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CEO Message To Our Shareholders

What Honda has achieved in the last two years and the direction Honda will take in the future

Since I became president, we have set and pursued two themes. One was the "development of challenging products unique to Honda" and the other was the "advancement of our six-region global operation structure."

Strengthening global models and regional models

Design and driving experience

To strengthen our automobile business, we have been enhancing the product strengths of global and regional models, which have long been strengths of Honda. As for global models, which are the backbone of our automobile products, the compact SUV model Vezel/HR-V has grown into one of our global models. Moreover, sales of the all-new Civic, with its refined design and driving experience, have been strong everywhere. Sales of the all-new CR-V, which started in the U.S., are also off to a strong start. With various measures including the introduction of a hybrid version, we are going to further grow CR-V as a strong global model. Furthermore, the next-generation Accord will undergo a full model change this year starting from the U.S. market, with a further advanced design and driving experience.

In addition to these global models, our regional models, another strength of Honda, have also been growing in each respective region. These highly acclaimed regional models include the Mobilio and BR-V in Asia; the Ridgeline and Odyssey in North America; the Crider, Avancier and UR-V in China and the N-BOX in Japan.

Mutually complementary system for our global operations

Concerning the advancement of our six-region global operation structure, we are facilitating inter-regional coordination to evolve our models more efficiently to further expand the potential of our regional models. For instance, the WR-V, a regional model developed mainly by the Honda R&D center in Brazil, is now being produced and sold in India as well. Moreover, to balance supply and demand in global production and sales, we have been working to establish a flexible production system and mutually complementary production among six regions. And now, we are gradually seeing positive results from our efforts.

For instance, in North America, in order to enable us to accommodate the recent increase in demand for SUVs, we are in the process of establishing a production system where we can handle the production of light truck models such as the Honda CR-V, Pilot and the Acura MDX more flexibly in North America. As for the Civic Hatchback, supply from the U.K. to North America has begun and supply to Japan also is on the way.

As these examples demonstrate, we will advance our six-region global operation structure through inter-regional cooperation and coordination in order to further strengthen our global competitiveness.

Realizing a carbon-free and collision-free society

As an important challenge for a mobility company, Honda has worked on the theme of the realization of a carbon-free and collision-free society. The speed of evolution in these areas has been rapidly increasing in recent years, and we need to fortify our initiatives. To this end, we have identified the introduction of electrification technologies and advanced safety technologies as our highest priority and are working proactively in these areas.

Enhancing the introduction of electrification technologies

As a part of our effort to address environmental issues, we are striving to electrify two-thirds of all automobiles we sell globally by the year 2030. In addition to the expansion of hybrid models, our development will put a central focus on hybrid-based models utilizing a high-efficiency plug-in hybrid system unique to Honda. Moreover, as we expect zero-emission vehicles will quickly become popular on a global basis, we will strengthen the development of fuel cell vehicles as well as battery EVs.

The Clarity series, which we recently introduced in the U.S., is our first model with a lineup including plug-in hybrid, battery EV and fuel cell variants using the same platform. Concerning battery EVs, we are planning to introduce a China-exclusive model next year. In addition, dedicated EV models for other regions also are currently under development.

In preparation for this evolution, we are strengthening our capabilities and development structure for electrified vehicles. In order to further increase development speed, in October of last year, we established an Electric Vehicle Development Division within Honda R&D where a specialized team will be in charge of developing the entire vehicle, including the powertrain and chassis. Going forward, we will aggressively pursue development of electrified vehicles under the leadership of this division.

As for the electrification of motorcycles, we are striving to promote the electrification of commuter models, and we are planning to introduce some new models, including an electric scooter, in 2018. For the electrification of motorcycle models, we are currently working on the research and development of a highly convenient system for electric commuter models, which features a detachable mobile battery that is easy to replace and/or recharge. We are considering conducting demonstration testing of this mobile battery in collaboration with Japan Post Co., Ltd., as we recently announced in Japan. And as we conduct research on this mobile battery, we are envisioning a future where we also use it for automobiles and power products.

Initiative toward the introduction of advanced safety technologies

In the area of safety, we are striving to further increase the number of automobile models that feature the Honda SENSING suite of advanced safety and driver-assistive technologies. In Japan, starting with the all-new N-BOX, which is scheduled to go on sale this fall, we will begin applying Honda SENSING to our mini-vehicles as standard equipment. Also, we will make Honda SENSING standard equipment on all new models we introduce in Japan from now on, as a means to further accelerate our efforts toward the realization of a collision-free society. Moreover, we will expand application of Honda SENSING to all-new models in other regions as well, including North America, China and Europe.

And we are making progress in the research and development of automated driving technologies, where Honda is striving to "serve people worldwide with the joy and freedom of collision-free mobility." There are three values we want to realize. First, is the "realization of a society where people do not get involved in accidents." Second, is "offering mobility products which enable all people to always enjoy the freedom of mobility." And the third value we want to realize is "creating travel time and cabin space that make mobility fun for people."

As for the concept of Honda's automated driving, we are striving to provide our customers with a sense of self-assuredness by offering automated driving which will help vehicles avoid dangerous situations and not make people around the vehicle feel anxious. In addition, by featuring smooth and natural driving characteristics, we will realize occupant comfort, which gives the driver self-confidence and naturally instills a desire within people to go out and enjoy mobility.

First, we are going to realize automated driving technologies for use on highways in 2020. And then, we will make them usable in a broader area including regular roads. As for automated driving on highways, we are striving to realize an automated lane-changing function which enables the vehicle to utilize in multiple lanes without any driver input. We are also going to realize an automated driving function which will free the driver from the need to monitor his or her surroundings while the vehicle is caught in traffic. Moreover, we will strive to establish the technologies to achieve "level 4" automated driving for personal car use by around 2025.

2030 Vision

For Honda to continue to be a company that society wants to exist even in the year 2050, when the Company will be more than 100 years old, we must try to envision what Honda needs to be like. This forward-looking image is summarized in what we call the 2030 Vision.

<Universal passion and strengths of Honda>

To draft our vision statement, we first clarified the "universal passion of Honda" and the "strengths of Honda."

Integration of advanced Mono-zukuri and Koto-zukuri

The universal passion of Honda consists of the value proposition that Honda should offer and the corporate attitude we should have toward the realization of that value proposition. Our value proposition is to provide products and services that expand people's dreams and potential. The corporate attitude means our approach to taking on new challenges while being driven by a strong passion to realize our value proposition.

Concerning the strengths of Honda, there are two existing strengths. The first one is our strength in manufacturing a broad range of products including motorcycles, automobiles and power products. The second strength is the number of markets and 28 million customers we connect with each year through our products. To these existing strengths, we will add a new strength of Honda which is our ability to create solutions, which includes both Mono-zukuri, the art of making things, and Koto-zukuri—which is creating new experiences through brand storytelling around the art of making things. Through this integration of further advanced Mono-zukuri and Koto-zukuri, we will continue creating the strengths of Honda.

Our 2030 Vision consists of four parts: 1) The 2030 Vision Statement, 2) The Corporate Attitude that describes how we are going to work toward the vision, 3) The direction of our initiatives toward the fulfillment of the 2030 Vision and 4) What we will do to strengthen our business foundation.

2030 Vision

<Vision Statement>

In two areas—the "advancement of mobility" and "value creation for people's daily lives"—we will bring the universal passion of Honda to "serve people worldwide with the joy of expanding their life's potential." And toward this end, we will "lead the advancement of mobility and enable people everywhere in the world to improve their daily lives." This is our 2030 Vision Statement.

<Direction of our initiatives toward the fulfillment of the 2030 Vision>

To embody our 2030 Vision Statement, we set the direction of our concrete initiatives.

From three perspectives—"Creating the Joys," "Expanding the Joys" and "Ensuring the Joys for the Next Generation"— we defined three areas of our initiatives.

From the first perspective of "Creating the Joys," we will work on "creating value for mobility and people's daily lives." We will focus on three areas, namely mobility, robotics—with a focus on AI—and energy solutions in order to provide people with the joy and freedom of mobility and the joy of making their lives better.

From the second perspective of "Expanding the Joys," we will focus on "accommodating the different characteristics of people and society." In this area, we will strive to further expand the joy of people by offering products and services that are optimized based on Honda's desire to "utilize technology to help people, while putting people at the core."

From the third perspective of "Ensuring the Joys for the Next Generation," we will make progress "toward a clean and safe / secure society." Striving to become No. 1 in the areas of the environment and safety, we will invest more resources in these areas. And we will strive to become a company that leads the efforts to realize a carbon-free and collision-free society.

<Strengthening our business foundations for growth>

Toward the fulfillment of this vision, the most important thing is how we will transform and evolve our existing businesses and also create new value through efficient use of finite corporate resources. To this end, we identified three areas we will focus on, and we will utilize our corporate resources effectively in such areas and strengthen our business foundation.

First, we will further enhance our inter-regional coordination and collaboration and increase the efficiency of our operations from a global perspective. Toward this end, we will grow our global models strong, so that they will be well received anywhere in the world. As for regional models, with consideration of customers needs in each region, multiple regions which have similar customer needs will work together to realize common regional models with a high level of product strength. Through this initiative, we will strive to achieve more efficient business operations in each region.

Second is the collaboration for open innovation with third parties. We will clarify what we should do on our own, and we will focus on that. At the same time, we will be proactive in engaging in open innovation with external partners. Since its foundation, Honda's strengths have been advantages in technologies and products centering around the powertrain and packaging, which includes internal combustion engines as well as more recent electrified vehicles. In addition, our business foundation established all around the world has also been one of our strengths. Identifying powertrain and packaging as Honda's core technologies, we would like to strengthen partnerships from the perspective of both Mono-zukuri and Koto-zukuri with our customers worldwide.

In fact, we have already begun exploring various partnership opportunities. For instance, in the area of the art of making things, we are collaborating with General Motors, Hitachi Automotive Systems and Yamaha Motor. And in the area of creating new experiences about the art of making things, we are already collaborating with Japan Post and Grab Inc. in the area of motorcycles and with Waymo in the U.S. in the area of automated driving. We will further accelerate these collaborations going forward.

The third area of focus is to strengthen our business foundation and ensure sustainable operations, especially with our automobile business, in order to solidify existing businesses. To this end, we are currently moving forward with a project which will significantly advance Honda's development system and capability. The special merit of Honda's automobile development is our "SED* development system," where development teams, production teams and sales teams work as one and form a project team to pursue product development. We will further advance this development system and introduce a new development process for Honda's art of making automobiles, which will enable us to more efficiently create both products and new experiences that appeal to people's emotions. Through those new initiatives, we will aim to create attractive automobiles and achieve comprehensive cost reduction by making both the development and production of new automobiles more efficient.

* Sales, Engineering and Research & Development

<Corporate attitude>

For the fulfillment of our 2030 Vision, we will set the corporate attitude to "pursue growth through the pursuit of quality." We will increase the quality of Honda products and services, and at the same time, we will increase the quality of our corporate activities, which we will carry out based on the strong principle that we want to please our customers.

<On a final note…>

In order for us to fulfill this 2030 Vision and create a New Honda, in addition to continuous investment in our research and development, returns to our shareholders and investors, investments in our production including our suppliers and earning profit that enables us to do all of that are all equally important. Also, with such a perspective, we will strive to further strengthen the foundation of our company so that we can fulfill the expectations of our shareholders, investors and many other people who support Honda.

Honda appreciates the continuous support from our shareholders toward our efforts to create a New Honda.

June 15, 2017
Takahiro Hachigo
President and Representative Director
Chief Executive Officer