Unit sales of Honda motorcycles, including all-terrain vehicles (ATVs) and personal watercraft (PWC), in fiscal 2002 climbed 19.1%, to 6,095,000 units, buoyed by gains in North and Latin America, as well as in Asia. Segment revenue advanced 17.7%, to ¥947.9 billion ($7,114 million), while operating income grew 23.3%, to ¥69.6 billion ($523 million). The operating margin was 7.3%.

JAPAN
Total demand in Japan's motorcycle market during the period under review slipped 5.7%, to 783,000 units. In this environment, flagging sales of commercial-use models counteracted the increase in sales of sport bikes generated by the introduction of new models. As a consequence, unit sales of Honda motorcycles in the domestic market remained relatively flat, at 404,000.

During fiscal 2002, we launched several models designed specifically to appeal to younger consumers, including two scooters – the Zoomer, which features distinctive "naked" styling, and the casually appointed Bite – and the Ape 100, a 100cc sport minibike. We also introduced models aimed at adult consumers, such as a new version of the Silver Wing large scooter mounted with a 600cc engine and the VFR, a super sport touring model.

To reinforce our motorcycle business in Japan, we established a new sales company, Honda Motorcycle Japan Co., Ltd. (HMJ), which combines all domestic motorcycle sales functions and supervises the overall motorcycle operations. Created through the integration of three wholesale companies, HMJ also assumedthe product planning and marketing functions of headquarters and the motorcycle sales support functions of related divisions. This combination enables HMJ to oversee market-oriented product planning and sales activities from a vantage point close to the market, enhancing the efficiency of operations and increasing customer satisfaction.

NORTH AMERICA
Unit sales of motorcycles in fiscal 2002 in North America climbed 13.7%, to 590,000, reflecting gains in the touring, custom and off-road categories. We recorded brisk sales of locally manufactured, large-displacement models, notably the Gold Wing GL1800 touring bike and the VTX 1800 custom classic, as well as motocross bikes and the XR50R off-road bike for children. We also launched the AquaTrax F-12 and AquaTrax F-12X, our first models in the PWC category.

EUROPE
Reflecting sluggish economic conditions and currency fluctu-ations, total market demand for motorcycles in Europe shrank in fiscal 2002 after seven consecutive years of growth. In this environment, unit sales of Honda motorcycles in the region slipped 7.6%, to 315,000. In Italy, the largest market for small scooters in Europe, tighter environmental and helmet regulations and higher insurance premiums accelerated a shift in scooter demand to models with 125cc or higher displacements. In Spain, demand was hampered by an increase in the value-added tax (VAT) on 50cc scooters. We responded by accelerating marketing efforts for the CBR600F and CBR900RR super sport bikes. We also sought to further stimulate demand by introducing two locally built 125cc and 150cc scooters, the SH125 and SH150.

OTHER REGIONS
Other regions comprise Asia, Oceania, Latin America, the Middle East and Africa. A strong performance in Asia spurred a 24.3%increase in unit sales of Honda motorcycles in other regions, to 4,786,000. Gains in Asia were largely attributable to a number of new models, such as the M-LIVING, an affordably priced 125cc commuter bike launched in China; the Wave 125, a fuel-efficient motorcycle with a 4-stroke engine offered in Thailand; and the Wave a, an inexpensive, family-oriented motorcycle launched in Vietnam that uses locally sourced parts, as well as those sourced from China and other regions of Asia. Sales in this geographical category were also bolstered by firm sales of the XR250 Tornado on-road/off-road bike, launched in Latin America in the summer of 2001.

In addition to stepping up marketing efforts in Asia, we also took action to expand our production and sales network to capitalize on rapidly rising demand. During the period, we established joint venture Sundiro Honda Motorcycle Co., Ltd., to manufacture and market motorcycles in China, the world's largest market for these vehicles. In November, Sundiro Honda Motorcycle began producing the M-LIVING motorcycle. Also, we established a new subsidiary, Honda Motorcycle R&D China Co., Ltd., in Shanghai.

The new company, which is scheduled to start operations in April 2003, will work closely with our three Chinese motorcycle joint ventures to facilitate expansion of our operations in this crucial market. In India – the world's second-largest motorcycle market – we commenced operations at a new plant for motorcycle manufacturing subsidiary Honda Motorcycle & Scooter India (Private) Limited (HMSI). HMSI will increase its annual production capacity to 250,000 units in fiscal 2003, from 120,000 at present.

OUTLOOK
We forecast a 29.3% increase in unit sales in our worldwide motorcycle business in fiscal 2003, to 7,880,000. We will continue to stimulate demand in Japan by introducing new concept models. Keeping the needs of increasingly price-conscious customers in mind, we will commence imports and sales of affordably priced scooters from Sundiro Honda Motorcycle in China. As a consequence, we forecast a 6.4% increase in unit sales of Honda motorcycles in Japan, to 430,000.

In North America, demand for motorcycles, including ATVs, is expected to continue expanding. The successful start-up of the 50cc scooter, the Metropolitan, launched in April 2002, bodes well for sales in the scooter market. We anticipate a 6.8% increase in unit sales in the region, to 630,000.

Although market conditions in Europe are likely to remain harsh, we will strive to support sales by enhancing the appeal of existing models, adding exciting new offerings and realigning our sales networks. In this environment, we project a 1.6% increase in unit sales of Honda motorcycles, to 320,000.

In other regions, we expect unit sales to climb 35.8%, to 6,500,000. In Asia, we will continue to reinforce competitiveness by promoting the complementary supply of parts among our manufacturing facilities. This will enable us to build a regional production network capable of generating high-quality, environment-friendly and affordably priced motorcycles.