HONDA MOTOR CO., LTD.

Strengthening of import/export regulations and tariff policies in various countries, along with progressing economic bloc formation, actually caused supply chain disruptions and semiconductor supply shortages during the fiscal year under review. Following a shift in U.S. government policy, the Company has been forced to review its EV model rollout plan and automobile electrification strategy, and there is a possibility that production slowdowns and increased costs related to development, procurement, and sales activities could adversely affect business results. As countermeasures, the Company is strengthening intelligence functions through collaboration between domestic and overseas departments and has established a forward-looking review framework led by the Risk Management Committee.

Geopolitical tensions continue in Ukraine, the Middle East, the South China Sea, and other regions, and the occurrence or prolongation of new conflicts could cause supply chain disruptions, soaring procurement prices, and suspension of business activities. Material prices have been rising globally due to the impact of the situation in the Middle East, and adverse effects on the Company's business results are anticipated. As countermeasures, the Company is strengthening information gathering and monitoring functions and has established a rapid business continuity response framework premised on

There are concerns over dependence on specific suppliers, a rapid expansion in demand for battery materials such as nickel, lithium, and cobalt accompanying accelerated electrification, and shortages in semiconductor and memory supply due to the spread of AI, and the impact of China's rare earth export restrictions is also under review. Rising prices or supply disruptions of raw materials and components directly lead to production slowdowns and reduced competitiveness, and quality defects caused by business partners could also damage the Company's brand image. As countermeasures, the Company is continuously reviewing and strengthening its supply chain and has established a system for monitoring the status of parts supply.

As cyberattacks become more sophisticated and complex, there is a need to respond to risks of unintended rights infringement or information leakage associated with AI utilization, as well as to rapidly evolving personal information protection regulations. If a security incident occurs, a wide range of adverse effects could result, including suspension of business and production systems, leakage of confidential information, damage to brand image, and payment of fines. As countermeasures, the Company has established a cross-functional response framework centered on the responsible departments within the Quality Innovation Headquarters and Corporate Strategy Headquarters, and is conducting monitoring and analysis of cyber threats in collaboration with external experts.

The automobile industry is undergoing a major transformation, with intensifying competition from emerging players such as Chinese companies, changes in environmental policy in North America and Europe, and the expansion of trade tensions accompanying the introduction of additional U.S. tariffs, making it difficult to predict the future with certainty. Throughout the fiscal year under review, the Company revised its EV model rollout plan and automobile electrification strategy, resulting in related losses and expenses. If the Company is unable to respond competitively to changes in the market and demand, this could have a material adverse effect on its business and business results.

While the use of business alliances and joint ventures is essential to achieving zero environmental impact, zero traffic collision fatalities, and the creation of original technologies, there is a possibility of adverse effects on the Company's business and business results if conflicts of interest arise between parties, technology leakage occurs, decision-making is delayed, or a partner's business performance deteriorates. Similar risks exist if the terms of an alliance are changed or terminated. As countermeasures, the Company conducts due diligence based on its medium- to long-term business strategy and monitors the operational status of partnerships after contracts are concluded.

Policies and regulations related to climate change, fuel efficiency, and emissions are being reviewed in countries around the world, and there is a possibility that costs related to production, development, procurement, and sales activities will increase across all businesses, including the Motorcycle Business, Automobile Business, and Power Products Business. Depending on regulatory trends, there is a risk that the Company may be forced to make significant changes to its product lineup and production systems. As countermeasures, the Company is promoting initiatives in carbon neutrality, clean energy, and resource circulation under the

In focus areas such as carbon neutrality, autonomous driving, IoT, and connected technologies, insufficient protection of intellectual property could lead to reduced competitiveness. Lawsuits arising from unintended infringement of third-party intellectual property rights due to AI adoption, as well as patent infringement lawsuits resulting in manufacturing and sales injunctions or claims for substantial damages, could adversely affect business results. As countermeasures, the Company conducts patent infringement litigation countermeasures in collaboration with external experts and business partners, and monitors and analyzes trends in related laws and regulations.

As the Group conducts production and sales operations in countries around the world, fluctuations in exchange rates affect the purchase prices of raw materials and components as well as the setting of product sales prices, which could adversely affect business results. In addition, a decline in unit sales due to economic downturns or business cycle fluctuations, rising procurement prices, and increases in credit risk and financing interest rates could also be factors contributing to a deterioration in business results. The Financial Services Business also entails residual value risk, credit risk, and funding risk.

If the Company's brand image is damaged due to unforeseeable events or a failure to disseminate information promptly and appropriately, this could adversely affect its business and business results. An inappropriate matter related to certification testing at the time of type designation applications was reported to the Ministry of Land, Infrastructure, Transport and Tourism on May 31, 2024, and the risk of recurrence of similar incidents remains. While the Company continues to strengthen compliance and governance, responding to unpredictable events such as natural disasters and cyberattacks also remains a challenge.