Motorcycle Business
In fiscal 2006, we continued supplying attractive products to the rapidly growing Asian motorcycle market. This enabled us to expand sales, especially in India and Indonesia. To address rising demand, we increased production capacity at our manufacturing subsidiaries and affiliates accounted for under the equity method in those countries.
We also reported higher sales in Brazil, where the market continues to grow. Sales in other regions were also favorable.
Amid ongoing expansion of our global operations, we sought to improve our production technologies and our ability to efficiently launch new models. At the same time, we advanced the skills of our technicians and strengthened our domestic production systems, with a view toward launching our advanced technologies globally.
We continued our aggressive pursuit of safety-enhancing and environmentally friendly technologies with highlights of the period including the launch in Asia of a small-size motorcycle equipped with Honda's original programmed fuel injection (PGM-FI)*1 technology. We also succeeded in developing the world's first mass-produced motorcycle with an airbag protection system. In these and other ways, we used multiple technologies, accumulated from our experience in automobiles, to make better and safer motorcycles.
Unit sales of Honda motorcycles, all-terrain vehicles (ATVs) and personal watercraft (PWC) in fiscal 2006 amounted to 10,271,000 units*2, down 2.0% from the previous year.
In another highlight, cumulative motorcycle production reached 150 million units in fiscal 2006, 57 years since the launch of the Dream Type D*3 in 1949.

Automobile Business
In the automobile segment, we undertook a full model change of the Civic in various regions around the world, launching models that meet specific local needs. These included dedicated models for the North American and European markets. Increasingly concerned about rising gasoline prices and environmental issues, more customers are demanding fuel-efficient products. As a result, the new Civic received overwhelming support.
Fiscal 2006 saw healthy sales of the Civic and other passenger cars in North America. Sales of light truck models in the region were also strong, mainly boosted by the launch of the Ridgeline in March 2005.
In Asia, where the market continues to grow, sales in China, India and other major markets increased, enabling us to broaden our business in the region. In response, we increased the production capacity of manufacturing subsidiaries and affiliates accounted for under the equity method.
In the domestic market, which remained challenging, we upgraded our product lineup and deployed information technology to strengthen our sales and service systems. Seeking to maximize customer satisfaction and enjoyment, in March 2006 we integrated our three sales channels—Primo, Clio and Verno—into a single Honda channel, through which all Honda-brand automobiles can now be purchased.
Unit sales of automobiles rose 4.6%, to 3,391,000 units,

Power Product Business
In the power product segment, we reported solid sales in North America of generators and engines supplied on an OEM*4 basis for use in pressure washers. In Europe, sales of engines supplied on an OEM basis for use in lawnmowers increased. Sales were also boosted by our supply to various regions of highly cost-competitive products made in Asia.
During the year, Honda began sales of the iGX engine*5, boasting world-class environmental performance, in major global markets. We also strove to expand sales of our compact, home-use cogeneration system.*6
As a result, unit sales of power products rose 10.9% compared with the preceding term, to 5,876,000 units.

Due to the factors described above, consolidated net sales in fiscal 2006 reached ¥9,907.9 billion, up 14.5% from the previous year. Net income rose 22.8%, to ¥597.0 billion.*7

Motorcycle Business
Although it is likely that the motorcycle business will continue to be affected by high gasoline prices, as well as interest rate hikes in some regions, we anticipate ongoing growth in regions where motorcycles are an important part of people's lives and an essential mode of transportation.
Through such moves as equipping scooters with AT*8, Honda is meeting increasingly diverse customer needs with products that are competitively priced, with the goal of increasing sales. From an environmental perspective, we are equipping more models with PGM-FI and other features that provide superior environmental performance. To meet the expected increase in sales, we are raising production capacity at our affiliates accounted for under the equity method in India and China, as well as consolidated subsidiaries in the Philippines and Pakistan.
In other regions, against the backdrop of a robust economy, we expect the Brazilian market to continue expanding, and are working to strengthen our model lineup as well as expand sales of our mainstay models in this country. Besides Brazil, in mid-2006 we plan to begin production in Argentina to meet demand in this expanding market.
In North America, in mid-2006 we will launch new ATV models that are tailored to customer needs and introduce an entry-level motocross bike. Such efforts should enhance sales in this region.
From the standpoint of safety, from mid-2006 we will offer the first motorcycles equipped with airbags, and will remain aggressive in our efforts to develop other safety initiatives.
As a result of these activities, we plan to sell 10,840,000 units*9 in fiscal 2007, deepening Honda's involvement in the motorcycle business, where the Company got its start.

Automobile Business
Taking into consideration such factors as high gasoline prices and higher interest rates, in calendar 2006, we expect overall United States demand for automobiles to total approximately 16.5 million units.
Honda will further enhance its model lineup that features superior environmental and safety performance. In addition to launching a new entry-premium SUV (sport utility vehicle), the Acura RDX, the Honda CR-V and the Acura MDX will undergo full model changes, and we will further expand our lineup of light truck models, which offer superb fuel economy and driving performance. In the passenger car segment, we will work to expand sales of the new Civic, which went on sale in 2005, and the Fit, for which sales launched from Canada in March 2006. In May 2006, we expanded local production by beginning operations at a new AT plant in the state of Georgia, in the United States.
We expect the Asian markets to continue delivering high levels of growth. To meet this burgeoning demand and increase sales, we will expand our sales and service networks within each country in this region. We will work to accelerate sales of the new Civic, which went on sale in China in April 2006. In addition to boosting production capacity at an affiliate accounted for under the equity method, we will also begin operations at a new powertrain plant in China in early 2007 as part of our efforts to increase local production. To meet as broad a range of market needs as possible, in 2006 we will launch a progression of Acura-brand vehicles, such as the Acura RL and the Acura TL. In addition to the Accord and the City, production of the Civic will begin in India, and this model will go on sale there in July 2006. We have accelerated our initially planned expansion to 100,000 units by three years, to 2007. In Vietnam, a new plant with an annual production capacity of 10,000 units will begin manufacturing and selling the Civic in mid-2006.
In other regions, we anticipate sales to continue growing in South America as these economies expand. To meet rising demand in Brazil, we will expand annual production capacity to 80,000 units in early 2007, rising to 100,000 units in 2008.
Despite an extremely competitive environment in Europe, the new Civic, five-door model (for the European market) has fared well since its launch at the beginning of 2006. We will add a three-door model within 2006, aiming to boost sales in this market as we augment our lineup. In anticipation of rapid expansion in the Ukrainian market, we have established a new subsidiary to strengthen our sales efforts there and round out our sales structure for the European region.
Japan remains an intensely difficult market, and in 2006 demand is expected to remain at the previous year's level. To better focus on enhancing the lifetime satisfaction of customers, we will bring our core Honda brand to the forefront, strengthening our sales and service system and making the Honda channel*10 easier for customers to access.
Through these activities, we are planning sales of 3,720,000 units in fiscal 2007. Our aim, while continuing to develop our business globally, is to create new value for our customers.