UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)  OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 1-7628

HONDA GIKEN KOGYO KABUSHIKI KAISHA

(Exact name of Registrant as specified in its charter)

HONDA MOTOR CO., LTD.

(Translation of Registrant’s name into English)

JAPAN

(Jurisdiction of incorporation or organization)

No. 1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo 107-8556, Japan

(Address of principal executive offices)

Ryosuke Niwa

+81-3-5412-1134, prj_h_ir2@hm.honda.co.jp, No. 1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo 107-8556, Japan

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock* American Depositary Shares**	HMC	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Title of each class	Outstanding as of March 31, 2023***
Common Stock	1,664,340,589****

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act,    Yes  ☒    No  ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such file).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    ☒ Accelerated filer    ☐ Non-accelerated filer    ☐ Emerging growth company    ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.    ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.    ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).    ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ☐    International Financial Reporting Standards as issued by the International Accounting Standards Board  ☒    Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

* Not for trading purposes, but only in connection with the registration of American Depositary Shares, each representing one share of Common Stock.

** American Depositary Receipts evidence American Depositary Shares, each American Depositary Share representing one share of Common Stock.

*** Unless otherwise indicated in this Form 20-F, “outstanding shares” excludes the number of shares held by the BIP Trust (as defined under Item 6.B. “Compensation-The Board Incentive Plan”).

**** Shares of Common Stock include 116,835,999 shares represented by American Depositary Shares.

PART I

Item 1. Identity of Directors, Senior Management and Advisers	1
Item 2. Offer Statistics and Expected Timetable	1
Item 3. Key Information	1
A. [Reserved]	1
B. Capitalization and Indebtedness	1
C. Reason for the Offer and Use of Proceeds	1
D. Risk Factors	1
Item 4. Information on the Company	7
A. History and Development of the Company	7
B. Business Overview	8
C. Organizational Structure	42
D. Property, Plants and Equipment	43
Item 4A. Unresolved Staff Comments	45
Item 5. Operating and Financial Review and Prospects	45
A. Operating Results	45
B. Liquidity and Capital Resources	63
C. Research and Development	66
D. Trend Information	71
E. Critical Accounting Estimates	71
Item 6. Directors, Senior Management and Employees	72
A. Directors and Senior Management	72
B. Compensation	92
C. Board Practices	98
D. Employees	99
E. Share Ownership	100
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation	100
Item 7. Major Shareholders and Related Party Transactions	100
A. Major Shareholders	100
B. Related Party Transactions	101
C. Interests of Experts and Counsel	101
Item 8. Financial Information	101
A. Consolidated Statements and Other Financial Information	101
B. Significant Changes	102
Item 9. The Offer and Listing	102
A. Offer and Listing Details	102
B. Plan of Distribution	103
C. Markets	103
D. Selling Shareholders	103
E. Dilution	103
F. Expenses of the Issue	103
Item 10. Additional Information	103
A. Share Capital	103
B. Memorandum and Articles of Association	103
C. Material Contracts	104
D. Exchange Controls	105
E. Taxation	105
F. Dividends and Paying Agents	109

G. Statement by Experts	109
H. Documents on Display	109
I. Subsidiary Information	109
J. Annual Report to Security Holders	109
Item 11. Quantitative and Qualitative Disclosure about Market Risk	109
Item 12. Description of Securities Other than Equity Securities	109
A. Debt Securities	109
B. Warrants and Rights	109
C. Other Securities	109
D. American Depositary Shares	110
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies	112
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	112
Item 15. Controls and Procedures	112
Item 16A. Audit Committee Financial Expert	113
Item 16B. Code of Ethics	113
Item 16C. Principal Accountant Fees and Services	113
Item 16D. Exemptions from the Listing Standards for Audit Committees	114
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	115
Item 16F. Change in Registrant’s Certifying Accountant	116
Item 16G. Corporate Governance	116
Item 16H. Mine Safety Disclosure	119
Item 16I. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections	119
PART III
Item 17. Financial Statements	120
Item 18. Financial Statements	120
Item 19. Exhibits	121

PART I

Unless the context otherwise requires, the terms “we”, “us”, “our”, “Registrant”, “Company” and “Honda” as used in this Annual Report each refer to Honda Motor Co., Ltd. and its consolidated subsidiaries.

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. [Reserved]

B. Capitalization and Indebtedness

Not applicable.

C. Reason for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

You should carefully consider the risks described below before making an investment decision. If any of the risks described below actually occurs, Honda’s business, financial condition or operating results could be adversely affected. In that event, the trading prices of Honda’s common shares and American Depositary Shares could decline, and you may lose all or part of your investment. Additional risks not currently known to Honda or that Honda now deems immaterial may also harm Honda and affect your investment.

Geopolitical Risk

Honda conducts business operations in countries worldwide and is exposed to a variety of risks including changes in local laws and regulations, agreements, institutions and business practices, such as tariffs, import and export regulations, and taxes, wars, terrorism, political uncertainty, worsening security situation, change in political regime and labor strikes in those countries or neighboring regions. If such unforeseeable events occur, and operations are delayed or suspended, including supply chain disruptions as a result of heightened political, military, or social tensions, Honda’s business and operating results could be adversely affected.

Particularly among them, Honda recognizes three major geopolitical risks: 1) economic security, 2) conflicts between nations or regional conflicts, and 3) laws and regulations concerning human rights.

These geopolitical risks could also significantly affect Honda’s initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value.

For the scale of business in each region that may be affected by such geopolitical risks in the future, see “(d) Supplemental Geographical Information” of note “(4) Segment Information” to the accompanying consolidated financial statements.

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1. Economic Security

Many countries are increasingly tightening import and export controls and adopting policies to encourage the blocking of critical resources, components, and parts, as well as advanced technologies. If governmental policy concerning exports and imports is strengthened in any country, this could possibly result in stoppages or delays in Honda’s production activities or lead us to incur countermeasure costs associated with development, purchasing, and sales, and other business activities, which could adversely affect Honda’s business and operating results.

2. Conflicts Between Nations or Regional Conflicts

The outlook for the international situation remains uncertain, including the worsening situation in Ukraine. If new conflicts occur, these could possibly result in human suffering, material and property damage, and supply chain disruptions, not only in the countries and regions where they occur, but also in other countries, which could adversely affect Honda’s business and operating results.

3. Laws and Regulations Concerning Human Rights

Laws and regulations requiring companies to address human rights are being enacted in many countries, and the need to address human rights risks throughout the supply chain is growing rapidly. Failure to respond to such laws and regulations in a timely and appropriate manner could damage Honda’s brand image and social credibility, and result in stoppages or delays in Honda’s production activities or lead us to incur countermeasure costs associated with development, purchasing, sales, and other business activities, which could adversely affect Honda’s business and operating results.

Purchasing and Procurement Risk

Honda aims to sustain the procurement of good products at reasonable prices in a timely manner, purchases raw materials and parts from numerous external suppliers, and relies on certain suppliers for some of the raw materials and parts which it uses to manufacture its products. Honda’s ability to continue to obtain these supplies in an efficient manner at appropriate cost levels is subject to a number of factors, some of which are outside of Honda’s control. These factors include the ability of its suppliers to provide a continued supply of raw materials and parts and Honda’s ability to compete with other users in obtaining the supplies.

In case it becomes impossible to receive the supply of materials and parts from suppliers on a continuous basis, in case the prices of materials and parts rise, or in case of losing any key supplier, this could lead to delays in or the suspension of Honda’s manufacturing operations and a loss of Honda’s competitiveness, which could adversely affect Honda’s business and operating results. For example, a shortage in the procurement of semiconductors has become manifest for Honda, which has led to such effects as the suspension or decrease of production of automobiles and motorcycles at some of Honda’s production bases in Japan and overseas. For some other materials and parts as well, a rise in their prices has occurred, or is projected to occur looking ahead. Moreover, these purchasing and procurement risk could also significantly affect Honda’s initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value.

Information Security Risk

Honda uses a wide range of information systems and networks relating to information services and driving support in its business activities and its products, including in areas managed by subcontractors. Especially, IoT and other information technologies have become indispensable for control of products.

The means of cyber-attacks that take place have become more advanced and sophisticated, targeting organizations around the world. Moreover, any cyber-attacks could significantly affect Honda’s initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value.

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In addition, in recent years, personal information protection rules have been rapidly developed in countries around the world. In creating Honda’s initiatives for the creation of new value, measures protecting personal information are also gaining importance due to possible differences in the amount and quality of the personal information handled in comparison to existing operations.

There is a possibility that, in addition to external cyber-attacks, any equipment malfunction, any management deficiency or human error at Honda or any of our business partners or subcontractors, or any natural disaster, infrastructure failure or any other unforeseen circumstances could also result in the suspension of important operations and services at Honda, leakage of confidential or personal information, inappropriate processing of documents and information, or the destruction or falsification of important data.

When such an event occurs, Honda’s business and operating results could be adversely affected in terms of damage to its brand image or social reputation, liability to customers or parties affected, payment of financial penalties, delays in or suspension of Honda’s manufacturing operations, and a loss of Honda’s competitiveness.

Business Alliances and Joint Ventures Risk

Honda engages in business operations through alliances and joint ventures with other companies in expectation of synergy effects and increased efficiency, or to meet the requirements of the countries in which business development is being undertaken.

As Honda advances its initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value, the utilization of alliances and other forms of partnership are gaining importance.

If disagreements among partners regarding business, leakage of profit or technology, delays in decision-making or poor operating results at business partners occur in the context of an alliance or joint venture, or if conditions to an alliance or joint venture are changed or cancelled, it may have an adverse effect on Honda’s business and operating results.

Environmental Risk

Carrying out its business operations in countries around the world, Honda recognizes wide-ranging potential risks related to environmental issues, as exemplified by the risks concerning climate change, resource depletion, air pollution, water pollution, and biodiversity, among other issues, and Honda is subject to wide-ranging regulations covering these issues.

For the regulations concerning climate change and the regulation concerning fuel efficiency and exhaust in particular, there has been implementation of or planning for their revisions around the world. Depending on the trends for the revisions and what the revised regulations may stipulate, Honda’s measures in response and related expenses could possibly weigh on its production, development, purchasing and sales activities, etc., in the Motorcycle, Automobile, Power products and other businesses operations. This could adversely affect Honda’s business and operating results.

Moreover, these risks could significantly affect Honda’s initiatives for company-wide strategy, zero impact on the global environment.

Intellectual Property Risk

Honda owns or otherwise has rights in a number of patents and trademarks relating to the products it manufactures, which have been obtained over a period of years. These patents and trademarks include those that could significantly affect Honda’s initiatives for company-wide strategies, which are zero impact on the global environment, zero traffic collision fatalities, and creating new value.

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The inability to protect this intellectual property generally, the illegal infringement of some or a large group of Honda’s intellectual property rights, or the suspension of manufacturing and/or sales activities and the payment of large amounts of damages as a result of lawsuits on infringement of patent rights and license fees, could have an adverse effect on Honda’s business and operating results.

Natural Disasters Risk

The suspension and delay in business activities such as production, development, purchasing and sales as a result of damage caused to Honda’s operation sites and employees by earthquakes, floods, windstorms, infections and other natural disasters may adversely affect Honda’s business and operating results. Also, if any of Honda’s business partners suffer any such damage, or if there is any disruption of the infrastructure due to a natural disaster, this may adversely affect Honda’s business and operating results.

In addition, under the effects of climate change and other factors, weather-related disasters have intensified and have become more frequent in various countries around the world, and it is projected that this trend could continue going forward. As a result, these disasters may adversely affect Honda’s business and operating results.

(Risks relating to the spread of coronavirus disease 2019 (COVID-19))

ln terms of COVID-19 status, the resumption of socio-economic activities is accelerating and the normalization of production, development, purchasing, sales, and other business activities is also underway at Honda. However, Honda’s business and operating results could be adversely affected if it were to become widespread again.

Financial & Economic Risk

1. Economic Trends and Economic Fluctuations

Honda conducts business operations in the countries throughout the world. Honda has manufacturing operations and sells products in various regions and countries. These business activities may be affected by economic slowdowns, currency fluctuation, or other factors, which could result in decreased sales due to market contraction, increases in component procurement prices and product sales prices, higher credit risk for Honda’s business, and higher financing interest rates, among others. Accordingly, these changes may have an adverse effect on Honda’s business and operating results.

2. Currency Fluctuations

Honda has manufacturing operations throughout the world, including Japan, and exports products and components to various countries. Honda purchases materials and components and sells its products and components in foreign currencies. Therefore, currency fluctuations could affect Honda’s pricing of materials purchased and products sold. Accordingly, currency fluctuations may have an adverse effect on Honda’s business and operating results.

Relating to Industry Market Risk

Honda conducts its operations in Japan and countries throughout the world, including North America, Europe and Asia. A sustained loss of consumer confidence in these markets, which may be caused by an extended economic slowdown, recession, changes in consumer preferences and needs, rising fuel prices, financial crisis, increases in product prices due to increases in material costs or decreases in supply volume, intensifying competition with other companies or other factors could trigger a decline in demand for Honda’s products that may adversely affect Honda’s business and operating results.

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Honda’s Financial services business conducts business under highly competitive conditions in an industry with inherent risks

Honda’s Financial services business offers various financing plans to its customers designed to increase the opportunity for sales of its products. However, customers can also obtain financing for the lease or purchase of Honda’s products through a variety of other sources that compete with our financing services, including commercial banks and finance and leasing companies. The financial services offered by Honda involve credit risk as well as risks relating to lease residual values, cost of capital and access to funding. Competition for customers and/or these risks may adversely affect Honda’s business and operating results.

Legal Risk

Honda could be subject to lawsuits, various investigations and legal proceedings under relevant laws and regulations of various jurisdictions. A negative outcome in any such current or future legal proceedings brought against Honda could adversely affect Honda’s business and operating results.

Honda is subject to risks relating to its obligations to provide post-employment benefits

Honda has various pension plans and provides other post-employment benefits, in which the amount of benefits is basically determined based on the level of salary, service years, and other factors. Contributions are also regularly reviewed and adjusted as necessary to the extent permitted by laws and regulations. Defined benefit obligations and defined benefit costs are based on assumptions of a variety of factors, including the discount rate and the rate of salary increase. Changes in assumptions could affect Honda’s defined benefit costs and obligations, including Honda’s cash requirements to fund such obligations in the future, which could adversely affect Honda’s operating results.

Honda’s success depends in part on the value of its brand image, which could be diminished by product defect

One of the important factors behind corporate sustainability is trust and support for the Honda brand from our customers, society and the communities in which Honda conducts business operations. In order to support this brand image, Honda endeavors to gain the trust of society in all types of corporate activities, including ensuring product quality and compliance with laws and regulations, conducting risk management, and enhancing internal controls related to corporate governance. However, if for some unforeseeable reason the Honda brand image is damaged or Honda is unable to communicate information in a timely manner and deal with such information appropriately, this could adversely affect Honda’s business and operating results.

Risks Relating to Honda’s ADSs

A holder of ADSs will have fewer rights than a shareholder has and such holder will have to act through the depositary to exercise those rights

The rights of shareholders under Japanese law to take various actions, including exercising voting rights inherent in their shares, receiving dividends and distributions, bringing derivative actions, examining a company’s accounting books and records, and exercising appraisal rights, are available only to holders of record. Because the depositary, through its custodian agents, is the record holder of the Shares underlying the ADSs, only the depositary can exercise those rights in connection with the deposited Shares. The depositary will make efforts to exercise votes regarding the Shares underlying the ADSs as instructed by the holders and will pay to the holders the dividends and distributions collected from the Company. However, in the capacity as an ADS holder, such holder will not be able to bring a derivative action, examine our accounting books or records or exercise appraisal rights through the depositary.

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Rights of shareholders under Japanese law may be more limited than under the laws of other jurisdictions

The Company’s Articles of Incorporation, Regulations of the Board of Directors, Regulations of the Nominating Committee, Regulations of the Audit Committee, Regulations of the Compensation Committee, and the Company Law of Japan (the “Company Law”) govern corporate affairs of the Company. Legal principles relating to such matters as the validity of corporate procedures, directors’ and officers’ fiduciary duties, and shareholders’ rights may be different from those that would apply if the Company were a U.S. company. Shareholders’ rights under Japanese law may not be as extensive as shareholders’ rights under the laws of the United States. An ADS holder may have more difficulty in asserting his/her rights as a shareholder than such an ADS holder would as a shareholder of a U.S. corporation. In addition, Japanese courts may not be willing to enforce liabilities against the Company in actions brought in Japan that are based upon the securities laws of the United States or any U.S. state.

Because of daily price range limitations under Japanese stock exchange rules, a holder of ADSs may not be able to sell his/her shares of the Company’s Common Stock at a particular price on any particular trading day, or at all

Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation limits for each stock, based on the previous day’s closing price. Although transactions may continue at the upward or downward limit price if the limit price is reached on a particular trading day, no transactions may take place outside these limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit may not be able to sell his or her shares at such price on a particular trading day, or at all.

U.S. investors may have difficulty in serving process or enforcing a judgment against the Company, its directors or executive officers

The Company is a limited liability, joint stock corporation incorporated under the laws of Japan. Most of its directors and executive officers reside in Japan. All or substantially all of the Company’s assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon the Company or these persons or to enforce against the Company or these persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Japan, in original actions or in actions for enforcement of judgment of U.S. courts, of liabilities predicated solely upon the federal securities laws of the United States.

The Company’s shareholders of record on a record date may not receive the dividend they anticipate

The customary dividend payout practice and relevant regulatory regime of publicly listed companies in Japan may differ from that followed in foreign markets. The Company’s dividend payout practice is no exception. While the Company may announce forecasts of year-end and interim dividends prior to the record date, these forecasts are not legally binding. The actual payment of year-end dividends requires a resolution of the Company’s Board of Directors. If the Board of Directors adopt such a resolution, the year-end dividend payment is made to shareholders as of the applicable record date, which is currently specified as March 31 by the Company’s Articles of Incorporation. However, such a resolution of the Board of Directors is usually made at a meeting of the Board of Directors held in April. The payment of interim dividends also requires a resolution of the Company’s Board of Directors. If the board adopts such a resolution, the dividend payment is made to shareholders as of the applicable record date, which is currently specified as September 30 by the Articles of Incorporation. However, the board usually does not adopt a resolution with respect to an interim dividend until after the record date.

Shareholders of record as of an applicable record date may sell shares after the record date in anticipation of receiving a certain dividend payment based on the previously announced forecasts. However, since these

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forecasts are not legally binding and resolutions to pay dividends are usually not adopted until after the record date, our shareholders of record on record dates for year-end and interim dividends may not receive the dividend they anticipate.

Cautionary Statement with Respect to Forward-Looking Statements in This Annual Report

This Annual Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements included in this Annual Report are based on the current assumptions and beliefs of Honda in light of the information currently available to it, and involve known and unknown risks, uncertainties, and other factors. Such risks, uncertainties and other factors may cause Honda’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors are generally set forth in Item 3.D “Risk Factors” and include, without limitation:

• the political, economic and social conditions in Japan and throughout the world including North America, Europe and Asia, including economic slowdowns, recessions, changes in consumer preferences, rising fuel prices, financial crises, exchange rates and other factors, as well as the relevant governments’ specific policies with respect to economic growth, inflation, taxation, currency conversion, imports and sources of supplies and the availability of credit, particularly to the extent such current or future conditions and policies affect the automobile, motorcycle and power product industries and markets in Japan and other markets throughout the world in which Honda conducts its business, and the demand, sales volume and sales prices for Honda’s automobiles, motorcycles and power products;

• the effects of competition in the automobile, motorcycle and power product markets on the demand, sales volume and sales prices for Honda’s automobiles, motorcycles and power products;

• Honda’s ability to finance its working capital and capital expenditure requirements, including obtaining any required external debt or other financing upon favorable interest rates or other terms;

• the effects of environmental, personal information and other governmental regulations and legal proceedings; and

• the effects of events such as environmental or man-made disasters, pandemics, cyber-attacks or other events affecting Honda, its suppliers, customers or the economy as a whole.

Honda undertakes no obligation and has no intention to publicly update any forward-looking statement after the date of this Annual Report. Investors are advised to consult any further disclosures by Honda in its subsequent filings pursuant to the Securities Exchange Act of 1934.

Item 4. Information on the Company

A. History and Development of the Company

Honda Motor Co., Ltd. is a limited liability, joint stock corporation incorporated on September 24, 1948 under the Commercial Code of Japan as Honda Giken Kogyo Kabushiki Kaisha. It was formed as a successor to the unincorporated enterprise established in 1946 by the late Soichiro Honda to manufacture motors for motorized bicycles.

Since its establishment, Honda has remained on the leading edge by creating new value and providing products of the highest quality at a reasonable price for worldwide customer satisfaction. Honda develops, manufactures and markets motorcycles, automobiles and power products globally.

Honda’s principal executive office is located at 1-1, Minami-Aoyama 2-chome, Minato-ku, Tokyo, 107-8556, Japan. Its telephone number is +81-3-3423-1111. We maintain a website at https://global.honda/investors/ that contains information about our Company.

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The United States Securities and Exchange Commission (the “SEC”) maintains a website at https://www.sec.gov/ which contains in electronic form each of the reports and other information that we have filed electronically with the SEC.

Principal Capital Investments

In the fiscal years ended March 31, 2021, 2022 and 2023, Honda’s capital expenditures were ¥2,567.1 billion, ¥2,503.8 billion and ¥2,233.5 billion, respectively, on an accrual basis. Also, capital expenditures excluding those with respect to equipment on operating leases were ¥565.2 billion, ¥477.7 billion and ¥690.0 billion, respectively, on an accrual basis. For further details of Honda’s capital expenditures during fiscal year 2023, see Item 4.D “Property, Plants and Equipment” of this Annual Report.

B. Business Overview

General

Honda’s business segments are the Motorcycle business operations, Automobile business operations, Financial services business operations, and Power products and other businesses operations.

The following tables show the breakdown of Honda’s revenue from external customers by category of business and by geographical markets based on the location of the customer for the fiscal years ended March 31, 2021, 2022 and 2023:

	Fiscal years ended March 31,
	2021		2022		2023
	Yen (billions)
Motorcycle Business	¥	1,787.2	¥	2,185.2	¥	2,908.9
Automobile Business		8,567.2		9,147.4		10,593.5
Financial Services Business		2,494.2		2,820.6		2,954.0
Power Products and Other Businesses		321.7		399.2		451.1
Total	¥	13,170.5	¥	14,552.6	¥	16,907.7
	Fiscal years ended March 31,
	2021		2022		2023
	Yen (billions)
Japan	¥	1,849.2	¥	1,943.6	¥	2,013.0
North America		7,080.8		7,624.7		8,945.9
Europe		511.7		611.8		690.6
Asia		3,250.1		3,711.4		4,335.7
Other Regions		478.4		660.8		922.2
Total	¥	13,170.5	¥	14,552.6	¥	16,907.7

Motorcycle Business

In 1949, Honda began mass production of motorcycles with the Dream D-Type, followed by other models such as the Benly and the Cub F-Type. By 1957, Honda became the top Japanese manufacturer in terms of motorcycle production volume. Honda expanded its business overseas by establishing American Honda Motor Co., Inc. in the United States in 1959. Honda first started overseas production in Belgium in 1963.

Honda produces a wide range of motorcycles, with engine displacement ranging from the 50cc class to the 1800cc class. Honda’s motorcycle lineup uses internal combustion engine of air- or water-cooled, and in single,

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two, four or six-cylinder configurations. Honda also has electric vehicles in its lineup. Honda’s motorcycle lineup consists of sports, business and commuter models. Honda also produces a range of off-road vehicles, including all-terrain vehicles (ATVs) and side-by-sides (SxS).

The following table sets out unit sales for Honda’s Motorcycle business, including motorcycles, all-terrain vehicles (ATVs) and side-by-sides (SxS) and revenue from Motorcycle business, and the breakdown by geographical markets based on the location of the customer for the fiscal years ended March 31, 2021, 2022 and 2023:

	Fiscal years ended March 31,
	2021							2022							2023
	Honda Group Unit Sales*		Consolidated Unit Sales*		Revenue			Honda Group Unit Sales*		Consolidated Unit Sales*		Revenue			Honda Group Unit Sales*		Consolidated Unit Sales*		Revenue
	Units (thousands)		Units (thousands)		Yen (billions)			Units (thousands)		Units (thousands)		Yen (billions)			Units (thousands)		Units (thousands)		Yen (billions)
Japan		215		215	¥	88.1			244		244	¥	105.0			246		246	¥	109.3
North America		332		332		197.1			437		437		230.7			459		459		306.7
Europe		234		234		146.9			317		317		202.2			347		347		250.0
Asia		13,319		8,451		1,149.8			14,589		8,283		1,309.9			16,108		9,512		1,739.7
Other Regions		1,032		1,032		205.1			1,440		1,440		337.2			1,597		1,597		503.0
Total		15,132		10,264	¥	1,787.2			17,027		10,721	¥	2,185.2			18,757		12,161	¥	2,908.9
Motorcycle revenue as a percentage of total sales revenue						14	%						15	%						17	%

*  Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries.

See Item 4. D. “Property, Plants and Equipment” for information regarding principal manufacturing facilities.

For further information on recent operations and a financial review of the Motorcycle business, see “Operating Results” in “Item 5. Operating and Financial Review and Prospects”.

Automobile Business

Honda started Automobile business operations in 1963 with the T360 mini truck and the S500 small sports car models. Honda subsequently launched a series of mass-production models including the CIVIC in 1972 and the ACCORD in 1976, which established a base for its Automobile business. In 1969, production of the mini vehicles N600 and TN600 began in Taiwan using component parts sets. In 1982, Honda became the first Japanese automaker to begin local automobile production in the United States (with the ACCORD model) and later conducted local development and expanded production activities to include light truck models. In 1986, the Acura Brand was established and an exclusive sales network was launched in the United States.

Honda’s vehicles use gasoline engines of three, four or six-cylinder configurations, gasoline-electric hybrid systems and gasoline-electric plug-in hybrid systems. Honda also offers other alternative fuel-powered vehicles such as battery electric vehicles, fuel cell vehicles, and flexible fuel vehicles.

Honda’s principal automobile products include the following vehicle models: (in alphabetical order)

Passenger cars:

ACCORD, BRIO, CITY, CIVIC, FIT, INTEGRA, JAZZ

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Light trucks:

BREEZE, CR-V, FREED, HR-V, ODYSSEY, PILOT, VEZEL, XR-V, ZR-V

Mini vehicles:

N-BOX

The following table sets out Honda’s unit sales of automobiles and revenue from Automobile business and the breakdown by geographical markets based on the location of the customer for the fiscal years ended March 31, 2021, 2022 and 2023:

	Fiscal years ended March 31,
	2021							2022							2023
	Honda Group Unit Sales*		Consolidated Unit Sales*		Revenue			Honda Group Unit Sales*		Consolidated Unit Sales*		Revenue			Honda Group Unit Sales*		Consolidated Unit Sales*		Revenue
	Units (thousands)		Units (thousands)		Yen (billions)			Units (thousands)		Units (thousands)		Yen (billions)			Units (thousands)		Units (thousands)		Yen (billions)
Japan		592		520	¥	1,321.4			547		476	¥	1,340.7			550		484	¥	1,385.8
North America		1,480		1,480		4,679.3			1,283		1,283		4,884.9			1,195		1,195		5,990.5
Europe		101		101		290.3			100		100		319.3			84		84		332.9
Asia		2,247		390		2,037.5			2,022		443		2,321.7			1,744		505		2,523.8
Other Regions		126		126		238.5			122		122		280.7			114		114		360.3
Total		4,546		2,617	¥	8,567.2			4,074		2,424	¥	9,147.4			3,687		2,382	¥	10,593.5
Automobile revenue as a percentage of total sales revenue						65	%						63	%						63	%

*  Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. Certain sales of automobiles that are financed with residual value type auto loans and others by our Japanese finance subsidiaries and provided through our consolidated subsidiaries are accounted for as operating leases in conformity with International Financial Reporting Standards (“IFRS”) and are not included in consolidated sales revenue to the external customers in our Automobile business. Accordingly, they are not included in Consolidated Unit Sales, but are included in Honda Group Unit Sales of our Automobile business.

See Item 4. D. “Property, Plants and Equipment” for information regarding principal manufacturing facilities.

For further information on recent operations and a financial review of the Automobile business, see “Operating Results” in “Item 5. Operating and Financial Review and Prospects”.

Financial Services Business

We offer a variety of financial services to our customers and dealers through finance subsidiaries in countries including Japan, the United States, Canada, the United Kingdom, Germany, Brazil and Thailand, with the aim of providing sales support for our products. The services of these subsidiaries include retail lending, leasing to customers and other financial services, such as wholesale financing to dealers.

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The following table sets out Honda’s revenue from Financial services business and the breakdown by geographical markets based on the location of the customer for the fiscal years ended March 31, 2021, 2022 and 2023:

	Fiscal years ended March 31,
	2021			2022			2023
	Yen (billions)
Japan	¥	380.3		¥	418.3		¥	428.2
North America		2,070.5			2,356.9			2,466.5
Europe		11.2			10.8			13.2
Asia		15.0			15.7			16.5
Other Regions		17.0			18.6			29.4
Total	¥	2,494.2		¥	2,820.6		¥	2,954.0
Financial Services revenue as a percentage of total sales revenue		19	%		19	%		17	%

For further information on recent operations and a financial review of the Financial services business, see “Operating Results” in “Item 5. Operating and Financial Review and Prospects”.

Power Products and Other Businesses

Honda’s Power products business began in 1953 with the introduction of the model H, its first general purpose engine. Since then, Honda has manufactured a variety of power products including general purpose engines, lawn mowers, generators, water pumps, brush cutters, tillers, outboard marine engines and snow throwers. In 2019, Honda had renamed Power product business to Life creation business. This renaming represented Honda’s intention to evolve Power product business as a function to create new value for “mobility” and “daily lives”. In 2022, Life creation business has been renamed Power products business.

In Other businesses, Honda began deliveries of the HondaJet aircraft in December 2015.

The following table sets out Honda’s revenue from Power products and other businesses and the breakdown by geographical markets based on the location of the customer for the fiscal years ended March 31, 2021, 2022 and 2023:

	Fiscal years ended March 31,
	2021					2022					2023
	Honda Group Unit Sales / Consolidated Unit Sales*		Revenue			Honda Group Unit Sales / Consolidated Unit Sales*		Revenue			Honda Group Unit Sales / Consolidated Unit Sales*		Revenue
	Units (thousands)		Yen (billions)			Units (thousands)		Yen (billions)			Units (thousands)		Yen (billions)
Japan		336	¥	59.2			353	¥	79.4			376	¥	89.6
North America		2,617		133.7			2,738		152.1			2,274		182.1
Europe		929		63.2			1,189		79.3			1,168		94.3
Asia		1,405		47.6			1,487		64.0			1,408		55.5
Other Regions		336		17.7			433		24.3			419		29.4
Total		5,623	¥	321.7			6,200	¥	399.2			5,645	¥	451.1
Power Products and Other businesses revenue as a percentage of total sales revenue				2	%				3	%				3	%

*  Honda Group Unit Sales is the total unit sales of completed power products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed power products corresponding to consolidated sales revenue to

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external customers, which consists of unit sales of completed power products of Honda and its consolidated subsidiaries. In Power products business, there is no discrepancy between Honda Group Unit Sales and Consolidated Unit Sales since no affiliate and joint venture accounted for using the equity method was involved in the sale of Honda power products.

For further information on recent operations and a financial review of the Power products and other businesses, see “Operating Results” in “Item 5. Operating and Financial Review and Prospects”.

Marketing and Distribution

Most of Honda’s products are distributed under the Honda trademarks in Japan and/or in overseas markets.

In fiscal year 2023, approximately 86% of Honda’s motorcycle units on a group basis were sold in Asia. Approximately 47% of Honda’s automobile units (including sales under the Acura Brand) on a group basis were sold in Asia followed by 32% in North America and 15% in Japan. Approximately 40% of Honda’s power products units on a group basis were sold in North America followed by 25% in Asia and 21% in Europe.

Sales and Service

In Japan, Honda produces and sells motorcycles, automobiles, and power products through its domestic sales subsidiaries and independent retail dealers. In overseas markets, Honda also provides motorcycles, automobiles, and power products through its principal foreign sales subsidiaries, which distribute Honda’s products to local wholesalers and retail dealers.

In fiscal year 2023, approximately 97% of Honda’s overseas sales were made through its principal foreign sales subsidiaries, which distribute Honda’s products to local wholesalers and retail dealers.

Honda sells spare parts and provides after-sales services through retail dealers directly or via its overseas operations, independent distributors and licensees.

Components and Parts, Raw Materials and Sources of Supply

Honda manufactures the major components and parts used in its products, including engines, frames and transmissions. Other components and parts, such as shock absorbers, electrical equipment and tires, are purchased from numerous suppliers. The principal raw materials used by Honda are steel plate, aluminum, special steels, steel tubes, paints, plastics and zinc, which are purchased from several suppliers. The most important raw material purchased is steel plate, accounting for approximately 40% of Honda’s total purchases of raw materials.

No single third-party supplier accounted for more than 5% of the Company’s purchases of major components and parts and principal raw materials during the fiscal year ended March 31, 2023.

Ordinarily, Honda does not have and does not anticipate having any difficulty in obtaining its required materials from suppliers and considers its contracts and business relations with the suppliers to be satisfactory. The Company does not believe any of its Japanese domestic suppliers are substantially more dependent on foreign suppliers than Japanese suppliers generally. However, it should be noted that Japanese industry in general is heavily dependent on foreign suppliers for substantially all of its raw materials.

Seasonality

Honda’s motorcycles and power products have historically experienced some seasonality. However, this seasonality has not generally been material to our financial results.

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Environmental and Safety Regulation

Honda is subject to various government regulations, including environmental and safety regulations for automobiles, motorcycles and power products. Such regulations relate to items such as emissions, fuel economy, recycling and safety, and Honda has incurred and will in the future incur compliance and other costs in connection with such regulations. However, Honda’s efforts to meet the wide range of applicable regulatory requirements, both in its production activities and in its research and development activities, are an integral part of and inseparable from its normal operational activities as a manufacturer and its efforts to continuously develop competitive products meeting consumer preferences. Accordingly, Honda does not believe it is feasible to separately specify the above compliance costs with a reasonable amount of precision. Relevant environmental and safety regulations are described below.

Outline of Environmental and Safety Regulation for Automobiles

1. Emissions

Japan

In March 2018, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) introduced the Real Driving Emissions (RDE) examination for diesel vehicles. It became applicable to new models of vehicles beginning in October 2022 and will become applicable to current models of vehicles beginning in October 2024.

The Ministry of the Environment (MOE) issued a Ministerial Ordinance on the particle number (PN) regulation for diesel gasoline direct injection vehicles in August 2021.

In October 2022, MLIT decided to introduce PN regulation. Among diesel direct injection vehicles, it will be applicable to new models beginning in October 2023, and to current models beginning in October 2025. Among gasoline direct injection vehicles, it will be applicable to the new models beginning in October 2024, and to the current models beginning in October 2026.

In December 2020, MOE announced the plan targeting the transition to the electrification of automobiles by around 2030, which covers hybrid vehicles, plug-in hybrid vehicles, electric vehicles and fuel cell vehicles.

The United States

Increasingly stringent emission regulations under the Clean Air Act have been enacted since the 1990s by the U.S. federal government.

Under the Clean Air Act, the State of California is permitted to establish its own emission control standards to the extent they are more stringent than federal standards. Pursuant to this authority, the California Air Resources Board (CARB) adopted the California Low Emission Vehicle Program in 1990, aiming to establish the strictest emission regulations in the world.

In August 2022, the Biden administration signed the Inflation Reduction Act of 2022. This act allows tax incentives to purchase clean vehicles which meet certain requirements. One of the requirements is that the final assembly of new motor vehicles is to be within North America. Most provisions of this act became effective in January 2023.

In November 2022, the CARB finalized Advanced Clean Car II (ACC II) regulations which will apply to 2026 and later model year vehicles. The ACC II regulations contain requirements for the new Low Emission Vehicle IV (LEV IV) regulation and new Zero-Emission Vehicle (ZEV) requirements. The new ZEV requirements will require all new light-duty vehicles sold in California to be zero-emission by 2035.

In April 2023, the U.S. Environmental Protection Agency (EPA) announced proposal of federal multi-pollutant regulation (Tier 4) together with more stringent greenhouse gas requirement which will apply from

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2027 model year vehicles. This proposal is more stringent than those of the CARB LEV IV in terms of particulate matter standards and NMOG+NOx fleet standards.

Canada

On July 16, 2015, the Environment Canada (current Environment and Climate Change Canada) issued the final regulation of amendment to emission regulation whose requirements refer to Tier 3 regulations in the United States.

Europe

The Euro 6 regulation was implemented in September 2014. Emission limits for diesel vehicles were lowered even more than the Euro 5 levels for nitrogen oxides (NOx) and total hydrocarbon (THC) plus NOx. Additionally, Euro 6 requires limits on particle numbers from gasoline vehicles with direct injection engines.

The required ethanol density of test fuel was also increased, starting from September 2016.

The testing cycle to measure emissions has gradually been transitioning from New European Driving Cycle (NEDC) to Worldwide harmonized Light duty driving Test Cycle (WLTC) beginning from September 2017.

The European Commission implemented regulations regarding the Real Driving Emissions (RDE) using Portable Emissions Measurement System (PEMS). The monitoring phase started from April 2016 and RDE testing with emission limits started from September 2017 for NOx and PN.

The new Evaporative Emissions Test started from September 2019. The testing cycle was updated from NEDC to Worldwide harmonized Light vehicles Test Procedure (WLTP) in conformity with the United Nations Economic Commission for Europe (UNECE) GTR No. 19.

On December 11, 2019, the European Commission released its communication on the “EU Green Deal”, which is intended to be the most ambitious package of measures that the European Commission has ever proposed, aiming for Europe to become the world’s first climate-neutral continent (economy) by 2050.

The Green Deal is designed as a set of 10 deeply transformative policies and more than 50 supporting legislative actions. One of the policies (Sustainable and smart mobility) includes “Euro 7 as more stringent pollutant emissions standards for combustion-engine vehicles”.

In November 2022, the European Commission proposed new emission standard “Euro 7” which, if finalized, will apply to all new vehicles sold after July 2025. “Euro 7” requires updated RDE test method, on-board monitoring (OBM) systems, on-board refueling vapor recovery systems and measurement of particulates from break wears and tire abrasions.

China

China implemented Step 6a emission regulations in July 2020, based on the Euro 6 regulation. Step 6a regulations were implemented in July 2020 and Step 6b regulations will be implemented in July 2023.

The President of China, Xi Jinping, proclaimed at the 75th session of the United Nations General Assembly held between September 2020 and September 2021 that China would address “reduction of greenhouse gas emissions”. In response, the relevant regulatory authorities are proceeding with research and formulation of the new emission standards.

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India

India implemented Bharat Stage VI (BS VI) regulations from April 2020, skipping the implementation of BS V regulations. The BS VI regulations feature two phases. The second phase applies from April 2023 with more stringent particle number and on-board diagnostic requirements and compliance for RDE.

Thailand

The Thai Cabinet has decided to introduce Euro 5 regulations from 2024. The timing of introduction of Euro 6 regulations is under discussion.

Brazil

Brazil implemented PROCONVE L7 in January 2022, and is scheduled to implement PROCONVE L8 from 2025. PROCONVE is a unique Brazilian regulation based on U.S. regulations.

2. Fuel Economy / CO2

Japan

In June 2010, MLIT and the Ministry of Economy, Trade and Industry (METI) jointly established a committee and commenced a study to formulate new fuel economy standards for passenger motor vehicles for 2020. The new standards were announced in March 2013. The next term fuel economy standards improve the 2015 standards by 19.6% and adopt the Corporate Average Fuel Economy (CAFE) calculation method.

In March 2018, MLIT and METI jointly established a committee and commenced a study to formulate new fuel economy standards for passenger motor vehicles for 2030. The new standards, announced in January 2020, require an improvement in fuel efficiency of 32.4% over the 2016 standards and adopted the CAFE calculation method.

In April 2020, it became mandatory to measure the fuel consumption of fuel cell vehicles in WLTP mode and electric mileage of electric vehicles in WLTC mode.

In June 2021, METI released “Green Growth Strategy Through Achieving Carbon Neutrality in 2050” and announced their target that 100% of new passenger vehicle sales would be made up of electric vehicles (including battery vehicles, fuel cell vehicles, plug-in hybrid electric vehicles and hybrid electric vehicles) by 2035.

In July 2021, MLIT revised its rules to establish new technical standard for in-vehicle measurement devices for fuel/energy consumption.

In March 2023, MLIT revised 2010 fuel efficiency standard. Standard levels have increased from 8 levels to 17 levels. At the same time, MLIT revised 2020 fuel economy standards by adding one higher level.

The United States

The National Highway Traffic Safety Administration (NHTSA) and EPA issued a regulation in August 2012 regarding GHG / CAFE regulations from the 2017 through 2025 model years. The standard for the 2025 model year is 163 g-CO2/mile or a 54.5 mpg industry average. The CARB also issued a regulation that was nearly equivalent to the EPA’s GHG regulations in August 2012. In December 2012, the CARB amended its GHG regulation so that a manufacturer is also deemed to comply with the CARB GHG regulations if it complies with EPA-GHG from the 2017 through 2025 model years.

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When GHG / CAFE regulation was legislated in 2012, the EPA and the NHTSA announced that they, in coordination with the CARB, would perform a mid-term evaluation re-examining the appropriateness of limit values for 2022-2025 model years by April 2018. Accordingly, the EPA, the NHTSA and the CARB jointly issued a joint technical assessment report in July 2016 (a technical report, and not a decision document). In January 2017, the EPA solely issued the final determination that they would not change the 2022-2025 model years standards established in 2012.

In March 2017, former president Trump issued executive order “Promoting Energy Independence and Economic Growth” which includes rescinding the “Climate Action Plan” announced by former president Obama.

The CARB decided in March 2017 not to change the GHG regulations applicable for the 2022-2025 model years, and, on April 2, 2018, the EPA announced that the GHG requirement for 2022-2025 model years needs reconsideration.

On September 27, 2019, the EPA and the NHTSA jointly issued Part 1 of the “Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule Part 1: One National Program” replacing the current GHG / CAFE regulations.

The SAFE Vehicles Rule Part 1 clarified that federal law supersedes state law and withdrew a preemption waiver (Federal Priority) previously granted to allow the state of California to set its own GHG emission standards different from the federal standards set by EPA.

In March 2020, the EPA and the NHTSA jointly published the SAFE Vehicles Rule Part 2. Under the new SAFE rule, both GHG and CAFE requirements will increase in stringency by 1.5% per year during 2021-2026 model years. The CO2 standard for the 2026 model year is industry average of 199 g-CO2/mile.

In September 2020, the Governor of California signed an executive order stating that 100% of in-state sales of new cars and light trucks would be ZEV by 2035. Following the California Governor’s announcement, a number of states have followed suit.

In January 2021, President Biden issued an executive order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis which called for such as review of SAFE Vehicles Rule and other regulations.

In accordance with this executive order, in December 2021, the EPA issued the revised GHG emissions standards which are more stringent than the SAFE rule standards in each model year from 2023 through 2026.

Moreover, in December 2021, the NHTSA repealed “SAFE Vehicles Rule Part One: One National Program” and withdrew federal law’s preemption over state laws in CAFE regulation.

In May 2022, the NHTSA issued revised CAFE standards for model years from 2024 through 2026, which increase in stringency by 8% each year relative to the prior year for model years 2024, 2025 and 10% for 2026 model year. The CAFE standards will reach approximately 49 MPG in the 2026 model year (U.S. fleet average), up from 36 MPG in the 2021 model year.

In April 2023, EPA announced proposed GHG regulations together with multi-pollutant standards (Tier 4) to be effective from 2027 to 2032 model years. If finalized, EPA projects that 67% of new vehicles in 2032 model year will be electrified.

Canada

The government of Quebec in Canada finalized the standard to mandate each automaker to sell a certain minimum number of ZEVs starting from the 2018 model year.

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In May 2019, the government of British Columbia also adopted a bill to mandate ZEV sales from 2025.

In June 2019, the Environment and Climate Change Canada signed an agreement with the CARB in the United States to promote cooperation in reducing GHG emissions.

In January 2022, the government of Quebec proposed regulatory amendments to the Quebec’s ZEV regulations which increase the percentage of ZEV sales that a manufacturer must achieve each year from 2025 to 2035. The percentages in 2025 are 12.5%, in 2030 are 65%, and in 2035 are 100%.

In December 2022, the federal government proposed a national ZEV mandate from model year 2026 as a part of greenhouse gas regulation. The proposed regulation mandates sales of new vehicles to be ZEVs at the rate of 20% in 2026, 60% in 2030 and 100% in 2035 model year.

Europe

In 2014, a new regulation was issued, requiring EU fleet-wide target of 95 g CO2/km for 2020 based on NEDC testing procedure.

The current European type-approval procedure for fuel consumption and CO2 emissions of cars based on NEDC has been gradually replaced with WLTP beginning from September 2017. During the transitional years, WLTP-measured CO2 values are calculated to NEDC CO2 values to check compliance to the NEDC based CO2 target.

On November 8, 2017, the European Commission proposed a new CO2 standard beyond 2025. The European Parliament and Council reached a provisional inter institutional agreement on the European Commission proposal during the fifth trilogue meeting on December 17, 2018.

The agreed target beyond 2025 is negative 15%. The agreed target beyond 2030 is negative 37.5% for new passenger cars and negative 31% for light commercial vehicles, respectively, compared to the 2021 average of all manufacturers’ EU fleet-wide target.

The agreement also provides that, for zero- and low-emission vehicles, a benchmark equal to 15% share of the respective fleets of newly registered passenger cars and light commercial vehicles shall apply from January 1, 2025, and a benchmark equal to 35% share of the fleet of newly registered passenger cars and a benchmark equal to 30% share of the fleet of newly registered light commercial vehicles shall apply from January 1, 2030.

On December 11, 2019, the European Commission released its communication on the EU Green Deal. See “—Outline of Environmental and Safety Regulation for Automobiles—1. Emissions—Europe”. One policy in the EU Green Deal (EU’s climate ambition for 2030 and 2050) includes “CO2 performance of cars”. On July 14, 2021, the European Commission issued a proposal to amend the Regulation (EU) 2019/631 defining CO2 emission targets for newly-registered passenger cars and light commercial cars, which contains a new provision establishing a 100% reduction of EU fleet-wide targets compared to 2021 from 2035 onwards. On April 2022, Committee on the Environment, Public Health and Food Safety (ENVI) released compromise amendments of the Commission’s proposal. In the compromise amendments, ENVI clarified that the Commission shall, by 2023, develop a report establishing a methodology for reporting life-cycle emissions and report on these.

China

China adopted a fuel consumption regulation for passenger vehicles in 2004. Step 5 of this regulation was implemented in 2021.

Newly published GB/T standards (Chinese national standards issued by the Standardization Administration of China) include an amendment to test methods for energy consumption of light-duty hybrid electric vehicles in November 2021.

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The Standards Center of the China Automotive Technology and Research Center (CATARC), which is in charge of vehicle carbon emission management policies, is proceeding with research and formulation of a new carbon emission management system throughout the entire vehicle life cycle. The implementation is scheduled to begin in 2025.

India

India has promulgated rules to introduce fuel economy / CO2 regulations in 2017 and 2022 in a phased manner.

Brazil

Brazil implemented new fuel economy / CO2 regulations from 2022.

3. Recycling / End-of-Life Vehicles (ELV) / Chemicals and hazardous substances

Japan

Japan enacted the Automobile Recycling Law in July 2002, which required manufacturers to take back air bags, fluorocarbon and shredder residue derived from end-of-life vehicles (ELV), which became effective on January 1, 2005. ELV processing costs are collected from owners of cars currently in use and purchasers of new cars.

Europe

On December 30, 2006, the European Union adopted the Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), which became effective on June 1, 2007. From June 1, 2008, any manufacturer or importer of chemical substances is required to submit a registration to the European Chemicals Agency, based on annual production or import quantity levels. Submitting a pre-registration between June 1 and December 1, 2008 will allow the manufacturer or importer to extend the deadline for submitting the registration for existing chemical substances. The list of Substances of Very High Concern (SVHC) is amended periodically to include new substances. Upon a request by a consumer, a supplier of a product containing SVHC must provide the consumer with sufficient information, including at least the name of the substance, within 45 days.

On February 18, 2011, the first set of substances which require authorization for use after specified dates were announced. Manufacturers using these substances in Europe must either be authorized for use after submitting an application or use substitute substances. Substances which require authorization will be added periodically.

The European Union has issued a proposed regulation amending the EU Battery Directive to the EU Battery Regulation. The proposed regulation would add requirements related to carbon footprints and information disclosure of remaining life for recycling, among others. The EU Battery Regulation is currently scheduled to come into force in 2024.

China

On June 23, 2017, China implemented automobile recycling laws partially following the regulations established by the European Union.

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India

India has a plan to implement automobile recycling laws in the near future.

India has issued a final regulation called Battery Waste Management Rules on August 24, 2022. This final regulation requires the achievement of certain recovery targets for waste batteries and sets targets for minimum use of domestically recycled materials in new batteries.

4. Safety

Japan

Japan Automobile Standards Internationalization Center (JASIC), which is organized by the MLIT and Japan Automobile Manufacturers Association (JAMA), among others, has started to review a proposal for the unification of Safety/Environment Standards, vehicle categories and certification in order to promote further internationalization of standards and certifications. JASIC made the proposal to other contracting parties of the 58 / 98 Agreement in 2009 and reached an agreement among the contracting parties by 2017.

In January 2021, the MLIT adopted UN R153, which regulates fuel system integrity and electric power train safety in rear-end collisions.

In January 2021, the MLIT adopted UN R155, which regulates cyber security and cyber security management.

In January 2021, the MLIT adopted UN R156, which regulates software updates and software update management systems.

In January 2021, the MLIT adopted UN R157, which regulates automated lane keep systems (ALKS).

To achieve the highest level of traffic safety in Japan, MLIT developed a strategy to introduce fully automated driving in the latter half of the 2020s. To develop harmonized regulations for automated driving, MLIT is joining ITS / AD Informal Working Group under WP29 of the United Nations. MLIT is co-chairman of Informal Working Group together with the United Kingdom.

MLIT is considering introducing a regulation regarding “Accident Emergency Call Systems (AECS)”.

Inspection of on-board diagnostics (OBD) will be required from October 2024 for inspections of vehicles with electronic control devices.

In 2021, the MLIT adopted UN R158, which regulates “rear view devices”.

In 2021, the MLIT adopted UN R160, which regulates “Event Data Recorders (EDRs)”.

In 2022, the MLIT adopted UN R161, which regulates “Devices against Unauthorized Use”.

In 2022, the MLIT adopted UN R162, which regulates “Immobilizers”.

In 2022, the MLIT adopted UN R163, which regulates “Vehicles Alarm systems”.

In 2023, the MLIT adopted UN R165, which regulates “Reverse warning devices and signals”.

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The United States

In September 2016, the NHTSA issued the Federal Automated Vehicles Policy for safety testing and deployment of automated vehicles. This policy comprises four sections: vehicle performance guidance for automated vehicles, model state policy, current regulatory tools, and modern regulatory tools. The vehicle performance guidance section outlines a 15 point “safety assessment” for the safe design, development, testing and deployment of automated vehicles.

In December 2016, the NHTSA issued a final rule to newly establish FMVSS141, a standard for minimum sound requirements for hybrid and electric vehicles. The purpose of FMVSS141 is to reduce the number of injuries that result from electric and hybrid vehicle crashes with pedestrians by providing a sound level and sound characteristics necessary for these vehicles to be detected and recognized by pedestrians. Manufacturers must comply with the new requirements for 50% of all hybrid and electric vehicles produced from September 2018, and all hybrid and electric vehicles in or after September 2019. In February 2018, the NHTSA issued another final rule amending FMVSS141. The purpose of this amendment is to clarify the details of technical requirements and reschedule the phase-in schedule (1 year delay).

In September 2017, the NHTSA issued a voluntary guidance “A Vision for Safety” to update the Federal Automated Vehicle Policy issued in 2016. Manufacturers may demonstrate how they address the safety elements contained in this guidance by publishing a Voluntary Safety Assessment for automated driving system (SAE Level 3 through 5).

In April 2020, the NHTSA issued “FMVSS Considerations for Vehicles with Automated Driving Systems: Volume 1” to provide interpretation verifying the legality of ADS-DV (an SAE International level 4 or level 5) which are not equipped with manually operated driving controls against FMVSS regulations on the premise of existing manually operated driving controls.

In September 2020, the NHTSA amended FMVSS141 again to extend phase-in timing, responding to a petition from manufacturers citing the challenges in complying with FMVSS141 due to the supply chain disruptions caused by the COVID-19 pandemic. The application date of FMVSS141 was extended until March 1, 2021, a half year later than the previous phase-in schedule (September 1, 2020).

In October 2020, the NHTSA proposed to revise the child restraint system (CRS) concerning FMVSS208 “Occupant crash protection” to improve the CRS safety in crashes and proposed to revise the CRS lists in line with the currently in-production CRSs.

In January 2021, the NHTSA issued a draft of “Cybersecurity Best Practices for the Safety of Modern Vehicles (2020 update)” to update non-binding and voluntary guidance, which the NHTSA had issued its first edition in 2016, to the automotive industry for improving motor vehicle cybersecurity.

In January 2021, the NHTSA issued “FMVSS Considerations for Vehicles with Automated Driving Systems: Volume 2” to provide interpretation verifying the legality of ADS-DV (an SAE International level 4 or level 5) which are not equipped with manually operated driving controls against FMVSS regulations on the premise of existing manually operated driving controls. This Volume 2 mainly covered FMVSS that were not studied in Volume 1.

In June 2021, the NHTSA issued a general order that requires vehicle manufacturers to report accident information (General Order 2021-01). The NHTSA has mandated that if any vehicle (including prototype and modified vehicles as well as production vehicles) equipped with an automated driving system (ADS) and SAE Level 2 or higher Advanced Driving Assistant System (ADAS) causes an accident on publicly accessible roads in the United States while or immediately after the ADS and ADAS are activated, vehicle manufacturers must report such accident to the NHTSA within one day, update the report within 10 days, and report additional information once a month for three years from the accident. The reporting requirement is in effect from June 2021.

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In November 2021, President Biden signed Infrastructure Investment and Jobs Act (H.R.3684). The Act requires government agencies in the United States to enact various rules and regulations. In particular, the Act mandates agencies to implement rules regarding vehicle safety, mandatory installation of collision avoidance systems and drunk driving prevention technology, as well as surveys on connected vehicles. The content of each rule to be implemented is expected to be considered by the NHTSA and Department of Transportation (DOT) in the future.

In February 2022, the NHTSA issued a final rule to revise FMVSS108 “Lamps, Reflective Devices, and Associated Equipment”. This amendment enables the adoption of adaptive driving beam (ADB) systems, an advanced headlamp technology that optimizes the beam pattern without driver action, specifies track testing requirements for vehicles and lab testing requirements at the component level.

In March 2022, the NHTSA issued a final rule to revise FMVSS200 series (201/203/204/205/206/207/208/212/214/216a/219/225/226) for occupant protection in ADS-equipped vehicles. ADS-equipped vehicles without seats that are not intended to carry people are excluded from the application of the FMVSS200 series for occupant protection in the event of a collision. ADS-equipped vehicles without conventional steering control systems are partially excluded from the application of the FMVSS200 series (as it relates to protection from steering control systems), and new requirements for occupant protection in the event of a collision have been added.

In June 2022, the NHTSA issued a proposed rule that amends time series data requirements of 49 CFR Part 563 EDR (Event Data Recorders). The proposed regulation would change the recording time of EDR time-series measurement data from 5 seconds to 20 seconds for pre-collision data, and change the data sampling frequency from 2 Hz to 10 Hz. This revision proposes to increase the recording time and recording frequency of pre-collision data in order to analyze the behavior of the vehicle before a collision occurs. The application applies to the vehicles manufactured after the first September 1st of the year following the publication of the final rule.

In September 2022, the NHTSA issued a final version of “Cybersecurity Best Practices for the Safety of Modern Vehicles (2022 update)” to update non-binding and voluntary guidance. This 2022 revision reflects comments received on the 2020 version of the Guidance, and clarifies and adds terminology in the scope, updated reference ISO/SAE 21434, and general cybersecurity best practices.

In the United States, state laws stipulate privacy protection laws aimed at protecting the privacy of consumers within the state, and as of April 2023, California, Virginia, Colorado, Utah, and Connecticut have enacted such privacy protection laws.

In May 2023, the NHTSA proposed a new FMVSS that would require all new light vehicles to be equipped with automatic emergency braking systems. It proposed mandatory installation of forward collision alarms and automatic emergency braking for lead vehicles and pedestrians by newly establishing FMVSS 127 “Automatic emergency braking systems for light vehicles” and 49 CFR Part 596 “Automatic Emergency Braking Test Devices”. The application is planned in 2 phases for vehicles manufactured on or after September 1, three years and four years after the publication of the final rule.

Europe

In August 2018, the EU commission issued a regulation to significantly revise the legal framework for the EU type-approval. This regulation introduces a market surveillance system for managing the conformity of motor vehicles available on the market and adds a requirement of an expiration date for vehicle type approval. This EU type-approval came into effect on September 1, 2020.

In March 2019, the Committee of the Permanent Representatives of the Governments of the Member States to the European Union approved amendments to the “General Safety Regulation”. Road traffic safety in the EU has improved during the last decade, but recently the decrease in the number of road fatalities has stagnated.

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To address this issue, the revised General Safety Regulation came into force in January 2020 and will be applied to vehicles from July 2022, which is 30 months after the enforcement. The revised General Safety Regulation include mandatory equipment such as advanced driver assistance systems (ADAS).

In addition to making ADAS equipment mandatory, the revised General Safety Regulation will also enact legislation for self-driving cars in 2026. As a response, rules for cyber security management systems formulated by UNECE WP29 in June 2020 has been incorporated into the revised General Safety Regulation, and it will be mandatory from July 2022 as with other items of the revised General Safety Regulation. In addition, software updates will become more important with advanced electronic controls, so software update management systems will also be required from July 2022 to check whether appropriate updates have been made to the vehicle.

For the first time, process approval has been introduced into cyber security management systems and software update management systems for vehicle type approval. This is not only for vehicles, but for everything from development to production and sales. This is to ensure that manufacturers are taking protective measures against cyber-attacks in the scene.

As an important block of the European Data Strategy of February 2020, the Data Act was announced as the primary regulation governing the assurance of data value and management. This Data Act applies to manufacturers and service co-owners, users and providers of products in the EU market with the aim of ensuring data management and accessibility of data between the private and public sectors. For vehicles, the European Commission has issued an impact assessment on access to vehicle data, features and resources. With regards to access to in-vehicle data for the purpose of providing vehicle related mobility services, the European Commission started public consultation for the revision of “Whole Vehicle Type Approval (WVTA) and market surveillance” (EU) 2018/858 in March 2022, a proposed regulation for which was issued in February 2022.

China

Vehicle safety regulations in China were drafted with reference to the UNECE standards and cover almost the same matters as the UNECE standards. However, these regulations also include unique provisions that take into account the distinctive characteristics of the Chinese market environment and the rules differ from the latest UNECE regulations. In addition, as rulemaking related to autonomous vehicles accelerates, multiple ICV (Intelligent Connecting Vehicle) standards will be promulgated in the future.

In June 2022, the Shenzhen Special Economic Zone ICV Management Ordinance has been issued, and local standards for ICV introduction are being considered in Shenzhen.

Future safety regulations are described as follows:

Newly published GB and GB/T standards (Chinese national standards issued by the Standardization Administration of China) include:

+ Event Data Recorder (EDR),

+ Amendment to electric vehicles traction battery safety requirements, and

+ Amendment to electric vehicles safety requirements.

+ Motor vehicles-Devices for indirect vision-Requirements of performance and installation

Newly established GB and GB/T standards (not yet published) include:

+ Establishment of technical requirements related to cyber security, and

+ Establishment of security requirements for automobile data collection and requirements for cross-border data transfers, and

+ Amendment to battery electric passenger cars – specifications.

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+ Amendment to connection set for conductive charging of electric vehicles-Part 1: General requirements

+ Amendment to test methods for Power performance of fuel cell electric vehicles

+ Amendment to fuel cell electric vehicles Onboard hydrogen system specifications

+ Amendment to measurement methods of net power for automotive engines and electric drive trains

+ Amendment to hybrid electric vehicles-Power performance-Test method

+ Amendment to battery electric vehicles-Power performance-Test method

India

In December 2022, the Ministry of Road Transport and Highways (MoRTH) issued the 25th amendment of the Central Motor Vehicles Rules (CMVR), which requires traction battery for electric power train vehicles manufactured on and from April 1, 2023 to be approved by the Annex IX-K to Automotive Industry Standards (AIS)-038.

Brazil

In April and December 2020, The National Traffic Department (DENATRAN) issued an ordinance regarding the vehicle safety labelling program. The ordinance was implemented from July 1, 2021.

In October 2020, the National Institute of Metrology, Standardization and Industrial Quality (INMETRO) issued an ordinance amending quality technical regulations for new tires. The ordinance was implemented from April 21, 2022 for new tire type and is scheduled to be implemented from October 21, 2025 for existing tire type.

In October 2020, the Brazil transport authority (CONTRAN) issued a resolution to postpone those applicable dates of some safety items due to COVID-19 impact.

In November 2020, INMETRO issued an ordinance, which amended “Regulation for Technical Quality on Child Restraint Systems” and “Requirements for assessment of compliance for Child Restraint Systems.” The ordinance was implemented from May 23, 2021.

In January 2021, an Act of cyber security related to the products listed in the Reference List of Telecommunications Products published by the National Telecommunications Agency that have the function of terminal equipment with an Internet connection or telecommunications network infrastructure equipment was announced. The Act was implemented from July 4, 2021.

CONTRAN announced a second proposal regarding the obligation to install and technical requirements for the Automatic Emergency Braking System (AEBS) installed in vehicles in November 2022. For moving obstacles, it is scheduled to be implemented from January 1, 2026 (new models) and January 1, 2029 (all models). For fixed obstacles, it is scheduled to be implemented from January 1, 2029 (new models) and January 1, 2031 (all models).

CONTRAN announced a proposal regarding the obligation to install and technical requirements for the Lane Departure Warning System (LDWS) installed in vehicles in November 2022. It is scheduled to be implemented from January 1, 2026 (new models) and January 1, 2029 (all models).

CONTRAN issued a regulation that establishes requirements for occupant protection and fuel system integrity in vehicle collisions in December 2018. It is scheduled to be implemented from January 1, 2024 (new models) and January 1, 2026 (all models).

CONTRAN issued a regulation to establish pedestrian protection requirements in the event of a collision in December 2018. It is scheduled to be implemented from January 1, 2025 (new models) and January 1, 2030 (all models).

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CONTRAN issued a regulation to establish requirements for rear warning and monitoring systems installed in vehicles in December 2018. It is scheduled to be implemented from January 1, 2025 (new models) and January 1, 2027 (all models).

CONTRAN issued a regulation to establish vehicle performance requirements in the event of pole side impact in December 2018. It is scheduled to be implemented from January 1, 2026 (new models) and January 1, 2030 (all models).

Outline of Environmental and Safety Regulation for Motorcycles

1. Emissions

Europe

Euro 5 requirements other than catalyst monitoring of OBD (Onboard Diagnostics Regulation) started to apply to new vehicle models from January 2020 and started to apply to all vehicles registered from January 2021. Catalyst monitoring will apply to new vehicle models from January 2024 and will apply to all vehicles registered from January 2025.

On December 11, 2019, the European Commission released its communication on the EU Green Deal. See “—Outline of Environmental and Safety Regulation for Automobiles—1. Emissions—Europe”.

India

India published BS VI regulation (Euro 5 level exhaust emission regulation), which became effective from April 2020. OBD II is introduced in two stages, Stage II-A and II-B. Stage II-A became effective from April 2023 and Stage II-B will become effective from April 2025.

China

China is considering the introduction of Euro 5 level emission regulation.

Other Asian Countries

Thailand published the 7th phase (Euro 4) level emission regulation to be implemented from March 2020.

Indonesia, Vietnam and the Philippines are implementing emission regulations based on European regulations (Euro 3). In addition, consideration of the introduction of Euro 4 has started.

Brazil

Brazil published a new emission regulation called PROMOT 5 (Euro 5 level exhaust emission regulation), which applies to new motorcycles from January 2023 and will apply to all motorcycles registered from January 2025. The OBD stage 2 requirement will apply to new models of motorcycles from January 2025 and will apply to all motorcycles registered from January 2027.

2. Recycling / Chemicals and hazardous substances

Europe

The same REACH compliance required for motor vehicles is required for motorcycles.

The European Union has a plan to implement motorcycle recycling laws in near future.

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The European Union has issued a proposed regulation amending the EU Battery Directive to the EU Battery Regulation. The proposed regulation would add requirements related to carbon footprints and information disclosure of remaining life for recycling, among others. The EU Battery Regulation is currently scheduled to come into force in 2024.

China

China has a plan to implement motorcycle recycling laws in near future.

India

India has announced a plan to implement motorcycle recycling laws in near future.

India has issued a final regulation called Battery Waste Management Rules on August 22, 2022. This final regulation requires the achievement of certain recovery targets for waste batteries and sets targets for value of use of recycled materials in new batteries.

Vietnam

Vietnam implemented motorcycle recycling laws on January 1, 2018.

3. Safety

Europe

In January 2019, the EU Commission issued a regulation complementing Union type-approval legislation with regard to Brexit.

India

In India, the Auto Headlight On (AHO) function, which automatically turns on the head lamps when the engine is running, shall be installed on all two-wheelers manufactured on and after April 1, 2017. New vehicle models certified on and after April 1, 2018, all vehicles manufactured on and after April 1, 2019 shall be equipped with an advanced brake system. For advanced brake system, two-wheeled vehicles with engine capacity of not more than 125cc, continuous rated or net power not more than 11kW and power/weight ratio not more than 0.1 kW/kg shall be equipped with ABS or CBS. All other categories of two-wheeled vehicles shall be equipped with ABS. Furthermore, the Automotive Industry Standard Committee (AISC) published AIS 146, 147 and 148. These are the standards for stand, external projection and footrest strength. These standards became closer to those required by the European regulations.

The Ministry of Road Transport and Highways, Government of India, has promulgated technical requirements for batteries that include India’s own requirements called AIS-156 (Amd3). The standard was enforced in two phases, item by item, with Phase 1 coming into effect on December 1, 2022, and Phase 2 on March 31, 2023.

China

China introduced a requirement for an advanced brake system, which shall be installed on new vehicle models manufactured on and after July 1, 2019, and also on all motorcycles manufactured on and after July 1, 2020. Motorcycles with engine capacity of more than 150cc and not exceeding 250cc shall be equipped with ABS or CBS. Motorcycles with engine capacity of more than 250cc shall be equipped with ABS.

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Electric motorcycle safety regulations were introduced in January 2021.

Newly established GB standards (mandatory national standards) and GB/T standards (voluntary national standards) include:

+ Technical requirements related to cyber security.

+ Security requirements for automotive data collection.

Other Asian Countries

In Thailand, regulations for brakes (UN R78) came effective in January 2022 and regulations for the safety of electric motorcycles (UN R136) became effective in January 2023, while regulations for lighting installation (UN R53) will become effective in January 2024.

Indonesia and Vietnam have been introducing various regulations regarding lighting and braking based on UN Regulations. Recently, Indonesia is considering the introduction of various regulations based on UN regulations, including horns (UN R28), speedometers (UN R39), lighting installation (UN R53), and brake systems (UN R78).

The Philippines has begun considering additional regulations to include an AHO function that automatically turns on the headlamps when the engine is running (From June 2023).

Brazil

The Brazil transport authority (CONTRAN) issued a standard concerning motorcycle braking based on the UNECE Brake regulation (R78.03) as well as a new regulation mandating ABS/CBS installation. The Brazilian standardization authority (INMETRO) currently mandates parts certification for tires and batteries, but added drive/driven sprocket, drive chain and muffler to the scope of application from March 24, 2019 at customs clearance. Brazilian government issued lighting regulation based on previous UNECE regulations; these regulations were implemented from January 1, 2019.

On January 31, 2020, CONTRAN implemented new requirements for license plates based on the Mercosur standards. In addition, the requirements for holes for sealing of license plates have been repealed, since QR codes are printed on the plates instead.

Outline of Environmental and Safety Regulation for Power Products

1. Emissions

The United States

In April 2016, CARB has published an evaporative emission regulation applicable to outboard engines implementing from the 2018 model year and later.

In December 2020, the “Portable Generator Safety Standard Bill” was submitted to the House of Representatives. It would require, if passed, a CO safety shutoff system and CO emissions restrictions for portable generators.

In September 2022, CARB published a final regulation to accelerate the transition of equipment using small off-road engines to zero-emission equipment, requiring most small off-road engines sold in California on or after January 1, 2024 to be zero emissions. In accordance with this, the evaporative (EVAP) emission standard value has also been changed.

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In April 2023, the U.S. Consumer Product Safety Commission (CPSC) initiated a rule-making process to establish safety standards regulations, including CO emissions (g/h) limits for portable generators.

Europe

The European Commission has finalized strengthened exhaust emission regulation for non-road small spark-ignition engines (commonly known as Stage 5 regulation). Its limit values of exhaust emission follow the U.S. EPA phase 3 and the effective date is January 2018 for new certifications and January 1, 2019 for the engines newly placed in the market.

On December 11, 2019, the European Commission released its communication on the EU Green Deal. See “—Outline of Environmental and Safety Regulation for Automobiles—1. Emissions—Europe”.

In December 2022, the European Commission published an amendment to Delegated Reg. Monitoring Non-Road Mobile Machinery (NRMM) in service engines of less than 56kW or more than 560kW.

China

An exhaust emission standard was introduced in China on March 1, 2011. Its requirements are based on the European exhaust emission regulations and are applicable to small spark-ignition engines for non-road mobile machinery with 19 kW or less. The phase 2 regulation with durability requirement started from January 1, 2014. The phase 3 regulation is under development.

Thailand

In February 2022, the Ministry of Industry of Thailand issued standards for the environmental performance of small air-cooled gasoline engines as a general standard.

2. Recycling / Chemicals and hazardous substances

The United States

The Toxic Substances Control Act (TSCA) is the US hazardous substances legislation restricting Phenol, Isopropylated Phosphate (PIP) (3:1) for the first time in the world. PIP (3:1) is mainly used as a flame retardant. The first rule implementing this restriction was issued in January 2021, but relevant industrial associations objected that the transitional period, which was to last only 60 days, would make it impossible to comply in a timely manner. As a result, the compliance date has been extended to November 2024. Currently, “Motor vehicles” are exempted from this rule; however, PIP (3:1) can no longer be used for power products from 2024.

Europe

The same REACH compliance required for motor vehicles is required for power products. In June 2011, the European Union Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment (RoHS) had been wholly revised and most power products were within its scope after 2019.

The European Union has issued a proposed regulation amending the EU Battery Directive to the EU Battery Regulation. The proposed regulation would add requirements related to carbon footprints and information disclosure of remaining life for recycling, among others. The EU Battery Regulation is currently scheduled to come into force in 2024.

China

On July 1, 2016, a regulation similar to European RoHS has entered into force. The first list of target products was published on March 12, 2018.

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India

India has issued a final regulation called Battery Waste Management Rules on August 22, 2022. This final regulation requires the achievement of certain recovery targets for waste batteries and sets targets for value of use of recycled materials in new batteries.

3. Safety

Japan

The Agricultural Technology Innovation Engineering Research Center of National Agriculture and Food Research Organization has decided to conduct safety inspection of agricultural machinery that has replaced agricultural machinery safety appraisal from July 31, 2018.

In July 2020, the Snow Thrower Safety Council has revised the safety standard for labeling and safety manuals to include warnings regarding the invalidated deadman clutch mechanism for operating levers on snow throwers.

In June 2021, the Snow Thrower Safety Council revised safety standards to add performance criteria allowing snow throwers to stop safely when moving backwards.

In April 2023, the MLIT expanded the certified output of shipbuilding businesses to 92 kW based on the provisions of the Ship Safety Act.

The United States

In November 2016, the CPSC promulgated a notice of proposed rule-making in the Federal Register, which proposes to restrict the carbon monoxide emission from portable generator rated 19kW and below. This regulation was proposed to address the carbon monoxide poisoning injuries occurring from portable generators.

In April 2018, an American National Standard Institute (ANSI) Standard for portable generators were amended.

In January 2023, the Portable Generator Manufacturers’ Association (PGMA), a trade association that seeks to develop and influence safety and performance standards for the industry, announced that it is in the process of revising PGMA G300-2018 in order to change the standard value of the CO shut-off system, expand the scope of application and other matters.

Europe

The EU Commission plans to enhance existing noise regulation applicable to equipment intended to be used outdoors. This is a comprehensive rulemaking including expansion of the scope of regulation, enhanced noise limits, change to the conformity assessment system, among other things.

In 2019, the EU Commission began discussions for a revision of the Machinery Directive.

In 2020, discussions to revise the Low Voltage Directive, Battery Directive and Recreational Craft Directive have been initiated.

In January 2022, the European Commission issued a regulation on cybersecurity to supplement the Radio Equipment Directive.

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China

In 2019, a recommended standard for lawn mower safety requirements was issued by the State Administration for Market Regulation (SAMR).

The publication of a new “Safety technical specification for agricultural machinery”, which specifies safety requirements for agricultural machinery in general, is under consideration.

Preparing for the Future

Please note that the forward-looking statements contained herein are judgments made by Honda as of the date of submission of this Annual Report (June 23, 2023) and may differ materially from actual results because of uncertainties that may arise in the future, including those discussed under “Item 3. Key Information—D. Risk Factors.”

Management Policies and Strategies

Honda has two fundamental beliefs: “Respect for the Individual” and “The Three Joys” (the Joy of Buying, the Joy of Selling, and the Joy of Creating). “Respect for the Individual” calls on Honda to nurture and promote these characteristics in Honda by respecting individual differences and trusting each other as equal partners. “The Three Joys” is based on “Respect for the Individual”, and is the philosophy of creating joy with everyone involved in Honda’s activities, with the joy of our customers as the driving force.

Based on these fundamental beliefs, Honda strives to improve its corporate value by sharing joy with all people, and with our shareholders in particular, by practicing its mission statement: “Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality, yet at a reasonable price for worldwide customer satisfaction”.

To remain “a company society wants to exist”, Honda is undertaking corporate activities to “serve people worldwide with the ‘joy of expanding their life’s potential’”, as stated in its 2030 Vision. As the world’s largest power unit manufacturer with annual sales of approximately 30 million units, Honda has been fully focusing on the environment and safety, and for the creation of new value, making company-wide efforts to expand its combined solutions business while taking on challenges in new areas. We will also strengthen our business structure further to generate the investment resources needed for the transformation of our business portfolio.

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Management Challenges

The business environment surrounding Honda has come to a major turning point. Values are diversifying, the population is aging, urbanization is accelerating, climate change is worsening, and the industrial structure is changing due to progress in technologies such as the use of electric-powered motors, autonomous driving and IoT, all on a global basis. Daily living environment and customs have changed dramatically due to the impact of COVID-19, while global fragmentation has accelerated and geopolitical risks have also become apparent. Furthermore, Honda needs to build positive relationships with all stakeholders involved in our corporate activities to solve long-term social issues. Working to improve the quality of the value we provide is essential to achieve future growth.

In the Automobile business, Honda has entered a transformation period that occurs only once in a century through technological innovations in connectivity, automation, shared & services and electrification. Even automobiles are required to offer integrated services and new, customized experiences in addition to their universal value, namely, the freedom of mobility with a sense of security. With increasingly tighter environmental regulations being adopted across the world, an expansion of the EV (electric vehicle) business in the automobile industry is expected to intensify competition for resources. Under such an uncertain environment, we will take more concerted efforts to strengthen our business structure in order to steadily promote electrification and initiatives for safety.

With more stringent environmental regulations being enforced across the world, some emerging countries have followed the move in developed countries and announced their respective governmental targets of electrification, and accordingly, the Motorcycle business is beginning to show signs of change. Facing such changes in the business environment and regional characteristics, Honda needs to take a multifaceted and multidimensional approach aiming to achieve carbon neutrality in the area of motorcycles. In addition, for safety,

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Honda will increase the application of safety technologies to motorcycles themselves, while at the same time connecting more motorcycles to social infrastructure and further reinforcing our activities to spread safe riding practices.

The Power products and other businesses need to evolve work equipment to become safer and more user-friendly due to a decline in the working population and an increase in older workers. As an effort to simultaneously evolve equipment and advance sensor and AI technologies, Honda will gather the know-how of experts and skilled workers, aggregate the collected know-how into data and improve the quality of work. Additionally, Honda will look into a variety of possible approaches for decarbonization while considering what is best for customers, going beyond merely replacing engines with batteries for electrification.

Challenges to be Addressed Preferentially

Considering the business environment, Honda will work on the following issues to provide value unique to Honda with a view to contributing to the solving of various social issues including climate change, while continuing to achieve sustainable growth.

For additional information on our research and development activities to achieve these goals, please see Item 5.C “Research and Development”.

“Initiatives for Value Creation”

1. Zero impact on the global environment

Honda will strive for zero impact on the global environment of not only its products but the entire product life cycle, including its corporate activities, by 2050. Honda will focus on the three-pillars of “carbon neutrality”, “clean energy” and “resource circulation” (Triple Action to ZERO).

Carbon neutrality

In order to realize a carbon-free society, the Automobile business aims to increase the ratio of electric vehicles (EVs) and fuel cell vehicles (FCVs) in overall unit sales in developed countries combined to be 40% by 2030, 80% by 2035 and then 100% globally by 2040.

Tailoring product lineup to market changes and stable procurement of the amount of batteries are important issues to realize the carbon-free society.

During the stage of increasing the use of EVs, from the present to the second half of the 2020s, Honda will release products matched to the respective characteristics of major markets such as North America, China and Japan.

Region	EVs to be released
North America	Plan to introduce two models jointly developed with General Motors Company (GM) in 2024 (Honda brand: Prologue, and Acura brand: ZDX) Plan to launch a mid- to large-size EV based on Honda’s proprietary EV platform in 2025
China	Plan to introduce ten new EV models by 2027
Japan	Plan to introduce a commercial-use mini-EV model based on N-VAN in early 2024 Plan to launch an EV model based on N-ONE in 2025, and two small-size EV models in 2026

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From the second half of the 2020s onward, when EVs are expected to enter a stage of more widespread popularity, we will evolve our strategy from introducing the “best EVs matched to each region” to releasing the “best EVs from a global perspective”. By 2030, Honda is planning to launch a full lineup from commercial-use mini-EVs to flagship-class models, and achieve annual production volume of more than 2 million units.

Honda aims to secure a stable procurement volume of liquid lithium-ion batteries by strengthening external partnerships from now to the second half of 2020s.

Region	Procurement policy
North America	Procure Ultium batteries from GM Procure batteries from a joint venture company for EV battery production with LG Energy Solution Ltd.
China	Further strengthen collaboration with Contemporary Amperex Technology Co., Ltd. (CATL)
Japan	Procure batteries for mini-EVs from Envision AESC Japan Ltd.

In the late 2020s, Honda will take on the challenge of independently developing next-generation battery technology in line with the EV expansion phase. In the cooperative relationship with GS Yuasa International Ltd., as the next stage of our ten years collaboration on the hybrid batteries, we will start development of high-capacity, high-output lithium-ion batteries for EVs. Honda is promoting the joint development of semi-solid-state batteries through our investment in SES AI Corporation, and also proceeding with research toward proprietary development of solid-state batteries, build a demonstration line in 2024 and further accelerate its efforts.

In addition to these procurement and development areas, Honda works to create a new value chain, including securing resources and resource circulation, from a long-term perspective. Honda has partnerships with HANWA Co., Ltd. and POSCO Holdings Inc. in securing critical minerals, and Ascend Elements Inc. and Cirba Solutions in terms of recycling.

In battery-related areas, Honda forms strategic partnerships in each area, seeking to “build a strong value chain with Honda as its hub,” and build a sustainable business foundation and strengthen our competitiveness by achieving co-existence and co-prosperity with each partner.

To achieve carbon neutrality by 2050, the Motorcycle business has defined phased targets for the ratio of electrified products in global unit sales and will seek to accelerate initiatives accordingly. Specifically, Honda aims for unit sales of 1 million electrified products by 2026 and 3.5 million by 2030, which accounts for 15% of all unit sales. Ultimately, we will strive to make 100% of our products carbon free during the 2040s through the advancement of internal combustion engines (ICEs) and electrification.

Emerging countries constitute the primary market for motorcycles and have the complex mix of social needs of each country and region, such as energy supply and demand, employment and convenience of life. As such, it is an issue to strike a fine balance between the convenience of motorcycles and carbon neutrality. In addition to the development of electrified vehicles, Honda will take a multifaceted and multidimensional approach toward carbon neutrality, such as applying technology for significantly improving the fuel efficiency of ICE vehicles.

For electric vehicles, Honda will develop electric products by category according to the characteristics of each market.

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Product	Initiatives
Commuter EVs	Two personal-use smart EVs adopting connectivity and battery-as-a-service (BaaS) technologies scheduled to become commercially available in Asia, Europe and Japan between 2024 and 2025
Commuter EMs / EBs*	Plan to release more compact, reasonably priced electrified vehicles in China, Asia, Europe and Japan, which will be adapted to the respective market characteristics and respond to the need to use such motorcycles more affordably A total of five EM/EB models to be released by 2024
FUN EVs	Develop a platform for large FUN EV models Plan to release three models in Japan, the United States and Europe between 2024 and 2025

*  EM: Electric Moped with a maximum speed ranging from 25 km/h to 50 km/h

EB: Electric Bicycle with a maximum speed of 25 km/h or slower

Excluding battery-assisted bicycles

Honda plans to introduce a total of more than ten new commuter and FUN electric vehicles by 2025.

For ICE vehicles, Honda has been developing technologies to improve the fuel efficiency of the engine on a standalone basis, including technologies to improve thermal efficiency and reduce friction, as well as technologies to achieve even higher fuel efficiency for the entire vehicle. Furthermore, taking into consideration the local characteristics of each region, Honda will work to develop a technology to use carbon-neutral fuels, which are gasoline mixed with ethanol and other substances.

In the Power products business, Honda aims to establish a presence by launching electric products targeting developed countries. Honda promotes the electrification of assembled products, such as engine-powered lawnmowers with a strong presence and offers strengths equivalent to those of engine-powered products. To corporate customers in the construction industry, who account for a large share of our engine sales, we will sell electrified power units and provide support for mounting the unit in machinery. By doing so, we will assist small construction machinery manufacturers in electrifying their products. As for the promotion of electrified products, we will go a step beyond conventional sales and after-sales services and seek to contribute to the business operation of corporate customers by promoting an improvement in their operational efficiency and helping them to reduce required investment.

For more details, please see “Concepts and Approaches to Sustainability”.

2. Zero traffic collision fatalities

Honda will strive for zero traffic collision fatalities involving Honda motorcycles and automobiles globally by 2050. In achieving this goal, Honda has also set a milestone of reducing global traffic collision fatalities involving Honda motorcycles and automobiles by half globally by 2030 compared to calendar year 2020.

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To achieve zero traffic collision fatalities, Honda considers traffic safety education activities, developing required infrastructure and engaging the local government to be a challenge, in addition to implementing future safety technologies and strengthening development.

We will lead the way in realizing an accident-free society in terms of both hardware and software by promoting the Honda SENSING 360, omni-directional safety and driver-assistance system, and by engaging in activities to provide safety education opportunities for all people.

For more details, please refer to “Concepts and Approaches to Sustainability”.

3. Creating new value

Providing combined solutions

Honda aims to offer greater value not only with each of its products, but also by linking various products to realize connectivity beyond product domains. For that purpose, Honda considers it an issue to establish technologies and a framework to regard electrified and other products as “user terminals” and seek to connect energy and information stored in each product with the users and society.

Honda will work on the establishment of a cross-domain connected platform and creating value. In the areas of electrification technologies, including batteries, as well as software and connectivity technologies, we aim to accelerate development in the future and will make efforts to enhance our development capabilities, which will include strengthening recruitment from outside Honda.

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Expanding into new areas

Honda R&D Co., Ltd., Honda’s research and development subsidiary, is making progress with research on technologies in the skies, the ocean, outer space, and the area of robotics to expand mobility into the 3rd and 4th dimensions, in addition to its advanced technologies aimed at realizing a zero environmental impact society and a collision-free society. We are tackling three specific research themes: eVTOL, Avatar Robot, and taking on a challenge in the space domain. Utilizing our group’s core technologies, such as combustion, electrification, control, and robotics technology, we will take on the challenge of realizing the joy of expanding the possibilities of people’s lives in new areas.

4. Financial strategy

Honda accelerates transformation of our business portfolio through appropriate resource allocation to achieve enhanced corporate value.

Honda views the following three themes as issues to realize what we endeavor to do: strengthening business structure, resource investments to accelerate new value creation, and higher capital efficiency.

Strengthening business structure

To realize the transformation of its business portfolio, Honda as a whole has worked as one team to strengthen our business structure.

The Automobile business has adopted the Honda Architecture, which is designed to integrate platform layouts and share parts, endeavored to optimize our production capacity, and reduced the total number of variations for our global models. The Motorcycle business strives to standardize specifications and parts beyond categories, displacements and motorcycle classes. These efforts have led to a steady improvement in the earnings structure.

The future outlook in the business environment still remains uncertain, with the impact of COVID-19 infections and escalation of geopolitical risks. Nonetheless, by further reinforcing the earnings structure built to date, we aim to achieve return on sales (ROS) (operating margin) of 7.0% or higher in FY2026.

Resource investments to accelerate new value creation

Honda plans to allocate roughly ¥8 trillion for research and development expenses over the next 10 years from the fiscal year ended March 31, 2022 as a resource investment for the transformation of its business portfolio. This mainly includes about ¥3.5 trillion in the area of electrification and software technologies and about ¥1 trillion for preparation for new growth. In the area of electrification and software technologies, we currently have a plan to invest about ¥1.5 trillion over the next decade from the fiscal year ended March 31, 2022 for the construction of dedicated EV plants, establishment of a battery production joint venture for stable procurement of the amount of batteries, and for other purposes. We expect that the total amount of resource investment in this area, combined with the research and development expenses, will amount to ¥5 trillion.

Higher capital efficiency

In order to ensure appropriate resource management to support the business portfolio transformation, we will utilize the return on invested capital (ROIC) figures to strengthen our management with a focus on capital cost. In each business, we will utilize optimum management indicators matching the corresponding business structure and work to continuously generate returns exceeding the capital cost. In our business domains other than financing, such as motorcycles, automobiles and power products, we will utilize ROIC to lead the generation of resources for the transformation from the viewpoint of financial management. We aim to maximize

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profit, which is the numerator of ROIC, while optimizing capital invested, which is its denominator, by thoroughly utilizing assets we own and carefully identifying necessary investments. Through these efforts, we aim to increase the capital efficiency and generate a maximum amount of resources to support our transformation.

In distributing profit, we regard returning profit to shareholders as one of the most important management tasks and will make related decisions from a long-term perspective, while taking into consideration internal reserves for future growth and consolidated business results. We will work to pay dividends stably and continuously at the consolidated dividend payout ratio of about 30% and buy back our own shares as appropriate with the goal of improving our capital efficiency and implementing a flexible capital policy.

Initiatives to Support Value Creation

1. Intellectual Capital

Honda aligns development efforts, businesses and activities concerning intellectual properties and standardization and makes strategic resource investments related to intellectual capital in the value creation story. In our intellectual capital utilization process, we invest intellectual capital based on our perception and analysis of the external environment and our own strategies and work to enhance our patent portfolio in new areas. Leveraging our present portfolio, we plan and execute various intellectual property strategies and aim to improve the quality of the value we provide and that of initiatives we undertake.

2. Initiatives Related to Quality

Honda aims for realizing products that offer a new level of outstanding quality.

The industry is heading toward an unprecedented turning point concerning response to the environment, safety and intelligence. Honda will accelerate powertrain electrification as well as the introduction of driver-assistance technologies for the realization of a collision-free mobile society. We are now working to create new value through open innovation. Moving ahead, Honda aims to reduce problems at all points of customer contact in step with an evolution in mobility and living. Through the pursuit of quality in each domain, we have been advancing our initiatives to realize a new level of outstanding quality.

3. Supply Chain Management

Honda will actively promote sustainable initiatives in cooperation with all its business partners around the world. By doing so, we are seeking to realize a supply chain where Honda co-exists and co-prospers with local communities as “a company society wants to exist”. We have implemented initiatives with consideration for the

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environment, safety, human rights, compliance and social responsibility, among others, in partnership with our suppliers worldwide. Based on the Honda Philosophy, we engage in business that is fair and equitable with transparency. In addition, we have formulated the Environmental Purchasing Grand Design, which shows the steps toward our priority of attaining a low-carbon society.

For more details, please refer to “Concepts and Approaches to Sustainability” and “Item 16G. Corporate Governance”.

Through these efforts throughout our corporate activities, Honda aims to become a company that shareholders, investors, customers, and society at large want to exist.

Concepts and Approaches to Sustainability

Please note that the forward-looking statements contained herein are judgments made by Honda as of the date of submission of this Annual Report (June 23, 2023) and may differ materially from actual results because of uncertainties that may arise in the future, including those discussed under “Item 3. Key Information—D. Risk Factors.”

Governance and Risk management

1. Governance

Honda established the Corporate Integration Strategy Meeting with the aim of building consensus on the company-wide direction based on recognition of the environment both internally and externally, as well as important issues that Honda as a whole should tackle.

Policies and initiatives for sustainability issues are discussed and examined in the meeting. To promote and reinforce efforts in the environmental and safety-related domains, which represent the most important issue as a mobility company, we have established the World Environment and Safety Strategy Committee. Since strategies in the environmental domain also include Honda’s response to climate change, the CO2 emissions reduction targets proposed by the Committee are examined and decided by the Board of Directors.

Taking into consideration the important issues examined at these committees, both of which are chaired by the Chief Executive Officer, we determine corporate strategies through the Executive Council and Board of Directors. We then break them down into policies and measures for business operations, functional Unit and subsidiaries for actual execution.

2. Risk management

Honda has established the Honda Global Risk Management Policy and has been conducting activities that will lead to sustainable growth and stable corporate management by actively controlling risks.

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Under the supervision and monitoring of the Risk Management Officer elected by the Board of Directors, we categorize, manage and address risks defined as potentially inflicting significant damage or loss on Honda’s tangible and intangible assets, corporate activities and stakeholders of Honda and possibly affecting our corporate management. Each organization identifies and evaluates risks. Based on the results of its evaluation, the Operations Risk Management Officers identify priority risks for respective Operations.

Based on the recognition of risks within Honda and reflecting external risk trends, we also identify risks deemed particularly important for an entire corporate entity as company-wide priority risks and check and discuss our response status against them. Important matters related to risk management are discussed by the Risk Management Committee established within Honda, and details of their activities are reported to the Executive Council as appropriate. The risk items managed and monitored by the Committee also cover regulatory, natural disaster and other risks arising from climate change, and we are promoting more effective risk management activities while considering the characteristics of respective Operations. For risks related to environmental regulations, for example, we manage risks related to both existing and new regulations.

Strategies, Indicators and Targets

1. Strategy

To remain “a company society wants to exist”, Honda is undertaking corporate activities to “Serve people worldwide with the ‘joy of expanding their life’s potential’” as stated in its 2030 Vision. In addition to its existing business activities, the entire company is working to create new value.

In particular, as the world’s largest power unit manufacturer supplying 30 million products a year, we are thoroughly committed to the environment and safety.

(Environmental Strategy)

Triple Action to ZERO (Efforts to realize a circular economy society with zero environmental impact.)

Honda will strive for zero environmental impact of not only its products but the entire product life cycle, including its corporate activities, by 2050, focusing on the three-pillars of “carbon neutrality,” “clean energy” and “resource circulation” (Triple Action to ZERO). Through this initiative, Honda aims to curb the consumption of natural resources to the extent possible and realize a circular economy society having zero impact on the environment.

Carbon neutral (Net zero CO2 emissions)

To address climate change issues, Honda will work toward contributing to larger societal goal of limiting the average global temperature rise to 1.5ºC above pre-industrial levels by reducing carbon emissions from corporate activities and throughout the product life cycle. In order to do this, Honda will reduce total CO2 emissions from corporate activities. Specific efforts including improving production efficiency, implementing energy-saving measures, shifting to low-carbon energy and using renewable energy. In the area of products, Honda will seek to CO2 emissions from product use by adopting electrification and other innovative environmental technologies, diversifying energy sources and conducting total energy management.

Clean energy (100% utilization of carbon-free energy)

To address energy issues, Honda will go a step beyond its conventional initiative of reducing energy risk and aim to use clean energy both in corporate activities and during product use. In utilizing renewable energy in corporate activities, we will prioritize methods that can directly contribute to the reduction of CO2 emissions in local communities. Specifically, Honda focuses on installing new power generation facilities, first examining the installation within its premises and then gradually expanding the scope to outside the premises for greater use of the facilities.

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Resource circulation (100% use of sustainable materials)

To address the effective utilization of resources, Honda will conduct research into the recycling of materials, including reuse and recycling of batteries. Going beyond its previous initiative aimed at reducing risks related to resources and waste disposal, Honda will take on an additional challenge of developing products that use sustainable materials having zero environmental impact.

(Safety Strategy)

For achieving zero traffic collision in developed countries

Honda plans to apply the Honda SENSING 360 omni-directional safety and driver-assistance system and technologies for pedestrian protection, enhanced collision mitigation and advanced, automatic reporting system of collisions (including those involving pedestrians), which seek to fatal collision situations, to all automobile models to be released in developed countries by 2030.

For achieving zero traffic collision fatalities in emerging countries

In emerging countries, Honda plans to install safety technologies applicable to both motorcycles and automobiles in all models while simultaneously seeking to provide to all people opportunities to receive safe riding education. As for safety technologies for motorcycles, Honda will equip more models with its advanced braking system and headlights that provide better visibility to riders and make them more visible by other road users. Moreover, we installed Honda SENSING capable of detecting motorcycles to the VEZEL released in 2021 and will progressively expand its use in subsequent new models of automobile. This is one of the Safety for Everyone technologies that make the most effective use of Honda’s characteristics of manufacturing both motorcycles and automobiles.

For achieving zero traffic collision fatalities globally by 2050

Honda will strive to achieve “zero traffic collision fatalities involving Honda motorcycles and automobiles globally by 2050” by leveraging two technologies. One is the Intelligent Driver-Assistive Technology, which utilizes Honda’s original attention estimation model and, based on Honda research, is the world’s first AI-based technology to use the driver’s gaze features (eye movements) to analyze the causal relationship between the driver’s attention and driving risks, providing assistance that is suited to the ability and situation of each individual to reduce driving errors and risks, helping the driver achieve safe and sound driving. The other is the Safe and Sound Network Technology that connects road users, both people and mobility products, through telecommunications, making it possible to predict potential risks and help people avoid such risks before collisions actually occur.

2. Indicators and targets

(Environment)

Executing Triple Action to ZERO

To realize a circular economy society with zero environmental impact, Honda aims to achieve of not only its products but the entire product life cycle, including its corporate activities, by 2050. In order to make steady progress toward that goal, we have set a target of reducing total CO2 emissions (Scopes 1 and 2) in our corporate activities by 46% by 2030 compared to the fiscal 2019 level. In the product area, we plan to accelerate our efforts by setting the sales ratio of electric products based on units sold as a benchmark, with the phased targets of 15% for motorcycles, 30% for automobiles, and 36% for power products by 2030. These ratios consist of the ratio of electric motorcycles and electric bicycles for motorcycles; the ratio of battery electric vehicles (BEVs) and fuel cell vehicles (FCVs) for automobiles; and the ratio of electrified products for power products.

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(Safety)

Reducing Traffic Collision Fatalities by Half by 2030 and to Zero by 2050

Honda will strive for zero traffic collision fatalities involving Honda motorcycles and automobiles globally by 2050. Towards achieving this goal, Honda has also set a target of reducing global traffic collision fatalities involving Honda motorcycles and automobiles per 10,000 units by half globally by 2030 compared to calendar year 2020. This target is based on an estimate of all Honda motorcycles and automobiles in use during 2030 including not only new models to be sold by 2030 but also Honda motorcycles and automobiles already in use today.

Strategy, Indicators and Targets of Human Capital

1. Strategies

(Vision of Human Capital and Organizational Strategies)

To prevail through a major turning point that we believe would occur in the automobile industry once in a century, Honda regards the current business environment as its “second foundation phase” and has been working to transform itself into a company capable of achieving new growth and creating new value.

In our human capital and organizational strategies as well, we have formulated a vision to ensure the advancement of our people and corporate culture to accelerate the Company’s transformation. More specifically, we will seek to evolve into an even more innovative and attractive corporate culture that can embrace changes by making the most of the strong commitment, passion and challenging spirit of our employees, who are self-reliant individuals.

(Human Capital Management Linked to Business Strategies)

We seek to develop an optimum personnel strategy based on the portfolio of required personnel, while linking with our business strategies in our existing business domains of motorcycles, automobiles and power products and in new business domains that mainly involve electrification and the development of new value businesses. The aim is to maximize our company-wide, total workforce strength.

In particular, for securing human resources to be tasked with electrification and the development of new value businesses, we will proactively recruit executive-level human resources from outside in addition to nurturing and promoting human resources within Honda.

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2. Indicators and Targets

(Initiatives to Realize the Vision of Human Capital and Organizational Strategies)

Toward achieving the vision of our human capital and organizational strategies, we are implementing initiatives to encourage and support the growth of motivated employees and further encourage them so they can thrive at Honda.

In each region, we use associate engagement as a management indicator. “Associate Engagement” is measured based on a survey of employee activeness in each region performed by a third-party research firm. In Japan, for the Company and its subsidiaries subject to labor contracts with our union (see Item 6. D. Employees), we aim to continuously achieve what we deem to be a “very good” engagement level (3.5 or higher average overall points on a five-point scale; 3.48 points in FY2022).

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C. Organizational Structure

As of March 31, 2023, the Company had 69 Japanese subsidiaries and 244 overseas subsidiaries. The following table sets out for each of the Company’s principal subsidiaries, the country of incorporation, function and percentage ownership and voting interest held by Honda.

Company	Country of Incorporation	Function	Percentage Ownership and Voting Interest
Honda R&D Co., Ltd.	Japan	Research & Development		100.0
Honda Finance Co., Ltd.	Japan	Finance		100.0
American Honda Motor Co., Inc.	U.S.A.	Coordination of Subsidiaries Operation, Research & Development, Manufacturing and Sales		100.0
American Honda Finance Corporation	U.S.A.	Finance		100.0
Honda Development and Manufacturing of America, LLC	U.S.A.	Research & Development and Manufacturing		100.0
Honda Canada Inc.	Canada	Manufacturing and Sales		100.0
Honda Canada Finance Inc.	Canada	Finance		100.0
Honda de Mexico, S.A. de C.V.	Mexico	Manufacturing and Sales		100.0
Honda Motor Europe Limited	U.K.	Coordination of Subsidiaries Operation and Sales		100.0
Honda Finance Europe plc	U.K.	Finance		100.0
Honda Motor (China) Investment Co., Ltd.	China	Coordination of Subsidiaries Operation and Sales		100.0
Honda Auto Parts Manufacturing Co., Ltd.	China	Manufacturing		100.0
Honda Motorcycle & Scooter India (Private) Ltd.	India	Manufacturing and Sales		100.0
Honda Cars India Limited	India	Manufacturing and Sales		100.0
P.T. Honda Prospect Motor	Indonesia	Manufacturing and Sales		51.0
Honda Malaysia Sdn Bhd	Malaysia	Manufacturing and Sales		51.0
Asian Honda Motor Co., Ltd.	Thailand	Coordination of Subsidiaries Operation and Sales		100.0
Honda Leasing (Thailand) Co., Ltd.	Thailand	Finance		100.0
Honda Automobile (Thailand) Co., Ltd.	Thailand	Manufacturing and Sales		89.0
Thai Honda Co., Ltd.	Thailand	Manufacturing and Sales		72.5
Honda Vietnam Co., Ltd.	Vietnam	Manufacturing and Sales		70.0
Honda South America Ltda.	Brazil	Coordination of Subsidiaries Operation		100.0
Moto Honda da Amazonia Ltda.	Brazil	Manufacturing and Sales		100.0

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D. Property, Plants and Equipment

The following table sets out information, as of March 31, 2023, with respect to Honda’s principal manufacturing facilities, all of which are owned by Honda:

Location	Number of Employees		Principal Products Manufactured
Yorii-machi, Osato-gun, Saitama, Japan		4,003	Automobiles
Hamamatsu, Shizuoka, Japan		1,834	Power products and transmissions
Suzuka, Mie, Japan		5,408	Automobiles
Ozu-machi, Kikuchi-gun, Kumamoto, Japan		2,485	Motorcycles, all-terrain vehicles, power products and engines
Greensboro, North Carolina, U.S.A.		729	Aircraft
Burlington, North Carolina, U.S.A.		98	Aircraft engines
Marysville, Ohio, U.S.A.		6,161	Automobiles
Anna, Ohio, U.S.A.		2,618	Engines
East Liberty, Ohio, U.S.A.		2,891	Automobiles
Lincoln, Alabama, U.S.A.		4,830	Automobiles and engines
Greensburg, Indiana, U.S.A.		2,438	Automobiles
Alliston, Canada		5,535	Automobiles and engines
El Salto, Mexico		457	Motorcycles
Celaya, Mexico		4,550	Automobiles
Gurugram, India		1,942	Motorcycles
Alwar, India		2,593	Motorcycles and automobiles
Narasapura, India		1,927	Motorcycles
Ahemdabad, India		890	Motorcycles
Karawang, Indonesia		2,738	Automobiles and engines
Melaka, Malaysia		1,998	Automobiles
Batangas, Philippines		1,286	Motorcycles
Ayutthaya, Thailand		2,447	Automobiles
Prachinburi, Thailand		1,220	Automobiles
Bangkok, Thailand		3,756	Motorcycles and power products
Phuc Yen, Vietnam		4,742	Motorcycles and automobiles
Duy Tien, Vietnam		728	Motorcycles
Buenos Aires, Argentina		627	Motorcycles
Itirapina, Brazil		1,015	Automobiles
Manaus, Brazil		6,804	Motorcycles and power products

In addition to its manufacturing facilities, the Company’s properties in Japan include sales offices and other sales facilities in major cities, repair service facilities, and R&D facilities.

As of March 31, 2023, the Company’s property, with a net book value of approximately ¥2.2 billion, was subject to specific mortgages securing indebtedness.

Capital Expenditures

Capital expenditures in the fiscal year ended March 31, 2023 were applied to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of sales and R&D facilities.

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Total capital expenditures for the year amounted to ¥2,037.3 billion, decreased by ¥267.1 billion from the previous year. Also, total capital expenditures, excluding equipment on operating leases, for the year amounted to ¥493.9 billion, increased by ¥215.5 billion from the previous year. Spending by business segment is shown below.

	Fiscal years ended March 31,
	2022		2023		Increase (Decrease)
	Yen (millions)
Motorcycle Business	¥	36,754	¥	44,818	¥	8,064
Automobile Business		230,476		438,469		207,993
Financial Services Business		2,026,438		1,543,664		(482,774	)
Financial Services Business (Excluding Equipment on Operating Leases)		340		216		(124	)
Power Products and Other Businesses		10,835		10,405		(430	)
Total	¥	2,304,503	¥	2,037,356	¥	(267,147	)
Total (Excluding Equipment on Operating Leases)	¥	278,405	¥	493,908	¥	215,503

Intangible assets are not included in the table above.

In Motorcycle business, we made capital expenditures of ¥44,818 million in the fiscal year ended March 31, 2023. Funds were allocated to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of sales and R&D facilities.

In Automobile business, we made capital expenditures of ¥438,469 million in the fiscal year ended March 31, 2023. Funds were allocated to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of sales and R&D facilities.

In Financial services business, capital expenditures excluding equipment on operating leases amounted to ¥216 million in the fiscal year ended March 31, 2023, while capital expenditures for equipment on operating leases were ¥ 1,543,448 million.

In Power products business, capital expenditures of ¥10,405 million in the fiscal year ended March 31, 2023, were deployed to upgrade, streamline, and modernize manufacturing facilities, and to improve R&D facilities.

Plans after fiscal year 2023

Our management mainly considers economic trends of each region, demand trends, situation of competitors and our business strategy such as introduction plans of new models in determining the future of projects.

The estimated amounts of capital expenditures for the fiscal year ending March 31, 2024 are shown below.

	Fiscal year ending March 31, 2024
	Yen (millions)
Motorcycle Business	¥	51,000
Automobile Business		338,000
Financial Services Business		200
Power Products and Other Businesses		10,800
Total	¥	400,000

The estimated amount of capital expenditures for Financial services business in the above table does not include equipment on operating leases.

Intangible assets are not included in the table above.

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Honda Development and Manufacturing of America LLC, which is one of the Company’s consolidated subsidiaries, plans to invest US$700 million to re-tool three existing plants in Ohio, the United States, which are the Marysville Auto Plant and East Liberty Auto Plant for automobile production, and Anna Engine Plant for automobile powertrain production, to prepare for full-scaled production of EVs in the future. The production equipment in these plants is planned to start operation in 2026. Honda will evolve these plants as its EV Hub in the coming years.

Furthermore, in order to secure stable battery procurement in North America, the Company established an unconsolidated joint venture to manufacture lithium-ion batteries for electric vehicles in the United States during the fiscal year ended March 31, 2023. The joint venture began construction of a new battery plant early in 2023 with the goal of completion by the end of 2024 and starting mass production by the end of 2025. The plant aims to have an annual production capacity of approximately 40GWh. All batteries produced by the new joint venture will be supplied exclusively to Honda plants in North America for battery electric vehicles sold in North America. For details, see “Unrecognized commitment” of note “(30) Related Parties” to the accompanying consolidated financial statements.

For information on Honda’s funding policies, see Item 5.B “Liquidity and Capital Resources—Overview of Capital Requirements, Sources and Uses”.

Item 4A. Unresolved Staff Comments

We do not have any unresolved written comments provided by the staff of the SEC regarding our periodic reports under the Securities Exchange Act of 1934.

Item 5. Operating and Financial Review and Prospects

You should read the following discussion of our financial positions and operating results together with our consolidated financial statements included in this Annual Report.

A. Operating Results

Overview

Honda aims to achieve zero impact on the global environment of not only its products but also the entire product life cycle, including its corporate activities, and zero traffic collision fatalities involving our motorcycles and automobiles globally by 2050. For more details, please see Item 4. “Information on the Company—B. Business Overview—Preparing for the Future—Management Policies and Strategies.” Although investments in new equipment and facilities for electrification and capitalized R&D expenditures related to the achievement of these goals are not currently a material portion of our overall capital expenditures, we plan to further shift resources to electrification and software in the future, leading the proportion of related expenditures to increase significantly within an appropriate range of overall expenditures.

Our business is subject to a severe economic and social environment, and our profitability depends on various factors. In such an environment, we are proactively working to resolve various social issues and to address risks such as climate change. For details of these social issues and the risks we are subject to, please see Item 4. “Information on the Company—B. Business Overview—Preparing for the Future—Challenges to be Addressed Preferentially” and Item 3.D “Risk Factors.” In the process of, or as a result of, dealing with such social issues and risks, our sales volumes may be affected and additional costs may be incurred, which may have a significant effect on our future profitability.

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Business Environment

Despite showing signs of moderate recovery, the economic environment surrounding Honda, its consolidated subsidiaries and its affiliates accounted for under the equity method in the fiscal year ended March 31, 2023, continued to be difficult due to the resurgence of COVID-19, the impact of semiconductor supply shortages, and the impact of inflation, among other factors. In the United States, the economy remained firm due to the factors such as underpinning of consumer spending despite rapid monetary tightening for price stability. In Europe, although there were signs of moderate recovery, the economy remained stagnant due to the impact of inflation caused by the worsening situation in Ukraine. In Asia, the economy moderately picked up, while weakness was seen in some parts of the region including China. In Japan, the economy showed a gradual recovery, although there were signs of weakness in some areas.

The trends, uncertainties, demands, commitments and events identified below may continue or recur, impacting the Company’s future financial results.

Overview of Fiscal Year 2023 Operating Performance

Honda’s consolidated sales revenue for the fiscal year ended March 31, 2023, increased from the fiscal year ended March 31, 2022, due mainly to increased sales revenue in Motorcycle business operations as well as positive foreign currency translation effects. Operating profit decreased from the previous fiscal year, due mainly to decreased profit attributable to sales impacts and increased expenses including product warranty expenses, which was partially offset by positive foreign currency effects.

Motorcycle Business

Honda’s consolidated unit sales of motorcycles, all-terrain vehicles (ATVs), and side-by-sides (SxS) in fiscal year 2023 totaled 12,161 thousand units, increased by 13.4% from the previous fiscal year, mainly due to the increases in consolidated unit sales primarily in India, Vietnam, and Thailand.

Automobile Business

Honda’s consolidated unit sales of automobiles in fiscal year 2023 totaled 2,382 thousand units, decreased by 1.7% from the previous fiscal year, mainly due to a decrease in consolidated unit sales primarily in the United States.

Power Products and Other Businesses

Honda’s consolidated unit sales of power products in fiscal year 2023 totaled 5,645 thousand units, decreased by 9.0% from the previous fiscal year, mainly due to a decrease in consolidated unit sales primarily in the United States.

Fiscal Year 2023 Compared with Fiscal Year 2022

Sales Revenue

Honda’s consolidated sales revenue for the fiscal year ended March 31, 2023, increased by ¥2,355.0 billion, or 16.2%, to ¥16,907.7 billion from the fiscal year ended March 31, 2022, due mainly to increased sales revenue in Motorcycle business operations as well as positive foreign currency translation effects. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have increased by approximately ¥253.2 billion, or 1.7%, compared to the increase as reported of ¥2,355.0 billion, which includes positive foreign currency translation effects.

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Operating Costs and Expenses

Operating costs and expenses increased by ¥2,445.4 billion, or 17.9%, to ¥16,126.9 billion from the previous fiscal year. Cost of sales increased by ¥2,008.2 billion, or 17.4%, to ¥13,576.1 billion from the previous fiscal year, due mainly to an increase in costs attributable to increased consolidated sales revenue in Motorcycle business operations as well as foreign currency effects. Selling, general and administrative expenses increased by ¥343.4 billion, or 25.9%, to ¥1,669.9 billion from the previous fiscal year, due mainly to an increase in expenses including product warranty expenses as well as foreign currency effects. Research and development expenses increased by ¥93.8 billion, or 11.9%, to ¥880.9 billion from the previous fiscal year.

Operating Profit

Operating profit decreased by ¥90.4 billion, or 10.4%, to ¥780.7 billion from the previous fiscal year, due mainly to decreased profit attributable to sales impacts and increased expenses including product warranty expenses, which was partially offset by positive foreign currency effects. Honda estimates that by excluding positive foreign currency effects of approximately ¥295.9 billion, operating profit would have decreased by approximately ¥386.3 billion.

With respect to the discussion above of the changes, management identified factors and used what it believes to be a reasonable method to analyze the respective changes in such factors. Management analyzed changes in these factors at the levels of the Company and its material consolidated subsidiaries.

(1) “Foreign currency effects” consist of “translation adjustments”, which come from the translation of the currency of foreign subsidiaries’ financial statements into Japanese yen, and “foreign currency adjustments”, which result from foreign-currency-denominated transaction. With respect to “foreign currency adjustments”, management analyzed foreign currency adjustments primarily related to the following currencies: U.S. dollar, Japanese yen and others at the level of the Company and its material consolidated subsidiaries.

(2) With respect to “price and cost impacts”, management analyzed effects of changes in sales price, cost reductions, effects of raw material cost fluctuations and others, excluding foreign currency effects.

(3) With respect to “sales impacts”, management analyzed changes in sales volume and mix of product models sold that resulted in increases/decreases in profit, changes in sales revenue of Financial services business that resulted in increases/decreases in profit as well as certain other reasons for increases/decreases in sales revenue and cost of sales, excluding foreign currency effects.

(4) With respect to “expenses”, management analyzed reasons for an increase/decrease in selling, general and administrative expenses from the previous fiscal year excluding foreign currency translation effects.

(5) With respect to “Research and Development expenses”, management analyzed reasons for an increase/decrease in research and development expenses from the previous fiscal year excluding foreign currency translation effects.

The estimates excluding the foreign currency effects are not on the same basis as Honda’s consolidated financial statements, and do not conform to IFRS. Furthermore, Honda does not believe that these measures are substitute for the disclosure required by IFRS. However, Honda believes that such estimates excluding the foreign currency effects provide financial statements users with additional useful information for understanding Honda’s results.

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Profit before Income Taxes

Profit before income taxes decreased by ¥190.6 billion, or 17.8%, to ¥879.5 billion from the previous fiscal year. The main factors behind this decrease, except factors relating to operating profit, are as follows:

Share of profit of investments accounted for using the equity method had a negative impact of ¥85.0 billion, due mainly to recognition of impairment losses on certain investments accounted for using the equity method.

Finance income and finance costs had a negative impact of ¥15.0 billion, due mainly to effect from gains or losses on derivatives as well as effect from gains or losses on foreign exchange, which was partially offset by increased interest income. For further details, see note “(22) Finance Income and Finance Costs” to the accompanying consolidated financial statements.

Income Tax Expense

Income tax expense decreased by ¥147.2 billion, or 47.6%, to ¥162.2 billion from the previous fiscal year. The average effective tax rate decreased by 10.5 percentage points to 18.4% from the previous fiscal year. The benefits of deferred taxes in Japan for the fiscal year ended March 31, 2023, include tax benefits of ¥96.1 billion resulting from the recognition of deferred tax assets previously unrecognized on tax losses, tax credits and deductible temporary differences in the consolidated group under the Japanese Group Relief System, which consists of the Company and its certain consolidated subsidiaries in Japan. We consider it probable that future taxable profit in the consolidated group would be available considering its taxable profits for the past two consecutive years and the expected increase of the Company’s profits in response to the increase in Honda’s consolidated unit sales of automobiles in Japan and foreign countries for the future years. For further details, see “(a) Income Tax Expense” of note “(23) Income Taxes” to the accompanying consolidated financial statements.

Profit for the Year

Profit for the year decreased by ¥43.3 billion, or 5.7%, to ¥717.3 billion from the previous fiscal year.

Profit for the Year Attributable to Owners of the Parent

Profit for the year attributable to owners of the parent decreased by ¥55.6 billion, or 7.9%, to ¥651.4 billion from the previous fiscal year.

Profit for the Year Attributable to Non-controlling Interests

Profit for the year attributable to non-controlling interests increased by ¥12.2 billion, or 22.9%, to ¥65.8 billion from the previous fiscal year.

Business Segments

Motorcycle Business

Honda’s consolidated unit sales of motorcycles, all-terrain vehicles (ATVs) and side-by-sides (SxS) totaled 12,161 thousand units, increased by 13.4% from the previous fiscal year, due mainly to an increase in consolidated unit sales in all regions.

Sales revenue from external customers increased by ¥723.7 billion, or 33.1%, to ¥2,908.9 billion from the previous fiscal year, due mainly to increased consolidated unit sales as well as positive foreign currency translation effects. Despite changes in sales price, the impact of the price changes was immaterial on sales revenue. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have increased by approximately ¥393.2 billion, or 18.0%, compared to the increase as reported of ¥723.7 billion, which includes positive foreign currency translation effects.

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Operating costs and expenses increased by ¥546.5 billion, or 29.2%, to ¥2,420.2 billion from the previous fiscal year. Cost of sales increased by ¥489.8 billion, or 30.4%, to ¥2,099.9 billion, due mainly to an increase in costs attributable to increased consolidated unit sales as well as foreign currency effects. Selling, general and administrative expenses increased by ¥53.9 billion, or 27.7%, to ¥248.4 billion, due mainly to an increase in expenses. Research and development expenses increased by ¥2.7 billion, or 4.0%, to ¥71.8 billion.

Operating profit increased by ¥177.2 billion, or 56.9%, to ¥488.7 billion from the previous fiscal year, due mainly to an increase in profit attributable to price and cost impacts, and sales impacts as well as positive foreign currency effects.

Japan

Total demand for motorcycles in Japan* was approximately 400 thousand units in fiscal year 2023, a decrease of approximately 4% from the previous fiscal year.

Honda’s consolidated unit sales in Japan increased by 0.8% from the previous fiscal year to 246 thousand units in fiscal year 2023, mainly due to the effects of launching the new Dax 125 model and an increase in sales units of the Super Cub 110 model.

*  Source: JAMA (Japan Automobile Manufacturers Association)

North America

Total demand for motorcycles and all-terrain vehicles (ATVs) in the United States*, the principal market within North America, decreased by around 6% from the previous year to approximately 730 thousand units in calendar year 2022.

Honda’s consolidated unit sales in North America increased by 5.0% from the previous fiscal year to 459 thousand units in fiscal year 2023, mainly due to the increases in sales units of the Navi and Dio models primarily in Mexico.

*  Source: MIC (Motorcycle Industry Council)

The total includes motorcycles and ATVs, but does not include side-by-sides (SxS).

Europe

Total demand for motorcycles in Europe* remained basically unchanged from the previous year at approximately 1,080 thousand units in calendar year 2022.

Honda’s consolidated unit sales in Europe increased by 9.5% from the previous fiscal year to 347 thousand units in fiscal year 2023, mainly due to an increase in sales units of the PCX model.

*  Based on Honda research. Only includes the following 10 countries: the United Kingdom, Germany, France, Italy, Spain, Switzerland, Portugal, the Netherlands, Belgium, and Austria.

Asia

Total demand for motorcycles in India*1, the largest market within Asia, increased by around 6% from the previous year to approximately 15,360 thousand units in calendar year 2022. Total demand for motorcycles in other countries in Asia*2 remained basically unchanged from the previous year at approximately 19,890 thousand units in calendar year 2022, mainly due to an increase in sales units in Vietnam, which offset a decrease in sales units in China.

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Honda’s consolidated unit sales in Asia were 9,512 thousand units in fiscal year 2023, an increase by 14.8% from the previous fiscal year, mainly due to the increases in sales units of the Activa model series in India and the Wave model series in Vietnam.

Honda’s consolidated unit sales do not include sales by P.T. Astra Honda Motor in Indonesia, which is accounted for using the equity method. P.T. Astra Honda Motor’s unit sales increased by around 15% from the previous fiscal year to approximately 4,480 thousand units in fiscal year 2023, mainly due to the increases in sales units of the BeAT and Vario model series.

*1 Based on Honda research.

*2 Based on Honda research. Only includes the following seven countries: Thailand, Indonesia, Malaysia, the Philippines, Vietnam, Pakistan, and China.

Other Regions

Total demand for motorcycles in Brazil*, the principal market within Other Regions, increased by around 19% from the previous year to approximately 1,350 thousand units in calendar year 2022.

Honda’s consolidated unit sales increased by 10.9% from the previous fiscal year to 1,597 thousand units in fiscal year 2023, mainly due to the increases in sales units of the CG160 and Biz model series in Brazil.

*  Source: ABRACICLO (the Brazilian Association of Motorcycle, Moped, and Bicycle Manufacturers)

Automobile Business

Honda’s consolidated unit sales of automobiles totaled 2,382 thousand units, decreased by 1.7% from the previous fiscal year, due mainly to a decrease in consolidated unit sales in North America.

Sales revenue from external customers increased by ¥1,446.0 billion, or 15.8%, to ¥10,593.5 billion from the previous fiscal year, due mainly to positive foreign currency translation effects. Despite changes in sales price, the impact of the price changes was immaterial on sales revenue. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have increased by approximately ¥141.4 billion, or 1.5%, compared to the increase as reported of ¥1,446.0 billion, which includes positive foreign currency translation effects. Sales revenue including intersegment sales increased by ¥1,421.1 billion, or 15.2%, to ¥10,781.7 billion from the previous fiscal year.

Operating costs and expenses increased by ¥1,673.9 billion, or 18.3%, to ¥10,798.3 billion from the previous fiscal year. Cost of sales increased by ¥1,330.7 billion, or 17.9%, to ¥8,778.2 billion, due mainly to foreign currency effects. Selling, general and administrative expenses increased by ¥251.5 billion, or 25.5%, to ¥1,238.2 billion, due mainly to an increase in expenses including product warranty expenses as well as foreign currency effects. Research and development expenses increased by ¥91.6 billion, or 13.3%, to ¥781.8 billion.

Operating loss was ¥16.6 billion, a decrease of ¥252.8 billion from the previous fiscal year, due mainly to decreased profit attributable to sales impacts and increased expenses including product warranty expenses, which was partially offset by positive foreign currency effects.

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Proportion of retail unit sales by vehicle category and principal automobile products:

	Fiscal year ended March 31,
	2022			2023
Passenger cars:		42	%		42	%
ACCORD, BRIO, CITY, CIVIC, FIT, INTEGRA, JAZZ
Light trucks:		52	%		50	%
BREEZE, CR-V, FREED, HR-V, ODYSSEY, PILOT, VEZEL, XR-V, ZR-V
Mini vehicles:		6	%		8	%
N-BOX

Although there are various factors that affect the profitability of each vehicle category, sales price is an important factor in determining profitability. In general, the weighted average sales price in the light trucks category is higher relative to the total average sales price, while the weighted average sales price in the mini vehicles category, which is unique to the Japanese market, is relatively lower, although sales price varies from model to model.

In general, the contribution margin of the light trucks category tends to be higher relative to the total weighted average contribution margin because the sales price is higher, while the contribution margin of the mini vehicles category tends to be relatively lower because the sales price is lower, although the level of contribution margin varies from model to model. For example, in Japan and the United States, which are the main sales markets for our automobiles, the contribution margin of our light trucks category was approximately 25% higher, our passenger cars category was approximately 5% lower and our mini vehicles category was approximately 65% lower than total weighted average contribution margin for the fiscal year ended March 31, 2023. It should be noted that we define contribution margin as an amount per unit of net sales minus material cost, which is thought to increase in almost direct proportion to net sales volume.

Japan

Total demand for automobiles in Japan*1 increased by around 4% from the previous fiscal year to approximately 4,380 thousand units in fiscal year 2023.

Honda’s consolidated unit sales in Japan*2 increased by 1.7% from the previous fiscal year to 484 thousand units in fiscal year 2023, mainly due to an increase in sales units of the N-BOX model, despite the impacts of the semiconductor supply shortage.

Honda’s unit production of automobiles in Japan increased by 1.4% from the previous fiscal year to 643 thousand units in fiscal year 2023.

*1  Source: JAMA (Japan Automobile Manufacturers Association), as measured by the number of regular vehicle registrations (661cc or higher) and mini vehicles (660cc or lower)

*2  Certain sales of automobiles that are financed with residual value type auto loans and others by our Japanese finance subsidiaries and provided through our consolidated subsidiaries are accounted for as operating leases in conformity with IFRS and are not included in consolidated sales revenue to external customers in the Automobile business. Accordingly, they are not included in consolidated unit sales.

North America

Total demand for automobiles in the United States*, the principal market within North America, decreased by around 8% from the previous year to approximately 13,890 thousand units in calendar year 2022.

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Honda’s consolidated unit sales in North America decreased by 6.9% from the previous fiscal year to 1,195 thousand units in fiscal year 2023, mainly due to the decreases in sales units of the HR-V and CIVIC models, attributable to the impacts of the semiconductor supply shortage.

Honda’s unit production of automobiles in North America decreased by 1.7% from the previous fiscal year to 1,249 thousand units in fiscal year 2023.

*  Source: Autodata

Europe

Total demand for automobiles in Europe* decreased by around 4% from the previous year to approximately 11,280 thousand units in calendar year 2022.

Honda’s consolidated unit sales in Europe decreased by 16.0% from the previous fiscal year to 84 thousand units in fiscal year 2023, mainly due to a decrease in sales units of the CIVIC model.

*  Source: ACEA (Association des Constructeurs Europeens d’Automobiles (the European Automobile Manufacturers’ Association)) New passenger car registrations cover 27 EU countries, three EFTA countries, and the U.K.

Asia

Total demand for automobiles in Asia*1 increased by around 18% from the previous year to approximately 8,340 thousand units in calendar year 2022. This was mainly due to the increases in demand in India and Malaysia. Total demand for automobiles in China*2 increased by around 2% from the previous year to approximately 26,860 thousand units in calendar year 2022.

Honda’s consolidated unit sales in Asia increased by 14.0% from the previous fiscal year to 505 thousand units in fiscal year 2023, mainly due to the increases in sales units of the BR-V and BRIO models in Indonesia.

Honda’s consolidated unit sales do not include unit sales of Dongfeng Honda Automobile Co., Ltd. and GAC Honda Automobile Co., Ltd., both of which are joint ventures accounted for using the equity method in China. Unit sales in China substantially decreased by 21.5% from the previous fiscal year to 1,240 thousand units in fiscal year 2023, mainly due to the decreases in sales units of the XR-V and VEZEL models, attributable to the impacts of the semiconductor supply shortage.

Honda’s unit production by consolidated subsidiaries in Asia*3 increased by 14.1% from the previous fiscal year to 556 thousand units in fiscal year 2023.

Meanwhile, unit production by Chinese joint ventures Dongfeng Honda Automobile Co., Ltd. and GAC Honda Automobile Co., Ltd. decreased by 19.4% from the previous fiscal year to 1,306 thousand units in fiscal year 2023.

*1  The total is based on Honda research and includes the following eight countries: Thailand, Indonesia, Malaysia, the Philippines, Vietnam, Taiwan, India, and Pakistan.

*2  Source: CAAM (China Association of Automobile Manufacturers)

*3  The total includes the following seven countries: Thailand, Indonesia, Malaysia, Vietnam, Taiwan, India, and Pakistan.

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Other Regions

Total demand for automobiles in Brazil*, the principal market within Other Regions, decreased by around 1% from the previous year to approximately 1,960 thousand units in calendar year 2022.

Honda’s consolidated unit sales decreased by 6.6% from the previous fiscal year to 114 thousand units in fiscal year 2023, mainly due to a decrease in sales units of the CIVIC model, which offset an increase in sales units of the CITY model in Brazil.

Unit production at Honda’s plant in Brazil substantially decreased by 21.4% from the previous fiscal year to 66 thousand units in fiscal year 2023.

*  Source: ANFAVEA (Associação Nacional dos Fabricantes de Veiculos Automotores (the Brazilian Automobile Association)) The total includes passenger cars and light commercial vehicles.

Financial Services Business

To support the sale of its products, Honda provides retail lending and leasing to customers and wholesale financing to dealers through its finance subsidiaries in Japan, the United States, Canada, the United Kingdom, Germany, Brazil and Thailand.

Total amount of receivables from financial services and equipment on operating leases of finance subsidiaries on March 31, 2023, increased by ¥27.4 billion, or 0.3%, to ¥10,621.0 billion from March 31, 2022. Honda estimates that by applying Japanese yen exchange rates as of March 31, 2022, total amount of receivables from financial services and equipment on operating leases of finance subsidiaries as of March 31, 2023 would have decreased by approximately ¥650.4 billion, or 6.1%, from March 31, 2022.

Sales revenue from external customers increased by ¥133.4 billion, or 4.7%, to ¥2,954.0 billion from the previous fiscal year, due mainly to positive foreign currency translation effects, which was partially offset by decreased operating lease income. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have decreased by approximately ¥289.0 billion, or 10.2%, compared to the increase as reported of ¥133.4 billion, which includes positive foreign currency translation effects. Sales revenue including intersegment sales increased by ¥132.8 billion, or 4.7%, to ¥2,956.1 billion from the previous fiscal year.

Operating costs and expenses increased by ¥179.9 billion, or 7.2%, to ¥2,670.2 billion from the previous fiscal year. Cost of sales increased by ¥145.0 billion, or 6.0%, to ¥2,544.2 billion from the previous fiscal year, due mainly to foreign currency effects, which was partially offset by a decrease in costs attributable to decreased operating lease income. Selling, general and administrative expenses increased by ¥34.9 billion, or 38.3%, to ¥126.0 billion from the previous fiscal year, due mainly to foreign currency effects.

Operating profit decreased by ¥47.1 billion, or 14.2%, to ¥285.8 billion from the previous fiscal year, due mainly to a decrease in profit attributable to decreased sales revenue, which was partially offset by positive foreign currency effects.

Power Products and Other Businesses

Honda’s consolidated unit sales of power products totaled 5,645 thousand units, decreased by 9.0% from the previous fiscal year, due mainly to a decrease in consolidated unit sales in North America.

Sales revenue from external customers increased by ¥51.8 billion, or 13.0%, to ¥451.1 billion from the previous fiscal year, due mainly to positive foreign currency translation effects. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would

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have increased by approximately ¥7.6 billion, or 1.9%, compared to the increase as reported of ¥51.8 billion, which includes positive foreign currency translation effects. Sales revenue including intersegment sales increased by ¥54.6 billion, or 13.0%, to ¥476.4 billion from the previous fiscal year.

Operating costs and expenses increased by ¥22.3 billion, or 5.2%, to ¥453.6 billion from the previous fiscal year. Cost of sales increased by ¥19.8 billion, or 5.7%, to ¥369.2 billion, due mainly to foreign currency effects. Selling, general and administrative expenses increased by ¥2.9 billion, or 5.5%, to ¥57.2 billion, due mainly to foreign currency effects, which was partially offset by decreased expenses. Research and development expenses decreased by ¥0.4 billion, or 1.8%, to ¥27.1 billion from the previous fiscal year.

Operating profit was ¥22.8 billion, an increase of ¥32.3 billion from the previous fiscal year, due mainly to increased profit attributable to sales impacts as well as positive foreign currency effects. In addition, operating loss of aircraft and aircraft engines included in Power products and other businesses was ¥25.7 billion, an improvement of ¥7.9 billion from the previous fiscal year, due mainly to decreased operating costs, which was partially offset by decreased profit attributable to negative foreign currency translation effects.

Japan

Honda’s consolidated unit sales in Japan increased by 6.5% from the previous fiscal year to 376 thousand units in fiscal year 2023, mainly due to an increase in sales units of OEM engines*.

*  OEM (Original Equipment Manufacturer) engines refer to engines installed on products sold under a third-party brand.

North America

Honda’s consolidated unit sales in North America decreased by 16.9% from the previous fiscal year to 2,274 thousand units in fiscal year 2023, mainly due to a decrease in sales units of OEM engines.

Europe

Honda’s consolidated unit sales in Europe decreased by 1.8% from the previous fiscal year to 1,168 thousand units in fiscal year 2023, mainly due to a decrease in sales units of OEM engines, which offset an increase in the sales units of generators.

Asia

Honda’s consolidated unit sales in Asia decreased by 5.3% from the previous fiscal year to 1,408 thousand units in fiscal year 2023, mainly due to a decrease in sales units of OEM engines.

Other Regions

Honda’s consolidated unit sales in Other Regions decreased by 3.2% from the previous fiscal year to 419 thousand units in fiscal year 2023, mainly due to a decrease in sales units of OEM engines.

Geographical Information

Japan

In Japan, sales revenue from domestic and export sales increased by ¥188.7 billion, or 4.3%, to ¥4,548.0 billion from the previous fiscal year, due mainly to increased sales revenue in all businesses. Operating profit increased by ¥19.4 billion, or 302.8%, to ¥25.8 billion from the previous fiscal year, due mainly to positive foreign currency effects, which was partially offset by a decrease in profit attributable to price and cost impacts.

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North America

In North America, where the United States is the principal market, sales revenue increased by ¥1,326.0 billion, or 16.4%, to ¥9,416.2 billion from the previous fiscal year, due mainly to positive foreign currency translation effects, which was partially offset by decreased consolidated unit sales in Automobile business as well as decreased operating lease income in Financial services business. Operating profit decreased by ¥242.2 billion, or 48.3%, to ¥258.8 billion from the previous fiscal year, due mainly to decreased profit attributable to sales impacts and increased expenses including product warranty expenses, which was partially offset by positive foreign currency effects.

Europe

In Europe, sales revenue increased by ¥2.5 billion, or 0.4%, to ¥703.7 billion from the previous fiscal year, due mainly to positive foreign currency translation effects, which was partially offset by decreased sales revenue in Automobile business. Operating loss was ¥2.5 billion, a decrease of ¥29.2 billion from the previous fiscal year, due mainly to decreased profit attributable to sales impacts, which was partially offset by increased profit attributable to price and cost impacts.

Asia

In Asia, sales revenue increased by ¥802.3 billion, or 19.8%, to ¥4,857.8 billion from the previous fiscal year, due mainly to increased sales revenue in Motorcycle business as well as positive foreign currency translation effects. Operating profit increased by ¥69.5 billion, or 20.5%, to ¥408.7 billion from the previous fiscal year, due mainly to an increase in profit attributable to price and cost impacts as well as positive foreign currency effects.

Other Regions

In Other Regions, sales revenue increased by ¥226.4 billion, or 38.2%, to ¥819.6 billion from the previous fiscal year, due mainly to increased sales revenue in Motorcycle business as well as positive foreign currency translation effects. Operating profit increased by ¥36.0 billion, or 157.4%, to ¥58.9 billion from the previous fiscal year, due mainly to increased profit attributable to price and cost impacts, which was partially offset by increased expenses.

Fiscal Year 2022 Compared with Fiscal Year 2021

Sales Revenue

Honda’s consolidated sales revenue for the fiscal year ended March 31, 2022, increased by ¥1,382.1 billion, or 10.5%, to ¥14,552.6 billion from the fiscal year ended March 31, 2021, due mainly to increased sales revenue in Motorcycle business and Financial services business operations as well as positive foreign currency translation effects. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have increased by approximately ¥671.7 billion, or 5.1%, compared to the increase as reported of ¥1,382.1 billion, which includes positive foreign currency translation effects.

Operating Costs and Expenses

Operating costs and expenses increased by ¥1,171.1 billion, or 9.4%, to ¥13,681.4 billion from the previous fiscal year. Cost of sales increased by ¥1,128.2 billion, or 10.8%, to ¥11,567.9 billion from the previous fiscal year, due mainly to an increase in costs attributable to increased consolidated sales revenue in Motorcycle business and Financial services business operations. Selling, general and administrative expenses decreased by ¥5.2 billion, or 0.4%, to ¥1,326.4 billion from the previous fiscal year, due mainly to a decrease in expenses. Research and development expenses increased by ¥48.1 billion, or 6.5%, to ¥787.0 billion from the previous fiscal year.

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Operating Profit

Operating profit increased by ¥211.0 billion, or 32.0%, to ¥871.2 billion from the previous fiscal year, due mainly to an increase in profit attributable to sales impacts as well as positive foreign currency effects, which was partially offset by a decrease in profit attributable to price and cost impacts. Honda estimates that by excluding positive foreign currency effects of approximately ¥168.9 billion, operating profit would have increased by approximately ¥42.1 billion.

With respect to the discussion above of the changes, management identified factors and used what it believes to be a reasonable method to analyze the respective changes in such factors. Management analyzed changes in these factors at the levels of the Company and its material consolidated subsidiaries. “Foreign currency effects” consist of “translation adjustments”, which come from the translation of the currency of foreign subsidiaries’ financial statements into Japanese yen, and “foreign currency adjustments”, which result from foreign-currency-denominated transaction. With respect to “foreign currency adjustments”, management analyzed foreign currency adjustments primarily related to the following currencies: U.S. dollar, Japanese yen and others at the level of the Company and its material consolidated subsidiaries. The estimates excluding the foreign currency effects are not on the same basis as Honda’s consolidated financial statements, and do not conform to IFRS. Furthermore, Honda does not believe that these measures are substitute for the disclosure required by IFRS. However, Honda believes that such estimates excluding the foreign currency effects provide financial statements users with additional useful information for understanding Honda’s results.

Profit before Income Taxes

Profit before income taxes increased by ¥156.1 billion, or 17.1%, to ¥1,070.1 billion from the previous fiscal year. The main factors behind this increase, except factors relating to operating profit, are as follows:

Share of profit of investments accounted for using the equity method had a negative impact of ¥70.2 billion, due mainly to recognition of reversal of impairment losses in previous fiscal year, which had been previously recognized on the investments in certain companies accounted for using the equity method.

Finance income and finance costs had a positive impact of ¥15.3 billion, due mainly to increased interest income. For further details, see note “(22) Finance Income and Finance Costs” to the accompanying consolidated financial statements.

Income Tax Expense

Income tax expense increased by ¥90.8 billion, or 41.6%, to ¥309.4 billion from the previous fiscal year. The average effective tax rate increased by 5.0 percentage points to 28.9% from the previous fiscal year. For further details, see “(a) Income Tax Expense” of note “(23) Income Taxes” to the accompanying consolidated financial statements.

Profit for the Year

Profit for the year increased by ¥65.2 billion, or 9.4%, to ¥760.7 billion from the previous fiscal year.

Profit for the Year Attributable to Owners of the Parent

Profit for the year attributable to owners of the parent increased by ¥49.6 billion, or 7.6%, to ¥707.0 billion from the previous fiscal year.

Profit for the Year Attributable to Non-controlling Interests

Profit for the year attributable to non-controlling interests increased by ¥15.6 billion, or 41.1%, to ¥53.6 billion from the previous fiscal year.

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Business Segments

Motorcycle Business

Honda’s consolidated unit sales of motorcycles, all-terrain vehicles (ATVs) and side-by-sides (SxS) totaled 10,721 thousand units, increased by 4.5% from the previous fiscal year, due mainly to an increase in consolidated unit sales in Other Regions.

Sales revenue from external customers increased by ¥397.9 billion, or 22.3%, to ¥2,185.2 billion from the previous fiscal year, due mainly to increased consolidated unit sales. The impact of price changes was immaterial on sales revenue. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have increased by approximately ¥301.2 billion, or 16.9%, compared to the increase as reported of ¥397.9 billion, which includes positive foreign currency translation effects.

Operating costs and expenses increased by ¥311.0 billion, or 19.9%, to ¥1,873.7 billion from the previous fiscal year. Cost of sales increased by ¥285.1 billion, or 21.5%, to ¥1,610.1 billion, due mainly to an increase in costs attributable to increased consolidated unit sales. Selling, general and administrative expenses increased by ¥23.0 billion, or 13.4%, to ¥194.4 billion, due mainly to an increase in expenses. Research and development expenses increased by ¥2.8 billion, or 4.3%, to ¥69.1 billion.

Operating profit increased by ¥86.8 billion, or 38.7%, to ¥311.4 billion from the previous fiscal year, due mainly to an increase in profit attributable to sales impacts as well as positive foreign currency effects, which was partially offset by increased expenses.

Japan

Total demand for motorcycles in Japan* was approximately 420 thousand units in fiscal year 2022, an increase of approximately 14% from the previous fiscal year.

Honda’s consolidated unit sales in Japan increased by 13.5% from the previous fiscal year to 244 thousand units in fiscal year 2022, mainly due to the effects of launching the new GB350 model series and an increase in sales units of the Rebel 250 model.

*  Source: JAMA (Japan Automobile Manufacturers Association)

North America

Total demand for motorcycles and all-terrain vehicles (ATVs) in the United States*, the principal market within North America, remained basically unchanged from the previous year at approximately 780 thousand units in calendar year 2021.

Honda’s consolidated unit sales in North America substantially increased by 31.6% from the previous fiscal year to 437 thousand units in fiscal year 2022, mainly due to an increase in sales units of the CRF110F model primarily in the United States.

*  Source: MIC (Motorcycle Industry Council)

The total includes motorcycles and ATVs, but does not include side-by-sides (SxS).

Europe

Total demand for motorcycles in Europe* increased by around 8% from the previous year to approximately 1,080 thousand units in calendar year 2021.

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Honda’s consolidated unit sales in Europe substantially increased by 35.5% from the previous fiscal year to 317 thousand units in fiscal year 2022, mainly due to the increases in sales units of the Vision and PCX models.

*  Based on Honda research. Only includes the following 10 countries: the United Kingdom, Germany, France, Italy, Spain, Switzerland, Portugal, the Netherlands, Belgium, and Austria.

Asia

Total demand for motorcycles in India*1, the largest market within Asia, increased by around 2% from the previous year to approximately 14,450 thousand units in calendar year 2021. Total demand for motorcycles in other countries in Asia*2 increased by around 16% from the previous year to approximately 19,890 thousand units, mainly due to an increase in demand in Indonesia.

Although Honda’s consolidated unit sales in Asia increased in calendar year 2021, it decreased by 2.0% from the previous fiscal year to 8,283 thousand units in fiscal year 2022, mainly due to a decrease in sales units of the Activa model series for the fiscal fourth quarter in India.

Honda’s consolidated unit sales do not include sales by P.T. Astra Honda Motor in Indonesia, which is accounted for using the equity method. P.T. Astra Honda Motor’s unit sales for fiscal year 2022 substantially increased by around 44% from the previous fiscal year to approximately 3,870 thousand units, mainly due to the increases in sales units of the BeAT and Vario model series.

*1  Based on Honda research.

*2  Based on Honda research. Only includes the following seven countries: Thailand, Indonesia, Malaysia, the Philippines, Vietnam, Pakistan, and China.

Other Regions

Total demand for motorcycles in Brazil*, the principal market within Other Regions, substantially increased by around 22% from the previous year to approximately 1,140 thousand units in calendar year 2021.

Honda’s consolidated unit sales substantially increased by 39.5% from the previous fiscal year to 1,440 thousand units in fiscal year 2022, mainly due to the increases in sales units of the CG160 and Biz model series in Brazil.

*  Source: ABRACICLO (the Brazilian Association of Motorcycle, Moped, and Bicycle Manufacturers)

Automobile Business

Honda’s consolidated unit sales of automobiles totaled 2,424 thousand units, decreased by 7.4% from the previous fiscal year, due mainly to a decrease in consolidated unit sales in North America.

Sales revenue from external customers increased by ¥580.2 billion, or 6.8%, to ¥9,147.4 billion from the previous fiscal year, due mainly to positive foreign currency translation effects, which was partially offset by decreased consolidated unit sales. The impact of price changes was immaterial on sales revenue. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have increased by approximately ¥112.7 billion, or 1.3%, compared to the increase as reported of ¥580.2 billion, which includes positive foreign currency translation effects. Sales revenue including intersegment sales increased by ¥581.2 billion, or 6.6%, to ¥9,360.5 billion from the previous fiscal year.

Operating costs and expenses increased by ¥435.2 billion, or 5.0%, to ¥9,124.3 billion from the previous fiscal year. Cost of sales increased by ¥474.6 billion, or 6.8%, to ¥7,447.4 billion, due mainly to an increase in costs attributable to increased consolidated sales revenue. Selling, general and administrative expenses decreased by ¥82.4 billion, or 7.7%, to ¥986.6 billion, due mainly to a decrease in expenses. Research and development expenses increased by ¥43.0 billion, or 6.7%, to ¥690.2 billion.

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Operating profit increased by ¥145.9 billion, or 161.7%, to ¥236.2 billion from the previous fiscal year, due mainly to decreased expenses as well as positive foreign currency effects, which was partially offset by a decrease in profit attributable to price and cost impacts.

Proportion of retail unit sales by vehicle category and principal automobile products:

	Fiscal year ended March 31,
	2021			2022
Passenger cars:		43	%		42	%
ACCORD, CITY, CIVIC, FIT/JAZZ
Light trucks:		50	%		52	%
BREEZE, CR-V, FREED, ODYSSEY, PILOT, Acura RDX, VEZEL/HR-V, XR-V
Mini vehicles:		7	%		6	%
N-BOX

Although there are various factors that affect the profitability of each vehicle category, sales price is an important factor in determining profitability. In general, the weighted average sales price in the light trucks category is higher relative to the total average sales price, while the weighted average sales price in the mini vehicles category, which is unique to the Japanese market, is relatively lower, although sales price varies from model to model.

In general, the contribution margin of the light trucks category tends to be higher relative to the total weighted average contribution margin because the sales price is higher, while the contribution margin of the mini vehicles category tends to be relatively lower because the sales price is lower, although the level of contribution margin varies from model to model. For example, in Japan and the United States, which are the main sales markets for our automobiles, the contribution margin of our light trucks category was approximately 25% higher, our passenger cars category was approximately 15% lower and our mini vehicles category was approximately 50% lower than total weighted average contribution margin for the fiscal year ended March 31, 2022. It should be noted that we define contribution margin as an amount per unit of net sales minus material cost, which is thought to increase in almost direct proportion to net sales volume.

Japan

Total demand for automobiles in Japan*1 decreased by around 9% from the previous fiscal year to approximately 4,210 thousand units in fiscal year 2022.

Honda’s consolidated unit sales in Japan*2 decreased by 8.5% from the previous fiscal year to 476 thousand units in fiscal year 2022, mainly due to a decrease in sales units of the FIT model, attributable to the impacts of the semiconductor supply shortage, which offset the effects of launching the new VEZEL model.

Honda’s unit production of automobiles in Japan decreased by 7.7% from the previous fiscal year to 634 thousand units in fiscal year 2022.

*1  Source: JAMA (Japan Automobile Manufacturers Association), as measured by the number of regular vehicle registrations (661cc or higher) and mini vehicles (660cc or lower)

*2  Certain sales of automobiles that are financed with residual value type auto loans and others by our Japanese finance subsidiaries and provided through our consolidated subsidiaries are accounted for as operating leases in conformity with IFRS and are not included in consolidated sales revenue to external customers in the Automobile business. Accordingly, they are not included in consolidated unit sales.

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North America

Total demand for automobiles in the United States*, the principal market within North America, increased by around 3% from the previous year to approximately 15,070 thousand units in calendar year 2021.

Honda’s consolidated unit sales in North America decreased by 13.3% from the previous fiscal year to 1,283 thousand units in fiscal year 2022, mainly due to a decreases in sales units of the CR-V and CIVIC models, attributable to the impacts of the semiconductor supply shortage.

Honda’s unit production of automobiles in North America decreased by 9.0% from the previous fiscal year to 1,271 thousand units in fiscal year 2022.

*  Source: Autodata

Europe

Total demand for automobiles in Europe* decreased by around 2% from the previous year to approximately 11,770 thousand units in calendar year 2021.

Honda’s consolidated unit sales in Europe decreased by 1.0% from the previous fiscal year to 100 thousand units in fiscal year 2022, mainly due to the decreases in sales units of the CIVIC model.

Honda’s unit production of automobiles in Europe decreased by 55.8% from the previous fiscal year to 31 thousand units in fiscal year 2022, mainly due to the discontinuation of automobile production at Honda’s U.K. plant.

*  Source: ACEA (Association des Constructeurs Europeens d’Automobiles (the European Automobile Manufacturers’ Association)) New passenger car registrations cover 27 EU countries, three EFTA countries, and the U.K.

Asia

Total demand for automobiles in Asia*1 increased by around 17% from the previous year to approximately 7,090 thousand units in calendar year 2021. This was mainly due to the increases in demand in India and Indonesia. Total demand for automobiles in China*2 increased by around 4% from the previous year to approximately 26,270 thousand units.

Honda’s consolidated unit sales in Asia increased by 13.6% from the previous fiscal year to 443 thousand units in fiscal year 2022, mainly due to the effects of launching the new CITY model and an increase in sales units of the BRIO model in Indonesia.

Honda’s consolidated unit sales do not include unit sales of Dongfeng Honda Automobile Co., Ltd. and GAC Honda Automobile Co., Ltd., both of which are joint ventures accounted for using the equity method in China. Unit sales in China decreased by 15.1% from the previous fiscal year to 1,579 thousand units in fiscal year 2022, mainly due to the decreases in unit sales of the CIVIC and CR-V models, attributable to the impacts of the semiconductor supply shortage.

Honda’s unit production by consolidated subsidiaries in Asia*3 substantially increased by 21.2% from the previous fiscal year to 487 thousand units in fiscal year 2022.

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Meanwhile, unit production by Chinese joint ventures Dongfeng Honda Automobile Co., Ltd. and GAC Honda Automobile Co., Ltd. decreased by 13.7% from the previous fiscal year to 1,620 thousand units in fiscal year 2022.

*1  The total is based on Honda research and includes the following eight countries: Thailand, Indonesia, Malaysia, the Philippines, Vietnam, Taiwan, India, and Pakistan.

*2  Source: CAAM (China Association of Automobile Manufacturers)

*3  The total includes the following seven countries: Thailand, Indonesia, Malaysia, Vietnam, Taiwan, India, and Pakistan.

Other Regions

Total demand for automobiles in Brazil*, the principal market within Other Regions, increased by around 1% from the previous year to approximately 1,970 thousand units in calendar year 2021.

Honda’s consolidated unit sales decreased by 3.2% from the previous fiscal year to 122 thousand units in fiscal year 2022, due to a decrease in consolidated unit sales in some countries, which offset an increase in Brazil.

Unit production at Honda’s plant in Brazil increased by 16.1% from the previous fiscal year to 83 thousand units in fiscal year 2022.

*  Source: ANFAVEA (Associação Nacional dos Fabricantes de Veiculos Automotores (the Brazilian Automobile Association)) The total includes passenger cars and light commercial vehicles.

Financial Services Business

To support the sale of its products, Honda provides retail lending and leasing to customers and wholesale financing to dealers through its finance subsidiaries in Japan, the United States, Canada, the United Kingdom, Germany, Brazil and Thailand.

Total amount of receivables from financial services and equipment on operating leases of finance subsidiaries on March 31, 2022, increased by ¥259.1 billion, or 2.5%, to ¥10,593.6 billion from March 31, 2021. Honda estimates that by applying Japanese yen exchange rates as of March 31, 2021, total amount of receivables from financial services and equipment on operating leases of finance subsidiaries as of March 31, 2022 would have decreased by approximately ¥624.8 billion, or 6.0%, from March 31, 2021.

Sales revenue from external customers increased by ¥326.3 billion, or 13.1%, to ¥2,820.6 billion from the previous fiscal year, due mainly to increased revenues on disposition of lease vehicles. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have increased by approximately ¥198.1 billion, or 7.9%, compared to the increase as reported of ¥326.3 billion, which includes positive foreign currency translation effects. Sales revenue including intersegment sales increased by ¥316.5 billion, or 12.6%, to ¥2,823.3 billion from the previous fiscal year.

Operating costs and expenses increased by ¥340.4 billion, or 15.8%, to ¥2,490.2 billion from the previous fiscal year. Cost of sales increased by ¥299.9 billion, or 14.3%, to ¥2,399.1 billion from the previous fiscal year, due mainly to an increase in costs attributable to increased revenues on disposition of lease vehicles. Selling, general and administrative expenses increased by ¥40.5 billion, or 80.2%, to ¥91.1 billion from the previous fiscal year, due mainly to difference in the amount of the allowance for credit losses.

Operating profit decreased by ¥23.9 billion, or 6.7%, to ¥333.0 billion from the previous fiscal year, due mainly to difference in the amount of the allowance for credit losses.

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Power Products and Other Businesses

Honda’s consolidated unit sales of power products totaled 6,200 thousand units, increased by 10.3% from the previous fiscal year, due mainly to an increase in consolidated unit sales in all regions.

Sales revenue from external customers increased by ¥77.5 billion, or 24.1%, to ¥399.2 billion from the previous fiscal year, due mainly to increased consolidated unit sales in Power products business. Honda estimates that by applying Japanese yen exchange rates of the previous fiscal year to the current fiscal year, sales revenue for the year would have increased by approximately ¥59.6 billion, or 18.5%, compared to the increase as reported of ¥77.5 billion, which includes positive foreign currency translation effects. Sales revenue including intersegment sales increased by ¥79.9 billion, or 23.4%, to ¥421.7 billion from the previous fiscal year.

Operating costs and expenses increased by ¥77.7 billion, or 22.0%, to ¥431.2 billion from the previous fiscal year. Cost of sales increased by ¥61.9 billion, or 21.6%, to ¥349.4 billion, due mainly to an increase in costs attributable to increased consolidated unit sales in Power products business. Selling, general and administrative expenses increased by ¥13.5 billion, or 33.5%, to ¥54.2 billion, due mainly to an increase in expenses. Research and development expenses increased by ¥2.2 billion, or 8.7%, to ¥27.6 billion from the previous fiscal year.

Operating loss was ¥9.4 billion, an improvement of ¥2.1 billion from the previous fiscal year, due mainly to an increase in profit attributable to sales impacts, which was partially offset by increased expenses. In addition, operating loss of aircraft and aircraft engines included in Power products and other businesses was ¥33.7 billion, an increase of ¥1.4 billion from the previous fiscal year.

Japan

Honda’s consolidated unit sales in Japan increased by 5.1% from the previous fiscal year to 353 thousand units in fiscal year 2022, mainly due to an increase in sales of OEM engines*, which offset a decrease mainly in sales of generators.

*  OEM (Original Equipment Manufacturer) engines refer to engines installed on products sold under a third-party brand.

North America

Honda’s consolidated unit sales in North America increased by 4.6% from the previous fiscal year to 2,738 thousand units in fiscal year 2022, mainly due to the increases in sales of OEM engines and lawnmowers, which offset a decrease in the sales of generators.

Europe

Honda’s consolidated unit sales in Europe substantially increased by 28.0% from the previous fiscal year to 1,189 thousand units in fiscal year 2022, mainly due to the increases in sales of OEM engines and lawnmowers, which offset a decrease in the sales of generators.

Asia

Honda’s consolidated unit sales in Asia increased by 5.8% from the previous fiscal year to 1,487 thousand units in fiscal year 2022, mainly due to an increase in sales of OEM engines, which offset a decrease mainly in sales of water pumps.

Other Regions

Honda’s consolidated unit sales in Other Regions substantially increased by 28.9% from the previous fiscal year to 433 thousand units in fiscal year 2022, mainly due to the increases in sales of OEM engines and lawnmowers.

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Geographical Information

Japan

In Japan, sales revenue from domestic and export sales increased by ¥491.4 billion, or 12.7%, to ¥4,359.2 billion from the previous fiscal year, due mainly to increased sales revenue in Motorcycle business. Operating profit was ¥6.4 billion, an increase of ¥82.3 billion from the previous fiscal year, due mainly to an increase in profit attributable to sales impacts as well as positive foreign currency effects, which was partially offset by increased expenses.

North America

In North America, where the United States is the principal market, sales revenue increased by ¥609.3 billion, or 8.1%, to ¥8,090.1 billion from the previous fiscal year, due mainly to increased sales revenue in Financial services business as well as positive foreign currency translation effects. Operating profit increased by ¥45.1 billion, or 9.9%, to ¥501.0 billion from the previous fiscal year, due mainly to an increase in profit attributable to sales impacts as well as positive foreign currency effects, which was partially offset by a decrease in profit attributable to price and cost impacts.

Europe

In Europe, sales revenue increased by ¥19.3 billion, or 2.8%, to ¥701.2 billion from the previous fiscal year, due mainly to increased sales revenue in Motorcycle business as well as positive foreign currency translation effects. Operating profit decreased by ¥0.7 billion, or 2.8%, to ¥26.6 billion from the previous fiscal year, due mainly to decreased profit attributable to sales impacts, which was partially offset by decreased expenses.

Asia

In Asia, sales revenue increased by ¥596.6 billion, or 17.3%, to ¥4,055.4 billion from the previous fiscal year, due mainly to increased sales revenue in Automobile business as well as positive foreign currency translation effects. Operating profit increased by ¥87.2 billion, or 34.6%, to ¥339.1 billion from the previous fiscal year, due mainly to an increase in profit attributable to sales impacts as well as positive foreign currency effects.

Other Regions

In Other Regions, sales revenue increased by ¥158.6 billion, or 36.5%, to ¥593.1 billion from the previous fiscal year, due mainly to increased sales revenue in Motorcycle business. Operating profit was ¥22.8 billion, an increase of ¥27.9 billion from the previous fiscal year, due mainly to an increase in profit attributable to sales impacts as well as price and cost impacts.

B. Liquidity and Capital Resources

Overview of Capital Requirements, Sources and Uses

The policy of Honda is to support its business activities by maintaining sufficient capital resources, a sufficient level of liquidity and a sound balance sheet.

Honda’s main business is the manufacturing and sale of motorcycles, automobiles and power products. To support this business, Honda also funds financial programs for customers and dealers.

Honda requires working capital mainly to purchase parts and raw materials required for production, as well as to maintain inventory of finished products and cover receivables from dealers and for providing financial

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services. Honda also requires funds for capital expenditures, mainly to introduce new models, upgrade, rationalize and renew production facilities, as well as to expand and reinforce sales and R&D facilities. As the world’s largest power unit manufacturer, Honda has been fully focusing on the “environment” and “safety” and, for the creation of new value, making company-wide efforts to taking on challenges in combined solutions and new areas. Honda requires funds for the transformation of our business portfolio. For a description of Honda’s current plans for resource investments relating to its business strategies, see Item 4.B. “Business Overview—Preparing for the Future—Challenges to be Addressed Preferentially—4. Financial Strategy—Resource investments to accelerate new value creation”.

Honda meets its working capital requirements primarily through cash generated by operations, bank loans and corporate bonds. In the fiscal year ended March 31, 2022, the Company developed its Sustainable Finance Framework to raise a part of the funds for addressing our environmental and safety initiatives through issuing bonds and issued Green Bonds totaling US$2.75 billion thereunder. The proceeds from the issuance of the Green Bonds are used exclusively toward environmental initiatives in accordance with the Sustainable Finance Framework. Honda believes that its working capital is sufficient for the Company’s present requirements. The year-end balance of liabilities associated with the Company and its subsidiaries’ funding for non-Financial services businesses was ¥802.7 billion as of March 31, 2023. In addition, the Company’s finance subsidiaries fund financial programs for customers and dealers primarily from medium-term notes, bank loans, securitization of finance receivables and equipment on operating leases, commercial paper and corporate bonds. The year-end balance of liabilities associated with these finance subsidiaries’ funding for Financial services business was ¥6,867.4 billion as of March 31, 2023.

There are no material seasonal variations in Honda’s borrowing requirements.

In light of the future situation of working capital requirements and cash on hand, the Company will consider raising funds as needed.

Cash Flows

Fiscal Year 2023 Compared with Fiscal Year 2022

Consolidated cash and cash equivalents on March 31, 2023 increased by ¥128.0 billion from March 31, 2022, to ¥3,803.0 billion. The reasons for the increases or decreases for each cash flow activity, when compared with the previous fiscal year, are as follows:

Net cash provided by operating activities amounted to ¥2,129.0 billion of cash inflows. Cash inflows from operating activities increased by ¥449.4 billion compared with the previous fiscal year, due mainly to increased cash received from customers, which was partially offset by increased payments for parts and raw materials.

Net cash used in investing activities amounted to ¥678.0 billion of cash outflows. Cash outflows from investing activities increased by ¥302.0 billion compared with the previous fiscal year, due mainly to increased payments for additions to property, plant and equipment.

Net cash used in financing activities amounted to ¥1,468.3 billion of cash outflows. Cash outflows from financing activities increased by ¥852.6 billion compared with the previous fiscal year, due mainly to increased repayments of financing liabilities as well as purchases of treasury stock.

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Fiscal Year 2022 Compared with Fiscal Year 2021

Consolidated cash and cash equivalents on March 31, 2022 increased by ¥916.9 billion from March 31, 2021, to ¥3,674.9 billion. The reasons for the increases or decreases for each cash flow activity, when compared with the previous fiscal year, are as follows:

Net cash provided by operating activities amounted to ¥1,679.6 billion of cash inflows. Cash inflows from operating activities increased by ¥607.2 billion compared with the previous fiscal year, due mainly to increased cash received from customers, which was partially offset by increased payments for parts and raw materials.

Net cash used in investing activities amounted to ¥376.0 billion of cash outflows. Cash outflows from investing activities decreased by ¥420.8 billion compared with the previous fiscal year, due mainly to decreased payments for acquisitions of investments accounted for using the equity method as well as increased proceeds from sales and redemptions of other financial assets.

Net cash used in financing activities amounted to ¥615.7 billion of cash outflows. Cash outflows from financing activities increased by ¥331.7 billion compared with the previous fiscal year, due mainly to a decrease in proceeds from financing liabilities and purchases of treasury stock.

Liquidity

The ¥3,803.0 billion in cash and cash equivalents as of March 31, 2023 is mainly denominated in U.S. dollars and in Japanese yen, with the remainder denominated in other currencies.

Honda’s cash and cash equivalents as of March 31, 2023 corresponds to approximately 2.7 months of sales revenue, and Honda believes it has sufficient liquidity for its business operations.

At the same time, Honda is aware of the possibility that various factors, such as recession-induced market contraction and financial and foreign exchange market volatility, may adversely affect liquidity. For this reason, finance subsidiaries that carry total short-term borrowings of ¥1,048.3 billion have committed lines of credit equivalent to ¥1,306.7 billion that serve as alternative liquidity for the commercial paper issued regularly to replace debt. Honda believes it currently has sufficient credit limits, extended by prominent international banks, as of the date of the filing of Honda’s Form 20-F.

Honda’s financing liabilities as of March 31, 2023 are mainly denominated in U.S. dollars, with the remainder denominated in Japanese yen and in other currencies. For further information regarding financing liabilities, see note “(15) Financing Liabilities” and “(25) Financial Risk Management” to the accompanying consolidated financial statements.

Honda’s short- and long-term debt securities are rated by credit rating agencies, such as Moody’s Investors Service, Inc., Standard & Poor’s Global Ratings, and Rating and Investment Information, Inc. The following table shows the ratings of Honda’s unsecured debt securities by Moody’s, Standard & Poor’s and Rating and Investment Information as of March 31, 2023.

	Credit ratings for
	Short-term unsecured debt securities		Long-term unsecured debt securities
Moody’s Investors Service		P-2		A3
Standard & Poor’s Global Ratings		A-2		A-
Rating and Investment Information		a-1+		AA

The above ratings are based on information provided by Honda and other information deemed credible by the rating agencies. They are also based on the agencies’ assessment of credit risk associated with designated

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securities issued by Honda. Each rating agency may use different standards for calculating Honda’s credit rating, and also makes its own assessment. Ratings can be revised or nullified by agencies at any time. These ratings are not meant to serve as a recommendation for trading in or holding Honda’s unsecured debt securities.

Off-Balance Sheet Arrangements

Loan commitments

Honda maintains unused balances on committed lines to dealers based on loan commitment contracts. The undiscounted maximum amount of this potential obligation as of March 31, 2023 was ¥119.2 billion. Although committed lines have been extended, they will not necessarily be withdrawn, as certain contracts contain terms and conditions of withdrawal that require screening of the obligor’s credit standing.

Guarantee of employee loans

As of March 31, 2023, we guaranteed ¥5.9 billion of employee bank loans for their housing costs. If an employee defaults on his/her loan payments, we are required to perform under the guarantee. The undiscounted maximum amount of our potential obligation to make future payments in the event of defaults is ¥5.9 billion. As of March 31, 2023, no amount has been accrued for any estimated losses under the obligations, as it was probable that the employees would be able to make all scheduled payments.

Contractual Obligations

The following table shows our contractual obligations as of March 31, 2023:

	Yen (millions)
			Payments due by period
	Total		Within 1 year		1-3 years		3-5 years		Thereafter
Financing liabilities	¥	7,996,385	¥	3,410,145	¥	2,651,286	¥	1,423,700	¥	511,254
Other financial liabilities		665,389		196,797		150,408		87,448		230,736
Purchase and other commitments*1		107,865		90,669		17,048		148		—
Contributions to defined benefit pension plans*2		44,301		44,301		—		—		—
Total	¥	8,813,940	¥	3,741,912	¥	2,818,742	¥	1,511,296	¥	741,990

*1  Honda had commitments for purchases of property, plant and equipment as of March 31, 2023.

*2  Since contributions beyond the next fiscal year are not currently determinable, contributions to defined benefit pension plans reflect only contributions expected for the next fiscal year.

C. Research and Development

The Company and its consolidated subsidiaries use the most-advanced technologies and conduct R&D activities with the goal of creating distinctive products that are internationally competitive. Product-related R&D is conducted mainly by the Company, Honda R&D Co., Ltd., and Honda Development and Manufacturing of America, LLC. R&D on production technologies centers around the Company and Honda Development and Manufacturing of America, LLC. All of these entities work in close association with our other entities and businesses in their respective regions.

To strengthen new value creation by combining hardware with software and services, Honda established a new organization, Business Development Operations, that brings together the Company’s business development functions and its software and core electrification technologies. In addition to improving agility by gathering these functions into a single organizational structure that is independent from the conventional product-based business operations of motorcycles, automobiles, and power products, the Company will integrate technologies and businesses across products for stronger synergy.

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A portion of the R&D expenditures at the Company and its consolidated subsidiaries has been capitalized and recorded as intangible assets. For details regarding R&D expenses recognized in the consolidated statements of income, see note “(21) Research and Development” to the accompanying consolidated financial statements.

R&D activities by segment are as follows.

Please note that the forward-looking statements contained herein are judgments made by Honda as of the date of submission of this Annual Report (June 23, 2023) and may differ materially from actual results because of uncertainties that may arise in the future, including those discussed under “Item 3. Key Information—D. Risk Factors.”

Motorcycle Business

In the Motorcycle business, Honda is engaged in research and development activities with the policy of “maximizing the organizational climate of self-challenge and forming a Mono-zukuri (the art of making things) team capable of continually creating products that delight our customers by overcoming changes in the business environment and offering reasonable prices.”

Among major technological achievements, we launched the XL750 TRANSALP in March 2023, an adventure-style large-sports type model. It features a newly developed a water-cooled, 4-stroke, OHC, 4-valve in-line 2-cylinder engine, functional large windscreen that combines windproof and aerodynamic performance, and a 5.0-inch TFT full-color liquid crystal multi-information display that aggregates and displays vehicle information. In addition, various advanced equipment such as Riding Mode and HSVCS that allows selection of preset output characteristics are adopted to enhance rider convenience.

We launched the HAWK 11 in September 2022. Offering new values and an enriched biking lifestyle, this new large motorcycle for the Japanese market primarily targets seasoned riders. It features a water-cooled, 4-stroke, OHC, straight-twin 1,082cc engine with 6-speed manual transmission and electronic control technologies to support riding, packaging an easy-to-handle chassis designed for rider satisfaction in all riding scenarios, from a leisurely ride to the agile touring of winding roads.

In January 2023, we launched the ADV160, an adventure-style small-displacement scooter, featuring the eSP+, a new water-cooled, 4-stroke, 4-valve, single-cylinder, 156cc engine. The scooter is also environmentally friendly and meets the latest exhaust gas regulations*.

The Rebel 1100T, a large cruiser model launched in February 2023, combines a stylish, low and long design with a large fork-mounted windscreen that protects riders from the elements to maximize comfort for long trips, making this model suitable for relaxed long-distance touring.

As part of our initiatives to achieve zero environmental footprint, we strive to realize carbon neutrality for all of its motorcycle products during the 2040s, as the primary focus of environmental strategies for Motorcycle business, Honda will accelerate electrification of its motorcycle models, while also continuing to advance internal combustion engines (ICE).

Specifically, we aim for introducing 10 or more electric motorcycle models globally by 2025, with the aim of reaching annual sales of 1 million units in 2026 and 3.5 million units, equivalent to 15% of Honda’s total unit sales, as of 2030.

As the forerunner to this plan, at EICMA 2022 in Milan, Italy in November 2022, Honda unveiled the EM1 e:, its first electric model for Europe. Aimed at a young demographic looking for easy, fun urban transport, it is perfect for short hops around town and for making journeys to work or college efficient, quiet, and emission-free. The EM1 e: fits neatly into an owner’s modern lifestyle.

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In China, the largest market for electric bicycles, at an online launch event held in Shanghai in January 2023, Honda announced three new models aimed at young Generation Z consumers in China: the Honda Cub e:, Dax e:, and ZOOMER e:. By taking the unique design motif of previous models and adding advanced features and equipment, Honda aims to offer a new sense of value and bring more surprise and choice to young Chinese consumers.

R&D expenditures in this segment incurred during the fiscal years ended March 31, 2021, 2022 and 2023 were ¥61.6 billion, ¥65.8 billion and ¥70.3 billion, respectively.

*FY2020 Discharge gas regulations

Automobile Business

In the Automobile business, Honda is engaged in research and development activities under the policy of “demonstrating collective strength for appealing and strong products, and ensuring continuing growth of the Automobile business by deepening the process of Mono-zukuri.”

Among major achievements, we launched new electric cars, the e:NS1 in April 2022, and the e:NP1 in June 2022 in China. The all-new e:NS1 and e:NP1 are the first “e:N Series” models developed as the first Honda-brand electric vehicle (EV) models in China, which combine the DNA of Honda “Mono-zukuri” that include the pursuit of originality and passion, with the cutting-edge electrification and intelligence technologies of China. Developed with the concept of “Inspiring EVs people have never experienced before,” the all-new e:NS1 and e:NP1 feature a number of new values that inspire people who get on board these vehicles.

In addition, the CIVIC e:HEV, launched in July 2022, and the CIVIC TYPE R, launched in September 2022, were named Performance Car of the Year in the 2022/2023 Car of the Year Japan awards (organized by a committee made up of major car magazine publishers), the first Japan-made cars to win this category. The hybrid CIVIC e:HEV, was applauded as a sports sedan that brings a modern and smart driving experience thanks to its sophisticated powertrain. The CIVIC TYPE R, meanwhile, features excellent chassis performance, aerodynamic body, and lets drivers feel the smooth revolution of its Turbocharged VTEC engine. The model garnered approval for inspiring drivers with performance that is ready for a wide range of situations, whether on the track or on city streets.

Globally, we launched new CR-V and ACCORD. In addition to the direct-injected 1.5-liter turbocharged DOHC 4-cylinder straight engine, their powertrains feature a two-motor hybrid system that is an updated and refined version of previous models. Features of Honda SENSING, a safety and driver-assistive system, has also been upgraded, offering advanced preventive safety technology.

In North America, we launched the new PILOT in December 2022. With the adoption of a new-generation platform, the new model offers more cabin space, and is particularly spacious in the third row of seats. The new model is also equipped with Honda’s first 3.5-liter V6 engine and 10-speed automatic transmission, realizing powerful driving.

In North America, the new Acura INTEGRA, launched in June 2022, was named 2023 North American Car of the Year at the 2023 North American Car, Truck and Utility Vehicle of the Year Awards, recognized for its sporty design, engaging driving experience, versatile package and premium features. This was Honda’s second consecutive win, after the CIVIC took out the same category in 2022.

As part of our initiatives to achieve zero environmental footprint, we continue to develop batteries and introduce EV products in line with market changes. Honda is working on independent research and development of next-generation batteries toward the second half of the 2020s, when the use of BEVs is expected to expand. Specifically, we will join forces with GS Yuasa International Ltd. to develop high-capacity, high-output lithium-ion batteries. We are also jointly developing semi-solid-state batteries through an equity investment in SES Holdings Pte. Ltd., as well as promoting in-house R&D of all-solid-state batteries.

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Honda plans to introduce EV products tailored to the market characteristics of each major region, from now through the second half of the 2020s. In North America, Honda will introduce two mid- to large-size EV models currently being developed jointly with General Motors Company (GM), in 2024. In China, we will further accelerate the development of the e:N series of Honda-brand EV and introduce a total of 10 new EV models by 2027. In Japan, we are planning to introduce a commercial-use mini-EV model within 2024. After the second half of the 2020s, assuming it will become the time of the popularization of EVs, Honda will begin introducing the best EVs from a global perspective. In 2025, Honda will begin adopting Honda e: Architecture, an EV platform that combines the hardware platform and software platform. Through the alliance with GM, Honda is planning to introduce affordable EVs in 2027 or thereafter, with a cost and range that will be as competitive as gasoline-powered vehicles, starting from North America.

Honda will further accelerate development aimed at electrification.

Honda is striving for zero traffic collision fatalities. In December 2022, we unveiled the next-generation technologies of Honda SENSING 360 and Honda SENSING Elite.

As next-generation technologies for Honda SENSING 360, new functions will be added to further reduce driver burden by detecting abnormal conditions occurring to the driver and the vehicle’s surroundings to reduce the risk of collisions. These new functions will be applied sequentially on a global basis starting in 2024. As the next-generation technologies for Honda SENSING Elite, Honda has developed new technologies to assist the driver in achieving a seamless ride from home to their destination on any roads, now including non-expressways, utilizing recognition and understanding technologies achieved by Honda’s original AI technologies. The new technologies will be applied sequentially starting in the mid-2020s.

R&D expenditures in this segment incurred during the fiscal years ended March 31, 2021, 2022 and 2023 were ¥692.5 billion, ¥708.1 billion and ¥754.1 billion, respectively.

Power Products and Other Businesses

In the Power products and other businesses, Honda is engaged in research and development activities based on the policy of “creating the lifestyles of the future, taking usefulness and joy to the next level.”

Among major technological achievements, we made modifications to the large snow thrower, HSL2511, and re-launched it in summer 2022. The HSL2511 is equipped with an electric-control fuel-injected engine, giving it superior starting and maintenance performance, as well as a high level of fuel efficiency. With the adoption of the Smart Auger System, Honda’s proprietary auger assist function, the new model has been well received for achieving both ease of use and powerful snow removal.

As part of our initiatives to achieve zero environmental footprint, in October 2022, we began sales of the Honda Power Pack Exchanger e: battery swapping station, with the first unit delivered to Gachaco Inc., a battery sharing service operator. Honda Power Pack Exchanger e: is a battery swapping station that simultaneously charges multiple units of Honda Mobile Power Pack e: and enables smooth battery swapping for users of electric motorcycles and other mobile products equipped with Honda Mobile Power Pack e:. The users will have access to fully-charged batteries whenever needed at battery swapping stations in the city, which enables efficient use of electrified mobility products without waiting for the batteries to get charged.

As initiatives for “Creating New Value”, we are developing a solution system for improving QOL (Quality Of Life) and QOW (Quality Of Work) for the realization of a better society. With a technology for that, we are accelerating activities that contribute to solving social issues by evolving the intelligence of work systems and IoT.

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In March 2023, we exhibited the third-generation prototype of the Honda Autonomous Work Vehicle (Honda AWV), a platform-based autonomous mobility vehicle for field testing, at CONEXPO-CON/AGG 2023 in Las Vegas, the United States. Based on the concept of the predecessor 3E-D18, the Honda AWV has attachments and tools that could make the vehicle a suitable platform for many work environments, including for transporting payloads. The Honda AWV employs a suite of sensors to operate autonomously, using GPS for location, as well as radar and lidar for obstacle detection.

In addition, we exhibited the Honda Autonomous Work Mower (Honda AWM), a prototype model of a self-driving lawn mower that is currently under development, at the Equip Exposition 2022 held in Louisville, Kentucky, the United States in October 2022. Recording the lawn mowing route manually the first time teaches the Honda AWM the route for autonomous mowing, thus automating subsequent mowing. In addition to this teaching and playback function, the Honda AWM is also capable of detecting and stopping before obstacles.

We will continue to accelerate initiatives aimed at creating new value.

In the aircraft business, Honda has created new value with uniquely developed leading-edge technology. We have been building an operating base in order to grow our aircraft business from a long-term perspective.

In October 2022, we unveiled the HondaJet Elite II, the latest, upgraded model of the HondaJet small business jet aircraft series, at the National Business Aviation Convention & Exhibition, the world’s largest business airshow, held in Orlando, Florida, the United States. Increased fuel capacity and maximum takeoff weight has expanded the aircraft’s range, enabling the Elite II to reach more distant destinations. It features structural improvements, with ground spoilers fitted into the main wings for the first time, optimizing landing performance by improved handling and stability. In addition, as a new air safety technology initiative, we plan to introduce state-of-the-art automation technologies, Autothrottle and Emergency Autoland.

In addition, in the aviation maintenance technician (AMT) awards program offered by the Federal Aviation Administration (FAA) of the United States, Honda Aircraft Company, LLC received the “diamond-level AMT employer award” (the highest-level award) in recognition of the company’s high-quality repair and maintenance services and the expertise of its technicians for the second year in a row.

We will continue to upgrade the structure for further vitalization of the business jet market.

R&D expenditures in this segment during the fiscal years ended March 31, 2021, 2022 and 2023 were ¥25.8 billion, ¥29.9 billion and ¥27.5 billion, respectively.

Research for next-generation technologies

In research for next-generation technologies, we unveiled the Honda CI Micro-mobility machines and their core technologies. Honda CI Micro-mobility technologies utilize Honda CI (Cooperative Intelligence), Honda’s original AI that supports cooperation and coexistence of people, machines and society. From November 2022, we sequentially start technology demonstration testing in multiple areas in Joso City, Ibaraki Prefecture, Japan. In a society where the birthrate is declining, the population is aging and people have adopted new habits after experiencing the COVID-19 pandemic, an increase has been forecast for the need for unrestricted mobility of people and things using micro-mobility machines. By continuing advancing its CI-powered micro-mobility technologies, our aim is to put these technologies into practical applications by around 2030 and introduce Honda CI Micro-mobility products which will simultaneously realize both the “advancement of mobility and people’s daily lives” and the “realization of zero traffic collisions.”

In addition, working toward the realization of a carbon-neutral society, we will not only continue electrifying its products but also take a proactive approach to increase the use of hydrogen as an energy carrier and strive to expand its hydrogen business. As the core of its hydrogen business, we will further advance its fuel

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cell system to more durability and reduce the cost. Specifically, we have identified four core domains for the utilization of its fuel cell system: fuel cell vehicles (FCV), commercial vehicles, stationary power stations and construction machinery, and will actively engage in collaboration with other companies.

R&D expenditures incurred in research for next-generation technologies are distributed among Honda’s business segments.

Patents and Licenses

As of March 31, 2023, Honda owned more than 15,000 patents in Japan and more than 27,100 patents abroad. Honda also had applications pending for more than 5,800 patents in Japan and for more than 14,200 patents abroad. While Honda considers that, in the aggregate, Honda’s patents are important, it does not consider any one of such patents, or any related group of them, to be of such importance that the expiration or termination thereof would materially affect Honda’s business.

D. Trend Information

See Item 5.A “Operating Results” for information required by this item.

E. Critical Accounting Estimates

Not applicable.

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Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Effective on June 23, 2021, Honda adopted a “company with three committees” corporate governance system (the “Three Committees system”) under the Company Law. Under the Three Committees system, Honda has no Board of Corporate Auditors and the function of corporate audit is implemented by the Audit Committee within the Board of Directors.

For Japanese companies which employ the Three Committees system, including Honda, the Company Law requires that such companies have a board of directors and one or more executive officers, and within the board of directors, a nominating committee (the “Nominating Committee”), an audit committee (the “Audit Committee”), and a compensation committee (the “Compensation Committee”) shall be established. Each of these three committees shall consist of three or more directors, a majority of which shall be outside directors. The members of each of the three committees as well as executive officers are elected by the resolution of the board of directors. In addition, Honda’s regulations of each of the three committees provide that the chairperson of each committee shall be elected from the Outside Directors who are members of the relevant committee by the resolution of the Board of Directors. For the Audit Committee, Honda’s regulations of the committee provide that full-time member of the Audit Committee shall be assigned by the resolution of the Board of Directors. The normal term of office of a director and an executive officer is one year. Directors and executive officers may serve any number of consecutive terms.

Honda’s Articles of Incorporation provide for the Board of Directors of not more than 15 Directors. Honda’s Board of Directors may appoint one Chairperson of the Board of Directors from among Directors. Also, Honda’s Board of Directors appoints one President and Executive Officer and may appoint several Executive Vice Presidents and Executive Officers, Senior Managing Executive Officers and Managing Executive Officers from among executive officers. The President and Executive Officer represents the Company. In addition, the Board of Directors may appoint, pursuant to its resolutions, Executive Officers who shall each represent the Company. Under the Company Law, a representative executive officer individually has authority to represent the company generally in the conduct of its affairs. The Board of Directors has an authority to determine the execution of business of the Company and to supervise the execution of duties of Directors and Executive Officers. Executive Officers are entitled to determine the execution of business of the Company which is entrusted by the Board of Directors and to execute business of the Company.

Under the Company Law, the Nominating Committee has the responsibility to determine the content of proposals regarding the election and dismissal of directors to be submitted to a general meeting of shareholders. The Audit Committee has the following responsibilities: (i) auditing the execution of duties by directors and executive officers and preparing audit reports and (ii) determining the content of proposals regarding the election and dismissal of accounting auditors and the refusal to reelect accounting auditors to be submitted to a general meeting of shareholders. The Compensation Committee has the responsibility to determine the content of the financial benefits as consideration for the execution of the duties, such as remuneration and bonuses, of directors and executive officers. As described above, not less than half of the members of each of the three committees must be outside directors. Each of the outside directors is required to meet all of the following independence requirements: the relevant person must be (1) a person who is not an executive director, executive officer, manager or any other employee of the company or any of its subsidiaries and has not been in such position for ten years prior to the assumption of office; (2) if the relevant person assumed an office of a non-executive director, accounting councilor or corporate auditor of the company or any of its subsidiaries during the ten years mentioned in (1) above, a person who had not been an executive director, executive officer, manager or any other employee of the company or any of its subsidiaries for further ten years prior to the assumption of such office; (3) a person who is not a director, corporate auditor, executive officer, manager or any other employee of the parent company or who is not a natural person controlling the company; (4) a person who is not an executive director, executive officer, manager or any other employee of a company which is controlled by the parent company or by the natural person controlling the company; and (5) a person who is not a spouse or one of a

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certain kinds of relatives of (a) a director, executive officer, manager or any other important employee of the company or (b) the natural person controlling the company. In addition, Honda has established additional independence requirements for the Outside Directors, the “Criteria for Independence of Outside Directors” as described in Exhibit 1.4 by the resolution of the Board of Directors, and all of Outside Directors meet the criteria. With respect to audit reports prepared by the audit committee, each member of the committee may note his or her opinion in the audit report if his or her opinion is different from the opinion expressed in the audit report. In addition, the Company is required to appoint independent certified public accountants or audit corporations as accounting auditors. Such accounting auditors have as their primary statutory duties to audit the consolidated and non-consolidated financial statements of the Company prepared in accordance with the Company Law to be submitted by a director to general meetings of shareholders and to prepare an accounting audit report thereon and to notify the contents of such report to the specified member of the audit committee (or, if such member is not specified, any member of the committee) and the specified director in charge.

The following table provides the names, date of birth, current positions held and brief biographies, term of office and number of shares owned of all the members of the Board of Directors and composition of the Three Committees. Also the names, date of birth, current positions held and brief biographies, term of office and number of shares owned of the Executive Officers (who are not concurrently the members of the Board of Directors) of the Company are provided below.

Members of the Board of Directors

Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Chairman and Director
Seiji Kuraishi	Joined Honda Motor Co., Ltd. in April 1982		*3		59,300
(July 10, 1958)	Director, appointed in June 2010
	Operating Officer and Director, appointed in April 2011
	Operating Officer (resigned from position as Director), appointed in June 2011
	President of Honda Motor (China) Technology Co., Ltd., appointed in November 2013
	Managing Officer of the Company, appointed in April 2014
	Senior Managing Officer, appointed in April 2016
	Executive Vice President, Executive Officer and Representative Director, appointed in June 2016
	Risk Management Officer, appointed in June 2016
	Corporate Brand Officer, appointed in June 2016
	Chief Operating Officer, appointed in April 2017

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term	Number of Shares Owned
	In Charge of Strategy, Business Operations and Regional Operations, appointed in April 2017
	Executive Vice President and Representative Director, appointed in June 2017
	Director in Charge of Strategy, Business Operations and Regional Operations, appointed in April 2019
	Chief Officer for Automobile Operations, appointed in April 2019
	Director, Executive Vice President and Representative Executive Officer, appointed in June 2021
	Compensation Committee Member, appointed in June 2021
	Chairman and Director, appointed in April 2022 (presently held)
	Chairman of the Board of Directors, appointed in April 2022 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Director and Representative Executive Officers
Toshihiro Mibe (July 1, 1961)	Joined Honda Motor Co., Ltd. in April 1987		*3		25,500
	Operating Officer, appointed in April 2014
	Executive in Charge of Powertrain Business for Automobile Operations, appointed in April 2014
	Head of Powertrain Production Supervisory Unit of Automobile Production for Automobile Operations, appointed in April 2014
	Executive in Charge of Powertrain Business and Drivetrain Business for Automobile Operations, appointed in April 2015
	Head of Drivetrain Business Unit in Automobile Production for Automobile Operations, appointed in April 2015
	Senior Managing Officer and Director of Honda R&D Co., Ltd., appointed in April 2016
	Managing Officer of the Company, appointed in April 2018
	Executive Vice President and Director of Honda R&D Co., Ltd., appointed in April 2018
	President and Representative Director of Honda R&D Co., Ltd., appointed in April 2019
	In Charge of Intellectual Property and Standardization of the Company, appointed in April 2019
	Senior Managing Officer, appointed in April 2020
	In Charge of Mono-zukuri (Research & Development, Production, Purchasing, Quality, Parts, Service, Intellectual Property, Standardization and IT), appointed in April 2020
	Risk Management Officer, appointed in April 2020
	Senior Managing Director, appointed in June 2020

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term	Number of Shares Owned
	Director in Charge of Mono-zukuri (Research & Development, Production, Purchasing, Quality, Parts, Service, Intellectual Property, Standardization and IT), appointed in June 2020
	President and Representative Director, appointed in April 2021
	Chief Executive Officer, appointed in April 2021 (presently held)
	Director, President and Representative Executive Officer, appointed in June 2021 (presently held)
	Nominating Committee Member, appointed in June 2021 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Shinji Aoyama	Joined Honda Motor Co., Ltd. in April 1986		*3		35,900
(December 25, 1963)	Operating Officer, appointed in April 2012
	Chief Officer for Motorcycle Operations, appointed in April 2013
	Operating Officer and Director, appointed in June 2013
	Chief Officer for Regional Operations (Asia & Oceania), appointed in April 2017
	President and Director of Asian Honda Motor Co., Ltd., appointed in April 2017
	Operating Officer of the Company (resigned from position as Director), appointed in June 2017
	Managing Officer, appointed in April 2018
	Vice Chief Officer for Regional Operations (North America), appointed in April 2018
	Senior Executive Vice President, Chief Operating Officer and Director of Honda North America, Inc., appointed in April 2018
	Senior Executive Vice President, Chief Operating Officer and Director of American Honda Motor Co., Inc., appointed in April 2018
	President, Chief Operating Officer and Director of Honda North America, Inc., appointed in November 2018
	President, Chief Operating Officer and Director of American Honda Motor Co., Inc., appointed in November 2018
	Chief Officer for Regional Operations (North America) of the Company, appointed in April 2019
	President, Chief Executive Officer and Director of Honda North America, Inc., appointed in April 2019,
	President, Chief Executive Officer and Director of American Honda Motor Co., Inc., appointed in April 2019,
	Managing Officer in Charge of Electrification of the Company, appointed in July 2021

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term	Number of Shares Owned
	Managing Executive Officer, appointed in October 2021
	Senior Managing Executive Officer, appointed in April 2022
	Chief Officer for Business Development Operations, appointed in April 2022
	Corporate Brand Officer, appointed in April 2022
	Chief Officer for Automobile Operations, appointed in June 2022
	Director, Senior Managing Executive Officer, appointed in June 2022
	Director, Executive Vice President and Representative Executive Officer, appointed in April 2023 (presently held)
	Chief Operating Officer, appointed in April 2023 (presently held)
	Compensation Committee Member, appointed in April 2023 (presently held)
	Risk Management Officer, appointed in April 2023 (presently held)
	In Charge of Government and Industry Relations, appointed in April 2023 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Director, Senior Managing Executive Officer
Noriya Kaihara	Joined Honda Motor Co., Ltd. in April 1984		*3		28,000
(August 4, 1961)	General Manager and Automobile Quality Assurance Division, appointed in April 2012
	Operating Officer, appointed in April 2013
	Chief Quality Officer, appointed in April 2013
	Operating Officer and Director, appointed in June 2013
	Chief Officer for Customer Service Operations, appointed in April 2014
	Head of Service Supervisory Unit for Automobile Operations, appointed in April 2014
	Chief Officer for Customer First Operations, appointed in April 2016
	Operating Officer (resigned from position as Director), appointed in June 2017
	Managing Officer, appointed in April 2018
	Chief Officer for Purchasing Operations, appointed in April 2018
	Head of Business Supervisory Unit for Automobile Operations, appointed in April 2020
	Chief Officer for Customer First Operations, appointed in April 2021
	Risk Management Officer, appointed in April 2021
	Managing Executive Officer, appointed in June 2021
	Managing Officer, appointed in October 2021
	Chief Officer for Regional Operations (North America), appointed in October 2021 (presently held)
	President, Chief Executive Officer and Director of American Honda Motor Co., Inc., appointed in October 2021 (presently held)
	Senior Managing Executive Officer of the Company, appointed in April 2023
	Director, Senior Managing Executive Officer, appointed in June 2023 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Directors
Asako Suzuki	Joined Honda Motor Co., Ltd. in April 1987		*3		23,800
(January 28, 1964)	President of Dongfeng Honda Automobile Co., Ltd., appointed in April 2014
	Operating Officer of the Company, appointed in April 2016
	Vice Chief Officer for Regional Operations (Japan), appointed in April 2018
	Chief Officer for Human Resources and Corporate Governance Operations, appointed in April 2019
	Operating Executive, appointed in April 2020
	Director, appointed in June 2021 (presently held)
	Full-time Audit Committee Member, appointed in June 2021 (presently held)
Masafumi Suzuki	Joined Honda Motor Co., Ltd. in April 1987		*3		61,820
(April 23, 1964)	General Manager of Regional Operation Planning Office for Regional Operations (Europe, CIS, the Middle & Near East and Africa), appointed in April 2012
	General Manager of Accounting Division for Business Management Operations, appointed in April 2013
	Director (Full-time Audit and Supervisory Committee Member), appointed in June 2017
	Director, appointed in June 2021 (presently held)
	Full-time Audit Committee Member, appointed in June 2021 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Kunihiko Sakai (March 4, 1954)	Public Prosecutor of Tokyo District Public Prosecutors’ Office, appointed in April 1979		*3		1,700
	Superintending Prosecutor of Takamatsu High Public Prosecutors’ Office, appointed in July 2014
	Superintending Prosecutor of Hiroshima High Public Prosecutors’ Office, appointed in September 2016 (resigned in March 2017)
	Registered with the Dai-Ichi Tokyo Bar Association in April 2017
	Advisor Attorney to TMI Associates, appointed in April 2017 (presently held)
	Audit and Supervisory Board Member (Outside) of Furukawa Electric Co., Ltd., appointed in June 2018 (presently held)
	Director (Audit and Supervisory Committee Member) of the Company, appointed in June 2019
	Director, appointed in June 2021 (presently held)
	Nominating Committee Member, appointed in June 2021 (presently held)
	Audit Committee Member, appointed in June 2021 (presently held)
Fumiya Kokubu (October 6, 1952)	Joined Marubeni Corporation in April 1975		*3		1,200
	President and CEO, Member of the Board of Marubeni Corporation, appointed in April 2013
	Chairman of the Board of Marubeni Corporation, appointed in April 2019 (presently held)
	Outside Director of Taisei Corporation, appointed in June 2019 (presently held)
	Director of the Company, appointed in June 2020 (presently held)
	Nominating Committee Member (Chairperson), appointed in June 2021 (presently held)
	Compensation Committee Member, appointed in June 2021 (presently held)
	Chairman of Japan Machinery Center for Trade and Investment, appointed in May 2022 (presently held)
	Chairman of Japan Foreign Trade Council, Inc., appointed in May 2022 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Yoichiro Ogawa (February 19, 1956)	Joined Tohmatsu & Aoki Audit Corporation (currently Deloitte Touche Tohmatsu LLC) in October 1980		*3		700
	Registered as Japanese Certified Public Accountant in March 1984
	Deputy CEO of Deloitte Touche Tohmatsu LLC, appointed in October 2013
	Deputy CEO of Tohmatsu Group (currently Deloitte Tohmatsu Group), appointed in October 2013
	Global Managing Director for Asia Pacific of Deloitte Touche Tohmatsu Limited (United Kingdom), appointed in June 2015 (resigned in May 2018)
	CEO of Deloitte Tohmatsu Group, appointed in July 2015
	Senior Advisor of Deloitte Tohmatsu Group, appointed in June 2018 (resigned in October 2018)
	Founder of Yoichiro Ogawa CPA Office in November 2018 (presently held)
	Outside Audit & Supervisory Board Member of Recruit Holdings Co., Ltd., appointed in June 2020 (presently held)
	Director of the Company, appointed in June 2021 (presently held)
	Audit Committee Member (Chairperson), appointed in June 2021 (presently held)
	Compensation Committee Member, appointed in June 2021 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Kazuhiro Higashi (April 25, 1957)	Joined Resona Group in April 1982		*3		700
	Director, President and Representative Executive Officer of Resona Holdings, Inc., appointed in April 2013
	Representative Director, President and Executive Officer of Resona Bank, Limited, appointed in April 2013
	Chairman of Osaka Bankers Association, appointed in June 2013 (resigned in June 2014)
	Chairman of the Board, President, and Representative Director of Resona Bank, Limited, appointed in April 2017
	Chairman of Osaka Bankers Association, appointed in June 2017 (resigned in June 2018)
	Chairman of the Board, President, Representative Director and Executive Officer of Resona Bank, Limited, appointed in April 2018
	Chairman and Director of Resona Holdings, Inc., appointed in April 2020 (resigned in June 2022)
	Chairman and Director of Resona Bank, Limited, appointed in April 2020 (resigned in June 2022)
	Outside Director of Sompo Holdings, Inc., appointed in June 2020 (presently held)
	Director of the Company, appointed in June 2021 (presently held)
	Nominating Committee Member, appointed in June 2021 (presently held)
	Compensation Committee Member (Chairperson), appointed in June 2021 (presently held)
	Senior Advisor of Resona Holdings, Inc., appointed in June 2022 (presently held)
	Senior Advisor of Resona Bank, Limited., appointed in June 2022 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Ryoko Nagata (July 14, 1963)	Joined Japan Tobacco Inc. in April 1987		*3		700
	Executive Officer of Japan Tobacco Inc., appointed in June 2008
	Standing Audit & Supervisory Board Member of Japan Tobacco Inc., appointed in March 2018 (resigned in March 2023)
	Director of the Company, appointed in June 2021 (presently held)
	Audit Committee Member, appointed in June 2021 (presently held)
	External Corporate Auditor of Medley, Inc., appointed in March 2023 (presently held)

*1 Effective on June 23, 2021, Honda adopted the Three Committees system under the Company Law.

*2 Directors Mr. Kunihiko Sakai, Mr. Fumiya Kokubu, Mr. Yoichiro Ogawa, Mr. Kazuhiro Higashi, and Ms. Ryoko Nagata are Outside Directors.

*3 The term of office of a Director is until at the close of the ordinary general meeting of shareholders of the fiscal year ending March 31, 2024 after his/her election to office at the close of the ordinary general meeting of shareholders on June 21, 2023.

Composition of the Three Committees under the Board of Directors

·: Chairperson ○: Member

Director’s Name	Nominating Committee	Audit Committee	Compensation Committee
Toshihiro Mibe	○
Shinji Aoyama			○
Asako Suzuki		○
Masafumi Suzuki		○
Kunihiko Sakai	○	○
Fumiya Kokubu	·		○
Yoichiro Ogawa		·	○
Kazuhiro Higashi	○		·
Ryoko Nagata		○

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Executive Officers (who are not concurrently the members of the Board of Directors)

Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Senior Managing Executive Officers
Katsushi Inoue (October 22, 1963)	Joined Honda Motor Co., Ltd. in April 1986		*4		19,200
	President and Chief Executive Officer of Honda Cars India Ltd., appointed in April 2015
	Operating Officer of the Company, appointed in April 2016
	Chief Officer for Regional Operations (Europe), appointed in April 2016
	President and Director of Honda Motor Europe Ltd., appointed in April 2016
	Managing Officer of the Company, appointed in April 2020
	Chief Officer for Regional Operations (China), appointed in April 2020
	President of Honda Motor (China) Investment Co., Ltd., appointed in April 2020
	President of Honda Motor (China) Technology Co., Ltd., appointed in April 2020
	Senior Managing Executive Officer of the Company, appointed in April 2023 (presently held)
	Chief Officer for Electrification Business Development Operations, appointed in April 2023 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Managing Executive Officers
Mitsugu Matsukawa (May 9, 1962)	Joined Honda Motor Co., Ltd. in April 1985		*4		38,300
	General Manager of Hamamatsu Factory for Production Operations, appointed in April 2010
	Operating Officer, appointed in April 2012
	Vice President of Honda Motor (China) Investment Co., Ltd., appointed in April 2012
	Head of Drivetrain Supervisory Unit in Automobile Production Oversight Unit for Automobile Operations of the Company, appointed in April 2013
	Head of Drivetrain Business Unit in Automobile Production for Automobile Operations, appointed in April 2014
	Chief Officer for IT Operations, appointed in April 2015
	Head of Supply Chain Management Supervisory Unit in Automobile Production for Automobile Operations, appointed in April 2015
	Head of Production Planning Supervisory Unit for Production Operations, appointed in April 2016
	Executive in Charge of Strategy, New Model and Supply Chain Management for Production Operations, appointed in April 2017
	Executive Vice President and Director of Honda of America Mfg., Inc., appointed in June 2018
	Managing Officer of the Company, appointed in April 2019
	President and Director of Honda of America Mfg., Inc., appointed in April 2019
	President and Director for Honda Development & Manufacturing of America, LLC, appointed in April 2021 (presently held)
	Managing Executive Officer of the Company, appointed in April 2023 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Noriaki Abe	Joined Honda Motor Co., Ltd. in April 1986		*4		21,500
(October 8, 1962)	Operating Officer, appointed in April 2014
	Chief Officer for Regional Operations (Asia & Oceania), appointed in April 2014
	President and Director of Asian Honda Motor Co., Ltd., appointed in April 2014
	President and Director of Honda Automobile (Thailand) Co., Ltd., appointed in April 2014
	Chief Officer for Motorcycle Operations of the Company, appointed in April 2017
	Managing Officer, appointed in April 2019
	Chief Officer for Regional Operations (Japan), appointed in April 2021
	Chief Officer for Traffic Safety Promotion Operations, appointed in April 2021 (presently held)
	Managing Executive Officer, appointed in June 2021 (presently held)
	Risk Management Officer, appointed in October 2021
	Compliance Officer, appointed in April 2022 (presently held)
	Chief Officer for Motorcycle and Power Products Operations, appointed in April 2023 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Keiji Ohtsu	Joined Honda R&D Co., Ltd. in April 1983		*4		17,600
(July 7, 1964)	Operating Officer of Honda R&D Co., Ltd., appointed in April 2013
	Managing Officer of Honda R&D Co., Ltd., appointed in April 2014
	Operating Officer of the Company, appointed in April 2018
	Chief Quality Officer, appointed in April 2018
	Operating Executive, appointed in April 2020
	Chief Officer for Quality Innovation Operations, appointed in April 2020
	In Charge of Certification & Regulation Compliance Division, appointed in April 2020
	In Charge of Quality & Compliance Audit Division, appointed in April 2020
	Managing Officer, appointed in April 2021
	President and Representative Director of Honda R&D Co., Ltd., appointed in April 2021 (presently held)
	Managing Executive Officer of the Company, appointed in June 2021 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Masayuki Igarashi	Joined Honda Motor Co., Ltd. in April 1988		*4		27,100
(July 6, 1963)	Director of Asian Honda Motor Co., Ltd., appointed in April 2014
	Operating Officer of the Company, appointed in April 2015
	Chief Operating Officer for Power Product Operations, appointed in April 2015
	Operating Officer and Director, appointed in June 2015
	Executive Vice President and Director of Honda North America, Inc., appointed in April 2017
	Executive Vice President and Director of American Honda Motor Co., Inc., appointed in April 2017
	Operating Officer of the Company, appointed in June 2017
	Chief Officer for Regional Operations (Asia & Oceania), appointed in April 2018
	President and Chief Executive Officer of Asian Honda Motor Co., Ltd., appointed in April 2018
	Operating Executive of the Company, appointed in April 2020
	Managing Officer, appointed in April 2022
	Managing Executive Officer, appointed in April 2023 (presently held)
	Chief Officer for Regional Operations (China), appointed in April 2023 (presently held)
	President of Honda Motor (China) Investment Co., Ltd., appointed in April 2023 (presently held)
	President of Honda Motor (China) Technology Co., Ltd., appointed in April 2023 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Kensuke Oe	Joined Honda Motor Co., Ltd. in April 1990		*4		3,000
(May 11, 1967)	In charge of Manufacturing of Honda Canada Inc., appointed in April 2018
	Operating Executive of the Company, appointed in April 2020
	General Manager of Saitama Factory in Production Supervisory Unit for Automobile Operations, appointed in April 2020
	Head of Production Engineering Supervisory Unit in Mono-zukuri Center for Automobile Operations, appointed in April 2021
	Managing Officer, appointed in April 2022
	Head of Production Unit for Automobile Operations, appointed in April 2022 (presently held)
	Managing Executive Officer, appointed in April 2023 (presently held)
Taro Kobayashi	Joined Honda Motor Co., Ltd. in April 1990		*4		5,800
(October 17, 1966)	Head of Regional Unit (Africa and the Middle & East), appointed in April 2018
	Operating Officer, appointed in April 2019
	Executive in Charge of Automobile Sales for Automobile Operations, appointed in April 2019
	Operating Executive, appointed in April 2020
	Head of Sales Supervisory Unit for Automobile Operations, appointed in April 2020
	Head of Business Supervisory Unit for Automobile Operations, appointed in April 2021
	Vice Chief Officer for Automobile Operations, appointed in June 2022
	Managing Executive Officer, appointed in April 2023 (presently held)
	Chief Officer for Automobile Operations, appointed in April 2023 (presently held)
	Chief Officer for Regional Operations (Associated Regions), appointed in April 2023 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Manabu Ozawa	Joined Honda Motor Co., Ltd. in April 1989		*4		3,000
(May 12, 1965)	Managing Director of Honda R&D Co., Ltd., appointed in April 2019
	Operating Executive of the Company, appointed in April 2020
	Head of Corporate Planning Supervisory Unit, appointed in April 2020
	Director for Honda Innovation Inc., appointed in April 2020
	Managing Executive Officer of the Company, appointed in April 2023 (presently held)
	Chief Officer for Corporate Strategy Operations, appointed in April 2023 (presently held)
Hironao Ito	Joined Honda Motor Co., Ltd. in April 1989		*4		3,000
(December 27, 1966)	Managing Director of Honda R&D Co., Ltd., appointed in April 2019
	Operating Executive of the Company, appointed in April 2020
	Head of Digital Transformation Supervisory Unit, appointed in April 2020
	Head of IT Operations, appointed in April 2021
	Head of Digital Supervisory Unit, appointed in April 2022
	Deputy General Manager of Mono-zukuri Center for Automobile Operations, appointed in April 2022
	Vice Chief Officer for Automobile Operations, appointed in June 2022
	Managing Executive Officer, appointed in April 2023 (presently held)
	Head of BEV Development Center for Electrification Business Development Operations, appointed in April 2023 (presently held)
	Head of Automobile Development Center for Automobile Operations, appointed in April 2023 (presently held)
	Director of Honda R&D Co., Ltd., appointed in April 2023 (presently held)

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Name (Date of birth)	Current Positions and Biographies with Registrant	Term		Number of Shares Owned
Executive Officer
Eiji Fujimura (September 1, 1970)	Joined Honda Motor Co., Ltd. in April 1993		*4		3,000
	General Manager of Regional Operation Planning Division for Regional Operations (North America), appointed in April 2019
	Operating Executive, appointed in April 2021
	Chief Officer for Business Management Operations, appointed in April 2021
	Head of Accounting and Finance Supervisory Unit, appointed in April 2022
	Executive Officer, appointed in April 2023 (presently held)
	Chief Financial Officer, appointed in April 2023 (presently held)
	Chief Officer for Corporate Management Operations, appointed in April 2023 (presently held)

*4 The term of office of an Executive Officer is until at the close of the first Board of Directors meeting held after the ordinary general meeting of shareholders of the fiscal year ending March 31, 2024 after his/her appointment to office.

*5 The Company abolished the Operating Officer System as of April 1, 2023 and integrated the position of Operating Officer with the position of Executive Officer, which is an officer under the Company Law, to further clarify the execution responsibility. “Operating Officer” under the operating officer system was not a statutory position under the Company Law and did not conform to the definition of “Directors and Senior Management” as defined in Form 20-F.

*6 The Company introduced the Operating Executive position effective April 1, 2020, with the aim of advancing its corporate executive structure and enabling the Company to address changes in the business environment with greater speed and flexibility. Operating Executives will engage in company operations, with responsibility for business execution in their respective areas under the direction and supervision of management. Operating Executives are not statutory positions under the Company Law and do not conform to the definition of “Directors and Senior Management” as defined in Form 20-F.

There is no family relationship between any Director or Executive Officer and any other Director or Executive Officer.

None of Honda’s members of the Board of Directors or Executive Officers is party to a service contract with Honda or any of its subsidiaries that provides for benefits upon termination of employment.

B. Compensation

Methods of determining the policy for determining individual remuneration of Directors and Executive Officers

The Company views remuneration for Directors and Executive Officers, the key to its corporate governance, as an important driving force in realizing our fundamental beliefs, management policies, and aspirations. The

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Compensation Committee has established the following decision-making policy in order to encourage appropriate risk-taking and accurately reflect management responsibility in an effort to promote speedy reforms to achieve our vision amidst a drastically changing environment.

1. The Company’s remuneration structure for Directors and Executive Officers is designed to motivate officers to contribute to the improvement of the Company’s business performance not only over the short-term, but also over the mid- to long-term, so that the Company can continuously enhance its corporate value, and it consists of monthly remuneration, a fixed amount paid each month as remuneration for the execution of duties, STI (Short Term Incentive) based on business performance for the relevant fiscal year, and LTI (Long Term Incentive) based on the mid- to long-term business performance.

2. Monthly remuneration shall be paid as a fixed amount each month based on remuneration standards resolved by the Compensation Committee.

3. STI shall be determined and paid by resolution of the Compensation Committee, taking into consideration the business performance of each fiscal year.

4. Based on standards and procedures approved by the Compensation Committee, LTI is based on the mid- to long-term performance and paid in the form of the Company’s shares and cash, in order to function as a sound incentive for sustainable growth.

5. Remuneration paid to Directors who concurrently serve as Executive Officers and Executive Officers shall consist of monthly remuneration, STI and LTI, and the composition rate shall be determined based on the remuneration standards resolved by the Compensation Committee. The composition ratio of variable compensation is increased according to the weight of management responsibility attributed to each position.

6. Remuneration paid to Outside Directors and other Directors who do not concurrently serve as Executive Officers shall consist only of monthly remuneration.

7. In order to advance the Company’s sustainable growth and enhance its corporate value over the mid-to long-term by achieving the management from the perspective of shareholders through having a shareholding in the Company, even Directors and Executive Officers who are not eligible for LTI shall acquire the Company’s stock by contributing a certain portion of their remuneration to the Officers Shareholding Association.

8. Directors and Executive Officers shall continuously hold, throughout their term of office and for one year after their retirement, any stock of the Company acquired as LTI or acquired through the Officers Shareholding Association.

Approach to remuneration level

The remuneration levels for Directors and Executive Officers are set at a level that is highly competitive in order to secure diverse and talented human resources based on objective remuneration data from an outside research organization and information provided by outside consultants, as well as research and analysis of a peer group of approximately 20 to 30 global Japanese companies of similar size. The Company also reviews remuneration from time to time in response to changes in the business environment.

Remuneration structure

Remuneration paid to Executive Officers consists of monthly remuneration, STI and LTI, and the ratio of STI and LTI is set according to the weight of management responsibility attributed to each position, with a view to providing an incentive to continuously improve corporate value.

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1. Outline of remuneration system for Executive Officers

Type of remuneration	Based on performance	Fluctuation	Payment  method	Payment     timing	Remuneration composition ratio (When STI/LTI are paid at the base amount)
					President and Executive Officer	Executive Vice President and Executive Officer	Senior Managing Executive Officer	Managing Executive Officer	Executive Officer
Monthly remuneration	Fixed	—	Cash	Monthly	25%	40%		50%
STI	Short-term performance-based  remuneration	0 to 180%	Cash	Annually	25%	30%		25%
LTI	Medium- to long-term performance-based remuneration	50 to 150%	Stock	Three years after the annual  stock points are granted with restriction on transfer until retirement	50%	30%		25%

2. Monthly remuneration

Monthly remuneration is paid each month as a fixed monthly amount in cash based on positions as consideration for the execution of duties.

3. STI

STI is a performance-based remuneration that is paid once a year in cash, taking into account the Company’s performance each fiscal year and the individual performance of each Executive Officer.

The final payment amount is determined by multiplying the standard STI amount by the individual performance coefficient after determining the payment level using the Company’s performance coefficient.

The Company’s performance coefficient fluctuates between 0 and 150% depending on the achievement of key performance indicators (KPIs), which are operating profit margin and profit attributable to owners of the parent of consolidated accounting, both of which are important indicators that measure the contribution to corporate value during each fiscal year.

The individual performance coefficient fluctuates between 80 and 120% depending on the achievement of individual targets set for each Executive Officer’s role. The President’s performance is evaluated by the Compensation Committee, while those of the Executive Officers, excluding the President, are evaluated by the Compensation Committee following an evaluation by the President.

Company’s performance coefficient (Fluctuation range: 0-150%)

KPIs (Consolidated accounting)	Evaluation method	Weight of each KPI
Operating profit margin	Degree of achievement of targets	50%
Profit attributable to owners of the parent		50%

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Individual performance coefficient (Fluctuation range: 80-120%)

KPIs	Evaluation method	Weight of each KPI
Individual targets set according to role	Degree of achievement of individual targets	100%

STI payment   = Standard STI   x Company’s performance coefficient   x Individual performance
coefficient  

4. LTI

LTI is a non-monetary performance-based remuneration that provides shares based on financial and non-financial performance through a trust structure, aiming to further enhance mindfulness toward contributing to the sustained improvement of corporate value of the Company over the mid- to long-term, as well as to share profits with shareholders.

Points are granted according to the base amount for each position in April each year, and shares equivalent to the points based on performance are granted three years after the points are awarded. Furthermore, a restriction period on transfer is placed on the granted shares. In principle, such restriction on transfer is lifted at the time of retirement from both of the Company’s Director and Executive Officer. Any share of the Company acquired as LTI shall be continuously held, throughout their term of office and for one year after their retirements.

Performance evaluations are based on key indicators that measure the degree of contribution to increasing corporate value over the mid- to long-term. KPIs for financial indicators are consolidated operating profit margin and consolidated profit before income taxes, which vary from 50 to 150% depending on the level of growth over the past three fiscal years. KPIs for non-financial indicators are brand value, SRI indicators, and Associate Engagement, which vary from 50 to 150% depending on the degree of achievement of the target values for the year under evaluation.

Points shall be forfeited and shares during the restriction period on transfer are acquired by the Company for no consideration in the event of certain misconduct or violations of laws, regulations, or company rules.

KPIs		Evaluation method	Weight	Fluctuation
Financial indicators	Consolidated operating profit margin	Evaluated based on growth over the past three fiscal years	35%	50 to 150%
	Consolidated profit before income taxes		35%
Non-financial indicators	Brand value	Evaluated based on degree of achievement of targets	30%
	SRI index
	Associate Engagement

*  Non-financial indicators are evaluated based on the following indicators:

- Brand value: Survey of motorcycle/automobile/power products businesses by a third-party research firm

- SRI index: Dow Jones Sustainability World Index

- Associate Engagement: Survey of employee activeness in each region by a third-party research firm

In addition, Executive Officers who are nonresidents of Japan are not eligible for LTI, but shall be eligible for the same addition to or subtraction from the remuneration based on the performance evaluation used in LTI.

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As a result of the evaluation in the fiscal year ended March 31, 2023, STI were decreased by 6% compared to the base amount, and LTI was paid with a performance-based coefficient of 109%.

Matters related to non-monetary remuneration

In order to function as a sound incentive for sustainable growth, in accordance with the criteria and procedures approved by the Compensation Committee, the Company delivers and provides the Company’s shares and dividends accruing on the Company’s shares, in conjunction with the mid- to long-term business performance.

Overview of the Compensation Committee and its activities

The Compensation Committee determines the details of remuneration, for each individual Director and Executive Officer and undertakes other duties as required by laws and regulations and the Articles of Incorporation. The Compensation Committee consists of four Directors, including three Outside Directors, and the Chairperson is selected from among the independent Outside Directors.

The Compensation Committee met eleven times in the fiscal year ended March 31, 2023, with all members present at each meeting.

The main matters discussed during the fiscal year ended March 31, 2023 are as follows.

- Basic policies and annual activity plans

- Compensation evaluation for Directors and Executive Officers

- LTI and share delivery rules

Reasons for the Compensation Committee to determine that the details of individual remuneration for Directors and Executive Officers are in line with the determination policy

The Company examines and deliberates the consistency of remuneration levels, the composition of remuneration, and the setting of targets for performance-based remuneration, etc., with the Company’s basic policy on the determination of remuneration for officers from various perspectives, based on comparisons with the external environment and information provided by external consultants.

Therefore, the Compensation Committee believes that the individual remuneration for Directors and Executive Officers for the fiscal year ended March 31, 2023 is in line with the determination policy.

The total amount of fixed monthly remuneration paid to the Company’s Directors and Executive Officers during the fiscal year ended March 31, 2023 was ¥679 million. This amount includes fixed monthly remuneration paid to one Director and one Executive Officer who retired during the fiscal year. The amount of fixed monthly remuneration paid to Executive Officers includes amount of fixed monthly remuneration paid to the Executive Officer who was also a Director of a subsidiary of the Company.

The total amount of STI and LTI for the Company’s Directors and Executive Officers accrued for the fiscal year ended March 31, 2023 were ¥229 million and ¥286 million, respectively.

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The amounts of fixed monthly remuneration paid, STI and LTI accrued during the fiscal year ended March 31, 2023 are as follows:

	Fixed remuneration				Performance-based remuneration								Total
	Remuneration				STI				LTI
	Number of persons		Yen (millions)		Number of persons		Yen (millions)		Number of persons		Yen (millions)		Yen (millions)
Directors excluding Outside Directors		4	¥	288		—	¥	—		1	¥	3	¥	291
Outside Directors		5		90		—		—		—		—		90
Executive Officers		6		301		6		229		6		283		813
Total		15	¥	679		6	¥	229		7	¥	286	¥	1,194

*  Directors excluding Outside Directors do not include three directors who concurrently serve as Executive Officers.

The amount of fixed monthly remuneration paid to Seiji Kuraishi during the fiscal year ended March 31, 2023 was ¥135 million. The amount of LTI for Seiji Kuraishi accrued for the fiscal year ended March 31, 2023 was ¥3 million.

The amount of fixed monthly remuneration paid to Toshihiro Mibe during the fiscal year ended March 31, 2023 was ¥94 million. The amount of STI and LTI for Toshihiro Mibe accrued for the fiscal year ended March 31, 2023 were ¥97 million and ¥157 million, respectively.

The amount of fixed monthly remuneration paid to Kohei Takeuchi during the fiscal year ended March 31, 2023 was ¥69 million. The amount of STI and LTI for Kohei Takeuchi accrued for the fiscal year ended March 31, 2023 were ¥49 million and ¥46 million, respectively.

The amount of fixed monthly remuneration paid to Shinji Aoyama during the fiscal year ended March 31, 2023 was ¥45 million. The amount of STI and LTI for Shinji Aoyama accrued for the fiscal year ended March 31, 2023 were ¥38 million and ¥32 million, respectively.

The Board Incentive Plan

At the Board of Directors meeting held on May 15, 2018 and the Ordinary General Meeting of Shareholders held on June 14, 2018, the Company resolved to introduce a stock compensation scheme (the “Scheme”) for the purpose of further enhancing Executive Officers’ mindfulness toward contributing to the sustained improvement of corporate value of the Company over the mid- to long-term as well as seeking for the sharing of common interests with its shareholders. The continuation of the content of the Scheme was resolved at the Company’s Compensation Committee meeting held on August 2, 2021.

Executive Officers and a part of Operating Executives of the Company who are residents of Japan (collectively, “Executive Officers Etc.”) are eligible for the Scheme.

Outline of the Scheme

The Scheme is a stock compensation scheme that uses a BIP (Board Incentive Plan) trust (a “BIP Trust”). A BIP Trust is a scheme where, in the same way as performance share and restricted stock schemes in the U.S., shares in the Company and money are delivered and paid to Executive Officers Etc. in accordance with their positions and the degree of achievement or growth in management indicators of the Company such as performance and corporate value.

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Content of trust agreement

Type of trust An individually-operated specified trust of money other than cash trust (third party beneficiary trust)

Purpose of trust To further enhance mindfulness of Executive Officers Etc. toward contributing to the sustained improvement of corporate value of the Company over the mid- to long-term

Trustor The Company

Trustee Mitsubishi UFJ Trust and Banking Corporation

(Joint trustee: The Master Trust Bank of Japan, Ltd.)

Beneficiaries Executive Officers Etc. who satisfy the beneficiary requirements

Trust administrator A third party which has no interests in the Company (a certified public accountant)

Date of trust agreement August 20, 2018

Period of trust From August 20, 2018 to August 31, 2024

Exercise of voting rights of Company shares None

Class of shares acquired Common shares of the Company

Amount of trust money added at the time of the trust period extension 1,975 million yen (including trust fees and trust expenses)

Timing of acquisition of shares August 20, 2021

Method of acquisition of shares Acquisition from stock market

Holder of vested rights The Company

Residual assets The residual assets that the Company can obtain as a holder of vested rights shall be included in the trust expenses reserve

Total number of shares scheduled to be acquired by Executive Officers Etc.

787,000 shares (Total number of shares scheduled to be acquired for three fiscal years from 2021)

Scope of persons eligible to receive beneficiary rights and other rights under the Scheme

Executive Officers Etc. who satisfy the beneficiary requirements

C. Board Practices

See Item 6.A “Directors and Senior Management” for information concerning the Company’s Directors required by this item.

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D. Employees

The following tables list the number of Honda full-time employees as of March 31, 2021, 2022 and 2023.

As of March 31, 2021

Total	Motorcycle Business	Automobile Business	Financial Services Business	Power Products and Other Businesses
211,374	46,255	153,413	2,385	9,321

As of March 31, 2021, Honda had 211,374 full-time employees, including 143,878 local nationals employed in its overseas operations.

As of March 31, 2022

Total	Motorcycle Business	Automobile Business	Financial Services Business	Power Products and Other Businesses
204,035	46,448	146,092	2,321	9,174

As of March 31, 2022, Honda had 204,035 full-time employees, including 138,796 local nationals employed in its overseas operations.

As of March 31, 2023

Total	Motorcycle Business	Automobile Business	Financial Services Business	Power Products and Other Businesses
197,039	45,813	139,999	2,340	8,887

As of March 31, 2023, Honda had 197,039 full-time employees, including 134,193 local nationals employed in its overseas operations.

Most of the Company’s regular employees in Japan, except management personnel, are required by the terms of the Company’s collective bargaining agreement with its labor union to become members of the Federation of All Honda Workers’ Union (AHWU), which is affiliated with the Japan Council of the International Metalworkers’ Federation. Approximately 86% of the employees of the Company and its Japanese subsidiaries were members of AHWU as of March 31, 2023.

The Company has had labor contracts with its labor union in Japan since 1970. These contracts are renegotiated with respect to basic wages and other working conditions. The regular employees of the Company’s Japanese subsidiaries are covered by similar contracts. Since 1957, neither the Company nor any of its subsidiaries has experienced any strikes or other labor disputes that materially affected its business activities. The Company considers labor relations with its employees to be very good.

Honda’s average number of temporary employees on a consolidated basis during the fiscal year ended March 31, 2023 was as follows.

Total	Motorcycle Business	Automobile Business	Financial Services Business	Power Products and Other Businesses
25,249	11,433	11,212	63	2,541

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E. Share Ownership

The total amount of the Company’s voting securities owned by its Directors and Executive Officers as a group as of June 23, 2023 is as follows. The individual ownership of each of the Directors and Executive Officers is listed next to their names under Item 6.A. Directors and Senior Management.

Title of Class	Amount Owned	% of Class
Common Stock	380,820 shares	0.023%

The Company’s full-time employees are eligible to participate in the Honda Employee Shareholders’ Association, whereby participating employees contribute a portion of their salaries to the Association and the Association purchases shares of the Company’s Common Stock on their behalf. As of March 31, 2023, the Association owned 6,951,852 shares of the Company’s common stock.

F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation

Not applicable.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

As of March 31, 2023, 1,811,428,430 shares of Honda’s Common Stock were issued and 1,664,340,589 shares were outstanding.

The following table shows the shareholders of record that owned 5% or more of the issued shares of Honda’s Common Stock as of March 31, 2023:

Name	Shares owned (thousands)		Ownership (%)
The Master Trust Bank of Japan, Ltd. (Trust Account)		260,025		15.6
Moxley & Co. LLC*		116,835		7.0
Custody Bank of Japan, Ltd. (Trust Account)		103,468		6.2

* Moxley & Co., LLC is the nominee of JPMorgan Chase Bank, N.A., which acts as the Depositary for the Honda’s ADSs.

According to a statement on Schedule 13G (Amendment No. 8) filed by BlackRock, Inc. with the SEC on January 31, 2023, BlackRock, Inc. directly and indirectly held, as of December 31, 2022, 128,508,615, or 7.1% of the then issued shares, of Honda’s Common Stock. According to a statement on Schedule 13G (Amendment No. 6) filed by Sumitomo Mitsui Trust Holdings, Inc. with the SEC on February 3, 2023, Sumitomo Mitsui Trust Holdings, Inc. directly and indirectly held, as of December 31, 2022, 99,352,900 shares, or 5.5% of the then issued shares, of Honda’s Common Stock.

None of the above shareholders has voting rights that are different from those of our other shareholders.

ADSs representing American Depositary Shares are issued by JPMorgan Chase Bank, N.A., as Depositary. The normal trading unit is 100 American Depositary Shares. Total issued shares of Honda as of the close of business on March 31, 2023 were 1,811,428,430 shares of Common Stock, of which 116,835,999 shares represented by ADSs and 365,066,090 shares not represented by ADSs were owned by residents of the United States. The number of holders of record of the Company’s shares of Common Stock in the United States was 218 at March 31, 2023.

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To the knowledge of Honda, it is not directly or indirectly owned or controlled by any other corporation, by any government, or by any other natural or legal person or persons severally or jointly. As far as is known to the Company, there are no arrangements, the operation of which may at a subsequent date, result in a change in control of the Company.

B. Related Party Transactions

Honda purchases materials, supplies and services from numerous suppliers throughout the world in the ordinary course of business, including firms with which Honda is affiliated.

During the fiscal year ended March 31, 2023, Honda had sales of ¥1,067.3 billion and purchases of ¥1,682.1 billion with affiliates and joint ventures accounted for using the equity method. As of March 31, 2023, Honda had receivables of ¥435.7 billion from affiliates and joint ventures, and had payables of ¥274.1 billion to affiliates and joint ventures.

Honda does not consider the amounts involved in such transactions to be material to its business.

C. Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

1 – 3. Consolidated Financial Statements

Honda’s audited consolidated financial statements are included under “Item 18—Financial Statements”.

4. Not applicable.

5. Not applicable.

6. Export Sales

See “Item 4—Information on the Company—Marketing and Distribution”.

7. Legal Proceedings

Various legal proceedings are pending against us. We believe that such proceedings constitute ordinary routine litigation incidental to our business.

Honda is subject to potential liability under various lawsuits and claims. Honda recognizes a provision for loss contingencies when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Honda reviews these pending lawsuits and claims periodically and adjusts the amounts recognized for these contingent liabilities, if necessary, by considering the nature of lawsuits and claims, the progress of the case and the opinions of legal counsel.

With respect to product liability, personal injury claims or lawsuits, Honda believes that any judgment that may be recovered by any plaintiff for general and special damages and court costs will be adequately covered by Honda’s insurance and provision. Punitive damages are claimed in certain of these lawsuits.

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After consultation with legal counsel, and taking into account all known factors pertaining to existing lawsuits and claims, Honda believes that the ultimate outcome of such lawsuits and pending claims should not result in liability to Honda that would be likely to have an adverse material effect on its consolidated financial position or results of operations.

8. Profit Redistribution Policy

The Company strives to carry out its operations worldwide from a global perspective and to increase its corporate value. With respect to the redistribution of profits to its shareholders, which we consider to be one of the most important management issues, the Company’s basic policy is to determine such distributions after taking into account, among others, its retained earnings for future growth and consolidated earnings performance based on a long-term perspective. With respect to dividends, the Company will strive to pay stable and continuous dividends aiming at a consolidated dividend payout ratio of approximately 30%.

The Company’s basic policy for dividends is to make semiannual distributions (an interim dividend and a year-end dividend). The Company may determine dividends from surplus by a resolution of the Board of Directors.

The Company may also acquire its own shares at a timing that it deems optimal, with the goal of improving efficiency of the Company’s capital structure and implementing a flexible capital strategy.

Retained earnings will be allocated toward financing R&D activities that are essential for the future growth of the Company as well as for capital expenditures and investment programs that will expand its operations for the purpose of improving business results and maintaining the Company’s sound financial condition.

The Company determined total dividends for the year ended March 31, 2023 were ¥120 per share. Semiannual dividends per share for the year ended March 31, 2023 were as follows: the interim ¥60, the year-end ¥60 per share.

Details of Distribution of Surplus (Record dates of the fiscal year ended March 31, 2023)

	Resolution of the Board of Directors		Resolution of the Board of Directors
	November 9, 2022		May 11, 2023
Dividend per Share of Common Stock (yen)		60.00		60.00
Total Amount of Dividends (millions of yen)		102,219		99,915

B. Significant Changes

Except otherwise disclosed in this Annual Report on Form 20-F, no significant change has occurred since the date of the annual financial statements.

Item 9. The Offer and Listing

A. Offer and Listing Details

Honda’s shares have traded on the Tokyo Stock Exchange (TSE) since its shares were first listed on the TSE in 1957. Our ordinary shares are traded on the TSE under the symbol “7267”.

Since February 11, 1977, American Depositary Shares (each representing one share of Common Stock and evidenced by American Depositary Receipts (ADRs)) have been listed and traded on the New York Stock Exchange (the NYSE) under the symbol “HMC”, having been traded on the over-the-counter markets in the United States since 1962.

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B. Plan of Distribution

Not applicable.

C. Markets

See Item 9.A, “Offer and Listing Details”.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Set forth below is certain information relating to Honda’s Common Stock, including brief summaries of the relevant provisions of Honda’s Articles of Incorporation and Share Handling Regulations as currently in effect, and of the Company Law of Japan (the “Company Law”) and related legislation. Additionally, the information called for by Items 10.B.3, 4, 5, 6, 7, 8, 9 and 10 of Form 20-F is included in Exhibit 2.3 to this Annual Report “Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934—Common Stock” and is incorporated by reference herein.

Objects and Purposes

Article 2 of the Articles of Incorporation of Honda states that its purpose is to engage in the following businesses:

• Manufacture, sale, lease and repair of motor vehicles, ships and vessels, aircraft and other transportation machinery and equipment.

• Manufacture, sale, lease and repair of prime movers, agricultural machinery and appliances, generators, processing machinery and other general machinery and apparatus, electric machinery and apparatus and precision machinery and apparatus.

• Manufacture and sale of fiber products, paper products, leather products, lumber products, rubber products, chemical industry products, ceramic products, metal products and other products.

• Overland transportation business, marine transportation business, air transportation business, warehousing business, travel business and other transport business and communication business.

• Sale of sporting goods, articles of clothing, stationery, daily sundries, pharmaceuticals, drink and foodstuffs and other goods.

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• Financial business, nonlife insurance agency business, life insurance agency business, construction business including building construction work and real estate business, including real estate brokerage.

• Publishing business, advertising business, translation business, interpretation business, management consultancy business, information services including information processing, information communication and information provision, industrial planning and design, comprehensive security business and labor dispatch services.

• Management of parking garages, driving schools, training and education facilities, racecourses, recreation grounds, sporting facilities, marina facilities, hotels, restaurants and other facilities.

• Electricity generation and supply and sale of electricity.

• Manufacture, sale and licensing of equipment, parts and supplies and all other relevant business activities and investments relating to each of the foregoing items.

Provisions Regarding Directors and Executive Officers

There is no provision in Honda’s Articles of Incorporation as to a Director’s power to vote on a proposal, arrangement or contract in which the Director is materially interested, but the Company Law and Honda’s regulations of the Board of Directors provide that such Director is required to refrain from voting on such matters at the Board of Director’s meetings.

The Company Law provides that compensation for directors and executive officers of a company which adopts a “company with three committees” corporate governance system, including Honda, is determined at the compensation committee within the board of directors, and the Articles of Incorporation of the Company also include the equivalent provisions. The compensation committee shall establish the compensation policy as well as determine the compensation for directors and executive officers.

The Company Law provides that a significant loan from a third party to a company should be approved by the board of directors.

There is no mandatory retirement age for directors under the Company Law or Honda’s Articles of Incorporation.

The Company Law provides that any articles of incorporation of a company having no restriction on a transfer of its shares, including Honda, may not provide any requirement concerning the number of shares one individual must hold in order to qualify him or her as a director.

Shareholders’ Register Manager

With effect from June 20, 2020, Mitsubishi UFJ Trust and Banking Corporation, located at 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100-8212, Japan, is the Shareholders’ Register Manager for Honda’s shares. Mitsubishi UFJ Trust and Banking Corporation maintains Honda’s register of shareholders and records the names and addresses of its shareholders and other relevant information in its register of shareholders upon notice thereof from JASDEC, as described in Exhibit 2.3 to this Annual Report “Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934—Common Stock—Rights of the Shares—Record Date”.

C. Material Contracts

All contracts concluded by Honda during the two years preceding this filing were entered into in the ordinary course of business.

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D. Exchange Controls

There are no laws, decrees, regulations or other legislation of Japan which materially affect our ability to import or export capital for our use or our ability to pay dividends or other payments to non-resident holders of our shares.

E. Taxation

Japanese Taxes

The following is a summary of the principal Japanese tax consequences as of the date of filing of this Form 20-F to owners of Honda’s shares or ADSs who are non-resident individuals or non-Japanese corporations without a permanent establishment in Japan to which income from Honda’s shares is attributable. The tax treatment is subject to possible changes in the applicable Japanese laws or double taxation conventions occurring after that date. This summary is not exhaustive of all possible tax considerations that may apply to a particular investor. Potential investors should consult their own tax advisers as to:

• the overall tax consequences of the acquisition, ownership and disposition of shares or ADSs, including specifically the tax consequences under Japanese law;

• the laws of the jurisdiction of which they are resident; and

• any tax treaty between Japan and their country of residence.

Generally, a non-resident of Japan or a non-Japanese corporation is subject to Japanese withholding tax on dividends paid by Japanese corporations.

In the absence of any applicable tax treaty, convention or agreement reducing the maximum rate of withholding tax, the rate of Japanese withholding tax applicable to dividends paid by Japanese corporations to a non-resident of Japan or a non-Japanese corporation is (a) 20.42% for dividends to be paid on or before December 31, 2037, and (b) 20% for dividends to be paid thereafter. With respect to dividends paid on listed shares issued by Japanese corporations (such as Honda’s shares) to a non-resident of Japan or a non-Japanese corporation, the aforementioned 20.42% or 20% withholding tax rate is reduced to (i) 15.315% for dividends to be paid on or before December 31, 2037, and (ii) 15% for dividends to be paid thereafter, except for dividends paid to any individual shareholder who holds 3% or more of the issued shares of that corporation. Japan has entered into income tax treaties, conventions or agreements with various countries, whereby the maximum withholding tax rate is generally set at 15% or 10% for portfolio investors. Under the income tax treaty between Japan and the United States, the maximum withholding tax rate is generally set at 10% for portfolio investors.

Pursuant to the Convention Between the United States of America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “U.S.-Japan Tax Treaty”), a portfolio investor that is a U.S. holder is generally subject to Japanese withholding tax on dividends on shares at a rate of 10%. Under Japanese tax law, the maximum rate applicable under the tax treaties, conventions or agreements shall be applicable except when such maximum rate is more than the Japanese statutory rate.

Gains derived from the sale outside Japan of common stock or Depositary Receipts by a non-resident of Japan or a non-Japanese corporation, or from the sale of common stock within Japan by a non-resident of Japan or by a non-Japanese corporation not having a permanent establishment in Japan, are in general not subject to Japanese income or corporation taxes. Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired common stock or Depositary Receipt as a legatee, heir or donee, even if the individual is not a Japanese resident.

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United States Taxes

This section describes the material U.S. federal income tax consequences of the ownership of shares or ADSs by U.S. holders, as defined below. It applies only to persons who hold shares or ADSs as capital assets for tax purposes.

This section is based on the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect, as well as on the U.S.-Japan Tax Treaty (the “Treaty”). These authorities are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

For purposes of the Treaty and the Code, U.S. holders of ADRs evidencing ADSs will be treated as the owners of the shares represented by those ADRs. Exchanges of shares for ADRs and ADRs for shares generally will not be subject to U.S. federal income tax. For purposes of this discussion, a “U.S. holder” is a beneficial owner of shares or ADSs that is, for U.S. federal income tax purposes, (i) a citizen or resident individual of the United States, (ii) a domestic corporation, (iii) an estate whose income is subject to United States federal income tax regardless of its source, or (iv) a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust; and that, for purposes of the Treaty, is not ineligible for benefits under the Treaty with respect to income and gain from the shares or ADSs.

This section does not apply to a person who is a member of a special class of holders subject to special rules, including a dealer in securities, a trader in securities that elects to use a mark-to-market method of accounting for its securities holdings, a tax-exempt organization, a life insurance company, a person liable for alternative minimum tax, a person that actually or constructively owns 10% or more of the combined voting power of the voting stock or of the total value of the stock of Honda, a person that holds shares or ADSs as part of a straddle or a hedging or conversion transaction, a person that purchases or sells shares or ADSs as part of a wash sale for tax purposes, or a person whose functional currency is not the U.S. dollar.

If a partnership holds the shares or ADSs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the shares or ADSs should consult its tax advisor with regard to the U.S. federal income tax treatment of an investment in the shares or ADSs.

This summary is not a comprehensive description of all the tax considerations that may be relevant with respect to a U.S. holder’s shares or ADSs. Each beneficial owner of shares or ADSs should consult its own tax advisor regarding the U.S. federal, state and local and other tax consequences of owning and disposing of shares and ADSs in its particular circumstances.

Taxation of Dividends

Under the U.S. federal income tax laws, and subject to the passive foreign investment company, or PFIC, rules discussed below, the gross amount of any dividend paid by Honda out of its current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) to a U.S. holder is subject to U.S. federal income taxation. A U.S. holder must include any Japanese tax withheld from the dividend payment in this gross amount even though it does not in fact receive it.

Dividends paid to a noncorporate U.S. holder that constitute qualified dividend income will be taxable to such U.S. holder at the preferential rates applicable to long-term capital gains provided that the noncorporate U.S. holder holds the shares or ADSs with respect to which the dividends are paid for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. Dividends that Honda pays with respect to the shares or ADSs generally will be qualified dividend income if, in

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the year you receive the dividend, the ADSs are readily tradable on an established securities market in the United States. Our ADSs are listed on the New York Stock Exchange and we therefore expect that dividends that you receive on the ADSs will be qualified dividend income. Dividends that Honda pays with respect to the shares generally will be qualified dividend income if we are eligible for the benefits of the Treaty in the year that you receive the dividend. We believe that we are currently eligible for the benefits of the Treaty, and we therefore believe that dividends on the shares are currently qualified dividend income. There can be no assurance, however, that we will continue to qualify under the Treaty in future taxable years.

A U.S. holder must include the dividend in its taxable income when the holder, in the case of shares, or the Depositary, in the case of ADSs, receives the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. The amount of the dividend distribution that a U.S. holder must include in its income will be the U.S. dollar value of the Japanese yen payments made, determined at the spot Japanese yen/U.S. dollar rate on the date of the dividend distribution, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend is distributed to the date payment is converted into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the U.S. for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of U.S. holder’s basis in the shares or ADSs and thereafter as capital gain. However, Honda does not expect to calculate earnings and profits in accordance with U.S. federal income tax principles. Accordingly, a U.S. holder should expect to generally treat distributions that Honda makes as dividends.

Subject to certain limitations, the Japanese tax withheld in accordance with the Treaty and paid over to Japan will be creditable or deductible against a U.S. holder’s United States federal income tax liability. However, under recently finalized U.S. Treasury regulations, it is possible that such withholding tax will not be creditable unless the U.S. holder is eligible to claim the benefits of the Treaty and elects to apply the Treaty. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates. To the extent a refund of the tax withheld is available to a U.S. holder under Japanese law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against the U.S. holder’s U.S. federal income tax liability.

Dividends will generally be income from sources outside the U.S. and will generally be “passive” income for purposes of computing the foreign tax credit allowable to such U.S. holder.

Taxation of Capital Gains

Subject to the PFIC rules discussed below, if a U.S. holder sells or otherwise disposes of its shares or ADSs, it will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the U.S. dollar value of the amount that it realizes and its tax basis, determined in U.S. dollars, in its shares or ADSs. Capital gain of a noncorporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the U.S. for foreign tax credit limitation purposes.

Passive Foreign Investment Company (PFIC) Rules

Honda believes its shares and ADSs should not be treated as stock of a PFIC for United States federal income tax purposes. This conclusion is a factual determination that is made annually and thus may be subject to change.

In general, Honda will be a PFIC with respect to a U.S. holder if for any taxable year in which such holder held shares or ADSs of Honda:

• at least 75% of Honda’s gross income for the taxable year is passive income; or

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• at least 50% of the value, determined on the basis of a quarterly average, of Honda’s assets is attributable to assets that produce or are held for the production of passive income.

Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s income.

If Honda is treated as a PFIC, and a U.S. holder does not make a mark-to-market election, as described below, that U.S. holder will be subject to special rules with respect to:

• any gain it realizes on the sale or other disposition of its shares or ADSs; and

• any excess distribution that Honda makes to the U.S. holder (generally, any distributions to it during a single taxable year that are greater than 125% of the average annual distributions received by it in respect of the shares or ADSs during the three preceding taxable years or, if shorter, its holding period for the shares or ADSs).

Under these rules:

• the gain or excess distribution will be allocated ratably over the U.S. holder’s holding period for the shares or ADSs,

• the amount allocated to the taxable year in which it realized the gain or excess distribution will be taxed as ordinary income,

• the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year, and

• the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.

Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions by a PFIC.

If a U.S. holder owns shares or ADSs in a PFIC that are treated as marketable stock, such U.S. holder may make a mark-to-market election. If a U.S. holder makes this election, it will not be subject to the PFIC rules described above. Instead, in general, a U.S. holder will include as ordinary income each year the excess, if any, of the fair market value of its shares or ADSs at the end of the taxable year over its adjusted basis in its shares or ADSs. These amounts of ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. A U.S. holder will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously-included income as a result of the mark-to-market election). The U.S. holder’s basis in the shares or ADSs will be adjusted to reflect any such income or loss amounts.

Shares or ADSs held by a U.S. holder will be treated as stock in a PFIC if Honda was a PFIC at any time during the U.S. holder’s holding period in its shares or ADSs, even if Honda is not currently a PFIC, unless a U.S. holder has made a mark-to-market election with respect to its shares or ADSs or the U.S. holder has otherwise made a “purging election” with respect to its shares or ADSs.

In addition, notwithstanding any election that a U.S. holder makes with regard to the shares or ADSs, dividends that a U.S. holder receives from Honda will not constitute qualified dividend income to such U.S. holder if Honda is a PFIC (or is treated as a PFIC with respect to such U.S. holder) in either the taxable year of the distribution or the preceding taxable year. Dividends that a U.S. holder receives that do not constitute qualified dividend income are not eligible for taxation at the preferential rates applicable to qualified dividend

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income. Instead, the U.S. holder must include the gross amount of any such dividend paid by Honda in the U.S. holder’s gross income, and it will be subject to tax at rates generally applicable to ordinary income.

If a U.S. holder owns shares or ADSs during any year that Honda is a PFIC with respect to such U.S. holder, it must file Internal Revenue Service Form 8621, subject to certain applicable exceptions set forth in Internal Revenue Service regulations. Each U.S. holder should consult its own tax advisors regarding the PFIC rules and potential filing and other requirements.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

Honda is subject to the information requirements of the Securities Exchange Act of 1934 and, in accordance therewith, it will file annual reports on Form 20-F and furnish other reports and information on Form 6-K with the Securities and Exchange Commission. These reports and other information can be inspected without charge at the public reference room at the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. You can also obtain copies of such material by mail from the public reference room of the Securities and Exchange Commission at prescribed fees. You may obtain information on the operation of the Securities and Exchange public reference room by calling the Securities and Exchange Commission in the United States at 1-800-SEC-0330. The Securities and Exchange Commission also maintains a web site at www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the Securities and Exchange Commission. Also, as a foreign private issuer, Honda is exempt from the rules under the Securities Exchange Act of 1934 prescribing the furnishing and content of proxy statements to shareholders.

I. Subsidiary Information

Not applicable.

J. Annual Report to Security Holders

Not applicable.

Item 11. Quantitative and Qualitative Disclosure about Market Risk

The information required under this Item 11 is set forth in “(b) Market Risk” of note “(25) Financial Risk Management” to the accompanying consolidated financial statements.

Item 12. Description of Securities Other than Equity Securities

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

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D. American Depositary Shares

3. Fees and charges

JPMorgan Chase Bank, N.A., as ADR depositary, collects fees for delivery and surrender of ADSs directly from investors, or from intermediaries acting for them, depositing ordinary shares or surrendering ADSs for the purpose of withdrawal. The ADR depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of the distributable property to pay the fees.

The charges of the ADR depositary payable by investors are as follows:

Category (as defined by SEC)	Depositary Actions	Associated Fee
(a) Depositing or substituting the underlying shares	Each person to whom ADRs are issued against deposits of Shares, including without limitation, deposits and issuances in respect of: •  Share distributions, stock split, rights, merger •  Exchange of securities or any other transaction or event or other distribution affecting the ADSs or the deposited securities	USD 5.00 for each 100 ADSs (or portion thereof) evidenced by the new ADRs delivered
(b) Receiving or distributing dividends	Any Cash distribution made, or for any elective cash/ stock dividend offered.	USD 0.05 or less per ADS
(c) Selling or exercising rights	Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities	USD 5.00 for each 100 ADSs (or portion thereof)
(d) Withdrawing an underlying security	Acceptance of ADRs surrendered for withdrawal of deposited securities	USD 5.00 for each 100 ADSs (or portion thereof) evidenced by the ADRs surrendered
(e) Transferring, splitting or grouping receipts	Transfers, combining or grouping of depositary receipts	Not applicable
(f) General depositary services, particularly those charged on an annual basis	Services performed by the depositary in administering the ADSs	An aggregate fee of USD 0.05 or less per ADS per calendar year (or portion thereof) which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders as of the record date or record dates set by the depositary during each calendar year and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions

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Category	Depositary Actions	Associated Fee
(g) Expenses of the depositary	Expenses incurred on behalf of holders in connection with
	•  The servicing of the shares or other deposited securities, the sale of securities (including, without limitation, deposited securities), the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation.	Fees for the reimbursement of such fees, charges and expenses may be charged on a periodic basis during each calendar year and shall be assessed on a proportionate basis against holders as of the record date or record dates set by the depositary during each calendar year and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions.
	•  Stock transfer or other taxes and other governmental charges.	Fees for such charges to be payable by the holders or persons depositing shares.
	•  SWIFT, cable, telex and facsimile transmission and delivery charges incurred at the request of persons depositing, or holders delivering shares, ADSs or deposited securities.	Fees for such charges to be payable by the persons depositing or holders delivering shares, ADSs or deposited securities.
	•  Transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities.	Fees for such charges to be payable by the persons depositing shares or holders withdrawing deposited securities.
	•  In connection with the conversion of foreign currency into U.S. dollars, transferring foreign currency or U.S. dollars to the United States, obtaining any approval or license of any governmental authority required for such conversion or transfer or making any sale.	To be deducted from cash distributed to holders.

4. Direct / Indirect Payment Disclosure

The Depositary has agreed to contribute to Honda a portion of certain fees received by the Depositary under the deposit agreement. From April 1, 2022 to March 31, 2023, such contributions totaled US$691,608.35. Additionally, from April 1, 2022 to March 31, 2023, the Depositary waived US$237,797.48 in expenses related to the Ordinary General Meeting of Shareholders.

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and participation of our management, including our Chief Executive Officer and Chief Financial Officer, we performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the U.S. Securities Exchange Act of 1934) as of March 31, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of that date.

Management’s Report on Internal Control over Financial Reporting

The management of Honda is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Securities Exchange Act of 1934). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with policies or procedures may deteriorate.

Our management assessed the effectiveness of internal control over financial reporting as of March 31, 2023 based on the criteria established in “Internal Control-Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that assessment, our management concluded that our internal control over financial reporting was effective as of March 31, 2023.

KPMG AZSA LLC (PCAOB ID:1009), the Company’s independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

No significant changes were made in our internal control over financial reporting for the fiscal year ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 16A. Audit Committee Financial Expert

Honda’s Audit Committee has determined that Mr. Yoichiro Ogawa and Mr. Masafumi Suzuki are each qualified as an “audit committee financial expert” as defined by the rules of the SEC. Additionally, Mr. Ogawa and Mr. Suzuki each meet the independence requirements applicable under Section 303A.06 of the New York Stock Exchange Listed Company Manual.

Item 16B. Code of Ethics

Honda has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of Honda’s code of ethics is attached as an exhibit to this Annual Report on Form 20-F.

Item 16C. Principal Accountant Fees and Services

KPMG AZSA LLC has served as Honda’s independent registered public accounting firm for each of the fiscal years in the three-year period ended March 31, 2023, for which audited financial statements appear in this Annual Report on Form 20-F.

The following table presents the aggregate fees for professional services and other services rendered by KPMG AZSA LLC and the various member firms of KPMG International to Honda in fiscal year 2022 and 2023:

	Yen (millions)
	2022		2023
Audit Fees	¥	4,394	¥	5,295
Audit-Related Fees		136		153
All Other Fees		11		11
Total	¥	4,541	¥	5,459

“Audit Fees” means fees for audit services, which are professional services provided by independent auditors for the audit of our annual financial statements or for services that are normally provided by independent auditors with respect to any submissions required under applicable laws and regulations.

“Audit-Related Fees” means fees for audit-related services, which are assurance services provided by independent auditors that are reasonably related to the carrying out of auditing or reviewing of our financial reports and other related services. This category includes fees for agreed-upon or expanded audit procedures related to accounting and/or other records.

“All Other Fees” mainly includes fees for services rendered with respect to advisory services.

Pre-approval policies and procedures of the Audit Committee

Under applicable SEC rules, the Audit Committee must pre-approve audit services, audit-related services, tax services and other services to be provided by the principal accountant to ensure that the independence of the principal accountant under such rules is not impaired as a result of the provision of any of these services.

While, as a general rule, specific pre-approval must be obtained for these services to be provided, the Audit Committee has adopted pre-approval policies and procedures which list particular audit and non-audit services that may be provided without specific pre-approval. The Audit Committee reviews this list of services on an annual basis, and is informed of each such service that is actually provided.

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All services to be provided to us by the principal accountant and its affiliates which are not specifically set forth in this list must be specifically pre-approved by the Audit Committee.

None of the services described above in this Item 16C. were waived from the pre-approval requirements pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

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Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table sets forth certain information with respect to purchases by Honda of its own shares during the fiscal year ended March 31, 2023. There were no purchases of Honda’s shares by its affiliated purchasers during that fiscal year.

Period	(a) Total Number of Shares Purchased*1		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Yen Amount of Shares that May Yet Be Purchased Under the Plans or Programs*2
April 1 to April 30, 2022		102	¥	3,446		—		—
May 1 to May 31, 2022		176	¥	3,203		—		—
June 1 to June 30, 2022		578	¥	3,286		—		—
July 1 to July 31, 2022		134	¥	3,229		—		—
August 1 to August 31, 2022		3,827,114	¥	3,658		3,827,000		86,000,264,500
September 1 to September 30, 2022		4,158,706	¥	3,607		4,158,500		71,000,014,700
October 1 to October 31, 2022		7,345,838	¥	3,267		7,345,700		47,000,312,900
November 1 to November 30, 2022		4,493,566	¥	3,338		4,493,400		32,000,470,600
December 1 to December 31, 2022		6,892,799	¥	3,192		6,892,600		10,000,315,800
January 1 to January 31, 2023		3,222,770	¥	3,103		3,222,700		156,300
February 1 to February 28, 2023		6,684,972	¥	3,440		6,684,800		47,002,057,700
March 1 to March 31, 2023		9,746,983	¥	3,488		9,746,900		13,005,290,300
Total		46,373,738	¥	3,386		46,371,600

*1  For each month, the number of shares shown in column (a) in excess of the number of shares shown in column (c) represents the aggregate number of shares representing less than one unit that Honda purchased from the holders thereof upon their request. For an explanation of the right of such holders, see “Japanese Unit Share System” and “Right of a Holder of Shares Representing Less Than One Voting Unit to Require Honda to Purchase or Sell Its Shares” under Item 10.B of this Annual Report. Total number of shares purchased does not include purchases of BIP trust.

*2  During the year ended March 31, 2023, the following share repurchase programs were in effect:

 Share repurchase was resolved at the meeting of the Board of Directors pursuant to the articles of  incorporation

 Date of announcement: August 10, 2022

 Maximum number of shares authorized to be repurchased: 32,000,000

 Maximum yen amount authorized to be used for repurchase: ¥100,000,000,000

 Repurchase period: from August 12, 2022 to March 31, 2023

 Share repurchase was resolved at the meeting of the Board of Directors pursuant to the articles of  incorporation

 Date of announcement: February 10, 2023

 Maximum number of shares authorized to be repurchased: 25,000,000

 Maximum yen amount authorized to be used for repurchase: ¥70,000,000,000

 Repurchase period: from February 13, 2023 to April 30, 2023

115

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

Companies listed on the New York Stock Exchange (the “NYSE”) must comply with certain standards regarding corporate governance under Section 303A of the NYSE Listed Company Manual.

However, listed companies that are foreign private issuers, such as Honda, are permitted to follow home country practice in lieu of certain provisions of Section 303A.

The following table shows the significant differences between the corporate governance practices followed by U.S. listed companies under Section 303A of the NYSE Listed Company Manual and those followed by Honda.

Corporate Governance Practices Followed by NYSE-listed U.S. Companies	Corporate Governance Practices Followed by Honda
A NYSE-listed U.S. company must have a majority of directors meeting the independence requirements under Section 303A of the NYSE Listed Company Manual.	Honda has adopted a “company with three committees” corporate governance system (the “Three Committees system”) under the Company Law.
	For Japanese companies which employ the Three Committees system, including Honda, the Company Law requires that such companies have a board of directors and one or more executive officers, and within the board of directors, a nominating committee (the “Nominating Committee”), an audit committee (the “Audit Committee”), and a compensation committee (the “Compensation Committee”) shall be established. Each of these committees shall consist of three or more directors, a majority of which shall be “outside directors” as defined below. Honda’s Articles of Incorporation provides for its Board of Directors consisting of no more than 15 members. Honda currently has eleven Directors (including five Outside Directors) and ten Executive Officers. The Nominating Committee has four members, of which three are Outside Directors. The Audit Committee has five members, of which three are Outside Directors. The Compensation Committee has four members, of which three are Outside Directors. Under the Company Law, the members of three committees are elected by the resolutions of the board of directors. In addition, Honda’s regulations of each of the three committees provide that the chairperson of each committee shall be elected from the Outside Directors who are members of the relevant committee by the resolution of the Board of Directors.
	“Outside director” is defined as a director who meets all of the following independence requirements: the relevant person must be (1) a person who is not an

116

Corporate Governance Practices Followed by NYSE-listed U.S. Companies	Corporate Governance Practices Followed by Honda
	executive director, executive officer, manager or any other employee of the company or any of its subsidiaries and has not been in such position for ten years prior to the assumption of office; (2) if the relevant person assumed an office of a non-executive director, accounting councilor or corporate auditor of the company or any of its subsidiaries during the ten years mentioned in (1) above, a person who had not been an executive director, executive officer, manager or any other employee of the company or any of its subsidiaries for further ten years prior to the assumption of such office; (3) a person who is not a director, corporate auditor, executive officer, manager or any other employee of the parent company or who is not a natural person controlling the company; (4) a person who is not an executive director, executive officer, manager or any other employee of a company which is controlled by the parent company or by the natural person controlling the company; and (5) a person who is not a spouse or one of a certain kinds of relatives of (a) a director, executive officer, manager or any other important employee of the company or (b) the natural person controlling the company. Companies which employ the Three Committees system, including Honda shall have at least two “outside directors”.
	In addition, the listing rules of the Tokyo Stock Exchange, which Honda is subject to (but reference to “corporate auditor” below is not applicable to Honda), require listed companies to have at least one “independent” director or corporate auditor, and to make efforts to have at least one “independent” director. Requirements for an independent director/corporate auditor are more stringent than those for outside directors or outside corporate auditors. Unlike an outside director/corporate auditor, an independent director/corporate auditor may not be (a) a person who is, or has been until recently, a major business counterparty or an executive director, executive officer, manager or employee of the major business counterparties, (b) a person who is, or has been until recently, a professional advisor receiving significant remuneration from the company, (c) a person who has been, for ten years prior to the assumption of office, a director, executive officer, manager or employee, or corporate auditor of the parent company or an executive director or executive officer, manager or employee of the parent company’s subsidiaries, or (d) a relative of persons mentioned in (a), (b) and

117

Corporate Governance Practices Followed by NYSE-listed U.S. Companies	Corporate Governance Practices Followed by Honda
	(c) or a relative of certain scope of persons such as directors of the parent company or any of its subsidiaries. Currently, Honda has five Outside Directors all of whom are also independent Directors. Furthermore, Honda has established additional independence requirements for the Outside Directors, the “Criteria for Independence of Outside Directors” as described in Exhibit 1.4 by the resolution of the Board of Directors, and all of the Outside Directors meet the criteria.
A NYSE-listed U.S. company must have an audit committee composed entirely of independent directors meeting the independence requirements under Section 303A.02 of the NYSE Listed Company Manual, and the audit committee must have at least three members.	Honda has an Audit Committee, as one of the Three Committees within its Board of Directors. Honda is required to satisfy the requirements set forth Rule 10A-3 under the U.S. Securities Exchange Act of 1934 relating to listed company audit committees. However, as a foreign private issuer, Honda is not subject to the independence requirements applicable to U.S. issuers pursuant to Section 303A.02 of the NYSE Listed Company manual. Additionally, as a foreign private issuer, Honda is not subject to the additional requirements under the Section 303A .07 of the NYSE Listed Company manual, including that the audit committee be made up of at least three members.
	Under the Company Law, the audit committee has the following responsibilities: (i) auditing the execution of duties by directors and executive officers, and preparing audit reports and (ii) determining the content of proposals regarding the election and dismissal of accounting auditors and the refusal to reelect accounting auditors to be submitted to a general meeting of shareholders. The Audit Committee shall consist of at least three directors and a majority shall be outside directors. Each director, including an Audit Committee member, has a one-year term. Honda’s regulations of the Audit Committee provide that full-time member of the Audit Committee shall be established by the resolution of the Board of Directors.
A NYSE-listed U.S. company must have a nominating/corporate governance committee entirely of independent directors.	Honda’s Directors are elected at a general meeting of shareholders. Its Board of Directors does not have the power to fill vacancies thereon. A proposal to elect a Director must be determined by the Nominating Committee and Honda’s Board of Directors itself does not have the power to determine a proposal to elect a Director.

118

Corporate Governance Practices Followed by NYSE-listed U.S. Companies	Corporate Governance Practices Followed by Honda
	Under the Company Law, the Nominating Committee is responsible for determining the content of proposals regarding the election and dismissal of directors to be submitted to a general meeting of shareholders. The Nominating Committee shall consist of at least three directors and a majority shall be outside directors. Each director, including a Nominating Committee member, has a one-year term.
A NYSE-listed U.S. company must have a compensation committee composed entirely of independent directors. Compensation committee members must satisfy the additional independence requirements under Section 303A.02(a)(ii) of the NYSE Listed Company Manual. A compensation committee must also have authority to retain or obtain the advice of compensation and other advisers, subject to prescribed independence criteria that the committee must consider prior to engaging any such adviser.	The compensation of Honda’s Directors and Executive Officers is determined by the Compensation Committee within the Board of Directors, and a General Meeting of Shareholders of the Company does not have the power to determine the compensation of Directors. Under the Company Law, the Compensation Committee shall establish the compensation policy as well as determine the compensation for directors and executive officers. The Compensation Committee shall consist of at least three directors and a majority shall be outside directors. Each director, including a Compensation Committee member, has a one-year term.
A NYSE-listed U.S. company must generally obtain shareholder approval with respect to any equity compensation plan.	Honda has a stock compensation scheme (the “Scheme”) for Executive Officers and a part of Operating Executives of the Company who are residents of Japan (collectively, “Executive Officers Etc.”). Under the Scheme, which uses a Board Incentive Plan trust (the “BIP Trust”), Honda’s shares and money will be delivered and paid to Executive Officers Etc. in accordance with their positions and the degree of growth in management indicators of Honda such as performance and corporate value. The period of the BIP Trust shall be from September 2021 to August 2024 (scheduled), provided, however, that this period may be extended by resolutions of the Compensation Committee and the Board of Directors for another three years by amending the trust agreement and entrusting additional amounts to the BIP Trust within the scope of the approval at the Ordinary General Meeting of Shareholders.

Item 16H. Mine Safety Disclosure

Not applicable.

Item 16I. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections

Not applicable.

119

PART III

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

See Consolidated Financial Statements attached hereto.

120

Item 19. Exhibits

1.1	Articles of Incorporation of the registrant (English translation) *1
1.2	Share Handling Regulations of the registrant (English translation)
1.3	Regulations of the Board of Directors of the registrant (English translation)
1.4	Honda Motor Co., Ltd. Criteria for Independence of Outside Directors (English translation) *2
2.1	Specimen common stock certificates of the registrant (English translation) *3
2.2	Form of Second Amended and Restated Deposit Agreement dated as of March 2022, among the registrant, JPMorgan Chase Bank, N.A., as Depositary, and holders and beneficial owners of American Depositary Receipts *4
2.3	Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934
8.1	List of Significant Subsidiaries (See “Organizational Structure” in Item 4.C of this Form 20-F)
11.1	Code of Ethics *5
12.1	Certification of the principal executive officer required by 17 C.F.R. 240. 13a-14(a)
12.2	Certification of the principal financial officer required by 17 C.F.R. 240. 13a-14(a)
13.1	Certification of the chief executive officer required by 18 U.S.C. Section 1350
13.2	Certification of the chief financial officer required by 18 U.S.C. Section 1350
15.1	Consent of Independent Registered Public Accounting Firm
101.INS	Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	The cover page for the Company’s Annual Report on Form 20-F for the year ended March 31, 2023, has been formatted in Inline XBRL

*1 Incorporated by reference to the registrant’s Annual Report on Form 20-F filed on June 23, 2021.

*2 Incorporated by reference to the registrant’s Annual Report on Form 20-F filed on June 23, 2021.

*3 Incorporated by reference to the registrant’s Annual Report on Form 20-F filed on September 27, 2001. (P)

*4 Incorporated by reference to the registration statement for American Depositary Shares on Form F-6 (File No. 333-263937) filed by JPMorgan Chase Bank, N.A. as depositary, on March 29, 2022.

*5 Incorporated by reference to the registrant’s Annual Report on Form 20-F filed on July 9, 2004.

The Company has not included as exhibits certain instruments with respect to its long-term debt, the amount of debt authorized under each of which does not exceed 10% of its total assets, and it agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.

(P) Paper exhibits

121

HONDA MOTOR CO., LTD.

(Honda Giken Kogyo Kabushiki Kaisha)

(A Japanese Company)

AND SUBSIDIARIES

Consolidated Financial Statements

and

Reports of Independent Registered

Public Accounting Firm

March 31, 2023

To be Included in

The Annual Report

Form 20-F

Filed with

The Securities and Exchange Commission

Washington, D.C., U.S.A.

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm	F-3
Consolidated Statements of Financial Position – March 31, 2022 and 2023	F-8
Consolidated Statements of Income – Years ended March 31, 2021, 2022 and 2023	F-9
Consolidated Statements of Comprehensive Income – Years ended March 31, 2021, 2022 and 2023	F-10
Consolidated Statements of Changes in Equity – Years ended March 31, 2021, 2022 and 2023	F-11
Consolidated Statements of Cash Flows – Years ended March 31, 2021, 2022 and 2023	F-12
Notes to Consolidated Financial Statements	F-13

Financial statements of affiliates and joint ventures are omitted because such affiliates and joint ventures are not individually significant.

F-2

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Honda Motor Co., Ltd.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Honda Motor Co., Ltd. and subsidiaries (the “Company”) as of March 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended March 31, 2023, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated June 23, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of the provision for specific warranty programs

As discussed in Note 17 to the consolidated financial statements, the Company’s provisions for product warranties as of March 31, 2023 amounted to ¥535,099 million, which included the provision for specific

F-3

warranty programs such as product recalls. The provision for specific warranty programs represents the estimated future warranty costs that are covered under such programs. The estimated future warranty costs are provided based on historical warranty claim experience with consideration given to the expected level of future warranty costs, including the expected number of units to be affected and the average repair cost per unit for warranty claims.

We identified the evaluation of the provision for specific warranty programs as a critical audit matter. A high degree of auditor judgment was required to evaluate the Company’s estimate of the expected number of units to be affected and the average repair cost per unit, due to the degree of subjectivity associated with such assumptions.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s product warranty accrual process. This included controls related to the development of the assumptions regarding the expected number of units to be affected and the average repair cost per unit. We assessed the Company’s assumptions regarding the expected number of units to be affected and the average repair cost per unit by evaluating:

• the consistency of the Company’s assumptions with recent historical trends of warranty costs, taking into account changes in conditions and events affecting the Company,

• input data used to develop those assumptions by testing the consistency of the data with underlying documents and historical claims data, and

• facts and circumstances related to specific warranty programs identified after year end but before the consolidated financial statements were issued, and the impact, if any, of such facts and circumstances on the expected number of units to be affected and the average repair cost per unit underlying the provision for specific warranty programs at year end.

Allowance for expected credit losses on retail receivables at the finance subsidiary in the United States

As discussed in Note 7 to the consolidated financial statements, the Company’s allowance for expected credit losses (ECL) related to receivables from financial services was ¥48,652 million as of March 31, 2023, which included the allowance for ECL on retail receivables which amounted to ¥46,083 million. The allowance for ECL on retail receivables is measured at amounts according to the ECL methodology, including the determination on whether credit risk increased significantly since initial recognition. ECL is a probability-weighted estimate of the difference between the contractual cash flows and the cash flows that the Company expects to receive, which can be affected by forward-looking economic conditions. At the finance subsidiary in the United States, ECL on retail receivables is determined for groups of financial assets based on relevant risk characteristics including borrower, collateral and macroeconomic risk characteristics.

We identified the assessment of the allowance for ECL on retail receivables at the finance subsidiary in the United States as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to measurement uncertainty. Specifically, the assessment encompassed the evaluation of the ECL methodology, including (1) the methods and models used to derive the allowance for ECL and significant increases in credit risk since initial recognition and (2) the selection of the forward-looking economic conditions and the probability weightings. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the allowance for ECL estimate, including controls related to:

• continued use and appropriateness of the ECL methodology and models, including the determination of significant increases in credit risk since initial recognition and the selection of the forward-looking economic conditions and the probability weightings,

F-4

• analysis of model results as compared to actual loss performance, and

• re-evaluation of the model used to estimate expected credit losses.

We evaluated the Company’s process to develop the allowance for ECL by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s ECL methodology for compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board,

• assessing the conceptual soundness and performance testing of the models by inspecting model documentation to determine whether the models are consistent with the model methodology and are suitable for their intended use,

• evaluating the Company’s method to measure significant increases in credit risk since initial recognition by performing a sensitivity analysis over the significant increase in credit risk threshold,

• assessing the selection of the forward-looking economic conditions and the probability weightings by comparing them to the Company’s business environment and relevant industry practices, and

• evaluating model back-testing results to verify model output is consistent with actual loss performance.

We also assessed the sufficiency of the audit evidence obtained by evaluating the:

• cumulative results of the audit procedures,

• qualitative aspects of the Company’s accounting practices, and

• potential bias in the accounting estimates.

Estimated end of term residual values of lease vehicles at the finance subsidiary in the United States

As discussed in Note 3(f) to the consolidated financial statements, depreciation of equipment on operating leases is calculated on the straight-line method over the lease term. The Company’s equipment on operating leases as of March 31, 2023 was ¥4,726,292 million, which included leased vehicles at the finance subsidiary in the United States. Equipment on operating leases is depreciated to the lower of contract residual value or estimated end of term residual value, and adjustments to estimated end of term residual values are made prospectively on a straight-line basis over the remaining term of the lease. At the finance subsidiary in the United States, the primary factors that affect estimated end of term residual values of leased vehicles are the percentage of leased vehicles expected to be returned by the lessees and the expected market values of leased vehicles at the end of their lease terms. Factors considered in this evaluation include, among other factors, economic conditions, external market information on new and used vehicles, historical trends, and recent auction values.

We identified the assessment of estimated end of term residual values of leased vehicles at the finance subsidiary in the United States as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to measurement uncertainty. Specifically, complex auditor judgment was required to assess the residual value methodology, the model used to estimate the percentage of leased vehicles expected to be returned by the lessee at the end of the lease term and the expected market values of leased vehicles at the end of the lease term. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the end of term residual values of lease vehicles estimate, including controls related to the:

• development of the residual value methodology, including the identification and determination of the expected market values of leased vehicles at the end of the lease term assumption,

F-5

• continued use and appropriateness of the model used to estimate the percentage of leased vehicles expected to be returned,

• evaluation of the percentage of lease vehicles expected to be returned by the lessees as compared to actual vehicles returned, and

• analysis of the actual gain or loss recorded on the disposition of lease vehicles.

We evaluated the Company’s process to develop the estimated end of term residual values of lease vehicles by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s residual value methodology for compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board,

• assessing the conceptual soundness and performance testing of the model by inspecting model documentation to determine whether the model is consistent with the model methodology and is suitable for their intended use, and

• evaluating the Company’s expected market values of leased vehicles at the end of the lease term assumption by comparing it to specific portfolio risk characteristics and trends.

We also assessed the sufficiency of the audit evidence obtained by evaluating the:

• cumulative results of the audit procedures,

• qualitative aspects of the Company’s accounting practices, and

• potential bias in the accounting estimates.

/s/ KPMG AZSA LLC

We have served as the Company’s auditor since 1962.

Tokyo, Japan

June 23, 2023

F-6

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Honda Motor Co., Ltd.:

Opinion on Internal Control Over Financial Reporting

We have audited Honda Motor Co., Ltd. and subsidiaries’ (the “Company”) internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of March 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended March 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated June 23, 2023 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG AZSA LLC

Tokyo, Japan

June 23, 2023

F-7

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Financial Position

March 31, 2022 and 2023

			Yen (millions)
	Note		2022			2023
Assets
Current assets:
Cash and cash equivalents		5	¥	3,674,931		¥	3,803,014
Trade receivables		6		896,768			1,060,271
Receivables from financial services		7		1,694,113			1,899,493
Other financial assets		8		217,743			263,892
Inventories		9		1,918,548			2,167,184
Other current assets				439,322			384,494
Total current assets				8,841,425			9,578,348
Non-current assets:
Investments accounted for using the equity method		10		967,404			915,946
Receivables from financial services		7		3,740,383			3,995,259
Other financial assets		8		819,654			855,070
Equipment on operating leases		11		5,159,129			4,726,292
Property, plant and equipment		12		3,079,407			3,168,109
Intangible assets		13		849,507			870,900
Deferred tax assets		23		91,592			105,792
Other non-current assets				424,652			454,351
Total non-current assets				15,131,728			15,091,719
Total assets			¥	23,973,153		¥	24,670,067
Liabilities and Equity
Current liabilities:
Trade payables		14	¥	1,236,233		¥	1,426,333
Financing liabilities		15		3,118,304			3,291,195
Accrued expenses				375,601			419,570
Other financial liabilities		16		236,900			324,110
Income taxes payable				96,116			86,252
Provisions		17		268,388			362,701
Other current liabilities				672,857			741,963
Total current liabilities				6,004,399			6,652,124
Non-current liabilities:
Financing liabilities		15		4,984,252			4,373,973
Other financial liabilities		16		282,083			288,736
Retirement benefit liabilities		18		282,054			255,852
Provisions		17		253,625			270,169
Deferred tax liabilities		23		990,754			877,300
Other non-current liabilities				403,440			449,622
Total non-current liabilities				7,196,208			6,515,652
Total liabilities				13,200,607			13,167,776
Equity:
Common stock				86,067			86,067
Capital surplus				185,495			185,589
Treasury stock				(328,309	)		(484,931	)
Retained earnings				9,539,133			9,980,128
Other components of equity				990,438			1,417,397
Equity attributable to owners of the parent				10,472,824			11,184,250
Non-controlling interests				299,722			318,041
Total equity		19		10,772,546			11,502,291
Total liabilities and equity			¥	23,973,153		¥	24,670,067

See accompanying notes to consolidated financial statements.

F-8

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Income

Years ended March 31, 2021, 2022 and 2023

		Yen (millions)
	Note	2021			2022			2023
Sales revenue	20	¥	13,170,519		¥	14,552,696		¥	16,907,725
Operating costs and expenses:
Cost of sales			(10,439,689	)		(11,567,923	)		(13,576,133	)
Selling, general and administrative			(1,331,728	)		(1,326,485	)		(1,669,908	)
Research and development	21		(738,894	)		(787,056	)		(880,915	)
Total operating costs and expenses			(12,510,311	)		(13,681,464	)		(16,126,956	)
Operating profit			660,208			871,232			780,769
Share of profit of investments accounted for using the equity method	10		272,734			202,512			117,445
Finance income and finance costs:
Interest income	22		19,805			25,627			73,071
Interest expense	22		(13,877	)		(16,867	)		(36,112	)
Other, net	22		(24,817	)		(12,314	)		(55,608	)
Total finance income and finance costs			(18,889	)		(3,554	)		(18,649	)
Profit before income taxes			914,053			1,070,190			879,565
Income tax expense	23		(218,609	)		(309,489	)		(162,256	)
Profit for the year		¥	695,444		¥	760,701		¥	717,309
Profit for the year attributable to:
Owners of the parent			657,425			707,067			651,416
Non-controlling interests			38,019			53,634			65,893
		Yen
		2021			2022			2023
Earnings per share attributable to owners of the parent Basic and diluted	24	¥	380.75		¥	411.09		¥	384.02

See accompanying notes to consolidated financial statements.

F-9

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Years ended March 31, 2021, 2022 and 2023

		Yen (millions)
	Note	2021			2022			2023
Profit for the year		¥	695,444		¥	760,701		¥	717,309
Other comprehensive income, net of tax:
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans			238,262			117,042			3,350
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			67,603			58,635			(18,465	)
Share of other comprehensive income of investments accounted for using the equity method	10		4,910			1,786			292
Items that may be reclassified subsequently to profit or loss
Net changes in revaluation of financial assets measured at fair value through other comprehensive income			(43	)		(682	)		(474	)
Exchange differences on translating foreign operations			239,097			680,724			422,960
Share of other comprehensive income of investments accounted for using the equity method	10		27,350			77,447			30,429
Total other comprehensive income, net of tax	19		577,179			934,952			438,092
Comprehensive income for the year		¥	1,272,623		¥	1,695,653		¥	1,155,401
Comprehensive income for the year attributable to:
Owners of the parent			1,214,757			1,619,997			1,081,429
Non-controlling interests			57,866			75,656			73,972

See accompanying notes to consolidated financial statements.

F-10

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

Years ended March 31, 2021, 2022 and 2023

			Yen (millions)
			Equity attributable to owners of the parent
	Note		Common stock		Capital surplus			Treasury stock			Retained earnings			Other components of equity			Total			Non- controlling interests			Total equity
Balance as of April 1, 2020			¥	86,067	¥	171,823		¥	(273,940	)	¥	8,142,948		¥	(114,639	)	¥	8,012,259		¥	273,764		¥	8,286,023
Comprehensive income for the year
Profit for the year												657,425						657,425			38,019			695,444
Other comprehensive income, net of tax		19													557,332			557,332			19,847			577,179
Total comprehensive income for the year												657,425			557,332			1,214,757			57,866			1,272,623
Reclassification to retained earnings		19										245,983			(245,983	)		—						—
Transactions with owners and other
Dividends paid		19										(145,090	)					(145,090	)		(43,348	)		(188,438	)
Purchases of treasury stock									(6	)								(6	)					(6	)
Disposal of treasury stock									160									160						160
Share-based payment transactions						226												226						226
Equity transactions and others																					2,251			2,251
Total transactions with owners and other						226			154			(145,090	)					(144,710	)		(41,097	)		(185,807	)
Balance as of March 31, 2021			¥	86,067	¥	172,049		¥	(273,786	)	¥	8,901,266		¥	196,710		¥	9,082,306		¥	290,533		¥	9,372,839
Comprehensive income for the year
Profit for the year												707,067						707,067			53,634			760,701
Other comprehensive income, net of tax		19													912,930			912,930			22,022			934,952
Total comprehensive income for the year												707,067			912,930			1,619,997			75,656			1,695,653
Reclassification to retained earnings		19										119,202			(119,202	)		—						—
Transactions with owners and other
Dividends paid		19										(188,402	)					(188,402	)		(45,131	)		(233,533	)
Purchases of treasury stock									(62,758	)								(62,758	)					(62,758	)
Disposal of treasury stock									578									578						578
Share-based payment transactions						(233	)											(233	)					(233	)
Equity transactions and others						13,679			7,657									21,336			(21,336	)		—
Total transactions with owners and other						13,446			(54,523	)		(188,402	)					(229,479	)		(66,467	)		(295,946	)
Balance as of March 31, 2022			¥	86,067	¥	185,495		¥	(328,309	)	¥	9,539,133		¥	990,438		¥	10,472,824		¥	299,722		¥	10,772,546
Comprehensive income for the year
Profit for the year												651,416						651,416			65,893			717,309
Other comprehensive income, net of tax		19													430,013			430,013			8,079			438,092
Total comprehensive income for the year												651,416			430,013			1,081,429			73,972			1,155,401
Reclassification to retained earnings		19										3,054			(3,054	)		—						—
Transactions with owners and other
Dividends paid		19										(213,475	)					(213,475	)		(51,601	)		(265,076	)
Purchases of treasury stock									(157,001	)								(157,001	)					(157,001	)
Disposal of treasury stock									379									379						379
Share-based payment transactions						94												94						94
Equity transactions and others																					(4,052	)		(4,052	)
Total transactions with owners and other						94			(156,622	)		(213,475	)					(370,003	)		(55,653	)		(425,656	)
Balance as of March 31, 2023			¥	86,067	¥	185,589		¥	(484,931	)	¥	9,980,128		¥	1,417,397		¥	11,184,250		¥	318,041		¥	11,502,291

See accompanying notes to consolidated financial statements.

F-11

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended March 31, 2021, 2022 and 2023

		Yen (millions)
	Note	2021			2022			2023
Cash flows from operating activities:
Profit before income taxes		¥	914,053		¥	1,070,190		¥	879,565
Depreciation, amortization and impairment losses excluding equipment on operating leases			624,239			611,063			721,630
Share of profit of investments accounted for using the equity method			(272,734	)		(202,512	)		(117,445	)
Finance income and finance costs, net			22,630			(56,352	)		(71,661	)
Interest income and interest costs from financial services, net			(137,178	)		(155,872	)		(146,461	)
Changes in assets and liabilities
Trade receivables			(133,788	)		(24,037	)		(155,924	)
Inventories			68,281			(208,895	)		(171,467	)
Trade payables			101,301			50,122			105,272
Accrued expenses			(40,927	)		(68,811	)		42,122
Provisions and retirement benefit liabilities			106,829			(156,079	)		90,880
Receivables from financial services			(59,934	)		509,741			(41,480	)
Equipment on operating leases			(161,579	)		171,600			768,070
Other assets and liabilities			(72,473	)		28,981			218,369
Other, net			5,190			(19,782	)		(1,222	)
Dividends received			191,112			193,555			244,902
Interest received			236,729			237,724			324,234
Interest paid			(113,100	)		(97,884	)		(159,020	)
Income taxes paid, net of refund			(206,272	)		(203,130	)		(401,342	)
Net cash provided by operating activities			1,072,379			1,679,622			2,129,022
Cash flows from investing activities:
Payments for additions to property, plant and equipment			(318,410	)		(268,143	)		(475,048	)
Payments for additions to and internally developed intangible assets			(232,727	)		(181,083	)		(157,440	)
Proceeds from sales of property, plant and equipment and intangible assets			6,770			27,108			16,206
Payments for acquisitions of subsidiaries, net of cash and cash equivalents acquired			2,230			—			—
Proceeds from sales of subsidiaries, net of cash and cash equivalents disposed of			—			—			740
Payments for acquisitions of investments accounted for using the equity method			(110,747	)		—			(23,826	)
Proceeds from sales of investments accounted for using the equity method			12,570			—			—
Payments for acquisitions of other financial assets			(433,375	)		(488,631	)		(527,334	)
Proceeds from sales and redemptions of other financial assets			276,808			534,693			488,642
Net cash used in investing activities			(796,881	)		(376,056	)		(678,060	)
Cash flows from financing activities:
Proceeds from short-term financing liabilities			9,115,347			7,487,724			9,127,333
Repayments of short-term financing liabilities			(9,294,859	)		(7,960,144	)		(8,684,799	)
Proceeds from long-term financing liabilities			1,948,835			2,002,823			971,067
Repayments of long-term financing liabilities			(1,798,429	)		(1,761,561	)		(2,382,190	)
Dividends paid to owners of the parent			(145,090	)		(188,402	)		(213,475	)
Dividends paid to non-controlling interests			(41,755	)		(53,813	)		(51,376	)
Purchases and sales of treasury stock, net			154			(62,180	)		(156,622	)
Repayments of lease liabilities			(67,628	)		(80,165	)		(78,297	)
Other, net			(555	)		—			—
Net cash used in financing activities			(283,980	)		(615,718	)		(1,468,359	)
Effect of exchange rate changes on cash and cash equivalents			94,149			229,063			145,480
Net change in cash and cash equivalents			85,667			916,911			128,083
Cash and cash equivalents at beginning of year			2,672,353			2,758,020			3,674,931
Cash and cash equivalents at end of year	5	¥	2,758,020		¥	3,674,931		¥	3,803,014

See accompanying notes to consolidated financial statements.

F-12

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Reporting Entity

Honda Motor Co., Ltd. (the “Company”) is a public company domiciled in Japan. The Company and its subsidiaries (collectively “Honda”) develop, manufacture and distribute motorcycles, automobiles, power products and others throughout the world, and also provide financial services to customers and dealers for the sale of those products. Principal manufacturing facilities are located in Japan, the United States of America, Canada, Mexico, China, India, Indonesia, Malaysia, Thailand, Vietnam and Brazil.

(2) Basis of Preparation

(a) Compliance with International Financial Reporting Standards

The Company’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The term “IFRS” also includes International Accounting Standards (IASs) and the related interpretations of the interpretations committees (SIC and IFRIC).

(b) Basis of Measurement

The consolidated financial statements have been prepared on the historical cost basis, except for certain assets and liabilities separately stated in note 3.

(c) Functional Currency and Presentation Currency

The consolidated financial statements are presented in Japanese yen, which is the functional currency of the Company. All financial information presented in Japanese yen has been rounded to the nearest million Japanese yen, except when otherwise indicated.

(d) New Accounting Standards and Interpretations Not Yet Adopted

None of new or amended standards and interpretations that have been issued as of the date of approval of the consolidated financial statements but are not effective and have not yet been adopted by Honda as of March 31, 2023 have a significant effect on the consolidated financial statements.

(e) Use of Estimates and Judgments

The preparation of consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies, the reported amount of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

These estimates and underlying assumptions are reviewed on a continuous basis. Changes in these accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about judgments that have been made in the process of applying accounting policies and that have significant effects on the amounts reported in the consolidated financial statements is as follows:

• Scope of subsidiaries, affiliates and joint ventures (notes 3(a) and 3(b))

F-13

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

• Recognition of intangible assets arising from development (note 3(h))

• Accounting for contracts including lease (note 3(i))

Information about accounting estimates and assumptions that have significant effects on the amounts reported in the consolidated financial statements is as follows:

• End of term residual values of operating lease vehicles (note 3(f))

• Valuation of financial assets measured at amortized cost and debt securities classified into financial assets measured at fair value through other comprehensive income (notes 6, 7 and 8)

• Fair value of financial instruments (note 26)

• Net realizable value of inventories (note 9)

• Recoverable amount of non-financial assets (notes 11, 12 and 13)

• Measurement of provisions (note 17)

• Measurement of net defined benefit liabilities (assets) (note 18)

• Recoverability of deferred tax assets (note 23)

• Likelihood and magnitude of outflows of resources embodying economic benefits required to settle contingent liabilities (note 28)

(3) Significant Accounting Policies

(a) Basis of Consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries which are directly or indirectly controlled by the Company, and those structured entities which are controlled by Honda. All significant intercompany balances and transactions have been eliminated in consolidation.

Honda controls an entity when Honda is exposed or has rights to variable returns from involvement with the entity, and has the ability to affect those returns by using its power, which is the current ability to direct the relevant activities, over the entity. To determine whether or not Honda controls an entity, status of voting rights or similar rights, contractual agreements and other specific factors are taken into consideration.

Structured entities are entities designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. Honda consolidates structured entities over which it has control, by comprehensively determining whether its control over the entity exists based on any contractual arrangements with such entity as well as the percentage of its voting or similar rights in the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date when the control is obtained until the date when the control is lost. The financial statements of subsidiaries have been adjusted in order to ensure consistency with the accounting policies adopted by the Company as necessary.

Changes in the Company’s ownership interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. When control over a subsidiary is lost, the investment retained after the loss of control is remeasured at fair value as of the date of the loss of control, and any gain or loss on such remeasurement and disposal of the interest sold is recognized in profit or loss.

F-14

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(b) Investments in Affiliates and Joint Ventures (Investments Accounted for Using the Equity Method)

Affiliates are entities over which Honda has a significant influence over the decisions on financial and operating policies, but does not have control or joint control.

Joint ventures are joint arrangements whereby the parties including Honda that have joint control have rights to the net assets of the arrangement. Joint arrangements are arrangements of which two or more parties have joint control, and joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Investments in affiliates and joint ventures are accounted for using the equity method from the date when the investees are determined to be affiliates or joint ventures until the date when they ceased to be classified as affiliates or joint ventures. Under the equity method, the investment is initially recognized at cost, and the carrying amount is subsequently increased or decreased, to recognize Honda’s share of profit or loss and other comprehensive income of the affiliate or the joint venture after the date of initial recognition. The financial statements of affiliates and joint ventures have been adjusted in order to ensure consistency with the accounting policies adopted by the Company in applying the equity method, as necessary.

The use of the equity method is discontinued from the date when the investees are determined to be no longer affiliates or joint ventures. The investment retained after cessation of the equity method is remeasured at fair value, and any gain or loss on such remeasurement and disposal of the investment is recognized in profit or loss.

(c) Foreign Currency Translations

1) Foreign currency transactions

Foreign currency transactions are translated into the respective functional currencies at the exchange rates prevailing when such transactions occur. All foreign currency receivables and payables are translated into the respective functional currencies at the applicable exchange rates at the end of the reporting period. Gains or losses on exchange differences arising on settlement of foreign currency receivables and payables or on their translations at the end of the reporting date are recognized in profit or loss and they are included in finance income and finance costs-other, net in the consolidated statements of income.

2) Foreign operations

All assets and liabilities of foreign subsidiaries, affiliates and joint ventures (collectively “foreign operations”), which use a functional currency other than Japanese yen, are translated into Japanese yen at the exchange rates at the end of the reporting period. All revenues and expenses of foreign operations are translated into Japanese yen at the average exchange rate for the period except when a functional currency is the currency of a hyperinflationary economy. Exchange differences arising from translation are recognized in other comprehensive income and accumulated in other components of equity in the consolidated statements of financial position. When a foreign operation is disposed of, and control, significant influence or joint control over the foreign operation is lost, the cumulative amount of exchange differences relating to the foreign operation is reclassified from equity to profit or loss.

(d) Financial Instruments

A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity security of another entity. When Honda becomes a party to the contractual provision of a financial

F-15

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

instrument, the financial instrument is recognized either as a financial asset or as a financial liability. When Honda purchases or sells a financial asset, the financial asset is recognized or derecognized at the trade date.

1) Non-derivative financial assets

Honda classifies financial assets other than derivatives into “financial assets measured at amortized cost”, “financial assets measured at fair value through other comprehensive income” or “financial assets measured at fair value through profit or loss”. Honda determines the classification of financial assets upon initial recognition.

Financial assets are derecognized when the contractual rights to cash flows from the financial assets expire, or when the contractual rights to receive the cash flows from the financial assets are transferred and all risks and rewards of ownership of the financial assets are substantially transferred.

Financial assets measured at amortized cost

A financial asset is classified into financial assets measured at amortized cost when the asset is held within a business model whose objective is to hold the asset in order to collect the contractual cash flows, and the contractual term of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets measured at amortized cost except trade receivables arising from contracts with customers are initially measured at their fair value and trade receivables arising from contracts with customers are initially measured at their transaction price. Financial assets measured at amortized cost are subsequently measured at amortized cost using the effective interest method.

Financial assets measured at fair value

A financial asset other than a financial asset measured at amortized cost is classified into financial assets measured at fair value. The financial assets measured at fair value are further classified into the following categories:

Financial assets measured at fair value through other comprehensive income

A debt security is classified into financial assets measured at fair value through other comprehensive income when the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The debt securities are initially measured at their fair value, and subsequent changes in fair value are recognized in other comprehensive income except for impairment gain or loss and foreign exchange gain or loss. When the debt securities are derecognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Honda elects to designate investments in equity securities such as shares, held for maintaining and strengthening the trade relationship as financial assets measured at fair value through other comprehensive income. Equity securities designated as financial assets measured at fair value through other comprehensive income are initially measured at their fair value, and subsequent changes in fair value of the investment are recognized in other comprehensive income. However, dividends from the equity securities are principally recognized in profit or loss. When the equity securities are derecognized, the cumulative gain or loss previously recognized in other comprehensive income is directly reclassified to retained earnings.

F-16

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Financial assets measured at fair value through profit or loss

Financial assets measured at fair value other than financial assets measured at fair value through other comprehensive income are classified into financial assets measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss are initially measured at their fair value, and subsequent changes in fair value are recognized in profit or loss.

(Cash and cash equivalents)

Cash and cash equivalents consist of cash on hand, demand deposits, and short-term highly liquid investments that are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. Honda includes all highly liquid debt instruments with original maturities of three months or less in cash equivalents.

2) Non-derivative financial liabilities

Financial liabilities other than derivatives are initially measured at their fair value, and are subsequently measured at amortized cost using the effective interest method.

Financial liabilities are derecognized, when the obligations specified in the contract are discharged, canceled or expire.

3) Derivatives

Honda has entered into foreign exchange and interest rate agreements to manage currency and interest rate exposures. These agreements include foreign currency forward exchange contracts, currency option contracts, currency swap agreements and interest rate swap agreements.

All these derivatives are initially recognized as assets or liabilities and measured at fair value, when Honda becomes a party to the contractual provision of the derivatives. Subsequent changes in fair value of derivatives are recognized in profit or loss in the period of the changes.

Honda has not held any derivatives designated as hedging instruments for the years ended March 31, 2021, 2022 and 2023.

4) Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statements of financial position, only when Honda currently has a legally enforceable right to offset the recognized amounts, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(e) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes purchase costs and conversion costs, and it is determined principally by using the first-in first-out method. Conversion cost includes an appropriate share of production overheads on the normal operation capacity. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

F-17

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(f) Equipment on Operating Leases

Equipment on operating leases is measured based on the cost model and carried at its cost less accumulated depreciation and impairment losses.

A vehicle subject to operating lease is initially measured at its cost. Depreciation of equipment on operating leases is calculated on the straight-line method over the lease term. The depreciable amount is the cost of the vehicle less its residual value.

Our most significant finance subsidiary located in the United States determines contractual residual values of operating lease vehicles at lease inception based on expectations of used vehicle values at the end of their lease term. The finance subsidiary in the United States depreciates operating lease vehicles on a straight-line basis over the lease term to the lower of contract residual values or estimated end of term residual values. The finance subsidiary in the United States assesses its estimates for end of term residual values of lease vehicles, at minimum, on a quarterly basis. Adjustments to estimated residual values are made on a straight-line basis over the remaining term of the lease and are recognized as depreciation expense. Lease customers have the option at the end of the lease term to return the vehicle to the dealer or to buy the vehicle for the contractual residual value (or if purchased prior to lease maturity, for the outstanding contractual balance). Returned lease vehicles can be purchased by the grounding dealer for the contractual residual value (or if purchased prior to lease maturity, for the outstanding contractual balance) or a market based price. Returned lease vehicles that are not purchased by the grounding dealers are sold through online and physical auctions.

Estimated end of term residual values are dependent on the percentage of leased vehicles expected to be returned by lessees and the expected market values of leased vehicles at the end of their lease terms. Factors considered in this evaluation include, among other factors, economic conditions, external market information on new and used vehicles, historical trends, and recent auction values.

(g) Property, Plant and Equipment

Property, plant and equipment is measured based on the cost model and carried at its cost less accumulated depreciation and impairment losses.

Property, plant and equipment is initially measured at its cost. Subsequent expenditures on an item of property, plant and equipment acquired, are recognized in the carrying amount of the item, only when it is probable that the expenditure will generate a future economic benefit.

Depreciation of property, plant and equipment, except for land that is not subject to depreciation, is calculated on the straight-line method over the estimated useful life. The depreciable amount is the cost of the asset less the respective estimated residual values.

The estimated useful lives used in calculating depreciation of property, plant and equipment are mainly as follows:

• Buildings and structures: 3 to 50 years

• Machinery and equipment: 2 to 20 years

The depreciation method, useful lives and residual values of property, plant and equipment are reviewed annually at each fiscal year end, and adjusted prospectively, if appropriate.

F-18

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Property, plant and equipment in the consolidated statements of financial position includes right-of-use assets under lease arrangements. For the accounting for the right-of-use assets, see note “(3) Significant Accounting Policies (i) Lease.”

(h) Intangible Assets

Intangible assets are measured based on the cost model and carried at their cost less accumulated amortization and impairment losses.

(Research and development)

Development expenditure for a product is capitalized only when there is a technical and commercial feasibility of completing the development, Honda has intention, ability and sufficient resources to use the outcome of the development, it is probable that the outcome will generate a future economic benefit, and the cost can be measured reliably.

Capitalized development cost is measured at the sum of expenditures for development incurred between when the foregoing conditions for capitalization are initially met and when the development is completed, and includes all directly attributable costs to the development process. Capitalized development cost is amortized using the straight-line method over the expected product life cycle of the developed product ranging mainly from 2 to 6 years.

Expenditures on research and other development expenditures which do not meet the foregoing conditions are expensed as incurred.

(Other intangible asset)

Other intangible assets are initially measured at cost and principally amortized using the straight-line method over their estimated useful lives. Other intangible assets are mainly comprised of software for internal use whose estimated useful lives range from 3 to 5 years.

The amortization method and useful lives of intangible assets are reviewed annually at each fiscal year end, and adjusted prospectively, if appropriate.

(i) Lease

At inception of a contract, Honda assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When Honda has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use and the right to direct the use of the identified asset, the contract conveys the right to control the use of the identified asset.

1) Lease as a lessee

A right-of-use asset and a lease liability are recognized at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the amount of initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, any initial direct costs incurred by the lessee and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset. For a contract that contains a lease component and non-lease components, Honda has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

F-19

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The right-of-use asset is measured based on the cost model and carried at its cost less accumulated depreciation and impairment losses. After the initial recognition, depreciation of the right-of-use asset is subsequently calculated on the straight-line method from the commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term. The estimated useful lives of underlying assets, see note “(3) Significant Accounting Policies (g) Property, Plant and Equipment.”

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, Honda’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise mainly the fixed payments (including the lease payments in an optional renewal period if Honda is reasonably certain to exercise the extension option) and the penalties for termination of a lease unless Honda is reasonably certain not to terminate early.

After the initial recognition, the lease liability is measured by increasing the carrying amount to reflect interest that produces a constant periodic rate of interest on the remaining balance of the lease liability and reducing the carrying amount to reflect the lease payments. The lease liability is remeasured if Honda changes its assessment of whether it will exercise an extension or termination option.

When the lease liability is remeasured, the amount of the remeasurement of the lease liability is recognized as an adjustment to the right-of-use asset. However, if the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, any remaining amount of the remeasurement is recognized in profit or loss.

2) Lease as a lessor

For a contract that is, or contains a lease, the lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset and the lease other than finance lease is classified as an operating lease.

Honda assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

The finance subsidiaries of the Company engage in the business of leasing vehicles as a lessor. A receivable from customer held under a finance lease is initially recognized at the amount of net investment in the lease which is the gross investment in the lease discounted at the interest rate implicit in the lease, and included in receivables from financial services in the consolidated statements of financial position. Vehicles subject to operating leases are presented as equipment on operating leases in the consolidated statements of financial position.

If a contract contains lease and non-lease components, Honda applies IFRS 15 to allocate the consideration in the contract.

F-20

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(j) Impairment

1) Financial assets measured at amortized cost and debt securities classified into financial assets measured at fair value through other comprehensive income

The allowance for impairment losses of financial assets measured at amortized cost other than trade receivables and debt securities classified into financial assets measured at fair value through other comprehensive income is measured at amounts according to the three-stage expected credit loss (ECL) model:

Stage 1 12-month ECL for financial assets without a significant increase in credit risk since initial recognition

Stage 2 Lifetime ECL for financial assets with a significant increase in credit risk since initial recognition but that are not credit-impaired

Stage 3 Lifetime ECL for credit-impaired financial assets

The allowance for impairment losses of trade receivables is continuously measured at amounts equal to lifetime ECL.

Lifetime ECL represents ECL that results from all possible default events over the expected life of a financial asset. 12-month ECL is the portion of lifetime ECL that results from default events that are possible within 12 months after the reporting date. ECL is a probability-weighted estimate of the difference between the contractual cash flows and the cash flows that the entity expects to receive, discounted at the original effective interest rates.

Receivables from financial services – Allowance for credit losses

The allowance for credit losses is management’s estimate of expected credit loss on receivables from financial services.

To determine whether credit risk has increased significantly, consumer finance receivables are assessed both individually and collectively. Individual assessments are based on delinquencies. Consumer finance receivables 30 days or greater past due have historically experienced increased default rates and therefore are considered to have a significant increase in credit risk. Collective assessments are performed for groups of consumer finance receivables with shared risk characteristics such as the period of initial recognition, collateral type, original term, and credit score considering relative changes in expected default rates since initial recognition. Dealer finance receivables are assessed at the individual dealership level to determine whether credit risk has increased significantly considering payment performance and other factors such as changes in the financial condition of the dealership and compliance with debt covenants.

Our definition of default on receivables from financial services varies depending on internal risk management practices of each of our finance subsidiaries. Our most significant finance subsidiary located in the United States considers delinquencies of 60 days past due to be in default. Collection efforts on consumer finance receivables are escalated after becoming 60 days past due including repossession of the underlying vehicles if it has been determined that the borrower is unable to perform on their obligations. Defaulted consumer finance receivables are considered to be credit-impaired. Dealer finance receivables are considered to be credit-impaired when there is evidence we will be unable to collect all amounts due in accordance with the original contractual terms including significant financial difficulty of the dealership, a breach of contract, such as a default or delinquency, or bankruptcy.

F-21

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

At the finance subsidiary in the United States, the estimated uncollectible portion of consumer finance receivables are written-off at 120 days past due or upon repossession of the underlying vehicle. Although various statutory regulations limit the length of time and circumstances when enforcement activities can be taken, in general, the outstanding contractual balances continue to be subject to enforcement activities for several years after write-offs. The portion of outstanding contractual balances that is estimated to be uncollectible reflects our expectations of collections from enforcement activities. Dealer finance receivables are written-off when there is no reasonable expectation of recovery.

At the finance subsidiary in the United States, ECL of consumer finance receivables is measured for groups of financial assets with shared risk characteristics by reflecting historical results, current conditions and forward-looking factors such as unemployment rates, used vehicles prices, and consumer debt service burdens.

2) Non-financial assets and investments accounted for using the equity method

At the end of the reporting period, the carrying amount of non-financial assets other than inventories and deferred tax assets (which are comprised mainly of equipment on operating leases, property, plant and equipment, and intangible assets) is assessed to determine whether or not there is any indication of impairment. If there is such an indication, the recoverable amount of such asset is estimated and compared with the carrying amount of the asset, as test of impairment.

For investments accounted for using the equity method, the entire carrying amount of each investment in affiliates and joint ventures is tested for impairment as a single asset, when there is objective evidence that the investments accounted for using the equity method may be impaired.

The recoverable amount of an individual asset or a cash-generating unit is the higher of fair value less costs to sell and value in use. Value in use is determined as the present value of future cash flows expected to be derived from an asset or a cash-generating unit. A cash-generating unit is determined as the smallest identifiable group of assets that generate cash inflows which are largely independent of cash inflows from other assets or a group of assets. When it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is estimated.

When the carrying amount of an asset or a cash-generating unit exceeds the recoverable amount, the carrying amount is reduced to the recoverable amount and an impairment loss is recognized in profit or loss. An impairment loss for a cash-generating unit is allocated to the assets on the basis of the relative carrying amount of each asset in the unit.

An impairment loss recognized for an asset or a cash-generating unit in prior period is reversed, if there is any indication that the impairment loss may have decreased or may no longer exist, and when the recoverable amount of the asset exceeds the carrying amount. If this is the case, the carrying amount of the asset is increased to its recoverable amount, but the increased carrying amount does not exceed the carrying amount (net of depreciation or amortization) calculated on the basis that no impairment loss had occurred in the prior period.

(k) Provisions

Provisions are recognized when Honda has present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Provisions are measured based on the best estimate of expenditure required to settle the present obligation at the end of the reporting period. Where the effect of the time value of money is material, a provision is measured

F-22

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

at the present value of the expenditures required to settle the obligation. In calculating the present value, a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the liability is used as the discount rate.

(l) Employee Benefits

1) Short-term employee benefits

For short-term employee benefits including salaries, bonuses and paid annual leave, when the employees render related services, the amounts expected to be paid in exchange for those services are recognized as expenses.

2) Post-employment benefits

Honda has various post-employment benefit plans including defined benefit plans and defined contribution plans.

Defined benefit plans

For defined benefit plans, the present value of defined benefit obligations less the fair value of plan assets is recognized as either liability or asset in the consolidated statements of financial position.

The present value of defined benefit obligations and service cost are principally determined for each plan using the projected unit credit method. The discount rate is determined by reference to market yields at the end of the reporting period on high quality corporate bonds that are consistent with the currency and estimated term of the post-employment benefit obligation. Net interest on the net defined benefit liability (asset) for the reporting period is determined by multiplying the net defined benefit liability (asset) by the discount rate.

Past service cost defined as the change in the present value of the defined benefit obligation resulting from a plan amendment or curtailment is recognized in profit or loss upon occurrence of the plan amendment or curtailment.

Honda recognizes the difference arising from remeasurement of present value of the defined benefit obligations and the fair value of the plan assets in other comprehensive income when it is incurred, and reclassifies it immediately to retained earnings.

Defined contribution plans

For defined contribution plans, when the employees render related services, the contribution payables to defined contribution plan are recognized as expenses.

(m) Equity

1) Common share

Common share issued by the Company is classified as equity, and the proceeds from issuance of common share are included in common stock and capital surplus.

F-23

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

2) Treasury stock

Treasury stock acquired by Honda is recognized at cost and deducted from equity. When treasury stock is sold, the consideration received is recognized as equity with the difference between the carrying amount and the consideration received included in capital surplus.

(n) Revenue Recognition

1) Sale of products

Sales of products are reported by Motorcycle business, Automobile business, Power products and other businesses. For details of the information on each business, see note 4.

Honda recognizes revenue when control over products is transferred to customers. This transfer generally corresponds to the date of delivery of products to customers. Revenue is measured based on consideration specified in a contract with customer and excludes amounts collected on behalf of third parties. The total consideration in the contract is allocated to all products and services based on their stand-alone selling prices. The stand-alone selling prices are determined with reference to the selling prices of similar products or services and other reasonably available information.

Honda provides dealer incentives, which generally represent discounts provided from Honda to the dealer. Honda also provides incentive programs generally in the form of below-market interest rate loans or lease programs for the retail customers to enhance dealer’s sales activities. The amount incurred for these programs is calculated based on the difference between the interest or lease rate offered to retail customers and the market-based interest or lease rate. These incentives are considered variable consideration when determining the transaction price and they are deducted from sales revenue recognized when products are sold to the dealers. Sales revenue is recognized only to the extent that it is highly probable that a significant reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Customers usually pay consideration for sales of products within 30 days from the transfers of control over the products to customers.

In addition, product sales contracts with customers include warranty clauses to guarantee that the products comply with agreed-upon specifications and Honda recognizes provisions for product warranties to meet these guarantees. For more information on product warranties, see note 17.

2) Rendering of financial services

Interest income from receivables from financial services is recognized using the effective interest method. Finance receivable origination fees and certain direct origination costs are included in the calculation of the effective interest rate, and the net fee or cost is amortized using the effective interest method over the contractual term of the finance receivables.

The finance subsidiaries of the Company offer financial services that contain a lease. Interest income from receivables held under a finance lease is recognized using the effective interest method. When Honda is the manufacturer or dealer lessor, sales revenue and the corresponding cost for a portion identified as sale of products is recognized in profit or loss in accordance with the policy on revenue recognition for sale of products. Revenue from operating leases is recognized on a straight-line basis over the term of the lease.

F-24

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(o) Income Taxes

Income tax expenses are presented as the aggregate amount of current taxes and deferred taxes. Current taxes and deferred taxes are recognized in profit or loss, except for the tax arising from a transaction which is recognized either in other comprehensive income or directly in equity.

Current taxes are measured at the amount expected to be paid to (or recovered from) the taxation authorities in respect of the taxable profit (or tax loss) for the reporting period, using the tax rates and tax laws enacted or substantively enacted at the end of the reporting period.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the carrying amount of assets or liabilities in the consolidated statements of financial position and the tax base of the assets or liabilities and carryforward of unused tax losses and tax credits. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses, and unused tax credits can be utilized.

Deferred tax liabilities for taxable temporary differences related to investments in subsidiaries and affiliates, and interest in joint ventures are not recognized to the extent that Honda is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future. Deferred tax assets for deductible temporary differences arising from investments in subsidiaries and affiliates, and interest in joint ventures are recognized to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which they can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the assets are realized or the liabilities are settled, based on the tax rates and tax laws enacted or substantively enacted at the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which Honda expects, at the end of reporting period, to recover or settle the carrying amount of its assets and liabilities.

Honda reviews the carrying amount of deferred tax assets at the end of each reporting period, and reduces the carrying amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax assets to be utilized.

Deferred tax assets and deferred tax liabilities are offset, only when Honda has a legally enforceable right to set off current tax assets against current tax liabilities, and the same taxation authority levies income taxes either on the same taxable entity or on different taxable entity which intends either to settle current tax liabilities and assets on a net basis or to realize the assets and settle the liabilities simultaneously.

Honda reflects the effect of uncertainty in the consolidated financial statements if Honda concludes it is not probable that the taxation authority will accept the tax treatment.

Honda has adopted amendments to IAS 12 “International Tax Reform—Pillar Two Model Rules” issued on May 23, 2023, and has neither recognized nor disclosed information about deferred tax assets and liabilities related to the income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development(OECD), including tax law that implements qualified domestic minimum top-up taxes described in those rules.

(p) Earnings per Share

Basic earnings per share is calculated by dividing profit for the year attributable to owners of the parent by the weighted average number of common shares outstanding during the period.

F-25

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(4) Segment Information

Based on Honda’s organizational structure and characteristics of products and services, Honda discloses segment information in four categories: Reportable segments of Motorcycle business, Automobile business and Financial services business, and other segments that are not reportable. The other segments are combined and disclosed in Power products and other businesses. Segment information is based on the components of Honda for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The accounting policies used for segment information are consistent with the accounting policies used in the Company’s consolidated financial statements.

Principal products and services, and functions of each segment are as follows:

Segment	Principal products and services	Functions
Motorcycle Business	Motorcycles, all-terrain vehicles (ATVs), side-by-sides (SxS) and relevant parts	Research and development Manufacturing Sales and related services
Automobile Business	Automobiles and relevant parts	Research and development Manufacturing Sales and related services
Financial Services Business	Financial services	Retail loan and lease related to Honda products Others
Power Products and Other Businesses	Power products and relevant parts, and others	Research and development Manufacturing Sales and related services Others

F-26

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(a) Segment Information

Segment information as of and for the years ended March 31, 2021, 2022 and 2023 is as follows:

As of and for the year ended March 31, 2021

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business			Power Products and Other Businesses			Segment Total			Reconciling Items			Consolidated
Sales revenue:
External customers	¥	1,787,283	¥	8,567,205	¥	2,494,294		¥	321,737		¥	13,170,519		¥	—		¥	13,170,519
Intersegment		—		212,144		12,494			20,107			244,745			(244,745	)		—
Total		1,787,283		8,779,349		2,506,788			341,844			13,415,264			(244,745	)		13,170,519
Segment profit (loss)	¥	224,608	¥	90,255	¥	356,980		¥	(11,635	)	¥	660,208		¥	—		¥	660,208
Share of profit of investments accounted for using the equity method	¥	18,164	¥	254,079	¥	—		¥	491		¥	272,734		¥	—		¥	272,734
Segment assets		1,555,057		8,643,109		10,832,645			374,169			21,404,980			516,050			21,921,030
Investments accounted for using the equity method		88,476		796,036		—			6,490			891,002			—			891,002
Depreciation and amortization		68,258		515,241		825,975			15,644			1,425,118			—			1,425,118
Capital expenditures		48,800		500,431		2,006,264			11,609			2,567,104			—			2,567,104
Impairment losses on non-financial assets		726		19,999		(16,319	)		357			4,763			—			4,763
Provision (reversal) for credit and lease residual losses on receivables from financial services		—		—		(5,038	)		—			(5,038	)		—			(5,038	)

As of and for the year ended March 31, 2022

	Yen (millions)
	Motorcycle Business			Automobile Business		Financial Services Business		Power Products and Other Businesses			Segment Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	2,185,253		¥	9,147,498	¥	2,820,667	¥	399,278		¥	14,552,696	¥	—		¥	14,552,696
Intersegment		—			213,095		2,656		22,480			238,231		(238,231	)		—
Total		2,185,253			9,360,593		2,823,323		421,758			14,790,927		(238,231	)		14,552,696
Segment profit (loss)	¥	311,492		¥	236,207	¥	333,032	¥	(9,499	)	¥	871,232	¥	—		¥	871,232
Share of profit of investments accounted for using the equity method	¥	33,510		¥	168,415	¥	—	¥	587		¥	202,512	¥	—		¥	202,512
Segment assets		1,448,926			9,563,553		11,318,756		475,124			22,806,359		1,166,794			23,973,153
Investments accounted for using the equity method		104,535			855,309		—		7,560			967,404		—			967,404
Depreciation and amortization		65,423			510,755		883,712		17,018			1,476,908		—			1,476,908
Capital expenditures		49,203			410,169		2,028,700		15,748			2,503,820		—			2,503,820
Impairment losses on non-financial assets		(23	)		13,097		1,874		276			15,224		—			15,224
Provision (reversal) for credit and lease residual losses on receivables from financial services		—			—		9,282		—			9,282		—			9,282

F-27

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

As of and for the year ended March 31, 2023

	Yen (millions)
	Motorcycle Business		Automobile Business			Financial Services Business		Power Products and Other Businesses		Segment Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	2,908,983	¥	10,593,519		¥	2,954,098	¥	451,125	¥	16,907,725	¥	—		¥	16,907,725
Intersegment		—		188,198			2,046		25,307		215,551		(215,551	)		—
Total		2,908,983		10,781,717			2,956,144		476,432		17,123,276		(215,551	)		16,907,725
Segment profit (loss)	¥	488,709	¥	(16,629	)	¥	285,857	¥	22,832	¥	780,769	¥	—		¥	780,769
Share of profit of investments accounted for using the equity method	¥	49,119	¥	66,973		¥	—	¥	1,353	¥	117,445	¥	—		¥	117,445
Segment assets		1,580,521		10,082,519			11,197,017		480,166		23,340,223		1,329,844			24,670,067
Investments accounted for using the equity method		110,665		795,973			—		9,308		915,946		—			915,946
Depreciation and amortization		65,746		600,617			908,942		21,571		1,596,876		—			1,596,876
Capital expenditures		59,101		613,351			1,546,683		14,386		2,233,521		—			2,233,521
Impairment losses on non-financial assets		4,662		24,777			5,259		91		34,789		—			34,789
Provision (reversal) for credit and lease residual losses on receivables from financial services		—		—			27,018		—		27,018		—			27,018

Explanatory notes:

1. Segment profit (loss) of each segment is measured in a consistent manner with consolidated operating profit, which is profit before income taxes before share of profit of investments accounted for using the equity method and finance income and finance costs. Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable.

2. Segment assets of each segment are defined as total assets including investments accounted for using the equity method, derivatives, and deferred tax assets. Segment assets are based on those directly associated with each segment and those not directly associated with specific segments are allocated based on the most reasonable measures applicable except for the corporate assets described below.

3. Intersegment sales revenues are generally made at values that approximate arm’s-length prices.

4. Reconciling items include elimination of intersegment transactions and balances as well as unallocated corporate assets. Unallocated corporate assets, included in reconciling items as of March 31, 2021, 2022 and 2023 amounted to ¥696,327 million, ¥1,319,995 million and ¥1,462,656 million, respectively, which consist primarily of the Company’s cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

5. Provisions for product warranties accrued for the years ended March 31, 2021, 2022 and 2023 are ¥272,076 million, ¥118,378 million and ¥289,850 million, respectively. These are mainly included in Automobile business.

6. The amounts of write-down of inventories recognized as an expense for the years ended March 31, 2021, 2022 and 2023 are ¥28,420 million, ¥11,295 million and ¥8,400 million respectively. These are related to Automobile business and aircraft and aircraft engines, which are included in Power products and other businesses.

7. Right-of-use assets are not included in Capital expenditures.

F-28

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(b) Product or Service Groups Information

Sales revenue by product or service groups of Honda for the years ended March 31, 2021, 2022 and 2023 is as follows:

	Yen (millions)
	2021		2022		2023
Motorcycles and relevant parts	¥	1,658,871	¥	2,066,557	¥	2,742,572
All-terrain vehicles (ATVs), side-by-sides (SxS) and relevant parts		128,412		118,696		166,411
Automobiles and relevant parts		9,746,374		10,582,764		12,093,972
Financial services		1,315,125		1,385,401		1,453,645
Power products and relevant parts		257,237		294,577		360,385
Others		64,500		104,701		90,740
Total	¥	13,170,519	¥	14,552,696	¥	16,907,725

(c) Geographical Information

The sales revenue and carrying amounts of non-current assets other than financial instruments, deferred tax assets and net defined benefit assets based on the location of the Company and its subsidiaries as of and for the years ended March 31, 2021, 2022 and 2023 are as follows:

As of and for the year ended March 31, 2021

	Yen (millions)
	Japan		United States		Other Countries		Total
Sales revenue	¥	2,190,797	¥	6,291,857	¥	4,687,865	¥	13,170,519
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	3,050,270	¥	4,242,405	¥	1,641,793	¥	8,934,468

As of and for the year ended March 31, 2022

	Yen (millions)
	Japan		United States		Other Countries		Total
Sales revenue	¥	2,354,532	¥	6,728,800	¥	5,469,364	¥	14,552,696
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	3,036,832	¥	4,490,562	¥	1,768,697	¥	9,296,091

As of and for the year ended March 31, 2023

	Yen (millions)
	Japan		United States		Other Countries		Total
Sales revenue	¥	2,409,584	¥	7,905,936	¥	6,592,205	¥	16,907,725
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	2,937,148	¥	4,373,329	¥	1,728,475	¥	9,038,952

F-29

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(d) Supplemental Geographical Information

In addition to the disclosure required by IFRS, Honda provides the following supplemental information for the financial statements users:

Supplemental geographical information based on the location of the Company and its subsidiaries

As of and for the year ended March 31, 2021

	Yen (millions)
	Japan			North America		Europe		Asia		Other  Regions			Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	2,190,797		¥	7,081,264	¥	503,549	¥	2,966,814	¥	428,095		¥	13,170,519	¥	—		¥	13,170,519
Inter-geographic areas		1,677,038			399,573		178,300		491,965		6,400			2,753,276		(2,753,276	)		—
Total		3,867,835			7,480,837		681,849		3,458,779		434,495			15,923,795		(2,753,276	)		13,170,519
Operating profit (loss)	¥	(75,935	)	¥	455,888	¥	27,460	¥	251,886	¥	(5,034	)	¥	654,265	¥	5,943		¥	660,208
Assets	¥	5,295,475		¥	12,209,455	¥	677,066	¥	3,267,417	¥	482,918		¥	21,932,331	¥	(11,301	)	¥	21,921,030
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	3,050,270		¥	5,039,085	¥	60,790	¥	666,795	¥	117,528		¥	8,934,468	¥	—		¥	8,934,468

As of and for the year ended March 31, 2022

	Yen (millions)
	Japan		North America		Europe		Asia		Other  Regions		Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	2,354,532	¥	7,618,932	¥	602,695	¥	3,393,323	¥	583,214	¥	14,552,696	¥	—		¥	14,552,696
Inter-geographic areas		2,004,754		471,255		98,516		662,124		9,925		3,246,574		(3,246,574	)		—
Total		4,359,286		8,090,187		701,211		4,055,447		593,139		17,799,270		(3,246,574	)		14,552,696
Operating profit (loss)	¥	6,411	¥	501,073	¥	26,681	¥	339,129	¥	22,899	¥	896,193	¥	(24,961	)	¥	871,232
Assets	¥	5,318,033	¥	12,983,779	¥	597,473	¥	3,803,877	¥	619,998	¥	23,323,160	¥	649,993		¥	23,973,153
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	3,036,832	¥	5,334,121	¥	49,129	¥	706,562	¥	169,447	¥	9,296,091	¥	—		¥	9,296,091

F-30

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

As of and for the year ended March 31, 2023

	Yen (millions)
	Japan		North America		Europe			Asia		Other  Regions		Total		Reconciling Items			Consolidated
Sales revenue:
External customers	¥	2,409,584	¥	8,939,259	¥	675,728		¥	4,068,234	¥	814,920	¥	16,907,725	¥	—		¥	16,907,725
Inter-geographic areas		2,138,418		476,993		27,990			789,603		4,695		3,437,699		(3,437,699	)		—
Total		4,548,002		9,416,252		703,718			4,857,837		819,615		20,345,424		(3,437,699	)		16,907,725
Operating profit (loss)	¥	25,821	¥	258,805	¥	(2,556	)	¥	408,728	¥	58,935	¥	749,733	¥	31,036		¥	780,769
Assets	¥	5,306,084	¥	13,467,383	¥	648,614		¥	3,771,171	¥	690,904	¥	23,884,156	¥	785,911		¥	24,670,067
Non-current assets other than financial instruments, deferred tax assets and net defined benefit assets	¥	2,937,148	¥	5,192,731	¥	47,869		¥	685,311	¥	175,893	¥	9,038,952	¥	—		¥	9,038,952

Explanatory notes:

1. Major countries in each geographic area:

North America	United States, Canada, Mexico
Europe	United Kingdom, Germany, Belgium, Italy, France
Asia	Thailand, China, India, Vietnam, Malaysia
Other Regions	Brazil, Australia

2. Operating profit (loss) of each geographical region is measured in a consistent manner with consolidated operating profit, which is profit before income taxes before share of profit of investments accounted for using the equity method and finance income and finance costs.

3. Assets of each geographical region are defined as total assets including investments accounted for using the equity method, derivatives, and deferred tax assets.

4. Sales revenues between geographic areas are generally made at values that approximate arm’s-length prices.

5. Reconciling items include elimination of inter-geographic transactions and balances as well as unallocated corporate assets. Unallocated corporate assets, included in reconciling items as of March 31, 2021, 2022 and 2023 amounted to ¥696,327 million, ¥1,319,995 million and ¥1,462,656 million, respectively, which consist primarily of the Company’s cash and cash equivalents and financial assets measured at fair value through other comprehensive income.

(5) Cash and Cash Equivalents

Cash and cash equivalents as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022		2023
Cash and deposits	¥	2,654,447	¥	2,822,949
Cash equivalents		1,020,484		980,065
Total	¥	3,674,931	¥	3,803,014

Cash equivalents held by Honda mainly consist of money market funds and certificates of deposit.

F-31

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(6) Trade Receivables

Trade receivables are classified as financial assets measured at amortized cost.

Trade receivables as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022			2023
Trade accounts and notes receivable	¥	793,022		¥	900,312
Other		112,591			168,579
Allowance for impairment losses		(8,845	)		(8,620	)
Total	¥	896,768		¥	1,060,271

The changes in the allowance for impairment losses on trade receivables for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Yen (millions)
	2021			2022			2023
Balance at beginning of year	¥	11,302		¥	10,521		¥	8,845
Remeasurement	¥	516		¥	260		¥	297
Write-offs		(1,312	)		(2,648	)		(757	)
Exchange differences on translating foreign operations		15			712			235
Balance at end of year	¥	10,521		¥	8,845		¥	8,620

(7) Receivables from Financial Services

The finance subsidiaries of the Company provide various financial services to customers and dealers in order to support the sale of products. These receivables from financial services are categorized as follows:

Consumer finance receivables:

Retail receivables primarily consist of receivables from installment contracts with customers.

Finance lease receivables primarily consist of receivables from non-cancelable auto leases with customers.

Dealer finance receivables:

Wholesale receivables primarily consist of financing receivables from dealers for the purchase of inventories and dealer loans.

Receivables from financial services are mainly classified into financial assets measured at amortized cost.

F-32

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Receivables from financial services as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022			2023
Consumer finance receivables:
Retail	¥	5,054,428		¥	5,363,260
Finance lease		145,932			174,256
Dealer finance receivables:
Wholesale		284,506			421,166
Subtotal	¥	5,484,866		¥	5,958,682
Allowance for credit losses	¥	(39,063	)	¥	(48,652	)
Unearned interest income and fees		(11,307	)		(15,278	)
Total	¥	5,434,496		¥	5,894,752
Current assets	¥	1,694,113		¥	1,899,493
Non-current assets		3,740,383			3,995,259
Total	¥	5,434,496		¥	5,894,752

Finance lease receivables

The lease payments receivable under the finance leases by maturity as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022			2023
Within 1 year	¥	25,066		¥	32,525
Between 1 and 2 years		25,569			33,924
Between 2 and 3 years		13,192			20,381
Between 3 and 4 years		9,335			13,497
Between 4 and 5 years		2,153			4,020
Later than 5 years		1,827			5,008
Undiscounted lease payments receivable	¥	77,142		¥	109,355
Unearned finance income	¥	(4,603	)	¥	(8,417	)
Unguaranteed residual value	¥	62,086		¥	58,040
Net investment in the lease	¥	134,625		¥	158,978

For the nature of the lessor’s leasing activities and the risk management strategy, see note 3(i) and (j).

F-33

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Allowance for credit losses

The changes in the allowance for credit losses on receivables from financial services for the years ended March 31, 2021, 2022 and 2023 are as follows:

For the years ended March 31, 2021, 2022 and 2023

	Yen (millions)
	12-month ECL (Stage 1)			Lifetime ECL						Total
				Not credit-impaired (Stage 2)			Credit-impaired (Stage 3)
Retail:
Balance as of April 1, 2020	¥	26,655		¥	26,632		¥	6,954		¥	60,241
Remeasurement	¥	(3,286	)	¥	(20,319	)	¥	18,827		¥	(4,778	)
Write-offs					—			(20,733	)		(20,733	)
Exchange differences on translating foreign operations		111			(390	)		(165	)		(444	)
Balance as of March 31, 2021	¥	23,480		¥	5,923		¥	4,883		¥	34,286
Remeasurement	¥	(2,513	)	¥	(925	)	¥	13,701		¥	10,263
Write-offs		—			—			(12,256	)		(12,256	)
Exchange differences on translating foreign operations		2,822			516			1,136			4,474
Balance as of March 31, 2022	¥	23,789		¥	5,514		¥	7,464		¥	36,767
Remeasurement	¥	868		¥	5,288		¥	20,673		¥	26,829
Write-offs		—			—			(19,942	)		(19,942	)
Exchange differences on translating foreign operations		1,810			270			349			2,429
Balance as of March 31, 2023	¥	26,467		¥	11,072		¥	8,544		¥	46,083
Finance lease:
Balance as of April 1, 2020	¥	481		¥	96		¥	113		¥	690
Remeasurement	¥	(65	)	¥	71		¥	136		¥	142
Write-offs		—			—			(107	)		(107	)
Exchange differences on translating foreign operations		54			17			17			88
Balance as of March 31, 2021	¥	470		¥	184		¥	159		¥	813
Remeasurement	¥	(339	)	¥	(98	)	¥	182		¥	(255	)
Write-offs		—			—			(97	)		(97	)
Exchange differences on translating foreign operations		8			6			12			26
Balance as of March 31, 2022	¥	139		¥	92		¥	256		¥	487
Remeasurement	¥	49		¥	(28	)	¥	(24	)	¥	(3	)
Write-offs		—			—			(35	)		(35	)
Exchange differences on translating foreign operations		4			5			7			16
Balance as of March 31, 2023	¥	192		¥	69		¥	204		¥	465

F-34

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

	Yen (millions)
	12-month ECL (Stage 1)			Lifetime ECL						Total
				Not credit-impaired (Stage 2)			Credit-impaired (Stage 3)
Wholesale:
Balance as of April 1, 2020	¥	1,437		¥	318		¥	782		¥	2,537
Remeasurement	¥	160		¥	(270	)	¥	(292	)	¥	(402	)
Write-offs		—			—			18			18
Exchange differences on translating foreign operations		144			14			(44	)		114
Balance as of March 31, 2021	¥	1,741		¥	62		¥	464		¥	2,267
Remeasurement	¥	(649	)	¥	(46	)	¥	(31	)	¥	(726	)
Write-offs		—			—			30			30
Exchange differences on translating foreign operations		84			1			153			238
Balance as of March 31, 2022	¥	1,176		¥	17		¥	616		¥	1,809
Remeasurement	¥	(263	)	¥	(8	)	¥	463		¥	192
Write-offs		—			—			33			33
Exchange differences on translating foreign operations		63			1			6			70
Balance as of March 31, 2023	¥	976		¥	10		¥	1,118		¥	2,104
Total:
Balance as of April 1, 2020	¥	28,573		¥	27,046		¥	7,849		¥	63,468
Remeasurement	¥	(3,191	)	¥	(20,518	)	¥	18,671		¥	(5,038	)
Write-offs		—			—			(20,822	)		(20,822	)
Exchange differences on translating foreign operations		309			(359	)		(192	)		(242	)
Balance as of March 31, 2021	¥	25,691		¥	6,169		¥	5,506		¥	37,366
Remeasurement	¥	(3,501	)	¥	(1,069	)	¥	13,852		¥	9,282
Write-offs		—			—			(12,323	)		(12,323	)
Exchange differences on translating foreign operations		2,914			523			1,301			4,738
Balance as of March 31, 2022	¥	25,104		¥	5,623		¥	8,336		¥	39,063
Remeasurement	¥	654		¥	5,252		¥	21,112		¥	27,018
Write-offs		—			—			(19,944	)		(19,944	)
Exchange differences on translating foreign operations		1,877			276			362			2,515
Balance as of March 31, 2023	¥	27,635		¥	11,151		¥	9,866		¥	48,652

For more information on allowance for credit losses, see note 25(c).

F-35

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(8) Other Financial Assets

Other financial assets as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022			2023
Financial assets measured at amortized cost:
Receivables other than trade receivables and receivables from financial services	¥	166,936		¥	164,503
Debt securities		79,176			85,235
Guaranty deposits		11,499			12,689
Restricted cash		53,290			65,723
Other		4,352			4,167
Allowance for impairment losses		(3,212	)		(2,988	)
Financial assets measured at fair value through other comprehensive income:
Debt securities		19,984			26,555
Equity securities		468,783			475,138
Financial assets measured at fair value through profit or loss:
Derivatives		134,338			185,968
Debt securities		102,251			101,972
Total	¥	1,037,397		¥	1,118,962
Current assets	¥	217,743		¥	263,892
Non-current assets		819,654			855,070
Total	¥	1,037,397		¥	1,118,962

The changes in the allowance for impairment losses on other financial assets for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Yen (millions)
	2021			2022			2023
Balance at beginning of year	¥	3,364		¥	3,358		¥	3,212
Remeasurement	¥	792		¥	42		¥	232
Write-offs		(805	)		(191	)		(461	)
Exchange differences on translating foreign operations		7			3			5
Balance at end of year	¥	3,358		¥	3,212		¥	2,988

The allowance for impairment losses on other financial assets for the years ended March 31, 2021, 2022 and 2023 are mainly for credit-impaired financial assets.

F-36

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Major securities included in the equity securities designated as financial assets measured at fair value through other comprehensive income as of March 31, 2022 and 2023 are as follows:

As of March 31, 2022

	Yen (millions)
	Fair value
Contemporary Amperex Technology Co., Ltd.	¥	226,938
GM Cruise Holdings LLC		105,916
Stanley Electric Co., Ltd.		21,463
Mitsubishi UFJ Financial Group, Inc.		11,026
SES AI Corporation		8,307
Tokio Marine Holdings, Inc.		7,789

As of March 31, 2023

	Yen (millions)
	Fair value
Contemporary Amperex Technology Co., Ltd.	¥	181,366
GM Cruise Holdings LLC		115,556
Stanley Electric Co., Ltd.		49,051
Mitsubishi UFJ Financial Group, Inc.		12,296
Tokio Marine Holdings, Inc.		8,349
Chubb Limited		7,998

(9) Inventories

Inventories as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022		2023
Finished goods	¥	907,872	¥	1,154,926
Work in process		90,871		95,041
Raw materials		919,805		917,217
Total	¥	1,918,548	¥	2,167,184

The amounts of write-down of inventories recognized as an expense for the years ended March 31, 2021, 2022 and 2023 are ¥28,420 million, ¥11,295 million and ¥8,400 million, respectively.

F-37

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(10) Investments accounted for using the equity method

Honda’s equity in affiliates and joint ventures as of March 31, 2022 and 2023 is as follows:

	Yen (millions)
	2022		2023
Investments accounted for using the equity method:
Affiliates	¥	544,563	¥	499,942
Joint ventures		422,841		416,004
Total	¥	967,404	¥	915,946
Honda’s equity of undistributed earnings:
Affiliates	¥	177,231	¥	87,284
Joint ventures		279,288		259,675
Total	¥	456,519	¥	346,959

For the year ended March 31, 2023, for certain investments accounted for using the equity method with quoted market prices in active markets, the Company recognized impairment losses to the recoverable amounts based on the fair values because there was objective evidence of impairment due to declines in quoted market prices.

Furthermore, for certain investments accounted for using the equity method with no quoted market prices in active markets, the Company recognized impairment losses to the recoverable amounts based on the value in use because there was objective evidence of impairment where the transaction price in the share purchase agreement executed during the year ended March 31, 2023 was below the acquisition cost.

The Company recognized impairment losses of ¥68,545 million in total, which are included in share of profit of investments accounted for using the equity method in the consolidated statements of income and mainly included in Automobile business.

Honda’s share of comprehensive income of affiliates and joint ventures for the years ended March 31, 2021, 2022 and 2023 is as follows:

	Yen (millions)
	2021			2022			2023
Profit for the year:
Affiliates	¥	53,511		¥	(17,844	)	¥	(81,504	)
Joint ventures		219,223			220,356			198,949
Total	¥	272,734		¥	202,512		¥	117,445
Other comprehensive income:
Affiliates	¥	(1,197	)	¥	26,673		¥	25,920
Joint ventures		33,457			52,560			4,801
Total	¥	32,260		¥	79,233		¥	30,721
Comprehensive income for the year:
Affiliates	¥	52,314		¥	8,829		¥	(55,584	)
Joint ventures		252,680			272,916			203,750
Total	¥	304,994		¥	281,745		¥	148,166

F-38

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Investments accounted for using the equity method, Honda’s equity of undistributed earnings, profit for the year, other comprehensive income and comprehensive income for the year items include a joint venture that is material to the Company.

(Material joint venture)

Dongfeng Honda Automobile Co., Ltd. is a joint venture that is material to the Company. Dongfeng Honda Automobile Co., Ltd., located in Wuhan City, China, manufactures and sells automobile products. Honda and Dongfeng Motor Corporation each holds 50% equity stake in Dongfeng Honda Automobile Co., Ltd.

Summarized consolidated financial information of Dongfeng Honda Automobile Co., Ltd. as of March 31, 2022 and 2023 is as follows:

	Yen (millions)
	2022			2023
Current assets	¥	747,397		¥	615,524
Non-current assets		252,219			279,691
Total assets		999,616			895,215
Current liabilities		610,379			520,257
Non-current liabilities		34,182			31,680
Total liabilities		644,561			551,937
Total equity	¥	355,055		¥	343,278
Honda’s share of total equity (50%)		177,527			171,639
Equity method adjustments		(697	)		(636	)
Carrying amount of its interest in the joint venture	¥	176,830		¥	171,003
Cash and cash equivalents included in current assets	¥	301,839		¥	99,862
Financial liabilities (excluding trade payables and provisions) included in current liabilities		6,168			6,803

Summarized consolidated financial information of Dongfeng Honda Automobile Co., Ltd. for the years ended March 31, 2021, 2022 and 2023 is as follows:

	Yen (millions)
	2021		2022		2023
Sales revenue	¥	2,201,051	¥	1,994,534	¥	1,777,882
Interest income		9,412		10,653		8,441
Depreciation and amortization		23,055		25,996		28,052
Income tax expense		65,102		60,868		52,826
Profit for the year		197,217		182,989		157,914
Other comprehensive income		25,462		44,812		3,256
Comprehensive income for the year	¥	222,679	¥	227,801	¥	161,170
Comprehensive income for the year (50%)		111,340		113,901		80,585
Equity method adjustments		53		607		67
Honda’s share of comprehensive income for the year	¥	111,393	¥	114,508	¥	80,652
Dividend from the joint venture to Honda	¥	102,767	¥	79,191	¥	86,506

F-39

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Combined financial information in respect of affiliates as of March 31, 2022 and 2023, and for the years ended March 31, 2021, 2022 and 2023 is as follows:

	Yen (millions)
For the year ended March 31, 2021	Motorcycle Business		Automobile Business		Power Products and Other Businesses		Total
Sales revenue	¥	122,605	¥	1,933,675	¥	6,331	¥	2,062,611
Profit for the year		2,552		2,593		843		5,988

	Yen (millions)
As of and for the year ended March 31, 2022	Motorcycle Business		Automobile Business			Power Products and Other Businesses		Total
Current assets	¥	64,324	¥	1,542,414		¥	14,313	¥	1,621,051
Non-current assets		28,330		2,030,822			22,928		2,082,080
Total assets		92,654		3,573,236			37,241		3,703,131
Current liabilities		25,819		1,013,738			3,768		1,043,325
Non-current liabilities		5,003		583,308			1,065		589,376
Total liabilities		30,822		1,597,046			4,833		1,632,701
Total equity	¥	61,832	¥	1,976,190		¥	32,408	¥	2,070,430
Sales revenue	¥	173,696	¥	3,120,190		¥	7,146	¥	3,301,032
Profit for the year		7,233		73,169			996		81,398
	Yen (millions)
As of and for the year ended March 31, 2023	Motorcycle Business		Automobile Business			Power Products and Other Businesses		Total
Current assets	¥	64,051	¥	1,746,374		¥	18,441	¥	1,828,866
Non-current assets		25,654		2,050,459			24,110		2,100,223
Total assets		89,705		3,796,833			42,551		3,929,089
Current liabilities		29,887		1,205,478			4,319		1,239,684
Non-current liabilities		3,109		539,040			655		542,804
Total liabilities		32,996		1,744,518			4,974		1,782,488
Total equity	¥	56,709	¥	2,052,315		¥	37,577	¥	2,146,601
Sales revenue	¥	189,332	¥	3,800,943		¥	9,187	¥	3,999,462
Profit for the year		10,038		(45,204	)		1,901		(33,265	)

F-40

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Combined financial information in respect of joint ventures as of March 31, 2022 and 2023, and for the years ended March 31, 2021, 2022 and 2023 is as follows:

	Yen (millions)
For the year ended March 31, 2021	Motorcycle Business		Automobile Business		Power Products and Other Businesses		Total
Sales revenue	¥	543,504	¥	4,839,927	¥	3,443	¥	5,386,874
Profit for the year		33,115		403,088		174		436,377

	Yen (millions)
As of and for the year ended March 31, 2022	Motorcycle Business		Automobile Business		Power Products and Other Businesses		Total
Current assets	¥	272,962	¥	1,810,581	¥	4,771	¥	2,088,314
Non-current assets		130,271		479,707		909		610,887
Total assets		403,233		2,290,288		5,680		2,699,201
Current liabilities		227,215		1,513,623		1,704		1,742,542
Non-current liabilities		17,769		70,675		665		89,109
Total liabilities		244,984		1,584,298		2,369		1,831,651
Total equity	¥	158,249	¥	705,990	¥	3,311	¥	867,550
Sales revenue	¥	811,764	¥	4,612,394	¥	3,940	¥	5,428,098
Profit for the year		62,907		375,642		363		438,912
	Yen (millions)
As of and for the year ended March 31, 2023	Motorcycle Business		Automobile Business		Power Products and Other Businesses		Total
Current assets	¥	337,603	¥	1,579,996	¥	3,677	¥	1,921,276
Non-current assets		134,567		544,319		989		679,875
Total assets		472,170		2,124,315		4,666		2,601,151
Current liabilities		275,607		1,397,048		1,791		1,674,446
Non-current liabilities		23,272		74,136		2,184		99,592
Total liabilities		298,879		1,471,184		3,975		1,774,038
Total equity	¥	173,291	¥	653,131	¥	691	¥	827,113
Sales revenue	¥	1,071,031	¥	4,360,348	¥	6,022	¥	5,437,401
Profit for the year		93,766		304,119		1,779		399,664

The amounts of a joint venture that is material to the Company are included in above.

F-41

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(Management Integration)

Through tender offers (the “Tender Offers”) targeting our former affiliates accounted for using the equity method which were Keihin Corporation, Showa Corporation and Nissin Kogyo Co., Ltd. (collectively, the “Target Companies”) conducted by Honda from September 2, 2020 to October 15, 2020 and the subsequent procedures for demand for sale of shares pursuant to the provisions of Article 179 of the Company Law of Japan, Honda has obtained all of the common shares of the Target Companies (excluding the common shares of the Target Companies owned by Honda and treasury shares owned by the Target Companies) for the year ended March 31, 2021.

In accordance with the basic contract agreed between Hitachi, Ltd., Hitachi Automotive Systems, Ltd. (“Hitachi Automotive Systems”) which is a consolidated subsidiary of Hitachi, Ltd., the Target Companies and Honda on October 30, 2019 to conduct a management integration, agreements of absorption-type merger in which Hitachi Automotive Systems will be the surviving company, and the Target Companies will be the disappearing companies (the “Absorption-type Merger”) were respectively concluded between each of the Target Companies and Hitachi Automotive Systems on November 18, 2020.

In the Absorption-type Merger, common shares of the surviving company after the Absorption-type Merger (the “Integrated Company”) were allotted to Honda as the consideration for the merger, in a merger ratio where the number of voting rights of the Integrated Company held by Honda will account for 33.4% of the number of voting rights held by all shareholders of the Integrated Company. On January 1, 2021, the effective date of Absorption-type Merger, the Integrated Company became our affiliate accounted for using the equity method. As of the same date, the Integrated Company changed its name to “Hitachi Astemo, Ltd.”

Prior to the effective date of the Absorption-type Merger, in order to have the ratio of the total share value of the Target Companies to Hitachi Automotive Systems’ share value correspond to the above merger ratio, the share values of the Target Companies had been adjusted through acquisitions of treasury shares by the Target Companies.

For the year ended March 31, 2021, upon the successful completion of the Tender Offers for the Target Companies, the Company recognized reversal of impairment losses of ¥56,849 million which had been previously recognized on the investments in certain Target Companies accounted for using the equity method, based on quoted market values which had increased since the announcement of the Tender Offers. The reversal of impairment losses is included in share of profit of investments accounted for using the equity method in the consolidated statements of income and mainly included in Automobile business. For the year ended March 31, 2022 and 2023, the Company did not recognize any significant reversal of impairment losses.

F-42

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(11) Equipment on Operating Leases

Equipment on operating leases are mainly vehicles.

The changes in cost, accumulated depreciation and impairment losses, and the carrying amounts of equipment on operating leases for the years ended March 31, 2022 and 2023 are as follows:

(Cost)

	Yen (millions)
Balance as of April 1, 2021	¥	6,302,709
Additions	¥	2,026,098
Sales or disposal		(2,171,117	)
Exchange differences on translating foreign operations		509,447
Other		—
Balance as of March 31, 2022	¥	6,667,137
Additions	¥	1,543,448
Sales or disposal		(2,357,684	)
Exchange differences on translating foreign operations		414,052
Other		—
Balance as of March 31, 2023	¥	6,266,953

(Accumulated depreciation and impairment losses)

	Yen (millions)
Balance as of April 1, 2021	¥	(1,382,793	)
Depreciation	¥	(879,196	)
Sales or disposal		856,835
Exchange differences on translating foreign operations		(100,982	)
Other		(1,872	)
Balance as of March 31, 2022	¥	(1,508,008	)
Depreciation	¥	(904,778	)
Sales or disposal		955,122
Exchange differences on translating foreign operations		(77,740	)
Other		(5,257	)
Balance as of March 31, 2023	¥	(1,540,661	)

(Carrying amount)

	Yen (millions)
Balance as of March 31, 2022	¥	5,159,129
Balance as of March 31, 2023		4,726,292

F-43

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(Future lease payments)

Future lease payments expected to be received under the operating leases by maturity as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022		2023
Within 1 year	¥	824,769	¥	737,110
Between 1 and 2 years		574,536		458,830
Between 2 and 3 years		240,437		220,722
Between 3 and 4 years		84,911		78,727
Between 4 and 5 years		27,796		25,641
Later than 5 years		—		10,148
Total	¥	1,752,449	¥	1,531,178

Future lease payments expected to be received as shown above should not necessarily be considered indicative of future cash collections.

(Lease income)

Operating leases income for the years ended March 31, 2022 and 2023 are ¥1,134,898 million and ¥1,152,964 million, respectively.

(12) Property, Plant and Equipment

The changes in cost, accumulated depreciation and impairment losses, and the carrying amounts of property, plant and equipment for the years ended March 31, 2022 and 2023 are as follows:

(Cost)

	Yen (millions)
	Land			Buildings and structures			Machinery and equipment			Construction in progress			Total
Balance as of April 1, 2021	¥	628,724		¥	2,558,905		¥	5,687,117		¥	217,198		¥	9,091,944
Additions		8,473			26,268			102,835			229,253			366,829
Reclassification		387			28,766			199,242			(228,395	)		—
Sales or disposal		(4,151	)		(33,722	)		(275,348	)		—			(313,221	)
Exchange differences on translating foreign operations		11,585			123,536			429,662			21,124			585,907
Other		454			(5,487	)		4,421			(1,606	)		(2,218	)
Balance as of March 31, 2022	¥	645,472		¥	2,698,266		¥	6,147,929		¥	237,574		¥	9,729,241
Additions		10,366			35,335			87,630			444,732			578,063
Reclassification		4,198			47,021			476,942			(528,161	)		—
Sales or disposal		(9,980	)		(80,024	)		(297,580	)		—			(387,584	)
Deconsolidation		(3,580	)		(19,932	)		(82,733	)		(3,384	)		(109,629	)
Exchange differences on translating foreign operations		7,167			84,744			285,024			16,047			392,982
Other		275			(6,556	)		(1,572	)		(2,029	)		(9,882	)
Balance as of March 31, 2023	¥	653,918		¥	2,758,854		¥	6,615,640		¥	164,779		¥	10,193,191

F-44

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(Accumulated depreciation and impairment losses)

	Yen (millions)
	Land			Buildings and structures			Machinery and equipment			Construction in progress			Total
Balance as of April 1, 2021	¥	(16,609	)	¥	(1,496,313	)	¥	(4,555,420	)	¥	(2,088	)	¥	(6,070,430	)
Depreciation		(7,087	)		(88,928	)		(342,254	)		—			(438,269	)
Sales or disposal		1,403			22,920			251,628			—			275,951
Exchange differences on translating foreign operations		(235	)		(68,557	)		(344,775	)		(19	)		(413,586	)
Other		(391	)		(2,324	)		(1,889	)		1,104			(3,500	)
Balance as of March 31, 2022	¥	(22,919	)	¥	(1,633,202	)	¥	(4,992,710	)	¥	(1,003	)	¥	(6,649,834	)
Depreciation		(6,025	)		(96,136	)		(410,340	)		—			(512,501	)
Sales or disposal		6,090			72,290			274,535			—			352,915
Deconsolidation		2,580			18,743			80,882			3,384			105,589
Exchange differences on translating foreign operations		(87	)		(48,748	)		(245,648	)		126			(294,357	)
Other		(2,863	)		(7,768	)		(12,857	)		(3,406	)		(26,894	)
Balance as of March 31, 2023	¥	(23,224	)	¥	(1,694,821	)	¥	(5,306,138	)	¥	(899	)	¥	(7,025,082	)

(Carrying amount)

	Yen (millions)
	Land		Buildings and structures		Machinery and equipment		Construction in progress		Total
Balance as of March 31, 2022	¥	622,553	¥	1,065,064	¥	1,155,219	¥	236,571	¥	3,079,407
Balance as of March 31, 2023		630,694		1,064,033		1,309,502		163,880		3,168,109

For commitments for purchases of property, plant and equipment, see note 28.

(Right-of-use Assets)

Property, plant and equipment in the consolidated statements of financial position includes the right-of-use assets under lease arrangements, which are mainly included in Automobile business.

Honda leases mainly dealer’s stores, company housing and parking lots, under arrangements that often contain extension and termination options. Since lease contracts are managed at each company and individually negotiated, the lease contracts include various terms. Extension and termination options are included mainly in order to enhance operational flexibly of each company.

F-45

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The changes in the carrying amounts of the right-of-use assets for the years ended March 31, 2022 and 2023 are as follows:

	Yen (millions)
	Land			Buildings and structures			Machinery and equipment			Total
Balance as of April 1, 2021	¥	80,543		¥	135,303		¥	79,484		¥	295,330
Additions		8,283			18,952			61,189			88,424
Depreciation		(7,087	)		(15,882	)		(45,326	)		(68,295	)
Other		(102	)		(8,192	)		535			(7,759	)
Balance as of March 31, 2022	¥	81,637		¥	130,181		¥	95,882		¥	307,700
Additions		10,386			30,294			43,474			84,154
Depreciation		(6,025	)		(15,887	)		(51,193	)		(73,105	)
Other		370			(8,529	)		(2,245	)		(10,404	)
Balance as of March 31, 2023	¥	86,368		¥	136,059		¥	85,918		¥	308,345

(13) Intangible Assets

The changes in cost, accumulated amortization and impairment losses, and carrying amounts of intangible assets for the years ended March 31, 2022 and 2023 are as follows:

(Cost)

	Yen (millions)
	Capitalized development costs			Software			Other			Total
Balance as of April 1, 2021	¥	1,108,616		¥	429,222		¥	60,905		¥	1,598,743
Additions	¥	—		¥	8,597		¥	11,235		¥	19,832
Internally developed		159,174			20,311			—			179,485
Sales or disposal		(118,065	)		(15,760	)		(12,966	)		(146,791	)
Exchange differences on translating foreign operations		6,565			22,365			6,057			34,987
Other		—			(2,484	)		(339	)		(2,823	)
Balance as of March 31, 2022	¥	1,156,290		¥	462,251		¥	64,892		¥	1,683,433
Additions	¥	—		¥	12,163		¥	35,103		¥	47,266
Internally developed		120,811			28,088			—			148,899
Sales or disposal		(267,115	)		(5,107	)		(9,741	)		(281,963	)
Exchange differences on translating foreign operations		4,280			15,870			3,503			23,653
Other		—			4,285			(336	)		3,949
Balance as of March 31, 2023	¥	1,014,266		¥	517,550		¥	93,421		¥	1,625,237

F-46

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(Accumulated amortization and impairment losses)

	Yen (millions)
	Capitalized development costs			Software			Other			Total
Balance as of April 1, 2021	¥	(437,213	)	¥	(329,104	)	¥	(13,663	)	¥	(779,980	)
Amortization	¥	(129,384	)	¥	(29,290	)	¥	(769	)	¥	(159,443	)
Sales or disposal		118,065			15,003			3,447			136,515
Exchange differences on translating foreign operations		(1,288	)		(17,442	)		(906	)		(19,636	)
Other		(12,821	)		1,364			75			(11,382	)
Balance as of March 31, 2022	¥	(462,641	)	¥	(359,469	)	¥	(11,816	)	¥	(833,926	)
Amortization	¥	(149,659	)	¥	(29,058	)	¥	(880	)	¥	(179,597	)
Sales or disposal		267,115			4,693			938			272,746
Exchange differences on translating foreign operations		(719	)		(12,893	)		(758	)		(14,370	)
Other		—			(1,036	)		1,846			810
Balance as of March 31, 2023	¥	(345,904	)	¥	(397,763	)	¥	(10,670	)	¥	(754,337	)

(Carrying amount)

	Yen (millions)
	Capitalized development costs		Software		Other		Total
Balance as of March 31, 2022	¥	693,649	¥	102,782	¥	53,076	¥	849,507
Balance as of March 31, 2023		668,362		119,787		82,751		870,900

Amortization of capitalized development costs is included in research and development, and amortization of other intangible assets is included in cost of sales, selling, general and administrative, and research and development in the consolidated statements of income.

For commitments for purchases of intangible assets, see note 28.

(14) Trade Payables

Trade payables are classified as financial liabilities measured at amortized cost.

Trade payables as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022		2023
Trade accounts and notes payable	¥	1,047,623	¥	1,181,893
Other		188,610		244,440
Total	¥	1,236,233	¥	1,426,333

 

F-47

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(15) Financing Liabilities

Financing liabilities are classified as financial liabilities measured at amortized cost.

Financing liabilities presented in current liabilities as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022		2023
Current:
Commercial paper	¥	421,801	¥	965,468
Loans		434,675		358,874
Asset-backed securities		50,067		41,433
Subtotal	¥	906,543	¥	1,365,775
Reclassification from non-current liabilities (Current portion)	¥	2,211,761	¥	1,925,420
Total	¥	3,118,304	¥	3,291,195

The weighted average interest rates for financing liabilities presented in current liabilities (excluding reclassification from non-current liabilities) as of March 31, 2022 and 2023 are as follows:

	2022			2023
Weighted average interest rate		1.01	%		4.29	%

Financing liabilities presented in non-current liabilities as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022			2023
Non-current:
Loans	¥	1,026,769		¥	958,836
Medium-term notes		3,996,486			3,359,462
Corporate bonds		1,035,379			1,001,187
Asset-backed securities		1,137,379			979,908
Subtotal	¥	7,196,013		¥	6,299,393
Reclassification to current liabilities (Current portion)	¥	(2,211,761	)	¥	(1,925,420	)
Total	¥	4,984,252		¥	4,373,973

The interest rate range and payment due date for financing liabilities presented in non-current liabilities (including reclassification to current liabilities) as of March 31, 2022 and 2023 are as follows:

	2022	2023
Loans	Interest rate: 0.07% - 11.75% Due: 2022 - 2046	Interest rate: 0.14% - 12.90% Due: 2023 - 2046
Medium-term notes	Interest rate: 0.30% - 3.63% Due: 2022 - 2031	Interest rate: 0.30% - 5.88% Due: 2023 - 2031
Corporate bonds	Interest rate: 0.01% - 2.97% Due: 2022 - 2032	Interest rate: 0.01% - 2.97% Due: 2023 - 2032
Asset-backed securities	Interest rate: 0.11% - 3.30% Due: 2022 - 2025	Interest rate: 0.11% - 5.50% Due: 2023 - 2028

F-48

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(Pledged assets)

Pledged assets for financing liabilities as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Trade receivables	¥	15,298	¥	20,811
Receivables from financial services		1,101,778		944,414
Equipment on operating leases		142,097		133,936
Property, plant and equipment		2,548		2,293
Total	¥	1,261,721	¥	1,101,454

Receivables from financial services and equipment on operating leases are pledged as collateral for liabilities related to asset-backed securities transactions. Other items are mainly pledged as collateral for secured bank loans.

As is customary in Japan, bank loans are extended under general agreements which provide that security and guarantees for present and future indebtedness will be given upon request of the bank, and that the bank shall have the right to offset cash deposits against obligations that have become due or, in the event of default, against all obligations due to the bank.

(Reconciliation of liabilities arising from financing activities)

The changes in liabilities arising from financing activities for the years ended March 31, 2021, 2022 and 2023 are as follows:

For the year ended March 31, 2021

	Yen (millions)
	Balance as of April 1, 2020		Cash flows from financing activities			Cash flows from operating activities			Non-cash changes											Balance as of March 31, 2021
									Acquisitions		Changes in foreign currency exchange rates			Changes in fair value			Other
Short-term financing liabilities	¥	1,424,667	¥	(179,512	)	¥	—		¥	—	¥	55,337		¥	—		¥	(1,145	)	¥	1,299,347
Long-term financing liabilities		6,045,019		149,807			—			—		222,565			—			4,247			6,421,638
Lease liabilities		330,040		(67,628	)		—			67,716		4,346			—			(17,045	)		317,429
Derivative financial liabilities (assets)*		11,615		599			(5,446	)		—		(1,705	)		(38,946	)		—			(33,883	)
Total	¥	7,811,341	¥	(96,734	)	¥	(5,446	)	¥	67,716	¥	280,543		¥	(38,946	)	¥	(13,943	)	¥	8,004,531

F-49

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the year ended March 31, 2022

	Yen (millions)
	Balance as of April 1, 2021			Cash flows from financing activities			Cash flows from operating activities			Non-cash changes									Balance as of March 31, 2022
										Acquisitions		Changes in foreign currency exchange rates		Changes in fair value		Other
Short-term financing liabilities	¥	1,299,347		¥	(472,420	)	¥	—		¥	—	¥	78,863	¥	—	¥	753		¥	906,543
Long-term financing liabilities		6,421,638			238,060			—			—		526,822		—		9,493			7,196,013
Lease liabilities		317,429			(80,165	)		—			84,413		6,096		—		(9,015	)		318,758
Derivative financial liabilities (assets)*		(33,883	)		3,202			(1,296	)		—		3,217		67,396		—			38,636
Total	¥	8,004,531		¥	(311,323	)	¥	(1,296	)	¥	84,413	¥	614,998	¥	67,396	¥	1,231		¥	8,459,950

For the year ended March 31, 2023

	Yen (millions)
	Balance as of April 1, 2022		Cash flows from financing activities			Cash flows from operating activities			Non-cash changes									Balance as of March 31, 2023
									Acquisitions		Changes in foreign currency exchange rates		Changes in fair value		Other
Short-term financing liabilities	¥	906,543	¥	442,534		¥	—		¥	—	¥	27,055	¥	—	¥	(10,357	)	¥	1,365,775
Long-term financing liabilities		7,196,013		(1,356,965	)		—			—		459,754		—		591			6,299,393
Lease liabilities		318,758		(78,297	)		—			79,202		3,675		—		(7,380	)		315,958
Derivative financial liabilities (assets)*		38,636		(54,158	)		(8,641	)		—		3,718		85,721		—			65,276
Total	¥	8,459,950	¥	(1,046,886	)	¥	(8,641	)	¥	79,202	¥	494,202	¥	85,721	¥	(17,146	)	¥	8,046,402

Explanatory note:

* Derivative financial liabilities (assets) are held by the Company and its finance subsidiaries to hedge foreign currency risk for principals and interests payment of long-term financing liabilities. The cash flows related to repayments of principals are included in cash flows from financing activities, while the cash flows related to interest paid are included in cash flows from operating activities.

F-50

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(16) Other Financial Liabilities

Other financial liabilities as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
	2022		2023
Financial liabilities measured at amortized cost	¥	48,283	¥	53,920
Financial liabilities measured at fair value through profit or loss:
Derivatives		151,942		242,968
Lease liabilities		318,758		315,958
Total	¥	518,983	¥	612,846
Current liabilities	¥	236,900	¥	324,110
Non-current liabilities		282,083		288,736
Total	¥	518,983	¥	612,846

(17) Provisions

The components of and changes in provisions for the year ended March 31, 2023 are as follows:

	Yen (millions)
	Product warranties*			Other			Total
Balance as of April 1, 2022	¥	419,201		¥	102,812		¥	522,013
Provision	¥	289,850		¥	27,766		¥	317,616
Write-offs		(160,757	)		(30,887	)		(191,644	)
Reversal		(33,070	)		(8,624	)		(41,694	)
Exchange differences on translating foreign operations		19,875			6,704			26,579
Balance as of March 31, 2023	¥	535,099		¥	97,771		¥	632,870

Current liabilities and non-current liabilities of provisions as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Current liabilities	¥	268,388	¥	362,701
Non-current liabilities		253,625		270,169
Total	¥	522,013	¥	632,870

Explanatory note:

* Honda recognizes provisions for product warranties to cover future product warranty expenses. Honda recognizes costs for general warranties on products Honda sells and for specific warranty programs, including product recalls. Honda recognizes general estimated warranty costs at the time products are sold to customers. Honda also recognizes specific estimated warranty program costs when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. These provisions are estimated based on historical warranty claim experience with consideration given to the expected level of future warranty costs, including current sales trends, the expected number of units to be affected and the estimated average repair cost per unit for warranty claims. Provisions for product warranties are utilized for expenditures based on the demand from customers and dealers.

F-51

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(18) Employee Benefits

(a) Post-employment Benefits

Honda has various pension plans covering substantially all of its employees in Japan and certain employees in foreign countries. The Company and its Japanese subsidiaries provide plans similar to a cash balance pension plan or other defined benefit pension plans in accordance with the Defined-Benefit Corporate Pension Act of Japan. The Company and some of its subsidiaries have retirement pension benefit plans as well as lump-sum retirement benefit plans, in which the amount of benefits is basically determined based on the level of salary, service years, and other factors. In addition, certain consolidated subsidiaries in North America provide mainly health care and life insurance benefits to retired employees.

The Company’s pension plans are administered by the Honda Pension Fund (the Fund) which is legally independent of the Company. The Director of the Fund has the fiduciary duty to comply with laws, the directives by the Minister of Health, Labour and Welfare, and the Director-Generals of Regional Bureaus of Health and Welfare made pursuant to those laws, and the by-laws of the Fund and the decisions made by the Board of Representatives of the Fund. The Company is required to make contributions to the Fund and obligated to make contributions in the amount stipulated by the Fund. Contributions are also regularly reviewed and adjusted as necessary to the extent permitted by laws and regulations.

Certain consolidated subsidiaries in North America amended their health care benefits which are provided to retired employees to eliminate certain plans and reduce the scope of the persons eligible for the benefits, and implemented a voluntary retirement opportunity program to streamline the workforce with the future of Honda’s business for the year ended March 31, 2021. The plan amendment and the implementation of the voluntary retirement opportunity program resulted in recognition of the past service cost to profit or loss for the year ended March 31, 2021.

F-52

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

1) Defined benefit obligations and plan assets

The changes in present value of defined benefit obligations and fair value of plan assets of the Company and certain of its consolidated subsidiaries for the years ended March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022						2023
	Japanese plans			Foreign plans			Japanese plans			Foreign plans
Present value of defined benefit obligations:
Balance at beginning of year	¥	1,305,054		¥	1,104,894		¥	1,262,245		¥	1,087,526
Current service cost		35,045			22,351			30,632			22,555
Past service cost		—			—			—			—
Interest cost		8,360			29,822			9,732			40,151
Plan participants’ contributions		—			3,657			—			4,165
Remeasurements:
Changes in demographic assumptions		6,346			(777	)		(3,387	)		(317	)
Changes in financial assumptions		(25,500	)		(85,754	)		(71,936	)		(220,863	)
Other		5,502			(3,603	)		12,291			38,427
Benefits paid		(72,562	)		(82,561	)		(63,085	)		(116,150	)
Deconsolidation		—			—			(15,765	)		—
Exchange differences on translating foreign operations		—			99,497			—			70,467
Balance at end of year	¥	1,262,245		¥	1,087,526		¥	1,160,727		¥	925,961
Fair value of plan assets:
Balance at beginning of year	¥	1,365,509		¥	910,436		¥	1,355,276		¥	1,013,050
Interest income		8,865			24,981			10,589			37,211
Actual return on plan assets, excluding interest income		21,172			50,833			(76,690	)		(137,659	)
Employer contributions		20,484			17,404			20,409			21,178
Plan participants’ contributions		—			3,657			—			4,165
Benefits paid		(60,754	)		(82,561	)		(58,544	)		(116,150	)
Deconsolidation		—			—			(14,285	)		—
Exchange differences on translating foreign operations		—			88,300			—			58,180
Balance at end of year	¥	1,355,276		¥	1,013,050		¥	1,236,755		¥	879,975
Effects of asset ceiling		—			35,321			—			62,516
Net defined benefit liabilities (assets)	¥	(93,031	)	¥	109,797		¥	(76,028	)	¥	108,502

Retirement benefit assets included in net defined benefit liabilities (assets) as of March 31, 2022 and 2023 are ¥216,604 million and ¥180,700 million, respectively, which are presented in other non-current assets in the consolidated statements of financial position.

F-53

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

2) Fair value of plan assets

Honda’s investment policies for the Japanese and foreign pension plan assets are designed to maximize total medium-to-long term returns that are available to provide future payments of pension benefits to eligible participants under accepted risks. Plan assets are invested in well-diversified Japanese and foreign individual equity and debt securities using target asset allocations, consistent with accepted tolerance for risks. Honda sets target asset allocations for each asset category with future anticipated performance over medium-to-long term periods based on the expected returns, long-term risks and historical returns. Target asset allocations are adjusted as necessary when there are significant changes in the investment environment of plan assets.

The fair value of the Japanese and foreign pension plan assets by asset category as of March 31, 2022 and 2023 is as follows:

As of March 31, 2022

	Yen (millions)
	Japanese plans								Foreign plans
	Market price in active market								Market price in active market
	Quoted		Unquoted			Total			Quoted		Unquoted		Total
Cash and cash equivalents	¥	56,192	¥	—		¥	56,192		¥	15,147	¥	—	¥	15,147
Equity securities:
Japan		32,349		—			32,349			9,483		—		9,483
United States		260,424		58			260,482			72,349		—		72,349
Other		248,143		276			248,419			51,606		—		51,606
Debt securities:
Japan		65,388		—			65,388			—		575		575
United States		2,795		150,494			153,289			—		81,155		81,155
Other		173,477		71,516			244,993			—		7,100		7,100
Group annuity insurance:
General accounts		—		40,008			40,008			—		—		—
Separate accounts		—		22,317			22,317			—		—		—
Pooled funds:
Real estate funds		—		402			402			—		87,540		87,540
Private equity funds		—		—			—			—		191,196		191,196
Hedge funds		—		145,474			145,474			—		34,341		34,341
Commingled and other mutual funds		1,798		129,080			130,878			4,732		425,668		430,400
Other		67		(44,982	)		(44,915	)		61		32,097		32,158
Total	¥	840,633	¥	514,643		¥	1,355,276		¥	153,378	¥	859,672	¥	1,013,050

F-54

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

As of March 31, 2023

	Yen (millions)
	Japanese plans						Foreign plans
	Market price in active market						Market price in active market
	Quoted		Unquoted		Total		Quoted		Unquoted		Total
Cash and cash equivalents	¥	20,230	¥	—	¥	20,230	¥	6,929	¥	—	¥	6,929
Equity securities:
Japan		22,388		—		22,388		398		—		398
United States		195,611		—		195,611		13,794		—		13,794
Other		171,921		153		172,074		7,413		—		7,413
Debt securities:
Japan		66,416		862		67,278		—		768		768
United States		35,338		136,352		171,690		—		114,757		114,757
Other		152,213		89,536		241,749		—		10,656		10,656
Group annuity insurance:
General accounts		—		40,942		40,942		—		—		—
Separate accounts		—		23,130		23,130		—		—		—
Pooled funds:
Real estate funds		—		398		398		—		73,017		73,017
Private equity funds		—		—		—		—		162,414		162,414
Hedge funds		—		117,422		117,422		—		26,061		26,061
Commingled and other mutual funds		1,419		151,752		153,171		—		454,352		454,352
Other		54		10,618		10,672		263		9,153		9,416
Total	¥	665,590	¥	571,165	¥	1,236,755	¥	28,797	¥	851,178	¥	879,975

3) Actuarial assumptions

The significant actuarial assumptions used to determine the present value of defined benefit obligations as of March 31, 2022 and 2023 are as follows:

	2022						2023
	Japanese plans			Foreign plans			Japanese plans			Foreign plans
Discount rate		0.8	%		2.8 - 4.0	%		1.2	%		4.8 - 5.1	%
Rate of salary increase		1.5	%		2.0 - 3.6	%		1.6	%		2.0 - 4.4	%

4) Sensitivity analysis

The effects on defined benefit obligations of 0.5% increase or decrease in the discount rate as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022				2023
	Japanese plans		Foreign plans		Japanese plans		Foreign plans
0.5% decrease	¥	93,079 increase	¥	86,569 increase	¥	80,821 increase	¥	57,236 increase
0.5% increase	¥	83,077 decrease	¥	78,153 decrease	¥	72,450 decrease	¥	50,643 decrease

F-55

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

This sensitivity analysis shows changes in defined benefit obligations as of March 31, 2022 and 2023, as a result of changes in actuarial assumptions that the Company can reasonably assume. This analysis is based on provisional calculations, and thus actual results may differ from the analysis. In addition, changes in the rate of salary increase are not expected.

5) Cash flows

The amount of contributions to plan assets made by the Company and certain of its consolidated subsidiaries is determined based on various factors such as the level of salary and service years of employees, status of plan asset reserve, and actuarial calculations. In accordance with the provisions of the Defined Benefit Corporate Pension Act, the Honda Pension Fund also recalculates the amount of contributions every five years at the end of the reporting period as a base date, in an effort to ensure balanced finances in the future. The Company and certain of its consolidated subsidiaries may make contributions of a necessary amount if the amount of reserve falls below the minimum base amount.

The Company and certain of its consolidated subsidiaries expect to contribute ¥20,000 million to its Japanese pension plans and ¥24,301 million to its foreign pension plans in the year ending March 31, 2024.

The weighted average duration of defined benefit obligations as of March 31, 2022 and 2023 are as follows:

	2022				2023
	Japanese plans		Foreign plans		Japanese plans		Foreign plans
Weighted average duration of defined benefit obligations		14 years		14 years		13 years		11 years

(b) Personnel Expenses

Personnel expenses included in the consolidated statements of income for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Yen (millions)
	2021		2022		2023
Personnel expenses	¥	1,470,748	¥	1,502,364	¥	1,635,515

Personnel expenses include salaries, bonuses, social security expenses and expenses relating to post-employment benefits.

(19) Equity

(a) Management of Capital

Honda makes investments in capital and research and development to improve corporate value through growth on a global basis. In order to meet these funding needs, Honda makes capital management through consideration of the balance between financing liabilities and equity.

Financing liabilities and equity of Honda as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Financing liabilities	¥	8,102,556	¥	7,665,168
Equity		10,772,546		11,502,291

F-56

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(b) Common Stock

The Company’s total number of shares authorized and issued for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Shares
	2021		2022		2023
Total number of authorized shares
Balance at end of year
Common shares, no par value		7,086,000,000		7,086,000,000		7,086,000,000
Total number of issued shares
Balance at beginning of year		1,811,428,430		1,811,428,430		1,811,428,430
Changes during the year		—		—		—
Balance at end of year		1,811,428,430		1,811,428,430		1,811,428,430

All of the issued shares as of March 31, 2021, 2022 and 2023 have been paid in full.

(c) Capital Surplus and Retained Earnings

Capital surplus consists of surplus that is derived from equity transactions and not recorded in common stock, and its primary component is capital reserves. The Companies Act of Japan provides that no less than 50% of the paid-in amount or proceeds of issuance of shares shall be incorporated in common stock, and that the remaining shall be incorporated in capital reserves. Capital reserves may be incorporated in common stock upon approval of the General Meeting of Shareholders.

Retained earnings consist of legal reserves and accumulated earnings. The Companies Act of Japan provides that earnings in an amount equal to 10% of cash dividends from retained earnings shall be appropriated as a capital reserve or a legal reserve on the date of distribution of retained earnings until an aggregated amount of capital reserve and legal reserve equals 25% of common stock. Legal reserves may be used upon approval of the General Meeting of Shareholders. Certain foreign consolidated subsidiaries are also required to appropriate their earnings under the laws of respective countries.

(d) Treasury Stock

The total number of the Company’s treasury stock held by Honda as of March 31, 2021, 2022 and 2023 is as follows:

	Shares
	2021		2022		2023
Common shares		84,773,162		100,828,074		147,087,841

Under the Companies Act of Japan, the number of shares and total value of treasury stock acquisition may be determined, upon approval of the General Meeting of Shareholders, within the amount available for distribution. Furthermore, treasury stock may be acquired through market transactions or tender offers in accordance with the articles of incorporation within the conditions set forth in the Companies Act, upon approval of the Board of Directors.

F-57

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(e) Other Components of Equity

The changes in other components of equity for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Yen (millions)
	Remeasurements of defined benefit plans			Net changes in revaluation of financial assets measured at fair value through other comprehensive income			Exchange differences on translating foreign operations			Total
Balance as of April 1, 2020	¥	—		¥	24,876		¥	(139,515	)	¥	(114,639	)
Adjustment during the year	¥	239,801		¥	69,876		¥	247,655		¥	557,332
Reclassification to retained earnings		(239,801	)		(6,182	)		—			(245,983	)
Balance as of March 31, 2021	¥	—		¥	88,570		¥	108,140		¥	196,710
Adjustment during the year	¥	117,489		¥	58,863		¥	736,578		¥	912,930
Reclassification to retained earnings		(117,489	)		(1,713	)		—			(119,202	)
Balance as of March 31, 2022	¥	—		¥	145,720		¥	844,718		¥	990,438
Adjustment during the year	¥	3,304		¥	(19,030	)	¥	445,739		¥	430,013
Reclassification to retained earnings		(3,304	)		250			—			(3,054	)
Balance as of March 31, 2023	¥	—		¥	126,940		¥	1,290,457		¥	1,417,397

F-58

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(f) Other Comprehensive Income

Each component of other comprehensive income and related tax effect including non-controlling interests for the years ended March 31, 2021, 2022 and 2023 are as follows:

For the year ended March 31, 2021

	Yen (millions)
	Before-tax			Tax benefit (expense)			Net-of-tax
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans:
Amount incurred during the year	¥	327,604		¥	(89,342	)	¥	238,262
Net changes		327,604			(89,342	)		238,262
Net changes in revaluation of financial assets measured at fair value through other comprehensive income:
Amount incurred during the year		93,450			(25,847	)		67,603
Net changes		93,450			(25,847	)		67,603
Share of other comprehensive income of investments accounted for using the equity method:
Amount incurred during the year		5,186			(276	)		4,910
Net changes		5,186			(276	)		4,910
Items that may be reclassified subsequently to profit or loss:
Net changes in revaluation of financial assets measured at fair value through other comprehensive income:
Amount incurred during the year		(107	)		1			(106	)
Reclassification to profit or loss		82			(19	)		63
Net changes		(25	)		(18	)		(43	)
Exchange differences on translating foreign operations:
Amount incurred during the year		239,097			—			239,097
Reclassification to profit or loss		—			—			—
Net changes		239,097			—			239,097
Share of other comprehensive income of investments accounted for using the equity method:
Amount incurred during the year		27,046			377			27,423
Reclassification to profit or loss		(73	)		—			(73	)
Net changes		26,973			377			27,350
Total other comprehensive income	¥	692,285		¥	(115,106	)	¥	577,179

F-59

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the year ended March 31, 2022

	Yen (millions)
	Before-tax			Tax benefit (expense)			Net-of-tax
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans:
Amount incurred during the year	¥	153,785		¥	(36,743	)	¥	117,042
Net changes		153,785			(36,743	)		117,042
Net changes in revaluation of financial assets measured at fair value through other comprehensive income:
Amount incurred during the year		76,909			(18,274	)		58,635
Net changes		76,909			(18,274	)		58,635
Share of other comprehensive income of investments accounted for using the equity method:
Amount incurred during the year		1,862			(76	)		1,786
Net changes		1,862			(76	)		1,786
Items that may be reclassified subsequently to profit or loss:
Net changes in revaluation of financial assets measured at fair value through other comprehensive income:
Amount incurred during the year		(915	)		203			(712	)
Reclassification to profit or loss		39			(9	)		30
Net changes		(876	)		194			(682	)
Exchange differences on translating foreign operations:
Amount incurred during the year		680,724			—			680,724
Reclassification to profit or loss		—			—			—
Net changes		680,724			—			680,724
Share of other comprehensive income of investments accounted for using the equity method:
Amount incurred during the year		79,484			(1,972	)		77,512
Reclassification to profit or loss		(65	)		—			(65	)
Net changes		79,419			(1,972	)		77,447
Total other comprehensive income	¥	991,823		¥	(56,871	)	¥	934,952

F-60

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the year ended March 31, 2023

	Yen (millions)
	Before-tax			Tax benefit (expense)			Net-of-tax
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans:
Amount incurred during the year	¥	7,192		¥	(3,842	)	¥	3,350
Net changes		7,192			(3,842	)		3,350
Net changes in revaluation of financial assets measured at fair value through other comprehensive income:
Amount incurred during the year		(26,279	)		7,814			(18,465	)
Net changes		(26,279	)		7,814			(18,465	)
Share of other comprehensive income of investments accounted for using the equity method:
Amount incurred during the year		294			(2	)		292
Net changes		294			(2	)		292
Items that may be reclassified subsequently to profit or loss:
Net changes in revaluation of financial assets measured at fair value through other comprehensive income:
Amount incurred during the year		(444	)		98			(346	)
Reclassification to profit or loss		(166	)		38			(128	)
Net changes		(610	)		136			(474	)
Exchange differences on translating foreign operations:
Amount incurred during the year		427,650			(1,612	)		426,038
Reclassification to profit or loss		(4,690	)		1,612			(3,078	)
Net changes		422,960			—			422,960
Share of other comprehensive income of investments accounted for using the equity method:
Amount incurred during the year		32,436			(1,905	)		30,531
Reclassification to profit or loss		(102	)		—			(102	)
Net changes		32,334			(1,905	)		30,429
Total other comprehensive income	¥	435,891		¥	2,201		¥	438,092

The components of other comprehensive income included in non-controlling interests for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Yen (millions)
	2021		2022			2023
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans	¥	1,030	¥	565		¥	341
Net changes in revaluation of financial assets measured at fair value through other comprehensive income		25		(136	)		88
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations		18,792		21,593			7,650
Total	¥	19,847	¥	22,022		¥	8,079

F-61

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(g) Dividends from Retained Earnings

The Company distributes retained earnings within the available amount calculated in accordance with the Companies Act of Japan. The amount of retained earnings available for distribution is calculated based on the amount of retained earnings recorded in the Company’s non-consolidated accounting records prepared in accordance with accounting principles generally accepted in Japan.

The amounts recognized as dividends of retained earnings for the years ended March 31, 2021, 2022 and 2023 are as follows:

1) Dividend payout

For the year ended March 31, 2021

Resolution	The Board of Directors Meeting on May 12, 2020
Type of shares	Common shares
Total amount of dividends (millions of yen)	48,363
Dividend per share (yen)	28.00
Record date	March 31, 2020
Effective date	June 3, 2020
Resolution	The Board of Directors Meeting on August 5, 2020
Type of shares	Common shares
Total amount of dividends (millions of yen)	18,999
Dividend per share (yen)	11.00
Record date	June 30, 2020
Effective date	September 4, 2020
Resolution	The Board of Directors Meeting on November 6, 2020
Type of shares	Common shares
Total amount of dividends (millions of yen)	32,818
Dividend per share (yen)	19.00
Record date	September 30, 2020
Effective date	December 2, 2020
Resolution	The Board of Directors Meeting on February 9, 2021
Type of shares	Common shares
Total amount of dividends (millions of yen)	44,909
Dividend per share (yen)	26.00
Record date	December 31, 2020
Effective date	March 8, 2021

F-62

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the year ended March 31, 2022

Resolution	The Board of Directors Meeting on May 14, 2021
Type of shares	Common shares
Total amount of dividends (millions of yen)	93,272
Dividend per share (yen)	54.00
Record date	March 31, 2021
Effective date	June 7, 2021
Resolution	The Board of Directors Meeting on November 5, 2021
Type of shares	Common shares
Total amount of dividends (millions of yen)	95,130
Dividend per share (yen)	55.00
Record date	September 30, 2021
Effective date	December 1, 2021

For the year ended March 31, 2023

Resolution	The Board of Directors Meeting on May 13, 2022
Type of shares	Common shares
Total amount of dividends (millions of yen)	111,256
Dividend per share (yen)	65.00
Record date	March 31, 2022
Effective date	June 6, 2022
Resolution	The Board of Directors Meeting on November 9, 2022
Type of shares	Common shares
Total amount of dividends (millions of yen)	102,219
Dividend per share (yen)	60.00
Record date	September 30, 2022
Effective date	December 5, 2022

2) Dividends payable of which record date was in the year ended March 31, 2023, effective after the period

Resolution	The Board of Directors Meeting on May 11, 2023
Type of shares	Common shares
Resource for dividend	Retained earnings
Total amount of dividends (millions of yen)	99,915
Dividend per share (yen)	60.00
Record date	March 31, 2023
Effective date	June 6, 2023

F-63

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(20) Sales Revenue

(a) Disaggregation of revenue

As stated in Note 4, Honda discloses segment information in four categories.

The sales revenue disaggregated by geographical markets based on the location of the customer and the reconciliation of the disaggregated sales revenue with each segment for the years ended March 31, 2021, 2022 and 2023 are as follows:

For the year ended March 31, 2021

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Power Products and Other Businesses		Total
Revenue arising from contracts with customers
Japan	¥	88,128	¥	1,321,329	¥	128,265	¥	59,249	¥	1,596,971
North America		197,155		4,671,998		1,049,739		133,641		6,052,533
Europe		146,948		290,326		—		63,262		500,536
Asia		1,147,539		2,032,469		1		47,465		3,227,474
Other Regions		205,142		238,509		—		17,785		461,436
Total	¥	1,784,912	¥	8,554,631	¥	1,178,005	¥	321,402	¥	11,838,950
Revenue arising from the other sources*		2,371		12,574		1,316,289		335		1,331,569
Total	¥	1,787,283	¥	8,567,205	¥	2,494,294	¥	321,737	¥	13,170,519

For the year ended March 31, 2022

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Power Products and Other Businesses		Total
Revenue arising from contracts with customers
Japan	¥	105,022	¥	1,337,860	¥	146,185	¥	79,182	¥	1,668,249
North America		230,766		4,877,900		1,289,076		152,096		6,549,838
Europe		202,254		319,340		—		79,393		600,987
Asia		1,307,915		2,314,425		37		63,861		3,686,238
Other Regions		337,219		280,702		—		24,305		642,226
Total	¥	2,183,176	¥	9,130,227	¥	1,435,298	¥	398,837	¥	13,147,538
Revenue arising from the other sources*		2,077		17,271		1,385,369		441		1,405,158
Total	¥	2,185,253	¥	9,147,498	¥	2,820,667	¥	399,278	¥	14,552,696

F-64

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the year ended March 31, 2023

	Yen (millions)
	Motorcycle Business		Automobile Business		Financial Services Business		Power Products and Other Businesses		Total
Revenue arising from contracts with customers
Japan	¥	109,393	¥	1,375,593	¥	158,653	¥	89,627	¥	1,733,266
North America		306,725		5,985,958		1,341,863		182,126		7,816,672
Europe		250,088		332,928		—		94,328		677,344
Asia		1,739,330		2,523,613		29		55,354		4,318,326
Other Regions		502,917		360,299		—		29,464		892,680
Total	¥	2,908,453	¥	10,578,391	¥	1,500,545	¥	450,899	¥	15,438,288
Revenue arising from the other sources*		530		15,128		1,453,553		226		1,469,437
Total	¥	2,908,983	¥	10,593,519	¥	2,954,098	¥	451,125	¥	16,907,725

Explanatory note:

* Revenue arising from the other sources primarily includes lease revenues recognized under IFRS 16 and interest recognized under IFRS 9.

(b) Contract balances

The receivables from contracts with customers and contract liabilities for the years ended March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Receivables from contracts with customers:
Trade receivables	¥	785,157	¥	893,559
Contract liabilities:
Other current liabilities		261,049		292,552
Other noncurrent liabilities		193,845		240,556

The amounts of revenue recognized for the years ended March 31, 2021, 2022 and 2023 that were included in the contract liability balances at the beginning of the year are ¥182,339 million, ¥199,902 million and ¥219,873 million, respectively. The amounts of revenue recognized for the years ended March 31, 2021, 2022 and 2023 from performance obligations satisfied (or partially satisfied) in previous years were immaterial. In addition, the balances of contract assets were immaterial.

F-65

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(c) Transaction price allocated to the remaining performance obligation

The revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Within 1 year	¥	127,377	¥	150,507
Between 1 and 5 years		221,282		280,981
Later than 5 years		15,748		14,892
Total	¥	364,407	¥	446,380

The table does not include the remaining performance obligations that have original expected durations of one year or less and estimated amounts of variable consideration that are constrained from being recognized as revenue.

(d) Assets recognized from the costs to obtain or fulfill a contract with a customer

The assets recognized from the costs to obtain a contract with a customer as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Assets recognized from the costs to obtain a contract with a customer	¥	128,864	¥	148,074

Honda recognizes the incremental costs of obtaining a contract with a customer and the costs incurred in fulfilling a contract with a customer that are directly associated with the contract as an asset, if those costs are expected to be recoverable. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. The assets recognized from the costs to obtain a contract are presented in the consolidated statement of financial position mainly as other non-current assets and are amortized over the period for which the services based on a contract are provided. The amounts of assets recognized from the costs to fulfill a contract are not material.

The amounts of amortization of the assets for the years ended March 31, 2021, 2022 and 2023 are ¥33,242 million, ¥39,682 million and ¥52,193 million, respectively.

(21) Research and Development

Research and development costs for the years ended March 31, 2021, 2022 and 2023 consist of the following:

	Yen (millions)
	2021			2022			2023
Research and development expenditures incurred during the reporting period	¥	780,065		¥	804,025		¥	852,067
Amount capitalized		(201,889	)		(159,174	)		(120,811	)
Amortization and impairment losses of capitalized development costs		160,718			142,205			149,659
Total	¥	738,894		¥	787,056		¥	880,915

F-66

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(22) Finance Income and Finance Costs

Finance income and finance costs for the years ended March 31, 2021, 2022 and 2023 consist of the following:

	Yen (millions)
	2021			2022			2023
Interest income:
Financial assets measured at amortized cost	¥	18,146		¥	22,847		¥	69,217
Financial assets measured at fair value through other comprehensive income		196			185			497
Financial assets measured at fair value through profit or loss		1,463			2,595			3,357
Total		19,805			25,627			73,071
Interest expense:
Financial liabilities measured at amortized cost		(12,269	)		(15,706	)		(34,065	)
Other		(1,608	)		(1,161	)		(2,047	)
Total		(13,877	)		(16,867	)		(36,112	)
Other, net:
Dividends received:
Financial assets measured at fair value through other comprehensive income		3,372			4,777			6,150
Financial assets measured at fair value through profit or loss		0			—			—
Gains (losses) on derivatives:
Financial assets and financial liabilities measured at fair value through profit or loss		15,102			(77,789	)		(92,144	)
Gains (losses) on foreign exchange		(26,163	)		68,033			47,705
Other		(17,128	)		(7,335	)		(17,319	)
Total		(24,817	)		(12,314	)		(55,608	)
Total	¥	(18,889	)	¥	(3,554	)	¥	(18,649	)

F-67

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(23) Income Taxes

(a) Income Tax Expense

Profit before income taxes and income tax expense for the years ended March 31, 2021, 2022 and 2023 consist of the following:

	Yen (millions)
	2021							2022							2023
	Japan			Foreign		Total		Japan			Foreign		Total		Japan			Foreign			Total
Profit (loss) before income taxes	¥	(32,954	)	¥	947,007	¥	914,053	¥	(42,213	)	¥	1,112,403	¥	1,070,190	¥	(40,638	)	¥	920,203		¥	879,565
Income tax expense (benefit):
Current taxes		7,236			174,694		181,930		9,539			277,894		287,433		12,699			353,611			366,310
Deferred taxes		(21,228	)		57,907		36,679		(4,081	)		26,137		22,056		(92,631	)		(111,423	)		(204,054	)
Total	¥	(13,992	)	¥	232,601	¥	218,609	¥	5,458		¥	304,031	¥	309,489	¥	(79,932	)	¥	242,188		¥	162,256

The benefits of deferred taxes in Japan for the year ended March 31, 2023, include tax benefits of ¥96,195 million resulting from the recognition of deferred tax assets previously unrecognized on tax losses, tax credits and deductible temporary differences since we consider it probable that future taxable profit would be available in the consolidated group under the Japanese Group Relief System, which consists of the Company and its certain consolidated subsidiaries in Japan.

The statutory income tax rate in Japan was approximately 30.2% for each of the years in the three-year period ended March 31, 2023. The foreign subsidiaries are subject to taxes based on income at rates ranging from 16.0% to 34.0%.

The Japanese statutory income tax rate for the years ended March 31, 2021, 2022 and 2023 differs from the average effective tax rate for the following reasons:

	2021			2022			2023
Statutory income tax rate		30.2	%		30.2	%		30.2	%
Difference in statutory income tax rates of foreign subsidiaries		(5.2	)		(4.5	)		(6.3	)
Effects of investments accounted for using the equity method		(9.0	)		(5.7	)		(4.0	)
Effects of undistributed earnings and withholding taxes on royalty		7.8			7.1			11.3
Changes in unrecognized deferred tax assets		1.2			1.4			(10.3	)
Effects of income and expense not taxable and deductible for tax purpose		0.3			0.0			0.1
Effects of tax credit		(1.4	)		(0.9	)		(2.9	)
Other adjustments relating to prior years		(0.1	)		(0.1	)		(0.5	)
Adjustments for the uncertain tax treatments on income taxes		(0.8	)		0.9			0.6
Adjustments for the changes in income tax laws		0.1			0.1			(0.6	)
Other		0.8			0.4			0.8
Average effective tax rate		23.9	%		28.9	%		18.4	%

F-68

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(b) Deferred Tax Assets and Deferred Tax Liabilities

The components by major factor in deferred tax assets and deferred tax liabilities as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022			2023
Deferred tax assets:
Inventories	¥	44,029		¥	51,604
Accrued expenses		36,567			56,926
Provisions		100,408			133,007
Property, plant and equipment		27,592			27,854
Intangible assets		12,017			47,995
Retirement benefit liabilities		67,120			64,275
Carryforward of unused tax losses		67,787			108,106
Carryforward of unused tax credit		22,285			14,930
Other		103,114			109,399
Total	¥	480,919		¥	614,096
Deferred tax liabilities:
Property, plant and equipment	¥	82,518		¥	106,715
Intangible assets		195,542			182,258
Other financial assets		61,580			59,275
Operating leases		846,978			772,991
Undistributed earnings		59,650			60,914
Retirement benefit assets		68,772			56,932
Other*		65,041			146,519
Total	¥	1,380,081		¥	1,385,604
Net deferred tax assets (liabilities)	¥	(899,162	)	¥	(771,508	)

Explanatory note:

* The amount of deferred tax liabilities arising from an evaluation of receivables from financial services for tax purpose in the United States included in other as of March 31, 2023 is ¥68,005 million.

F-69

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The changes in deferred tax assets and deferred tax liabilities recognized as income tax expense in the consolidated statements of income for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Yen (millions)
	2021			2022			2023
Inventories	¥	(3,920	)	¥	(9,865	)	¥	(7,407	)
Provisions		(10,708	)		(3,491	)		(27,854	)
Property, plant and equipment		(6,955	)		(3,738	)		18,708
Retirement benefit liabilities (assets)		(10,353	)		(4,991	)		(4,149	)
Operating leases		37,506			(35,308	)		(153,429	)
Undistributed earnings		(2,885	)		4,198			(1,005	)
Carryforward of unused tax losses		(7,695	)		(1,608	)		(42,172	)
Carryforward of unused tax credit		15,695			16,102			9,504
Other*		25,994			60,757			3,750
Total	¥	36,679		¥	22,056		¥	(204,054	)

Explanatory note:

* The income tax expense recognized due to the decrease of deferred tax assets arising from accrued expenses included in other as of March 31, 2022 is ¥27,321 
million.

Honda considers the probability that a portion of, or all of, the deductible temporary differences, carryforward of unused tax losses and carryforward of unused tax credit can be utilized against future taxable profits in the recognition of deferred tax assets. In assessing recoverability of deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable profit and tax planning strategies. Based upon the level of historical taxable profit and projections for future taxable profit over the periods for which the deferred tax assets are deductible, management believes it is probable that Honda will utilize the benefits of these deferred tax assets as of March 31, 2022 and 2023. Uncertainty of estimates of future taxable profit could increase due to changes in the economic environment surrounding Honda, effects by market conditions, effects of currency fluctuations or other factors. Deferred tax assets recognized by entities that have suffered a loss in either the preceding or current period are ¥26,109 million and ¥19,414 million as of March 31, 2022 and 2023, respectively.

Deductible temporary differences, carryforward of unused tax losses and carryforward of unused tax credit for which deferred tax assets are not recognized as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Deductible temporary differences	¥	553,778	¥	391,536
Carryforward of unused tax losses		693,323		532,191
Carryforward of unused tax credit		549		35,629

F-70

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The components by expiry of the carryforward of unused tax losses for which deferred tax assets are not recognized as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Within 1 year	¥	3,603	¥	13,331
Between 1 and 5 years		73,448		82,173
Between 5 and 20 years		256,340		107,052
Indefinite periods		359,932		329,635
Total	¥	693,323	¥	532,191

The components by expiry of the carryforward of unused tax credit for which deferred tax assets are not recognized as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Within 1 year	¥	147	¥	5
Between 1 and 5 years		259		35,611
Between 5 and 20 years		143		13
Indefinite periods		—		—
Total	¥	549	¥	35,629

The aggregate amounts of temporary differences relating to investments in subsidiaries and interests in joint ventures for which deferred tax liabilities are not recognized as of March 31, 2022 and 2023 are ¥6,323,299 million and ¥6,956,545 million, respectively.

(24) Earnings Per Share

Earnings per share attributable to owners of the parent for the years ended March 31, 2021, 2022 and 2023 are calculated based on the following information. There were no significant dilutive potential common shares outstanding for the years ended March 31, 2021, 2022 and 2023.

	2021		2022		2023
Profit for the year attributable to owners of the parent (millions of yen)	¥	657,425	¥	707,067	¥	651,416
Weighted average number of common shares outstanding, basic (shares)		1,726,638,088		1,719,961,835		1,696,307,115
Basic earnings per share attributable to owners of the parent (yen)	¥	380.75	¥	411.09	¥	384.02

(25) Financial Risk Management

(a) Risk Management

Honda has manufacturing operations throughout the world and sells products and components to various countries. In the course of these activities, Honda holds trade receivables arising from business activities,

F-71

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

receivables from financial services, trade payables and financing liabilities, and is thus exposed to market risk, credit risk and liquidity risk associated with the holding of such financial instruments.

These risks are evaluated by Honda through periodic monitoring.

(b) Market Risk

Honda is exposed to the risk that the fair value or future cash flows of a financial instrument fluctuates because of changes in foreign currency exchange rates and interest rates.

Honda uses derivatives that consist mainly of foreign currency forward exchange contracts, foreign currency option contracts, currency swap agreements and interest rate swap agreements to reduce primarily the risk that future cash flows of a financial instrument fluctuates because of changes in foreign currency exchange rates and interest rates.

Derivatives are used within the scope of actual demand, in accordance with risk management policies. In addition, Honda does not hold any derivatives for trading purpose.

1) Foreign currency exchange rate risk

Honda has manufacturing operations throughout the world and exports products and components to various countries. Honda purchases materials and components and sells its products and components in foreign currencies. Therefore, currency fluctuations may affect Honda’s profit and the value of the financial instruments it holds.

Foreign currency forward exchange contracts and foreign currency option contracts are used to hedge currency risk of transactions denominated in foreign currencies (principally U.S. dollars).

(Foreign currency exchange rate risk sensitivity analysis)

Sensitivity analysis of Honda’s foreign currency exchange rate risk associated with holding financial instruments as of March 31, 2022 and 2023 is as follows.

The following scenario demonstrates the impact of a 1% appreciation of the Japanese yen against the U.S. dollar on profit before income taxes, holding all variables other than the foreign currency exchange rate constant.

	Yen (millions)
	2022		2023
Impact on profit before income taxes	¥	(1,780)	¥	(2,696)

2) Interest rate risk

Honda is exposed to market risk for changes in interest rates related primarily to its debt obligations and receivables from financial services. In addition to short-term financing such as commercial paper, Honda has long-term debt with both fixed and floating rates. Honda’s receivables from financial services primarily use fixed rates. Interest rate swap agreements are mainly used to manage interest rate risk exposure of receivables from financial services and to match finance costs with finance income. Currency swap agreements used among different currencies, also serve to hedge foreign currency exchange risk as well as interest rate risk.

F-72

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(Interest rate risk sensitivity analysis)

Sensitivity analysis of Honda’s interest rate risk associated with holding financial instruments as of March 31, 2022 and 2023 is as follows.

The following scenario demonstrates the impact of a 100 basis point rise in interest rates on profit before income taxes, holding all variables other than interest rates constant.

	Yen (millions)
	2022		2023
Impact on profit before income taxes	¥	(25,830)	¥	(2,092)

3) Equity price risk

Honda is exposed to equity price risk as a result of its holdings of marketable equity securities. Marketable equity securities are held for purposes other than trading, and are mainly classified into financial assets measured at fair value through other comprehensive income.

(c) Credit Risk

Honda is exposed to the risk that one party to a financial instrument causes a financial loss for the other party by failing to discharge an obligation. Honda reduces the risk of financial assets other than derivatives in accordance with credit administration rules. Honda reduces the risk of derivatives by limiting the counterparties to major international banks and financial institutions that meet the internally established credit guidelines.

The credit risk is mainly in receivables from financial services. Credit risk of the portfolio of consumer finance receivables can be affected by general economic conditions. Adverse changes such as a rise in unemployment can increase the likelihood of defaults. Declines in used vehicle prices can reduce the amount of recoveries on repossessed collaterals. The finance subsidiaries of the Company manage exposures to credit risk in consumer finance receivables by monitoring and adjusting underwriting standards, which affect the level of credit risk that Honda assumes, pricing contracts for expected losses, and focusing collection efforts to minimize losses. Credit risk on dealer finance receivables is affected primarily by the financial strength of the dealers within the portfolio, the value of collateral securing the financings, and economic and market factors that could affect the creditworthiness of dealers. The finance subsidiaries of the Company manage exposures to credit risk in dealer finance receivables by performing comprehensive reviews of dealers prior to establishing financing arrangements and continuously monitoring the payment performance and creditworthiness of these dealers.

Honda has entered into various guarantee agreements, which mainly consist of loan commitments to dealers and guarantees of bank loans of employees for their housing costs. The finance subsidiaries of the Company maintain unused balances on committed lines to dealers based on loan commitment contracts. Although committed lines have been extended, they will not necessarily be withdrawn, as certain contracts contain terms and conditions of withdrawal that require screening of the obligor’s credit standing. There is risk that dealers fail to discharge withdrawn committed lines and cause financial loss for Honda. Regarding the bank loans of employees for their housing costs, if an employee defaults on his/her loan payments, Honda is required to perform under the guarantee. As of March 31, 2023, no amount has been accrued for any estimated losses under the obligations, as it is probable that the employees will be able to make all scheduled payments.

F-73

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

1) Credit risk exposure

The analysis of the age of receivables from financial services that are past due as of March 31, 2022 and 2023 is as follows:

	Yen (millions)
As of March 31, 2022	Less than 30 days past due		30-59 days past due		60-89 days past due		90 days and greater past due		Total
Consumer finance receivables:
Retail	¥	204,661	¥	43,051	¥	11,452	¥	7,512	¥	266,676
Finance lease		200		51		7		324		582
Dealer finance receivables:
Wholesale		9,661		36		4		23		9,724
Total	¥	214,522	¥	43,138	¥	11,463	¥	7,859	¥	276,982

	Yen (millions)
As of March 31, 2023	Less than 30 days past due		30-59 days past due		60-89 days past due		90 days and greater past due		Total
Consumer finance receivables:
Retail	¥	223,674	¥	55,675	¥	13,185	¥	9,481	¥	302,015
Finance lease		545		118		5		300		968
Dealer finance receivables:
Wholesale		8,929		9		11		18		8,967
Total	¥	233,148	¥	55,802	¥	13,201	¥	9,799	¥	311,950

The balances of retail receivables included in consumer finance receivables as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	12-month ECL (Stage 1)		Lifetime ECL				Total
As of March 31, 2022			Not credit-impaired (Stage 2)		Credit-impaired (Stage 3)
Consumer finance receivables:
Retail*	¥	4,897,471	¥	139,306	¥	17,651	¥	5,054,428
	Yen (millions)
	12-month ECL (Stage 1)		Lifetime ECL				Total
As of March 31, 2023			Not credit-impaired (Stage 2)		Credit-impaired (Stage 3)
Consumer finance receivables:
Retail*	¥	4,985,289	¥	356,005	¥	21,966	¥	5,363,260

Explanatory note:

* The tables above represent the gross amounts of retail receivables by stages of ECL model since the expected credit losses are measured collectively by our finance subsidiaries and the balances of those receivables are not directly allocated to the risk ratings.

F-74

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Dealerships are assigned an internal risk rating based primarily on their financial condition. At a minimum, risk ratings for dealerships are updated annually and more frequently for dealerships with weaker risk ratings.

The following table shows the balances of dealer finance receivables and loan commitments classified into Group A or B based on the internal risk ratings. Group A includes the dealer finance receivables and loan commitments of dealerships with high credit quality characteristics. Group B includes the dealer finance receivables and loan commitments of remaining dealerships.

The balances of dealer finance receivables and the undiscounted maximum amounts of potential payment for loan commitments by this risk rating as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	12-month ECL (Stage 1)		Lifetime ECL				Total
As of March 31, 2022			Not credit-impaired (Stage 2)		Credit-impaired (Stage 3)
Dealer finance receivables:
Group A	¥	188,101	¥	88	¥	2,117	¥	190,306
Group B		91,995		2,133		72		94,200
Total	¥	280,096	¥	2,221	¥	2,189	¥	284,506
Loan commitments:
Group A	¥	95,485	¥	—	¥	—	¥	95,485
Group B		23,683		—		—		23,683
Total	¥	119,168	¥	—	¥	—	¥	119,168

The undiscounted maximum amount of potential payment for guarantees of bank loans of employees for their housing costs as of March 31, 2022 is ¥7,098 million.

	Yen (millions)
	12-month ECL (Stage 1)		Lifetime ECL				Total
As of March 31, 2023			Not credit-impaired (Stage 2)		Credit-impaired (Stage 3)
Dealer finance receivables:
Group A	¥	297,885	¥	706	¥	4,612	¥	303,203
Group B		116,156		1,684		123		117,963
Total	¥	414,041	¥	2,390	¥	4,735	¥	421,166
Loan commitments:
Group A	¥	103,858	¥	—	¥	—	¥	103,858
Group B		15,364		—		—		15,364
Total	¥	119,222	¥	—	¥	—	¥	119,222

The undiscounted maximum amount of potential payment for guarantees of bank loans of employees for their housing costs as of March 31, 2023 is ¥5,988 million.

F-75

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

2) Collateral held as security

The finance subsidiaries of the Company generally hold sold products as collateral for consumer finance receivables. The finance subsidiaries of the Company hold the dealerships’ other assets as collateral in addition to sold products for dealer finance receivables. The extent to which collateral mitigates credit risk is dependent on the value of collateral relative to the outstanding receivables balance at the time of repossession. The estimated fair value of collateral for credit-impaired consumer finance receivables excluding collateral values in excess of carrying amounts as of March 31, 2022 and 2023 are approximately 90% and 80%, respectively, and those for dealer finance receivables are approximately 100% and 100% of the carrying amounts, respectively. The extent to which collateral mitigates credit risk is also dependent on finance subsidiaries’ ability to take possession of the collateral.

(d) Liquidity Risk

Honda raises funds by commercial paper, bank loans, medium-term notes, corporate bonds and securitization of finance receivables and equipment on operating leases. Honda is exposed to the liquidity risk that Honda would not be able to repay liabilities on the due date due to the deterioration of the financing environment.

Exposure to liquidity risk is managed by maintaining sufficient capital resources, a sufficient level of liquidity and a sound balance sheet. Honda meets its working capital targets primarily through cash generated by business operations, bank loans, corporate bonds and commercial paper. Honda funds financial programs for customers and dealers primarily from medium-term notes, bank loans, securitization of finance receivables and equipment on operating leases, commercial paper and corporate bonds.

The unused portions of the credit facility of Honda’s commercial paper and medium-term note programs as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Commercial paper	¥	1,190,631	¥	729,096
Medium-term notes		1,291,612		3,832,311
Total	¥	2,482,243	¥	4,561,407

Honda is authorized to obtain financing at prevailing interest rates under these programs.

Honda is aware of the possibility that various factors, such as recession-induced market contraction and financial and foreign exchange market volatility may adversely affect liquidity. For this reason, Honda has sufficient committed lines of credit that serve as alternative liquidity for the commercial paper issued regularly to replace debt.

F-76

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The unused portions of the committed lines of credit extended by financial institutions to Honda as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Commercial paper programs	¥	1,226,138	¥	1,306,781
Other		67,976		65,299
Total	¥	1,294,114	¥	1,372,080

Borrowings under those committed lines of credit generally are available at the prime interest rate.

Maturity analysis of financial liabilities

1) Non-derivative financial liabilities

Non-derivative financial liabilities by maturity as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
As of March 31, 2022	Carrying amount		Within 1 year		Between 1 and 5 years		Later than 5 years		Total contractual cash flows
Trade payables	¥	1,236,233	¥	1,236,233	¥	—	¥	—	¥	1,236,233
Financing liabilities		8,102,556		3,218,988		4,407,350		765,207		8,391,545
Accrued expenses		375,601		375,601		—		—		375,601
Other financial liabilities		367,041		93,054		94,837		206,529		394,420
Total	¥	10,081,431	¥	4,923,876	¥	4,502,187	¥	971,736	¥	10,397,799

	Yen (millions)
As of March 31, 2023	Carrying amount		Within 1 year		Between 1 and 5 years		Later than 5 years		Total contractual cash flows
Trade payables	¥	1,426,333	¥	1,426,333	¥	—	¥	—	¥	1,426,333
Financing liabilities		7,665,168		3,410,145		4,074,986		511,254		7,996,385
Accrued expenses		419,570		419,570		—		—		419,570
Other financial liabilities		369,878		87,685		100,800		207,949		396,434
Total	¥	9,880,949	¥	5,343,733	¥	4,175,786	¥	719,203	¥	10,238,722

Other financial liabilities include lease liabilities. Lease liabilities by maturity as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
As of March 31, 2022	Carrying amount		Within 1 year		Between 1 and 5 years		Later than 5 years		Total contractual cash flows
Lease liabilities	¥	318,758	¥	71,510	¥	86,305	¥	188,321	¥	346,136

	Yen (millions)
As of March 31, 2023	Carrying amount		Within 1 year		Between 1 and 5 years		Later than 5 years		Total contractual cash flows
Lease liabilities	¥	315,958	¥	69,297	¥	87,428	¥	185,790	¥	342,515

F-77

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

2) Derivative financial liabilities

Derivative financial liabilities by maturity as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
As of March 31, 2022	Within 1 year		Between 1 and 5 years		Later than 5 years		Total contractual cash flows
Derivative financial liabilities	¥	53,895	¥	106,214	¥	25,140	¥	185,249
	Yen (millions)
As of March 31, 2023	Within 1 year		Between 1 and 5 years		Later than 5 years		Total contractual cash flows
Derivative financial liabilities	¥	109,112	¥	137,056	¥	22,787	¥	268,955

(26) Fair Value

(a) Definition of Fair Value Hierarchy

Honda uses a three-level hierarchy when measuring fair value. The following is a description of the three hierarchy levels:

Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly

Level 3 Unobservable inputs for the assets or liabilities

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest input that is significant to the fair value measurement in its entirety. Honda recognizes the transfers between the levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

(b) Method of Fair Value Measurement

The fair values of assets and liabilities are determined based on relevant market information and through the use of an appropriate valuation method.

The measurement methods and assumptions used in the measurement of assets and liabilities are as follows:

(Cash and cash equivalents, trade receivables and trade payables)

The fair values approximate their carrying amounts due to their short-term maturities.

(Receivables from financial services)

The fair value of receivables from financial services is measured primarily by discounting future cash flows using the current interest rates applicable for these receivables of similar remaining maturities. Fair value measurement for receivables from financial services is classified as Level 3.

F-78

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(Debt securities)

Debt securities consist mainly of mutual funds, corporate bonds, local bonds and auction rate securities.

The fair value of mutual funds with an active market is measured by using quoted market prices. Fair value measurement for mutual funds with an active market is classified as Level 1.

The fair values of corporate bonds and local bonds are measured based on proprietary pricing models provided by specialists and/or market makers and the models obtain a wide array of market observable inputs such as credit ratings and discount rates. Fair value measurements for corporate bonds and local bonds are classified as Level 2.

The subsidiary’s auction rate securities are A to AAA rated and are insured by qualified guarantee agencies, and reinsured by the Secretary of Education and the United States government, and guaranteed at approximately 95% by the United States government. To measure fair value of auction rate securities, Honda uses a third-party-developed valuation model which obtains a wide array of market observable inputs, as well as unobservable inputs including probability of passing or failing auction at each auction. Fair value measurement for auction rate securities is classified as Level 3.

(Equity securities)

The fair value of equity securities with an active market is measured by using quoted market prices. Fair value measurement for equity securities with an active market is classified as Level 1.

The fair value of equity securities with no active market is measured mainly by using a discounted cash flow method, a comparable company valuation method and other appropriate valuation methods. Fair value measurement for equity securities with no active market is classified as Level 3. In addition, in the case that cost represents the best estimate of fair value, fair value for the equity securities with no active market is measured at cost.

Cash flow forecasts and discount rate for the discounted cash flow model and price book-value ratio (PBR) of a comparable company for the comparable company valuation method are used as significant unobservable inputs in the fair value measurement of equity securities classified as Level 3. The fair value increases (decreases) as Cash flow forecasts increase (decrease), discount rate decline (rise) and PBR of a comparable company rise (decline). Such fair value measurements are conducted in accordance with the group accounting policy approved by the appropriate person of authority and based upon valuation methods determined by personnel in accounting divisions of Honda.

(Derivatives)

Derivatives consist mainly of foreign currency forward exchange contracts, foreign currency option contracts, currency swap agreements and interest rate swap agreements.

The fair values of foreign currency forward exchange contracts and foreign currency option contracts are measured by using market observable inputs such as spot exchange rates, discount rates and implied volatility. The fair values of currency swap agreements and interest rate swap agreements are measured by discounting future cash flows using market observable inputs such as interest rates and foreign exchange rates. Fair value measurements for these derivatives are classified as Level 2.

The credit risk of the counterparties is considered in the valuation of derivatives.

F-79

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(Financing liabilities)

The fair value of financing liabilities is measured by discounting future cash flows using interest rates currently available for liabilities of similar terms and remaining maturities. Fair value measurement of financing liabilities is mainly classified as Level 2.

(c) Assets and Liabilities Measured at Fair Value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and 2023 consist of the following:

	Yen (millions)
As of March 31, 2022	Level 1		Level 2		Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	15,674	¥	—	¥	15,674
Interest rate instruments		—		114,016		—		114,016
Other		—		—		4,648		4,648
Total		—		129,690		4,648		134,338
Debt securities		42,837		54,641		4,773		102,251
Financial assets measured at fair value through other comprehensive income:
Debt securities		—		19,984		—		19,984
Equity securities		335,745		—		133,038		468,783
Total	¥	378,582	¥	204,315	¥	142,459	¥	725,356
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	66,644	¥	—	¥	66,644
Interest rate instruments		—		83,669		—		83,669
Other		—		1,629		—		1,629
Total		—		151,942		—		151,942
Total	¥	—	¥	151,942	¥	—	¥	151,942

There were no transfers between Level 1 and Level 2 for the year ended March 31, 2022.

F-80

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

	Yen (millions)
As of March 31, 2023	Level 1		Level 2		Level 3		Total
Other financial assets:
Financial assets measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	29,026	¥	—	¥	29,026
Interest rate instruments		—		151,242		—		151,242
Other		—		—		5,700		5,700
Total		—		180,268		5,700		185,968
Debt securities		43,264		53,634		5,074		101,972
Financial assets measured at fair value through other comprehensive income:
Debt securities		—		26,555		—		26,555
Equity securities		325,318		—		149,820		475,138
Total	¥	368,582	¥	260,457	¥	160,594	¥	789,633
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss:
Derivatives
Foreign exchange instruments	¥	—	¥	95,412	¥	—	¥	95,412
Interest rate instruments		—		141,786		—		141,786
Other		—		5,770		—		5,770
Total		—		242,968		—		242,968
Total	¥	—	¥	242,968	¥	—	¥	242,968

There were no transfers between Level 1 and Level 2 for the year ended March 31, 2023.

F-81

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended March 31, 2022 and 2023 are as follows:

	Yen (millions)
For the year ended March 31, 2022	Derivatives			Debt securities			Equity securities
Balance as of April 1, 2021	¥	4,829		¥	5,314		¥	110,050
Total gains or losses:
Profit or loss		(674	)		112			—
Other comprehensive income		—			—			17,973
Purchases		—			—			7,075
Sales		—			(1,124	)		(1,487	)
Transfer to level 1 due to listing		—			—			(1,158	)
Exchange differences on translating foreign operations		493			471			585
Balance as of March 31, 2022	¥	4,648		¥	4,773		¥	133,038
Unrealized gains or losses included in profit or loss on assets held at March 31, 2022	¥	(674	)	¥	112		¥	—

	Yen (millions)
For the year ended March 31, 2023	Derivatives		Debt securities			Equity securities
Balance as of April 1, 2022	¥	4,648	¥	4,773		¥	133,038
Total gains or losses:
Profit or loss		678		(136	)		—
Other comprehensive income		—		—			9,156
Purchases		—		—			10,029
Sales		—		—			(1,144	)
Transfer to level 1 due to listing		—		—			(1,551	)
Exchange differences on translating foreign operations		374		437			292
Balance as of March 31, 2023	¥	5,700	¥	5,074		¥	149,820
Unrealized gains or losses included in profit or loss on assets held at March 31, 2023	¥	678	¥	(136	)	¥	—

Explanatory notes:

1. Gains or losses included in profit or loss for the years ended March 31, 2022 and 2023 are included in other, net in finance income and finance costs in the consolidated statements of income.

2. Gains or losses on equity securities included in other comprehensive income for the years ended March 31, 2022 and 2023 are included in net changes in revaluation of financial assets measured at fair value through other comprehensive income under items that will not be reclassified to profit or loss in the consolidated statements of comprehensive income.

F-82

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(d) Financial Assets and Financial Liabilities measured at amortized cost

The carrying amounts and fair values of financial assets and financial liabilities measured at amortized cost as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022				2023
	Carrying amount		Fair value		Carrying amount		Fair value
Receivables from financial services	¥	5,434,496	¥	5,374,754	¥	5,894,752	¥	5,696,283
Debt securities		79,176		79,176		85,235		85,235
Financing liabilities		8,102,556		7,984,057		7,665,168		7,440,205

The table does not include financial assets and financial liabilities measured at amortized cost whose fair values approximate their carrying amounts.

(27) Offsetting of Financial Assets and Financial Liabilities

The offsetting information regarding financial assets and financial liabilities as of March 31, 2022 and 2023 is as follows:

	Yen (millions)
As of March 31, 2022	Gross amounts of recognized financial assets and financial liabilities		Amounts offset in the consolidated statements of financial position		Net amounts presented in the consolidated statements of financial position		Amounts not offset due to not meeting offsetting criteria despite being subject to a master netting agreement or similar agreement			Net Amounts
Other financial assets
Derivatives	¥	134,338	¥	—	¥	134,338	¥	(98,419	)	¥	35,919
Other financial liabilities
Derivatives		151,942		—		151,942		(98,419	)		53,523
	Yen (millions)
As of March 31, 2023	Gross amounts of recognized financial assets and financial liabilities		Amounts offset in the consolidated statements of financial position		Net amounts presented in the consolidated statements of financial position		Amounts not offset due to not meeting offsetting criteria despite being subject to a master netting agreement or similar agreement			Net Amounts
Other financial assets
Derivatives	¥	185,968	¥	—	¥	185,968	¥	(133,472	)	¥	52,496
Other financial liabilities
Derivatives		242,968		—		242,968		(133,472	)		109,496

Generally, the set-off rights on financial instruments that do not meet the offsetting criteria for offsetting financial assets and financial liabilities become enforceable only under special circumstances, such as when the counterparty can no longer fulfill its obligations due to bankruptcy and other reasons.

F-83

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(28) Commitments and Contingent Liabilities

(a) Commitments

Purchase commitments

Commitments for purchases of property, plant and equipment and other commitments as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Commitments for purchases of property, plant and equipment and other commitments	¥	60,527	¥	107,865

(b) Claims and Lawsuits

Honda is subject to potential liability under various lawsuits and claims. Honda recognizes a provision for loss contingencies when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Honda reviews these pending lawsuits and claims periodically and adjusts the amounts recognized for these contingent liabilities, if necessary, by considering the nature of lawsuits and claims, the progress of the case and the opinions of legal counsel.

With respect to product liability, personal injury claims or lawsuits, Honda believes that any judgment that may be recovered by any plaintiff for general and special damages and court costs will be adequately covered by Honda’s insurance and provision. Punitive damages are claimed in certain of these lawsuits.

After consultation with legal counsel, and taking into account all known factors pertaining to existing lawsuits and claims, Honda believes that the ultimate outcome of such lawsuits and pending claims should not result in liability to Honda that would be likely to have an adverse material effect on its consolidated financial position or results of operations.

Loss related to airbag inflators

Honda has been conducting market-based measures in relation to airbag inflators. Honda recognizes a provision for specific warranty costs when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. There is a possibility that Honda will need to recognize additional provisions when new evidence related to the product recalls arises. However, it is not possible for Honda to reasonably estimate the amount and timing of potential future losses as of the date of this report.

 

F-84

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(29) Structured Entities

Honda considers whether its control over structured entities exists under IFRS 10 “Consolidated Financial Statements”. Honda consolidates structured entities over which it has control, by comprehensively determining whether its control over the entity exists based on any contractual arrangements with such entity as well as the percentage of its voting or similar rights in the entity.

The finance subsidiaries of the Company periodically securitize finance receivables and operating lease assets for liquidity and funding purposes. Securitized assets are transferred to structured entities that are established with the limited purpose of issuing asset-backed securities. The finance subsidiaries of the Company are deemed to have the power to direct the activities of these structured entities that most significantly impact the entities’ economic performance as they retain servicing rights, including the management of delinquencies and defaults of the finance receivables and beneficial interests in operating lease assets. Furthermore, the finance subsidiaries of the Company are deemed to have the obligation to absorb losses and the right to receive variable returns from these structured entities that could potentially be significant to these structured entities by retaining certain subordinated interests of these structured entities. Therefore, the Company is deemed to have substantial control over these entities and consolidates them.

Investors in the asset-backed securities issued by these structured entities do not have recourse to the finance subsidiaries’ general credit with the exception of representations and warranties customary in the industry provided by the finance subsidiaries.

There were no significant unconsolidated structured entities as of March 31, 2022 and 2023.

(30) Related Parties

(a) Related Party Transactions

Honda mainly purchases materials, supplies and services from affiliates and joint ventures, and sells finished goods, parts used in its products, equipment and services to them in the ordinary course of business. Transactions with affiliates and joint ventures are generally made at values that approximate arm’s-length prices.

The balances of receivables and payables with affiliates and joint ventures as of March 31, 2022 and 2023 are as follows:

	Yen (millions)
	2022		2023
Receivables:
Affiliates	¥	34,317	¥	95,429
Joint ventures		346,370		340,368
Total	¥	380,687	¥	435,797
Payables:
Affiliates	¥	147,705	¥	207,090
Joint ventures		36,380		67,044
Total	¥	184,085	¥	274,134

F-85

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

The amount of the transactions with affiliates and joint ventures for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Yen (millions)
	2021		2022		2023
Sales revenue:
Affiliates	¥	87,742	¥	93,187	¥	125,318
Joint ventures		985,920		1,053,370		942,003
Total	¥	1,073,662	¥	1,146,557	¥	1,067,321
Purchase:
Affiliates	¥	1,015,921	¥	1,176,066	¥	1,443,840
Joint ventures		150,123		194,321		238,341
Total	¥	1,166,044	¥	1,370,387	¥	1,682,181

Unrecognized commitment

The Company entered into the joint venture agreement with LG Energy Solution, Ltd. on August 29, 2022 and committed to invest US$1,730 million in L-H Battery Company, Inc., which was newly established and became our affiliate. The Company has the commitment under this agreement for the remaining investment of US$1,627 million as of March 31, 2023.

(b) Compensation to Key Management

Compensation paid to the directors and executive officers of the Company for the years ended March 31, 2021, 2022 and 2023 are as follows:

	Yen (millions)
	2021		2022		2023
Remuneration	¥	683	¥	696	¥	679
STI (Short Term Incentive)		95		188		229
LTI (Long Term Incentive)		129		159		286
Total	¥	907	¥	1,043	¥	1,194

F-86

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(c) Major Consolidated Subsidiaries

Major consolidated subsidiaries as of March 31, 2023 are as follows:

Company	Country of Incorporation	Function	Percentage Ownership and Voting Interest
Honda R&D Co., Ltd.	Japan	Research & Development		100.0
Honda Finance Co., Ltd.	Japan	Finance		100.0
American Honda Motor Co., Inc.	U.S.A.	Coordination of Subsidiaries Operation, Research & Development, Manufacturing and Sales		100.0
American Honda Finance Corporation	U.S.A.	Finance		100.0
Honda Development and Manufacturing of America, LLC	U.S.A.	Research & Development and Manufacturing		100.0
Honda Canada Inc.	Canada	Manufacturing and Sales		100.0
Honda Canada Finance Inc.	Canada	Finance		100.0
Honda de Mexico, S.A. de C.V.	Mexico	Manufacturing and Sales		100.0
Honda Motor Europe Limited	U.K.	Coordination of Subsidiaries Operation and Sales		100.0
Honda Finance Europe plc	U.K.	Finance		100.0
Honda Motor (China) Investment Co., Ltd.	China	Coordination of Subsidiaries Operation and Sales		100.0
Honda Auto Parts Manufacturing Co., Ltd.	China	Manufacturing		100.0
Honda Motorcycle & Scooter India (Private) Ltd.	India	Manufacturing and Sales		100.0
Honda Cars India Limited	India	Manufacturing and Sales		100.0
P.T. Honda Prospect Motor	Indonesia	Manufacturing and Sales		51.0
Honda Malaysia Sdn Bhd	Malaysia	Manufacturing and Sales		51.0
Asian Honda Motor Co., Ltd.	Thailand	Coordination of Subsidiaries Operation and Sales		100.0
Honda Leasing (Thailand) Co., Ltd.	Thailand	Finance		100.0
Honda Automobile (Thailand) Co., Ltd.	Thailand	Manufacturing and Sales		89.0
Thai Honda Co., Ltd.	Thailand	Manufacturing and Sales		72.5
Honda Vietnam Co., Ltd.	Vietnam	Manufacturing and Sales		70.0
Honda South America Ltda.	Brazil	Coordination of Subsidiaries Operation		100.0
Moto Honda da Amazonia Ltda.	Brazil	Manufacturing and Sales		100.0

F-87

HONDA MOTOR CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

(31) Subsequent Event

Acquisition of the Company’s Own Shares

The Board of Directors of the Company, at its meeting held on May 11, 2023, resolved that the Company will acquire its own shares pursuant to Article 459, Paragraph 1 of the Company Law and Article 36 of the Company’s Articles of Incorporation.

(a) Reason for acquisition of own shares

The Company will acquire its own shares for the purpose, among others, of improving efficiency of its capital structure and implementing a flexible capital strategy.

(b) Details of the acquisition

1) Class of shares to be acquired:

Shares of common stock

2) Total number of shares to be acquired:

Up to 64,000,000 shares (3.8 % of total number of issued shares (excluding treasury stock))

3) Total amount of shares to be acquired:

Up to 200,000 million yen

4) Period of acquisition:

Starting on May 12, 2023 and ending on March 31, 2024

5) Method of acquisition:

Market purchases on the Tokyo Stock Exchange

1. Purchases through the Tokyo Stock Exchange Trading Network Off-Auction Own Share Repurchase Trading System (ToSTNeT-3)

2. Market purchases based on a discretionary trading contract regarding acquisition of own shares

(32) Approval of Release of Consolidated Financial Statements

The release of the consolidated financial statements was approved by Toshihiro Mibe, Director, President and Representative Executive Officer and Eiji Fujimura, Executive Officer and Chief Financial Officer on June 23, 2023.

F-88

INDEX OF EXHIBITS

1.1	Articles of Incorporation of the registrant (English translation) *1
1.2	Share Handling Regulations of the registrant (English translation)
1.3	Regulations of the Board of Directors of the registrant (English translation)
1.4	Honda Motor Co., Ltd. Criteria for Independence of Outside Directors (English translation) *2
2.1	Specimen common stock certificates of the registrant (English translation) *3
2.2	Form of Second Amended and Restated Deposit Agreement dated as of March 2022, among the registrant, JPMorgan Chase Bank, N.A., as Depositary, and holders and beneficial owners of American Depositary Receipts *4
2.3	Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934
8.1	List of Significant Subsidiaries (See “Organizational Structure” in Item 4.C of this Form 20-F)
11.1	Code of Ethics *5
12.1	Certification of the principal executive officer required by 17 C.F.R. 240. 13a-14(a)
12.2	Certification of the principal financial officer required by 17 C.F.R. 240. 13a-14(a)
13.1	Certification of the chief executive officer required by 18 U.S.C. Section 1350
13.2	Certification of the chief financial officer required by 18 U.S.C. Section 1350
15.1	Consent of Independent Registered Public Accounting Firm
101.INS	Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	The cover page for the Company’s Annual Report on Form 20-F for the year ended March 31, 2023, has been formatted in Inline XBRL

*1 Incorporated by reference to the registrant’s Annual Report on Form 20-F filed on June 23, 2021.

*2 Incorporated by reference to the registrant’s Annual Report on Form 20-F filed on June 23, 2021.

*3 Incorporated by reference to the registrant’s Annual Report on Form 20-F filed on September 27, 2001. (P)

*4 Incorporated by reference to the registration statement for American Depositary Shares on Form F-6 (File No. 333-263937) filed by JPMorgan Chase Bank, N.A. as depositary, on March 29, 2022.

*5 Incorporated by reference to the registrant’s Annual Report on Form 20-F filed on July 9, 2004.

The Company has not included as exhibits certain instruments with respect to its long-term debt, the amount of debt authorized under each of which does not exceed 10% of its total assets, and it agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.

(P) Paper exhibits

Signatures

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for the filing of Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

HONDA GIKEN KOGYO KABUSHIKI KAISHA (HONDA MOTOR CO., LTD.)
By:	/s/     Toshihiro Mibe
	Toshihiro Mibe Director, President and Representative Executive Officer Chief Executive Officer
Date:    June 23, 2023
Tokyo, Japan