In fiscal 2003, automobile unit sales grew by 8.3% to 2,888,000 units as a result of favorable sales in North America and other regions, centered on Asia, except Japan. Net sales increased by 8.6%, to ¥6,440 billion, mainly due to increased unit sales, which offset the negative impact from the appreciation of the yen against the U.S. dollar. Operating income expanded by 7.6% to ¥560.1 billion, and operating margin was 8.7%.

Mobilio Spike (up)
This vehicle offers large cabin space as well as distinctive styling in the compact body package.







Element (down)
The Element incorporates center -pillar-less body construction and its side doors open from the center for convenient loading access.

During fiscal 2003, overall industry demand for automobiles in Japan totaled 5,860,000 units, about the same level as the previous year. While Honda enjoyed brisk sales of the Fit, Mobilio, and all-new Accord, which received Japan's Car of the Year award, unit sales of the Step Wagon and Stream declined. As a result, unit sales in Japan fell by 3.3% to 849,000 units.
The new products Honda launched in fiscal 2003 were the Fit 1.5T, equipped with a newly developed 1.5L VTEC engine that combines high performance with high fuel economy, the Fit Aria, a small sedan manufactured in Thailand, and the Canadian-made SUV MDX.

During the calendar 2002, overall industry demand for automobiles in the United States dropped by 2% to 16,840,000 units.
Despite this situation, Honda's unit sales of automobiles in North America rose by 11.3% to a record high 1,522,000 units in fiscal 2003. This was attributable to the launch of two new models, the Pilot and Element, in addition to steady sales of the all-new Accord and favorable sales of light truck models, such as CR-V and Odyssey.
In order to meet increased demand for light trucks in the North American market, Honda boosted its local production capacity in North America. At the Canadian automobile assembly plant, we expanded the production capacity on the first and second lines by 30,000 units, bringing the overall annual production capacity to 390,000 units. Of this figure, the production capacity for light trucks is 195,000 units. Moreover, the Alabama automobile assembly plant, which began production in November 2001, reached its full capacity of 150,000 units a year, bringing the total annual production capacity in North America for light trucks and passenger cars to 1,250,000 units.

In Europe, the economy remained weak, but Honda's unit sales in that region grew by 17.6% to 207,000 units, thanks to strong sales of the Jazz and CR-V.
Further, we added a diesel car to our Civic lineup, as demand for diesel cars is particularly strong in continental Europe. Thus, we managed to meet a wide range of customer needs. In addition to increased sales within the region, exports of the CR-V to North America increased, and the capacity utilization rate at our U.K. plant improved remarkably. Our U.K. plant, which celebrated ten years of operations in October 2002, achieved the cumulative production of the 1,000,000-unit mark in February 2003.

Unit sales in other regions increased by 27% to 310,000 units, as a result of sales growth in Asia. Especially in China, the passenger car market broke through the 1,000,000-unit mark in calendar 2002. Honda's sales in China were favorable, and we began local production there of the Odyssey, in addition to the Accord. In order to meet growing local demand, we increased our annual production capacity in China to 120,000 units.
In the ASEAN region, we increased production capacity at our Thai plant, with the goal of meeting expanding demand inside and outside the region. In addition, we began operations at new automobile assembly plants in Malaysia, Indonesia, and Taiwan.

In the year ending March 2004, we plan to increase automobile unit sales by 7.7% to 3,110,000 units.
The sales environment in Japan is likely to remain unfavorable. However, in addition to starting sales of the North American-made SUV MDX and the Element, we will work to improve the attractiveness of our products in the minivan segment by making substantial improvements and full model changes to existing models. For our sedan models and minivehicles as well, we will work to strengthen our products through full model changes. Further, in order to improve our sales efficiency, we are developing a nationwide IT infrastructure. With this strategy, we project a 0.7% increase in our fiscal 2004 unit sales, to 855,000 units.
In the North American region, sales of the Odyssey, Pilot, and Acura MDX are expected to continue growing thanks to the full-scale operations at the first production line at the Alabama automobile assembly plant and an increased production capacity at the Canadian automobile assembly plant. We project fiscal 2004 unit sales to increase by 2.5% to 1,560,000 units, due to stable sales of the all-new Accord and the introduction of new models, such as the Element, which we launched in December 2002, the sports sedan Acura TSX, which we put on the market this spring, and the luxury performance sedan Acura TL, which will have a full model change this fall. In addition, we are building a second line at our Alabama plant in order to increase our production capacity for light trucks. In the spring of 2004, the annual production capacity at the Alabama plant will total 300,000 units.
In Europe, we expect steady sales of the remodeled Accord, launched at the beginning of 2003, supported by a diesel-powered version to be added during this year. Moreover, we will improve the attractiveness of the the core model of our European automobile business, such as the U.K.-built Civic. We project unit sales in Europe to grow by 1.4% to 210,000 units in fiscal 2004.
We expect unit sales in other regions to rise by 56.5% to 485,000 units in fiscal 2004. In China, which is experiencing dramatic growth, we will boost our local production capacity to 240,000 units a year, and strive to meet the expanding demand in that country. In addition to the Accord and Odyssey, which we have been marketing in China thus far, we intend to introduce the subcompact car Fit Saloon, with aims to expand our customer base. In Thailand, we increased our annual production capacity to 120,000 units in May 2003 in order to meet growing demand. Further, in the Asian region, we will continue to enhance our regional complementary supply network for products and components. In Korea, which has the third largest automobile market in Asia following Japan and China, we will start sales of imported automobiles from the beginning of 2004 by expanding the function of our existing local motorcycle sales subsidiary.