
(for North American Market)

Table of Contents

FY07* Financial Results Outline Profit Analysis Segment Information FY08* Financial Forecasts Outline (Sales units / Profit analysis / Capital Expenditures / R&D, etc.) Returning Profit to Shareholders Highlights of Major Strategies for Business Growth Automobile Business : North America BRICs Japan Motorcycle Business : Asia Brazil - Steady Growth of Hondas subsidiaries - Strong position in the market P. 38 - 41 P. 42 - Stable increase in slowing market - Steady Growth - Improving margin of Fit, highest-selling model P. 27 - 29 P. 30 - 34 P. 35 P. 36 - 37 P. 20 - 23 P. 24 - 25 P. 3 - 4 P. 5 - 6 P. 7 - 19

Production capacity - Continuous growth

*FY07: Fiscal year ended March 31, 2007,

FY08: Fiscal year ending March 31, 2008

Outline of 2nd Quarter Financial Results (Consolidated)


2Q Results

Unit Sales
Unit (thousands)

FY07 2,816 884 1,187

FY08 2,333 937 1,258

Change

Motorcycles Automobiles Power Products

- 17.2% + 6.0% + 6.0%

Business environment Yen depreciation in 2Q YOY basis in spite of underlying yen appreciation mainly against the U.S. dollar High prices for raw materials and gasoline continued Motorcycle business:
Growth in Brazil continued Tougher competitive conditions in Asian major motorcycle market such as in India and Indonesia Struggling motorcycle and ATV market in North America

Automobile business:
Growth of Emerging markets such as BRICs and others Strong demand for fuel-efficient cars in the U.S. Japan automobile market situation remained stagnant

2Q Results

Financial results
Yen (billions)

FY07 2,630.8 193.0 163.6 27.4 127.9 70.05


approx. 1,825,993,000 shares

FY08 2,971.3 * 286.3 * 269.9 * 26.2 208.4 * 114.94 *

Change

Net sales & other operating revenue Operating income Income before income taxes Equity in income of affiliates Net income EPS (Yen)
Note : Shares which are based on calculation of EPS

+ 12.9% + 48.3% + 65.0% - 4.4% + 63.0% + 44.89

Major change factors Increased unit sales in overseas regions mainly in automobile business Improved operating margin in all regions Unit Sales
Motorcycles: Automobiles: Power Products: Decreased unit sales of component parts sets for Asia Strong sales in South America, etc. Increased sales of CR-V in overseas regions Increased unit sales in Japan, Europe, Asia and Other Regions Decreased unit sales in North America

Net sales & other operating revenue


Increased unit sales in automobile segments / Currency effects from the depreciation of the yen

Operating income
<Increase Factors> - Increased profit from higher revenue - Decrease in unrealized profit due to inventories - Continuing cost reduction effects - Currency effects from the depreciation of the yen <Decrease Factors> - Change in model mix - Increased incentives in North America - Increased depreciation expenses - Increasing raw material prices - Increased SG&A and R&D expenses

approx. * Record high 1,813,784,000 shares

(weighted average number of shares outstanding )

Average Rates (Yen)

US Dollar Euro

116 148

118 162

weaker by 2 yen weaker by 14 yen

Outline of 2nd Quarter & 1st Half Financial Results (Consolidated)


2Q Results 1H Results Change

Unit Sales
Unit (thousands)

FY07 2,816 884 1,187

FY08 2,333 937 1,258


2Q Results

FY07 5,196 1,780 2,911

FY08 4,586 1,883 2,787


1H Results

Change

Motorcycles Automobiles Power Products

- 17.2% + 6.0% + 6.0%

- 11.7% + 5.8% - 4.3%

Financial results
Yen (billions)

FY07 2,630.8 193.0 163.6 27.4 127.9 70.05


approx. 1,825,993,000 shares

FY08 2,971.3 * 286.3 * 269.9 * 26.2 208.4 * 114.94*

Change

FY07 5,230.5 396.5 355.0 57.6 271.3 148.52


approx. 1,826,739,000 shares

FY08 5,902.4 * 508.0 * 488.2 * 63.2* 374.6 * 206.26*

Change

Net sales & other operating revenue Operating income Income before income taxes Equity in income of affiliates Net income EPS (Yen)
Note : Shares which are based on calculation of EPS

+ 12.9% + 48.3% + 65.0% - 4.4% + 63.0%


+ 44.89

+ 12.8% + 28.1% + 37.5% + 9.8% + 38.1%


+ 57.74

approx. * Record high 1,813,784,000 shares

approx. * Record high 1,816,129,000 shares

(weighted average number of shares outstanding )

(weighted average number of shares outstanding )

Average Rates (Yen)

US Dollar Euro

116 148

118 162

weaker by 2 yen weaker by 14 yen

115 146

119 162

weaker by 4 yen weaker by 16 yen

Change in Income Before Income Taxes < FY08 2nd Quarter >
Income before Income taxes + 106.3 bn. yen ( + 65.0 % ) Operating Income + 93.3 bn. yen ( + 48.3 %) Other Income & Expenses + 13.0 bn. yen
Yen (billions)

<Negative

Factors> - Increasing raw materials prices - Increases in depreciation expenses, etc.


<Positive

Factors> - Continuing cost reduction effects, etc.

- Increased sales expenses, storage fees due to the increase in unit sales - Increased expenses for advertising, ,sales promotion, etc.

- 6.2 + 19.2
Others Fair value of derivative instruments
( Exhibit 2)

- 11.8
Cost Reduction, the effect of raw material cost fluctuations, etc.

- 15.8
Increase in SG&A

- 11.1
Increase in R&D

+ 27.0
Currency Effect

269.9

+ 105.1

163.6

Revenue, model mix, etc. <Increase Factors> - Increased profit from higher revenue in automobile business segment - Decrease in unrealized profit due to inventories, etc. <Decrease Factors> - Change in model mix - Increased sales incentives in North America, etc.

- Difference between transaction rates and average rates : + 17.2 bn. yen - Gain and loss from valuation of the balance of receivable and debt : - 23.4 bn. yen

FY07 2Q

Currency effects (change in average rates + translation effects): Difference between transaction rates and average rates: Currency effect on income before income taxes:

+ 27.0 bn. yen + 17.2 bn. yen + 44.2 bn. yen

<Impact on Operating income> <Impact on Other Income & expenses> (Exhibit 1)

FY08 2Q

Change in Income Before Income Taxes < FY08 1st Half >
Income before Income taxes + 133.2 bn. yen ( + 37.5 % ) Operating Income + 111.4 bn. yen ( + 28.1 %)
<Negative

Yen (billions)

Factors> - Increasing raw materials prices - Increases in depreciation expenses, etc.


<Positive

<Negative

Factors> - Increased sales expenses, storage fees due to the increase in unit sales, etc.
<Positive

Other Income & Expenses + 21.7 bn. yen

Factors> - Continuing cost reduction effects, etc.

Factors> - Decreased expenses for advertising, sales promotion, etc.

- 8.8 - 30.1 + 133.6


Cost Reduction, the effect of raw material cost fluctuations, etc.

+ 30.6 - 33.3
Increase in SG&A

Others

+ 77.5 - 36.3
Increase in R&D Currency Effect

Fair value of derivative instruments


( Exhibit 2)

488.2

355.0

Revenue, model mix, etc. <Increase Factors> - Increased profit from higher revenue in all regions - Change in sales prices in North America - Decrease in unrealized profit due to inventories, etc. <Decrease Factors> - Increased sales incentives in North America - Change in model mix, etc.

- Difference between transaction rates and average rates : + 3.8 bn. yen - Gain and loss from valuation of the balance of receivable and debt : - 12.7 bn. yen

FY07 1H

Currency effects (change in average rates + translation effects): Difference between transaction rates and average rates: Currency effect on income before income taxes:

+ 77.5 bn. yen + 3.8 bn. yen + 81.4 bn. yen

<Impact on Operating income> <Impact on Other Income & expenses> (Exhibit 1)

FY08 1H

Motorcycle Unit Sales (Motorcycles All-Terrain Vehicles, etc.)


FY08 2Q Japan North America Europe Asia
Change from FY 07 2Q

Major increase/decrease factors


Introduction of all new Today model Decreased unit sales of utility ATVs such as FourTrax Rancher model Decreased unit sales of cruisers such as Shadow Spirit 750 Decreased unit sales of 125cc models such as XL125 model in France Decreased unit sales of component parts sets for India Introduction of POP100 model in Brazil Increased unit sales of CG125 FAN model in Brazil

- 610
- 11.7%
Approx.1,060
Today Japan

Approx.2,120

Unit (thousands)

107 121 68 1,645 392 2,333

+9 - 22 -3 - 518 + 51 - 483

6,000 6,000

5,196
629
CG125 FAN Brazil

5,000 5,000

Other Regions Total

4,586
763
Other Regions

4,000 4,000
Approx.1,150 Approx.560 Approx.640

- 483
- 17.2%
Approx.1,100 Approx.1,020

3,000 3,000

Approx.500

2,816
341

2,765
314

Unit sales of Honda-brand motorcycle products that are manufactured and sold by overseas affiliates accounted for under the equity method, but do not use any parts supplied by Honda and its subsidiaries 3,972

2,380
288

2,408
362

2,253
371

2,333
392

3,268

Asia

2,000 2,000
2,163 1,809 2,217 1,706

1,000 1,000

1,623

1,645

0 0

105 89 89

71 143 98

56 107 71

97 164 79

95 80 84

68 121 107

176 232 187

163 201 191

Europe North America Japan

1Q


FY07

2Q

3Q

4Q


FY08

1Q

2Q

1H 66 FY07

1H 66 FY08

Unit sales is the total of sales of completed products of Honda and its consolidated subsidiaries and sales of parts for Hondas affiliates accounted for under the equity method.

Motorcycle Business
FY07 1Q
Net Sales

Net Sales/Operating Income/Operating Margin


FY08 FY07 1Q 2Q 1H FY08 1H

2Q

3Q

4Q

310.1

335.5

303.2

421.7
+ 13.8%

368.3

381.6

645.6

749.9

Yen (billions)

Yen (billions)

Operating Income Operating Margin

10.5%

<Increase Factors> - Currency effects of weakened yen, etc. <Decrease Factors> - Increased sales incentives in North America - Increased SG&A expenses - Increased R&D expenses, etc.

+ 16.2%

68.1
( + 50.7%)

60

9.6% 8.5%

9.7% 9.1%

10%

44.2

45.2 7.0% 37.0


( + 15.4%)

40

32.0 4.2%

31.1

5%

20
13.1

3.7%

11.1

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

0%

Automobile Unit Sales


FY08 2Q Japan
Unit (thousands) Change from FY 07 2Q

Major increase/decrease factors


Decreased unit sales of Zest and Stream models Introduction of Crossroad model Increased unit sales of CR-V and Fit models Increased unit sales of Civic and CR-V models in Russia and UK Increased unit sales of component parts sets for China (CR-V and Fit models ) Increased unit sales CR-V model in ASEAN countries such as Indonesia and Thailand Introduction of Civic FFV model CR-V Civic

143 445 100 177 72 937

- 28 + 34 + 21 + 14 + 12 + 53

+ 103 + 5.8%

2,000

North America Europe

1,883 1,780
120
Civic 4Door

138

Other Regions

Asia Other Regions Total

364 316

Asia

1,500

150

192

Europe

+ 53 + 6.0%

Civic 5Door

1,000

957 896
60 153 71

884
60 163 79

915
61 155 72

946
66 187 92

937
72
North America

67 149 102

177 100

867

910

500
456 411 471 450 465 445

327 156 171 156 189 136 143

279

Japan

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

Unit sales is the total of sales of completed products of Honda and its consolidated subsidiaries and sales of parts for Hondas affiliates accounted for under the equity method.

Automobile Business
FY07 1Q
Net Sales
Yen (billions)

Net Sales/Operating Income/Operating Margin


FY07 1Q 2Q 1H FY08 1H

FY08 2Q 3Q 4Q

2,095.6

2,098.8

2,263.8

2,430.7
+ 12.3%

2,327.2

2,356.4

4,194.4

4,683.7

Yen (billions)

+ 11.7%

400

Operating Income Operating Margin

350

300 7.2% 250 6.2%

<Increase Factors> - Increased profit from higher revenue - Decrease in unrealized profit due to inventories - Continuing cost reduction effects - Currency effects of weakened yen, etc. <Decrease Factors> - Increased sales incentives in North America - Increasing raw material prices - Increases in depreciation expenses - Increased SG&A expenses - Increased R&D expenses, etc.

10% 9.0% 361.3


( + 28.6%)

8% 280.9 7.7% 6%

7.1% 6.5% 6.4%

6.7% 213.0
( + 62.8%)

200

150

150.0 130.8

160.7

157.7

148.3

4%

100 2% 50

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

0%

10

Unit Sales Ratio of Hondas 4 Global Models

Jan.- Sept. 2006


Accord 19.2% Others 39.9% Civic 20.3% CR-V Fit 11.9% 8.7%

Jan.- Sept. 2007

Others 33.7%

Accord 18.7%

Fit 11.2%

Civic 23.0% CR-V 13.4%


Source: Honda

Fit

Civic

CR-V

Accord 11

Growing 4 Global models

Power Products Unit Sales


FY08 2Q Japan North America
Unit (thousands) Change from FY 07 2Q

Major increase/decrease factors

141 479 280 242 116 1,258

+ 14 - 15 + 26 + 35 + 11 + 71
+ 71 + 6.0%
Decreased unit sales of push lawn mowers in the U.S. Increased unit sales of push lawn mowers in Europe Increased unit sales of general-purpose engines and others in China

- 124 - 4.3%

Europe Asia Other Regions Total

3,000

HRX537push loan mower

2,911
177 369 462
Asia

2,787
213

Other Regions

2,500

2,128
2,000
112 230

GX160 general-purpose engine 636


Europe

1,724
72 162

670

1,500
382

1,529 1,382 1,187


105 207 254 117 161 390 365 1,023 687 479 264 276
Japan

624

97 220

1,258
116 242 280 1,465 1,166
North America

1,000

971

500
494

615

137

127

124

139

135

141

1Q

2Q FY07

3Q

4Q

1Q FY08

2Q

1H FY07

1H FY08

Unit sales is the total of sales of completed products of Honda and its consolidated subsidiaries and sales of parts for Hondas affiliates accounted for under the equity method. 12

Power product & Other Businesses


Net Sales/Operating Income/Operating Margin
FY08 1Q
Net Sales

FY07 2Q 3Q 4Q

FY07 1Q 2Q 1H

FY08 1H

108.4
Yen (billions)

100.0
Operating Income Operating Margin

105.0

125.3
+ 4.9%

115.2

105.0

208.5

220.2

Yen (billions)

20

+ 5.6%

10.2%

9.9%

<Decrease Factors> - Increased R&D expenses, etc. <Increase Factors> - Decreased SG&A expenses - Currency effects of weakened yen, etc.

12% 18.4

15
8.9% 7.5% 6.9% 6.6% 6.8% 14.9
( - 19.1%)

10%

8%

10

11.0

10.4

5.8% 6% 7.9 7.2 6.9


( - 6.5%)

7.4

4%

5
2%

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

0%

13

Financial Services Business


FY07 1Q
Net Sales
Yen (billions)

Net Sales/Operating Income/Operating Margin


FY07 FY08 1H
*

FY08 2Q 3Q 4Q
*

1Q
*

2Q
*

1H

90.8

98.9

105.0

118.4

129.8

137.8

189.8

267.6

Yen (billions)

+ 39.3%
Operating Income Operating Margin
<Increase Factors>

+ 41.0%

* Including increased net sales due to start of operating lease transaction

70

32.2%

34.6%

- Increased profit from higher revenue - Decreased SG&A expenses - Currency effects of weakened yen, etc.

60

63.5
( + 22.5%)

30%

26.4%

27.3% 51.8 23.7%

50
22.8% 21.7% 40.9 34.2 21.3%

40

20%

30
29.2 29.3
( + 29.7%)

20

22.6

22.7

10%

10

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

0%

14

Japan
FY07 1Q
Net Sales
Yen (billions)

Net Sales / Operating Income / Operating Margin


FY08 FY07 1Q 2Q 1H FY08 1H 4Q

2Q

3Q

1,109.2

1,175.8

1,223.8

1,265.1
+ 3.4%

1,176.2

1,215.5

2,285.1

2,391.8

Yen (billions)

+ 4.7%

140

Operating Income Operating Margin

120
5.9%

<Increase Factors> - Increased profit from higher revenue - Continuing cost reduction effects - Decreased SG&A expenses - Currency effects of weakened yen, etc. <Decrease Factors> - Increasing raw material prices - Increases in depreciation expenses - Increased R&D expenses, etc.

8% 133.9
( + 13.6%)

117.9 6.0% 5.6% 6%

100
4.4% 3.4% 68.9

5.4%

5.2%

5.2%

80

73.3 68.2 60.6


( + 6.3%)

4%

60
48.9

40

41.9

2%

20

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

0%

15

North America
FY07 1Q
Net Sales
Yen (billions)

Net Sales / Operating Income / Operating Margin


FY08 FY07 1Q 2Q 1H FY08 1H 4Q

2Q

3Q

1,467.9

1,421.0

1,612.1

1,671.4
+ 9.6%

1,583.3

1,557.1

2,888.9

3,140.5

Yen (billions)

+ 8.7%

220 200 180

Operating Income Operating Margin

7.8% 160 6.7% 140 120 114.4 100 95.7 80 60 40 20 0


1Q 2Q FY07

<Increase Factors> - Increased profit from higher revenue in automobile and financial services business segments - Continuing cost reduction effects - Currency effects of weakened yen, etc. <Decrease Factors> - Change in model mix - Increased sales incentives in motorcycle and automobile business segments - Increasing raw material prices, etc.

210.2

213.0
( + 1.4%)

10%

7.3%

7.7% 6.1% 128.4

7.5%

8% 7.3% 6.8%

6% 116.0
( + 21.2%)

118.2 97.0

4%

2%

0%
3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

16

Europe
FY07 1Q
Net Sales

Net Sales / Operating Income / Operating Margin


FY08 FY07 1Q 2Q 1H FY08 1H 4Q

2Q

3Q

325.1

310.7

271.6

440.1
+ 25.8%

400.2

390.8

635.9

791.0

Yen (billions)

+ 24.4%

Yen (billions)

Operating Income Operating Margin

30

<Increase Factors> - Increased profit from higher revenue - Continuing cost reduction effects - Currency effects of weakened yen, etc. <Decrease Factors> - Increased SG&A expenses, etc.

5% 4.3%

27.0
( + 74.4%)

25

4%

3.4%

20
2.9% 2.9% 16.7 2.6% 2.0% 12.6
( + 84.7%)

3% 2.4% 15.5 2% 10.3

15

10
9.0 1.4%

6.4 3.7

1%

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

0%

17

Asia
FY07 1Q
Net Sales
Yen (billions)

Net Sales / Operating Income / Operating Margin


FY08 FY07 1Q 2Q 1H FY08 1H 4Q

2Q

3Q

287.5

313.5

303.4

366.9
+ 32.6%

393.3

415.6

601.0

808.9

Yen (billions)

Operating Income Operating Margin

+ 34.6%

10% 9.4% 70.3 8.7% 8%


( + 86.7%)

8.0%

60
6.8% 5.8% 6.7% 5.2%
<Increase Factors> - Increased profit from higher revenue - Currency effects of weakened yen, etc. <Decrease Factors> - Increased SG&A expenses, etc.

6.3% 6%

40
37.6 36.9 33.4
( + 82.9%)

4%

20
19.4 18.2

20.2

19.2

2%

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

0%

18

Other Regions
FY07 1Q
Net Sales
Yen (billions)

Net Sales / Operating Income / Operating Margin


FY08 FY07 1Q 2Q 1H FY08 1H 4Q

2Q

3Q

176.9

196.3

193.0

231.3
+ 36.4%

226.3

267.9

373.2

494.2

Yen (billions)

60

Operating Income Operating Margin

+ 32.4%

50

<Increase Factors> - Increased profit from higher revenue - Continuing cost reduction effects - Currency effects of weakened yen, etc. <Decrease Factors> - Increased SG&A expenses, etc.

11.3%

51.9
( + 41.5%)

10.9% 9.6% 9.8%

10.5%

10%

40

8.6%

8.3%

8.4% 36.6

30

30.1
(+ 40.7%)

20
15.2

21.4 16.0

21.7 19.5

5%

10

0
1Q 2Q FY07 3Q 4Q 1Q FY08 2Q 1H FY07 1H FY08

0%

19

Forecast: Unit Sales by Business Segment


Unit sales of Honda-brand motorcycle products that are manufactured and sold by overseas affiliates accounted for under the equity method, but do not use any parts supplied by Honda and its subsidiaries

Motorcycles
- 789
Approx. 4,840 Approx. 4,000 4,680

Automobiles
+ 283

Power Products
- 86

3,960 3,652
248 310

3,935
315
6,000

Unit
(thousands) 12,000

Approx. 2,860

6,421
406 760

6,220
410 1,020

6,335
420 955

Other Regions Asia

750

750
5,000

10,369
1,305
9,000

3,000

620 390 390

9,930
1,535

9,580
1,555 324

1,625
4,000

1,650

1,715

Europe

2,000 6,000

7,895

7,220

6,855

1,788

1,850

1,855

3,000

3,103
2,000 1,000 3,000 1,000

2,560

2,670

North America

329 503 337


FY07

295 550 330


FY08
Forecasts of Jul. 25th

295 545 330


FY08 Revised

672
FY07

660
FY08
Forecasts of Jul. 25th

625 527
FY08 Revised FY07

Japan

580
FY08
Forecasts of Jul. 25th

575
FY08 Revised

Unit sales is the total of sales of completed products of Honda and its consolidated subsidiaries and sales of parts for Hondas affiliates accounted for under the equity method.

20

FY08 Financial Forecasts (Consolidated)


Yen (billions)

FY07
Results

FY08
Revised Forecasts

Change amount %

Change from previous forecasts

Net sales & other operating revenue Operating income Income before income taxes Equity in income of affiliates Net income
EPS (Yen)
Note : Shares which are based on calculation of EPS

11,087.1 851.8 792.8 103.4 592.3


324.62
approx. 1,824,675,000 shares

12,300.0 880.0 870.0 98.0 640.0


352.85
approx. 1,813,782,000 shares

+ 1,212.8 + 28.1 + 77.1 - 5.4 + 47.6 + 28.23

+ 10.9% + 3.3% + 9.7% - 5.2% + 8.0%

- 50.0 -15.0 + 1.0 + 15.0

(weighted average number of shares outstanding )

(Sep. 30, 2007)

Average Rates (Yen) US Dollar

117
1H: 115 2H: 119

116
1H: 119 2H: 113

stronger by 1 yen
1H: weaker by 4 yen 2H: stronger by 6 yen

stronger by 1 yen
(1H:stronger by 2 yen 2H: 0 yen)

Euro

151
1H: 146 2H: 155

155
1H: 162 2H: 148

weaker by 4 yen
1H: weaker by 16 yen 2H: stronger by 7 yen

0 yen
(1H: stronger by 1 yen 2H: 0 yen)

21

Forecast: Change in Income Before Income Taxes


Yen (billions)

Income before income taxes + 77.1 bn. yen ( + 9.7 %)


Operating Income + 28.1 bn. yen ( + 3.3 %)
- 8.0
Cost Reduction, the effect of raw material cost fluctuations, etc.

Other Income & Expenses

+ 49.0 bn. yen


- 106.0
Increase in SG&A

+ 174.3

+ 14.0 - 38.2
Change in R&D

+ 6.0
Currency Effect

+ 35.0
Fair value of derivative instruments

Others

870.0

792.8

Revenue, model mix, etc.

FY07

FY08
Revised Forecasts

22

FY08 Financial Forecasts (Consolidated)

Yen (billions)

FY07
Results

FY08
forecasts

Change + 127.9 + 48.2 + 38.2

Change from previous forecasts

Capital expenditures * Depreciation and amortization * R&D expenses

627.0 361.7 551.8

755.0 410.0 590.0

* Capital expenditures in results and the forecast aforementioned exclude investment in operating leases. Depreciation and amortization in results and the forecast aforementioned exclude depreciation of investment in operating leases.

23

Dividend to Shareholders
Yen

Dividend per share 1st quarter End 2nd quarter End

FY07 Results

FY08 ( Projects )

Increase from FY07 results

30 17 20 67

20 + 12 22 ( 22 ) ( 22 ) ( 86 ) (+ 5) (+ 2) ( + 19 )

3rd quarter End 4th quarter End Fiscal Year

24

Return to Shareholders
Purchase of the Companys own shares *1 Dividend amounts *2 Shareholders return ratio *3 Payout ratio

(billion yen)

250 30% 200

150

20%

100 10% 50

0
FY02 FY03 FY04 FY05 FY06 FY07 FY08(P)
*1: Purchase of the Companys own shares amounts correspond to shareholders meetings date *2: Dividend amounts correspond to each fiscal years record date *3:Shareholders return ratio = Cash dividend + Purchase of Companys own shares Net income

0%

25

Table of Contents

FY07* Financial Results Outline Profit Analysis Segment Information FY08* Financial Forecasts Outline (Sales units / Profit analysis / Capital Expenditures / R&D etc.) Returning Profit to Shareholders Highlights of Major Strategies for Business Growth Automobile Business : North America BRICs Japan Motorcycle Business : Asia Brazil - Steady Growth of Hondas subsidiaries - Strong position in the market - Stable increase in slowing market - Steady Growth - Improving margin of Fit, highest-selling model

Production capacity - Continuous growth

*FY07: Fiscal year ended March 31, 2007

FY08: Fiscal year ending March 31 , 2008

26

Update on Inventory and Incentives


Days Days Inventory Inventory
(days)

Incentives Incentives
(U.S.$ / unit)
3,000

Source: Autodata

Passenger Cars
U.S. Big 3

Passenger Cars

100

Industry average
2,000

50

Japanese Automakers
1,000

Honda
Honda

0
Jan.05 J ul Jan.06 J ul Jan.07 Jul

Oct.

Jan.05

Jul

Jan.06

Jul

Jan.07

July

Oct.

Light Trucks
5,000

Light Trucks

120

U.S. Big 3
4,000

Industry average
3,000

70

Japanese Automakers
2,000

1,000

Honda
20
Jan.05 Jul Jan.06 Jul Jan.07 Jul
0

Honda
Jan.05 Jul Jan.06 Jul Jan.07 July

Oct.

Oct.

Honda maintains sound inventory level and lowest incentive level in both segments

27

Hondas Principal Models Inventory / Incentives / Residual Value


Days Days Inventory Inventory
Passenger Cars
(U.S.$ / unit)
2,500

Incentives Incentives
Passenger Cars Source: Autodata

(days)
100

Residual Residual Value Value (( 36 36 months) months)


Source: Auto Lease Guide

Accord
75

2,000

Accord
1,500

Accord Accord LX LX (4D) (4D) 54% 54%

50
1,000

25

Civic
500

Civic Civic LX LX (4D) (4D) 59% 59%


Civic

0
Jan.05 Jul Jan.06 Jul Jan.07 Jul

Oct.

Jan.05

Jul

Jan.06

Jul

Jan.07

July

Oct.

Light Trucks
100
2,500

Light Trucks
Odyssey Odyssey LX LX 52% 52%

2,000

75

Odyssey
1,500

50
1,000

25
500

CR-V CR-V EX(4WD) EX(4WD) 60% 60%


CR-V
Odyssey CR-V
0

0
Jan.05 Jul Jan.06 Jul Jan.07 July

Oct.

Jan.05

Jul

Jan.06

Jul

Jan.07

Jul

Oct.

28

Update on Hondas U.S. Automobile Business


Industry Demand and Honda
Unit (thousands) Unit (thousands)

Hondas Retail Unit Sales


(aggregate numbers of Honda brand and Acura brand)

20,000

12% Passenger Cars Light Trucks 16,965 Honda share 17,134 16,831 16,884 16,652 16,556 16,000 10%

Passenger Cars Light Trucks 1,500


1,349 1,394 1,462 1,509

1,560

15,000
1,207

1,247

8%
1,000

10,000

6%

4%
500

5,000 2%

0 CY01 02 03 04 05 06 07(E)

0%

0 CY01 02 03 04 05 06 07(P) Source: Honda

Hondas steady growth despite weak SAAR

29

Automobile Demand in BRICs Markets


Industry: Unit (thousands)

Industry Demand (excluding commercial vehicles)


China India Brazil Russia

10,000

8,000

6,000

4,000

2,000

0 CY01 02 03 04 05 06 07(E)
Source: Global Insight

30

Hondas Growth in China


Industry Demand and Honda
Unit (thousands)
6,000

(excluding commercial vehicles)

Unit (thousands)
10%

Hondas Unit Sales


Over 400

450 400

5,000 8%

350
323
4,000 6%

WDHAC models

300 250
257 214 Honda share
4%

Civic CR-V Fit

3,000

200
City GHAC models

2,000

150
123
2%

Odyssey

100 50
53 66
Accord

1,000

0 CY01 02 03 04 05 06 07(E)

0%

0 CY01
GHAC model line up

02

03

04

05

06

07(P)

Source: Honda

Source: Honda

Hondas Progress in China


1 Enhancing model lineup and dealer network
- New CR-V introduced in Apr. 2007 - Number of Dealer outlets: GHAC 300, WDHAC 140, Acura 5(Oct.2007) - Introduced Acura (TL/RL/MDX)

Fit

City

Accord

Odyssey

2 Progress in Manufacturing Operation


GHAC*1 : Annual production capacity 360 thousand units WDHAC*2 : Annual production capacity 120 thousand units CHAC*3 : Added 2nd shift from Apr. 2007 CHAM*4 : A new powertrain plant started operation in Mar. 2007
*1 GHAC: Guangzhou Honda Automobile Co., Ltd. *2 WDHAC: Dongfeng Honda Automobile Co., Ltd. *3 CHAC: Honda Automobile (China) Co., Ltd. *4 CHAM: Honda Auto Parts Manufacturing Co., Ltd.

WDHAC model line up

Civic

CR-V

31

Hondas Growth in India


Unit (thousands) 1,200

Industry Demand and Honda


(excluding commercial vehicles, SUV and MUV)
10%

Unit (thousands)

Hondas Unit Sales


70

80 70

Category
1,000

Premium "A"
Honda share

8%

60 50
6%

800

800cc

55 CR-V Civic 40 35

600 4% 400

40 30 20
2%

City

15

200

10 0

10

12

Accord

0 CY01 02 03 04 05 06 07(E)

0%

CY01

02

03

04

05

06

07(P)

Source: Global Insight

Source: Honda
Honda model line up in India

Hondas Progress in India


1. Enhancing dealer network - Number of Dealer outlets: 34 (Mar. 2003) 63 (Sep. 2007) 2. Further Accelerating production capacity expansion
Existing Plant 50,000 100,000 units (by the end of 2007) Second Plant 60,000 units (initial) (To start operation by the end of 2009)

City

Civic

Accord

CR-V

32

Update on Hondas Automobile Business in South America Industry Demand and Honda
Unit (thousands)

Hondas Unit Sales


Unit (thousands)

(including commercial vehicles)


Brazil Columbia Argentina Ecuador Venezuela Peru 8% Chile 10%

Good sales of FFV models contributed to growth in 2007.


118

3,500 3,000 2,500

120 100 80

Flexible Fuel Vehicles (currently marketed in Brazil) Petrol Engine Vehicles


Brazil

84 68

84

2,000 1,500
Honda share

6%

60
4%

57 57 50

67

40
1,000
2%

36 26 24 21 32

500 0 CY01 02 03 04 05 06 07(E)


0%
Source: Global Insight

20 0

22

CY01

02

03

04

05

06 07(P) Source: Honda

Hondas Progress in Brazil


1. Features of Honda FFV models in Brazil - Adapt to ethanol-to-gasoline ratios of between 20% and 100% 2. Enhancing dealer network - Number of Dealer outlets: 94 (2004 end) 130 (Sep. 2007) 3. Further Accelerating production capacity expansion
50,000 100,000 units per year in 2007

Flexible Fuel Vehicles introduced in Brazil Civic FFV Fit FFV

Introduced in Nov. 2006

Introduced in Dec. 2006

33

Hondas Growth in Russia


Unit (thousands)

Industry Demand and Honda


(excluding commercial vehicles)
Foreign brands Domestic brands

Unit (thousands)

Hondas Unit Sales


38.0

2,000

35 30

1,500

25 20 15
500

1,000

15.7 Others

10
8.9

CR-V Civic Accord

5
0.8
0

3.5 1.3

6.0

0
CY01 CY02 CY03 CY04 CY05 CY06 CY07

CY01

02

03

04

05

06

07(P)

Source: AEB (The Association of European Businesses) & DRI

Source: Honda
Honda model line up in Russia

Hondas Progress in Russia


1 Starting business - Established subsidiary in Feb. 2004

Jazz

Civic 5D

Civic 4D

2 Enhancing dealer network - Number of Dealer outlets: 15 (2004 end) 34 (Sep. 2007) to expand mainly in large cities 70 outlets in a few years

CR-V

Accord

Legend

34

Update on Hondas Automobile Business in Japan


Unit (thousands)

Industry Demand and Honda


Registered vehicle Mini

Unit (thousands)

Hondas Unit Sales


892 873

900
20%

6,000

800
732

700
15%

717

710

691

Others

660

600 500
Minivan

Honda share

4,000 10%

400
Small

300
2,000 5%

200 100
Mini

0%

0 FY02 03 04 05 06 07 08(P)
Source: Honda
Models introduced in FY2007 and 2008

CY01

02

03

04

05

06

Source: Honda

07(E)

Hondas progress in Japan -Introduced all-new Fit in Oct. 2007 -Introducing all-new Accord by the end of 2007 -Aiming to enhance mini-vehicle models

Stream
Jul. 2006

Elysion Prestige
Dec. 2006

CR-V
Oct. 2006

Crossroad
Feb. 2007

Fit
Oct. 2007

35

Expansion of Production Capacity (Automobiles)


FY2007: 3,700 <Sales Volume> <Production Capacity (Plan as at Oct. 2006)>
CY2006 Japan
U.S. Canada Mexico

2010: 4,500 thousand


2008
Indiana

CY2007

2009
Yorii

2010 +200

1,300
980 390 30

+200

+20

North America
U.K. Turkey

1,400
250 30

+20 +120

Europe
Thailand Indonesia Philippines Malaysia Vietnam India Pakistan China Taiwan

280
120 50 15 20 10 50 50 530 30

+50

+60

Asia
Brazil Argentina

875
50 0

+30

+20 +30 4,025 4,425


New plant

Others Total

50 3,905 4,455 4,655 36


Capacity expansion

Expansion of Production Capacity (Automobiles)

Unit (thousands)

2010 2008
Thailand +120 Turkey +20

2009

Yorii Japan +200

4,655

2007

India Indiana Argentina +60 +30 +200

3,905

Mexico Brazil +20 +50

India +50

3,500

2006

37

Growth Potential of Principal Asian Motorcycle Markets


Penetration Rate for Motorcycles
Population (millions)

GDP per capita (U.S.$)

People / Unit

Units in operation (millions)

15,482 5,718 3,136 723 1,640 796


JETRO 2006

Taiwan Malaysia Thailand Vietnam Indonesia India

1.7 people/unit 3.5 4.2 4.9 9.3 36.6


100 200 1,000 Honda wholesales: Unit ( thousands ) 14,000
12,000

Industry: Unit ( thousands ) 40,000


China Indonesia Vietnam 30,000 Honda's units sales India Thailand Philippines

Business expansion in Vietnam market due to deregulation

10,000

8,000 20,000 6,000

4,000 10,000 2,000

0 CY01 02 03 04 05 06

0 07(E) Source: Honda

38

India
Penetration Rate for Motorcycles : 36.6 people / unit Solidify business foundation with 2 companies in rapidly growing market
Industry: Unit (thousands)
10,000

To expand annual production capacity (4,900 5,400 thousand units by the end of 2007)
Other brands Hero Honda Honda Motorcycle & Scooter India Honda share
50%

8,000

6,000

40%

4,000 30% 2,000

CY 01

02

03

04

05

06

07(E)

Principal models of Hero Honda Motors Limited

Principal models of Honda Motorcycle & Scooter India

20% Source : Honda

Splendor+
CY06 : 1,142 thousand units

CD Deluxe CBZ X-treme


Introduced in Nov. 06 Introduced in Nov. 06

Activa Shine
CY06 : 397 thousand units Introduced in Apr. 06

39

Vietnam
Honda to enhance product pipeline for growing market
Industry: Unit (thousands)

Other brands Honda Honda share

To expand of production capacity by the end of 2008 (1,000 1,500 thousand units per year)

Honda Share

60%

2,500 2,000 1,500 1,000 500 0 CY01 02 03 04 05 06 07(E)


Source: Honda

40%

20%

0%

Principal models

Super Dream

Wave RS

Future Neo FI

Click 40

Indonesia
Penetration Rate for Motorcycles : 9.3 people / unit
Industry: Unit (thousands)

Continuous competitive market situation


Other brands Honda Honda share

Honda Share

6,000 5,000

60% 50%

4,000 40% 3,000 2,000 1,000 0 CY01 02 03 04 05 06 07(E)


Added annual production capacity in Sep. 2005 (2,000 3,000 thousand units)

30% 20% 10% 0%


Source: Honda

Principal models

Revo
* AT model: Motorcycles equipped with automatic transmission

Vario (AT* model) 41

Brazil
Solid operation as a market leader in ongoing expansion of Brazilian market
Industry: Unit (thousands)

1,600 1,400 1,200 1,000 800 600 400 200 0 CY01

Other brands Honda Honda share

Honda Share

100%

80%

60%

40%
Accelerating expansion of production capacity by the end of 2007 (1,350 1,500 thousand units per year)

20%

0% 02 03 04 05 06 07(E)
Source: Honda

Principal models

CG 150 Titan

CG 125 FAN

Biz 125

CBX125 Twister 42

Hondas Continued Growth (Production) Motorcycles


<Production Capacity (Plan as at Aug. 2007)>
CY2006 Japan North America (U.S.)
Spain Italy
Unit (thousands)

CY2007

2008 600

2009

2010

700 430
30 200

Europe
Thailand Indonesia Vietnam Philippines Malaysia India Pakistan China

230
1,500 3,000 860 500 250 4,900 500 2,600

+140

+500

HHML +500

HMSI +200

Asia
Brazil Peru Argentina

14,110
1,000 15

+350

+150 +25

Others Total
New plant

1,030 16,500 17,165


Capacity expansion

18,165

18,165

18,365

43

(Reference) Transition of commodity markets (Base metal prices)

3000

(US$/tonne)

Aluminum

9000

(US$/tonne)

Copper

8000 2500 7000

2000

Average 2,483

Average 2,550
6000

5000 1500 4000

Average 7,666

Average 7,699

1000

3000

2000 500 1000

0
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

0
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

FY06

FY07

FY08

FY06

FY07

FY08

*Source: LME

44

(Reference) Transition of commodity markets (Precious metal prices)


(US$ per troy oz)

Platinum

(US$ per troy oz)


6000

Rhodium
Average 6,120 Average 4,694

1200
5000

1000

800

Average 1,218

Average 1,294

4000

3000

600

2000

400

200

1000

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

FY06
(US$ per troy oz) 400

FY07

FY08

FY06

FY07

FY08

Palladium

300

Average 326
200

Average 349

100

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

FY06

FY07

FY08

*Source: Platinum Today

45

Caution Cautionwith withRespect Respectto toForward-Looking Forward-LookingStatements: Statements:


This Thisslide slidecontains containsforward-looking forward-lookingstatements statementsabout aboutthe theperformance performanceof ofHonda, Honda,which which are based on managements assumptions and beliefs taking into account information are based on managements assumptions and beliefs taking into account information currently currentlyavailable availableto toit. it.Therefore, Therefore,please pleasebe beadvised advisedthat thatHondas Hondasactual actualresults resultscould could differ materially from those described in these forward-looking statements as a result differ materially from those described in these forward-looking statements as a result of ofnumerous numerousfactors, factors,including includinggeneral generaleconomic economicconditions conditionsin inHondas Hondasprincipal principal markets marketsand andforeign foreignexchange exchangerates ratesbetween betweenthe theJapanese Japaneseyen yenand andthe theU.S. U.S.dollar, dollar,the the Euro and other major currencies, as well as other factors detailed from time to time. Euro and other major currencies, as well as other factors detailed from time to time.

Accounting Accountingstandards: standards:


Our Ourconsolidated consolidatedfinancial financialstandards standardsare areprepared preparedin inconformity conformitywith withU.S. U.S.generally generally accepted accounting principles. accepted accounting principles.

Notice Noticeon onthe theFactors Factorsfor forIncreases Increasesand andDecreases Decreasesin inIncome: Income:
The Thevarious variousfactors factorsfor forincreases increasesand and decreases decreasesin inincome incomeset setforth forthin inthis thisslide slidehave have been classified in accordance with a method that Honda considers reasonable. been classified in accordance with a method that Honda considers reasonable.

46

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