Honda’s Global Operation

and Our Business in Canada

Honda Motor Co., Ltd

March 2016

Table of Contents

1．Introduction

2．Principle of Global Operation

(1) Building Products Close to the Market

(2) Promote Local Procurement of Parts

3. Honda in Canada

(1) Sales and Production

(2) Opportunity by TPP Agreement

(3) R&D Activities

Honda Products

Mobility

Honda’s Overall Sales Volume

Annual worldwide sales units in 2015

Motorcycle

17.1 mil

Automobile

4.7 milPower Products

6.0 mil

Domestic

Overseas99% 84% 94%

Honda encountered approx. 28 mil. customers in 2015

EUROPE, AFRICA

& MIDDLE EAST

CHINAJAPAN

NORTH AMERICA

SOUTH

AMERICA

ASIA & OCEANIA

GRAND TOTAL: 4.6 million units

205 1,010726

701

1,853

166

Automobile Sales by Region in CY2015

thousand units

48 49 45

47 50 51 52 52

61 61 63 63 66 68

72 73 76 75

80 79 84

0

10

20

30

40

50

60

70

80

90

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

（million） (%)

（year）

Overseas Production

（scale in left)

Domestic Production（scale in left）

Proportion of Overseas

Production（scale in right)

Automobile Worldwide Production

Table of Contents

1．Introduction

2．Principle of Global Operation

(1) Building Products Close to the Market

(2) Promote Local Procurement of Parts

3. Honda in Canada

(1) Sales and Production

(2) Opportunity by TPP Agreement

(3) R&D Activities

0

20

40

60

80

100

120

140

160

83 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

13

99

（year）・ To supply customer-oriented products and service quickly• Cooperation with local society as a good corporate citizen• Overcome tariff, currency exchange rate risks and trade friction

Automobile sales in the US(ten thousand)

Proportion of Local production

13% (’83) → 99% (’14)

Local Productionincl.

Canada & Mexico

Import

(1) Building Products Close to the Customer

(2) Promote Local Procurement of Parts

Note: Figures are based on Honda’s fiscal year calendar, which runs from April 1 through March 31

$0

$2,500

$5,000

$7,500

$10,000

$12,500

$15,000

$17,500

$20,000

$22,500

$25,000

$27,5001

98

2

19

83

1984

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

1993

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

2007

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

①Supply products quickly②Dedicate to local

economy (employment,

parts procurement)③Overcome risk, tariff, avoid

confliction

A record $ 26.5 billion purchased from 713 suppliers

in FY 2015

Parts purchases from local suppliers by Honda plants in N. America

Present local procurement rate: 79% ~ 83%

Export / Import to Supplement Localization

iron parts

engine

India

U.K.

TurkeyPakistan

transmission

pressed parts

ChinaJapan

ThailandPhilippines

MalaysiaIndonesia

aluminum parts

transmission

Brazil

U.S.A.

aluminum parts

Local procurement+ Export and Import

Parts supply

Canada

.

Table of Contents

1．Introduction

2．Principle of Global Operation

(1) Building Products Close to the Market

(2) Promote Local Procurement of Parts

3. Honda in Canada

(1) Sales and Production

(2) Opportunity by TPP Agreement

(3) R&D Activities

HCMHonda of Canada Mfg.

Honda Canada Manufacturing

4 Door Civic 2 Door Civic CRV

4 Door Civic

◆ Capacity 400,000 units ◆Number of Associates 4,200

PLANT 2

4 Cylinder Engines

Engine Plant

Honda Recreation Center in HCM

Ice Hockey Rink

Fitness Facility

1 5

21

33

51 45

33

47

63 56 54 53

63 64

73 75

84

101 104

85

68 69 67 74

107

117

131 135

150

165

155

144

155

166 170 171

140 141

123

149

164

172 178

0.1%0.4%

1.6%

2.6%

3.9%3.3%

2.4%

3.6%

5.4%

6.2%

5.3%

4.5%4.2%4.3%

4.9%5.0%

5.9%

7.7%

8.2%

7.0%

5.9%5.6%

5.9%6.3%

7.7%

8.4%8.8%8.7%

9.6%9.7%9.7%9.4%

9.8%10.3%10.3%

10.5%

9.6%9.1%

7.8%

8.9%9.4%9.3%9.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

20

40

60

80

100

120

140

160

180

2001973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

CH Market Share%

(in 1000)

Acura (‘87- )

Honda Brand Passenger Car

Honda Brand Truck

Automobile Sales in Canada

Lehman Shock

Earthquake

CivicPassenger Car18years No.1

10th Generation Honda New Civic

Canadian Car

of the Year Award

16MY Civic Car of the Year

All-new 2016 Honda Civic Named the Canadian Car of the Year by Automobile Journalists Association

10th Generation Honda Civic

ELP

HPPG

HTM

AEP

HCM

Civic 4D

HMIN

HDM

HDMC

Civic 2D

CRV

Civic 4D

Fit

CRV

TLX

Accord

Crosstour

CRV

RDX

MAP

Pilot

Ridgeline

Odyssey

MDX HMA

ILX

HRV

Products in N.A. and Made in Canada

● Sales in Canada(2015)

177,506

● Made in Canada(2015)

96.932

● The Ratio of Made in

Canada 54.6%

High ratio of

‘Made in Canada’

Honda

Canada

Manufacturing

15YM NAFTA Results (qualification = 62.5%)

HAM Accord 79%

HMA Odyssey 84%

HMA Pilot 80%

HMA MDX 81%

HMIN Civic 79%

HCM CR-V 83%HCM Civic 79%

79%～83% of parts are locally procured

Current Status of Local Contents (major models)

US

Canada

・HCM purchases parts from 242 suppliers in North Americaand 42 suppliers in Canada

・HCM also purchases smaller portion of parts, mainly from Asia

‘Mother Factory’ for Alabama Plant

JAPAN

Technology transfer from Canada to Alabama(U.S.)

Odyssey

Canada

1986~

Ohio

1982~

Alabama2001~

HCM as Global Lead Factory of Civic Production

Table of Contents

1．Introduction

2．Principle of Global Operation

(1) Building Products Close to the Market

(2) Promote Local Procurement of Parts

3. Honda in Canada

(1) Sales and Production

(2) Opportunity by TPP Agreement

(3) R&D Activities

• Tariff reduction and elimination of passenger car

At present 6.1% →1st Year 5.5% → 2nd Year 5.0% → 3rd Year 2.5% → 4th year 2.0%

→ 5th Year 0%

Import to Canada

• Tariff elimination of 87.5% of parts for production

Rule of Origin

• Unified rule introduced

• Threshold of local content rate Completed Car 55%

Parts 50%~55%

Honda Canada can smoothly import car and parts with lower cost

Impact of TPP Agreement

Impact of TPP Agreement

Localization

+ Global Trademaking use of TPP

・Build products close to the customer

・Promote local procurement of parts

Honda can have more flexible supply of products

or procurement of parts TPP will bring tougher competition

Basic principle

Supplementary measure

Table of Contents

1．Introduction

2．Principle of Global Operation

(1) Building Products Close to the Market

(2) Promote Local Procurement of Parts

3. Honda in Canada

(1) Sales and Production

(2) Opportunity by TPP Agreement

(3) R&D Activities

R&D Center Worldwide

Honda R&D Asia Pacific

Bangkok

Honda R&D Europe

Swindon Offenbach

Honda R&D Americas

Los Angeles Ohio Center Toronto

Honda R&D Brazil

Sumare

Delhi

Honda R&D India

Honda R&D China

Guangzhou

23 Locations

HRA-LA Silicon Valley Office

Silicon Valley

HamamatsuSuzuka

Honda R&D Africa

Johannesburg

Honda R&D Japan

Proving GroundTochigi

WakoSakura

Hondajet

Newest Fuel Cell VehicleFuel Cell Vehicle and Hydrogen Station

Our Challenges through R&D Activities

Humanoid Robot

Joint Research with Canadian University

◆Lead Institution University of Waterloo

◆Collaborating Institutions Western University

◆Private Sector PartnersHonda R&D America

Magna / ArcelorMittal / Alcoa /

3M / Zelixir / Hexion / Zoltec

Partners

Title and Focus

Supported by ORF

Multi-Material lightweight Vehicle ArchitectureDisruptive light-weight material vehicle architectures and

manufacturing methods to meet the targets for fuel

consumption and vehicle emissions while maintaining safety.