A. History and Development of the Company Honda Motor Co., Ltd. is a limited liability, joint stock corporation incorporated on September 24, 1948, under the Commercial Code of Japan as Honda Giken Kogyo Kabushiki Kaisha. It was formed as a successor to the unincorporated enterprise established in 1946 by the late Soichiro Honda to manufacture motors for motorized bicycles. Since its establishment, Honda has remained on the leading edge by creating new value and providing products of the highest quality at a reasonable price for worldwide customer satisfaction. Honda develops, manufactures and markets motorcycles, automobiles and power products globally. Honda’s principal executive office is located at No.2-3, Toranomon 2-chome, Minato-ku, Tokyo 105-8404, Japan. Its telephone number is +81-3-3423-1111. We maintain a website at https://global.honda/en/investors/ that contains information about our Company. The United States Securities and Exchange Commission (the “SEC”) maintains a website at https://www.sec.gov/ which contains in electronic form each of the reports and other information that we have filed electronically with the SEC. 9 Table of Contents Principal Capital Investments In the fiscal years ended March 31, 2024, 2025 and 2026, Honda’s capital expenditures were ¥3,141.1 billion, ¥4,036.8 billion and ¥3,804.7 billion, respectively, on an accrual basis. Also, capital expenditures excluding those with respect to equipment on operating leases were ¥692.7 billion, ¥902.7 billion and ¥1,040.4 billion, respectively, on an accrual basis. For further details of Honda’s capital expenditures during the fiscal year ended March 31, 2026, see Item 4.D “Property, Plants and Equipment” of this Annual Report. B. Business Overview General Honda’s business segments are the Motorcycle business operations, Automobile business operations, Financial services business operations, and Power products and other businesses operations. The following tables show the breakdown of Honda’s revenue from external customers by category of business and by geographical markets based on the location of the customer for the fiscal years ended March 31, 2024, 2025 and 2026: Fiscal years ended March 31, 2024 2025 2026 Yen (billions) Motorcycle Business ¥ 3,220.1 ¥ 3,626.6 ¥ 4,018.8 Automobile Business 13,567.5 14,169.2 13,863.3 Financial Services Business 3,248.8 3,507.7 3,529.4 Power Products and Other Businesses 392.2 385.1 384.9 Total ¥ 20,428.8 ¥ 21,688.7 ¥ 21,796.6 Fiscal years ended March 31, 2024 2025 2026 Yen (billions) Japan ¥ 2,242.2 ¥ 2,477.6 ¥ 2,536.9 North America 11,713.6 12,798.3 12,578.8 Europe 961.1 938.4 1,005.5 Asia 4,313.8 4,108.9 4,094.8 Other Regions 1,197.9 1,365.2 1,580.4 Total ¥ 20,428.8 ¥ 21,688.7 ¥ 21,796.6 Motorcycle Business In 1949, Honda began mass production of motorcycles with the Dream D-Type, followed by other models such as the Benly and the Cub F-Type. By 1957, Honda became the top Japanese manufacturer in terms of motorcycle production volume. Honda expanded its business overseas by establishing American Honda Motor Co., Inc. in the United States in 1959. Honda first started overseas production in Belgium in 1963. Honda produces a wide range of motorcycles covering various engine displacement classes. Honda’s motorcycle lineup uses internal combustion engine of air- or water-cooled, and in single, two, four or six-cylinder configurations. Honda also has electric vehicles in its lineup. Honda’s motorcycle lineup consists of sports, business and commuter models. Honda also produces a range of off-road vehicles, including all-terrain vehicles (ATVs) and side-by-sides (SxS). 10 Table of Contents The following table sets out unit sales for Honda’s Motorcycle business, including motorcycles, all-terrain vehicles (ATVs) and side-by-sides (SxS) and revenue from Motorcycle business, and the breakdown by geographical markets based on the location of the customer for the fiscal years ended March 31, 2024, 2025 and 2026: Fiscal years ended March 31, 2024 2025 2026 Honda Group Unit Sales* Consolidated Unit Sales* Revenue Honda Group Unit Sales* Consolidated Unit Sales* Revenue Honda Group Unit Sales* Consolidated Unit Sales* Revenue Units (thousands) Units (thousands) Yen (billions) Units (thousands) Units (thousands) Yen (billions) Units (thousands) Units (thousands) Yen (billions) Japan 241 241 ¥ 113.7 224 224 ¥ 106.6 205 205 ¥ 113.2 North America 498 498 335.5 548 548 347.5 538 538 351.7 Europe 440 440 351.8 475 475 379.4 407 407 395.8 Asia 16,016 9,416 1,793.3 17,478 10,591 2,078.4 18,738 11,310 2,256.5 Other Regions 1,624 1,624 625.6 1,847 1,847 714.5 2,213 2,213 901.3 Total 18,819 12,219 ¥ 3,220.1 20,572 13,685 ¥ 3,626.6 22,101 14,673 ¥ 4,018.8 Motorcycle revenue as a percentage of total sales revenue 16 % 17 % 18 % * Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. See Item 4. D. “Property, Plants and Equipment” for information regarding principal manufacturing facilities. For further information on recent operations and a financial review of the Motorcycle business, see “Operating Results” in “Item 5. Operating and Financial Review and Prospects”. Automobile Business Honda started Automobile business operations in 1963 with the T360 mini truck and the S500 small sports car models. Honda subsequently launched a series of mass-production models including the CIVIC in 1972 and the ACCORD in 1976, which established a base for its Automobile business. In 1969, production of the mini vehicles N600 and TN600 began in Taiwan using component parts sets. In 1982, Honda became the first Japanese automaker to begin local automobile production in the United States (with the ACCORD model) and later conducted local development and expanded production activities to include light truck models. In 1986, the Acura Brand was established and an exclusive sales network was launched in the United States. Honda’s vehicles use gasoline engines of three, four or six-cylinder configurations, gasoline-electric hybrid systems and gasoline-electric plug-in hybrid systems. Honda also offers other alternative fuel-powered vehicles such as battery electric vehicles, fuel cell electric vehicles, and flexible fuel vehicles. Honda’s principal automobile products include the following vehicle models: (in alphabetical order) Passenger cars: ACCORD series, CITY, CIVIC series, FIT series Light trucks: CR-V series, FREED, HR-V series, ODYSSEY, PASSPORT, PILOT, VEZEL series Mini vehicles: N-BOX 11 Table of Contents The following table sets out Honda’s unit sales of automobiles and revenue from Automobile business and the breakdown by geographical markets based on the location of the customer for the fiscal years ended March 31, 2024, 2025 and 2026: Fiscal years ended March 31, 2024 2025 2026 Honda Group Unit Sales* Consolidated Unit Sales* Revenue Honda Group Unit Sales* Consolidated Unit Sales* Revenue Honda Group Unit Sales* Consolidated Unit Sales* Revenue Units (thousands) Units (thousands) Yen (billions) Units (thousands) Units (thousands) Yen (billions) Units (thousands) Units (thousands) Yen (billions) Japan 595 525 ¥ 1,600.6 630 539 ¥ 1,807.3 605 515 ¥ 1,818.1 North America 1,628 1,628 8,510.2 1,654 1,654 9,384.6 1,605 1,605 9,213.4 Europe 103 103 506.7 93 93 459.7 90 90 503.2 Asia 1,651 468 2,449.8 1,182 397 1,954.4 929 343 1,765.9 Other Regions 132 132 500.1 157 157 563.0 158 158 562.6 Total 4,109 2,856 ¥ 13,567.5 3,716 2,840 ¥ 14,169.2 3,387 2,711 ¥ 13,863.3 Automobile revenue as a percentage of total sales revenue 66 % 65 % 64 % * Honda Group Unit Sales is the total unit sales of completed products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed products of Honda and its consolidated subsidiaries. Certain sales of automobiles that are financed with residual value type auto loans and others by our Japanese finance subsidiaries and provided through our consolidated subsidiaries are accounted for as operating leases in conformity with International Financial Reporting Standards (“IFRS”) and are not included in consolidated sales revenue to the external customers in our Automobile business. Accordingly, they are not included in Consolidated Unit Sales, but are included in Honda Group Unit Sales of our Automobile business. See Item 4. D. “Property, Plants and Equipment” for information regarding principal manufacturing facilities. For further information on recent operations and a financial review of the Automobile business, see “Operating Results” in “Item 5. Operating and Financial Review and Prospects”. Financial Services Business We offer a variety of financial services to our customers and dealers through finance subsidiaries in countries including Japan, the United States, Canada, the United Kingdom, Germany, Brazil and Thailand, with the aim of providing sales support for our products. The services of these subsidiaries include retail lending, leasing to customers and other financial services, such as wholesale financing to dealers. 12 Table of Contents The following table sets out Honda’s revenue from Financial services business and the breakdown by geographical markets based on the location of the customer for the fiscal years ended March 31, 2024, 2025 and 2026: Fiscal years ended March 31, 2024 2025 2026 Yen (billions) Japan ¥ 440.7 ¥ 474.7 ¥ 506.9 North America 2,729.1 2,938.2 2,895.5 Europe 18.1 21.4 25.4 Asia 14.7 13.9 13.8 Other Regions 46.0 59.4 87.6 Total ¥ 3,248.8 ¥ 3,507.7 ¥ 3,529.4 Financial Services revenue as a percentage of total sales revenue 16 % 16 % 16 % For further information on recent operations and a financial review of the Financial services business, see “Operating Results” in “Item 5. Operating and Financial Review and Prospects”. Power Products and Other Businesses Honda’s Power products business began in 1953 with the introduction of the model H, its first general purpose engine. Since then, Honda has manufactured a variety of power products including general purpose engines, generators, water pumps, lawn mowers, brush cutters, and tillers. In Other businesses, Honda began deliveries of the HondaJet aircraft in December 2015. The following table sets out Honda’s revenue from Power products and other businesses and the breakdown by geographical markets based on the location of the customer for the fiscal years ended March 31, 2024, 2025 and 2026: Fiscal years ended March 31, 2024 2025 2026 Honda Group Unit Sales / Consolidated Unit Sales* Revenue Honda Group Unit Sales / Consolidated Unit Sales* Revenue Honda Group Unit Sales / Consolidated Unit Sales* Revenue Units (thousands) Yen (billions) Units (thousands) Yen (billions) Units (thousands) Yen (billions) Japan 302 ¥ 87.0 278 ¥ 88.9 300 ¥ 98.5 North America 1,083 138.7 1,020 127.9 927 118.0 Europe 794 84.4 651 77.8 712 80.9 Asia 1,294 55.9 1,413 62.1 1,295 58.4 Other Regions 339 26.0 338 28.2 355 28.8 Total 3,812 ¥ 392.2 3,700 ¥ 385.1 3,589 ¥ 384.9 Power Products and Other businesses revenue as a percentage of total sales revenue 2 % 2 % 2 % * Honda Group Unit Sales is the total unit sales of completed power products of Honda, its consolidated subsidiaries and its affiliates and joint ventures accounted for using the equity method. Consolidated Unit Sales is the total unit sales of completed power products corresponding to consolidated sales revenue to external customers, which consists of unit sales of completed power products of Honda and its consolidated subsidiaries. In Power products business, there is no discrepancy between Honda Group Unit Sales and Consolidated Unit Sales since no affiliate and joint venture accounted for using the equity method was involved in the sale of Honda power products. 13 Table of Contents For further information on recent operations and a financial review of the Power products and other businesses, see “Operating Results” in “Item 5. Operating and Financial Review and Prospects”. Marketing and Distribution Most of Honda’s products are distributed under the Honda trademarks in Japan and/or in overseas markets. In the fiscal year ended March 31, 2026, approximately 85% of Honda’s motorcycle units on a group basis were sold in Asia. Approximately 47% of Honda’s automobile units (including sales under the Acura Brand) on a group basis were sold in North America followed by 27% in Asia and 18% in Japan. Approximately 36% of Honda’s power products units on a group basis were sold in Asia followed by 26% in North America and 20% in Europe. Sales and Service In Japan, Honda produces and sells motorcycles, automobiles, and power products through its domestic sales subsidiaries and independent retail dealers. In overseas markets, Honda also provides motorcycles, automobiles, and power products through its principal foreign sales subsidiaries, which distribute Honda’s products to local wholesalers and retail dealers. In the fiscal year ended March 31, 2026, approximately 98% of Honda’s overseas sales were made through its principal foreign sales subsidiaries, which distribute Honda’s products to local wholesalers and retail dealers. Honda sells spare parts and provides after-sales services through retail dealers directly or via its overseas operations, independent distributors and licensees. Components and Parts, Raw Materials and Sources of Supply Honda manufactures the major components and parts used in its products, including engines, frames and transmissions. Other components and parts, such as shock absorbers, electrical equipment and tires, are purchased from numerous suppliers. The principal raw materials used by Honda are steel plate, aluminum, special steels, steel tubes, paints, plastics and zinc, which are purchased from several suppliers. The most important raw material purchased is steel plate, accounting for approximately 44% of Honda’s total purchases of raw materials. No single third-party supplier accounted for more than 5% of the Company’s purchases of major components and parts and principal raw materials during the fiscal year ended March 31, 2026. Ordinarily, Honda does not have and does not anticipate having any difficulty in obtaining its required materials from suppliers and considers its contracts and business relations with the suppliers to be satisfactory. The Company does not believe any of its Japanese domestic suppliers are substantially more dependent on foreign suppliers than Japanese suppliers generally. However, it should be noted that Japanese industry in general is heavily dependent on foreign suppliers for substantially all of its raw materials. Seasonality Honda’s motorcycles and power products have historically experienced some seasonality. However, this seasonality has not generally been material to our financial results. 14 Table of Contents Environmental and Safety Regulation Honda is subject to various government regulations, including environmental and safety regulations for automobiles, motorcycles and power products. Such regulations relate to items such as emissions, fuel economy, recycling and safety, and Honda has incurred and will in the future incur compliance and other costs in connection with such regulations. However, Honda’s efforts to meet the wide range of applicable regulatory requirements, both in its production activities and in its research and development activities, are an integral part of and inseparable from its normal operational activities as a manufacturer and its efforts to continuously develop competitive products meeting consumer preferences. Accordingly, Honda does not believe it is feasible to separately specify the above compliance costs with a reasonable amount of precision. Relevant environmental and safety regulations are described below. Outline of Environmental and Safety Regulation for Automobiles 1. Emissions Japan In March 2018, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) introduced the Real Driving Emissions (RDE) examination for diesel vehicles. It became applicable to new models of vehicles beginning in October 2022 and to current models of vehicles beginning in October 2024. The Ministry of the Environment (MOE) issued a Ministerial Ordinance on the particle number (PN) regulation for diesel gasoline direct injection vehicles in August 2021. In October 2022, MLIT decided to introduce PN regulation. Among diesel vehicles, it has been applicable to new models beginning in October 2023, and to current models beginning in October 2025. Among gasoline direct injection vehicles, it became applicable to the new models beginning in October 2024, and will become applicable to the current models beginning in October 2026. In December 2020, MOE announced the plan targeting the transition to the electrification of automobiles by around 2030, which covers hybrid vehicles, plug-in hybrid vehicles, electric vehicles and fuel cell electric vehicles. The United States In August 2022, the Biden administration signed the Inflation Reduction Act (IRA) of 2022. This act allows tax incentives to purchase clean vehicles which meet certain requirements. One of the requirements is that the final assembly of new motor vehicles is to be within North America. Most provisions of this act became effective in January 2023. In May 2024, the US Treasury and the Internal Revenue Service issued a final rule on the tax credits for new clean vehicles under the IRA. This rule (codified at 26 U.S.C. § 30D) clarifies the eligibility criteria for new electric vehicles to qualify for tax credits. The rule also implements restrictions on vehicles containing critical minerals or battery components sourced from foreign entities of concern, excluding such vehicles from eligibility for the new clean vehicle tax credits. In November 2022, the California Air Resources Board (CARB) finalized Advanced Clean Car II (ACC II) regulations which will apply to 2026 and later model year vehicles. The ACC II regulations contain requirements for the new Low Emission Vehicle IV (LEV IV) regulation and new Zero-Emission Vehicle (ZEV) requirements. The new ZEV requirements will require all new light-duty vehicles sold in California to be zero-emission by 2035. 15 Table of Contents In April 2023, the U.S. Environmental Protection Agency (EPA) announced proposal of federal multi-pollutant regulation (Tier 4) together with more stringent greenhouse gas (GHG) requirement which will apply from 2027 model year vehicles. The finalization of Tier 4 was announced on March 20, 2024. The finalized requirement required a more stringent PM emission standard of 0.5mg/mile for light-duty vehicles (LDVs) and medium-duty vehicles (MDVs) compared to CARB LEV IV and fleet NMOG+NOx standard of 15 mg/mile for light-duty vehicles for 2032 model year. In June 2025, the Trump administration signed legislation disapproving the EPA’s decision to grant a waiver from federal preemption for California’s vehicle and engine pollution control standards, including ACC II. Then, in October 2025, the CARB brought into effect an emergency amendment confirming that, until the regulatory uncertainty arising from the above congressional resolutions is resolved, certain antecedent regulations that had been displaced by ACC II and the Omnibus regulation would continue to remain in force. In February 2026, the EPA issued a final rule repealing all GHG emission standards applicable to LDVs, MDVs, heavy-duty vehicles, as well as engines. Canada On July 16, 2015, the Environment Canada (current Environment and Climate Change Canada) issued the final regulation of amendment to emission regulation whose requirements refer to Tier 3 regulations in the United States. Europe The Euro 6 regulation was implemented in September 2014. Emission limits for diesel vehicles were lowered even more than the Euro 5 levels for nitrogen oxides (NOx) and total hydrocarbon (THC) plus NOx. Additionally, Euro 6 requires limits on PNs from gasoline vehicles with direct injection engines. The required ethanol density of test fuel was also increased, starting from September 2016. The testing cycle to measure emissions has gradually been transitioning from New European Driving Cycle (NEDC) to Worldwide harmonized Light duty driving Test Cycle (WLTC) beginning from September 2017. The European Commission implemented regulations regarding the Real Driving Emissions (RDE) using Portable Emissions Measurement System. The monitoring phase started from April 2016 and RDE testing with emission limits started from September 2017 for NOx and PN. The new Evaporative Emissions Test started from September 2019. The testing cycle was updated from NEDC to Worldwide harmonized Light vehicles Test Procedure (WLTP) in conformity with the United Nations Economic Commission for Europe (UNECE) Global Technical Regulation (GTR) No. 19. On December 11, 2019, the European Commission released its communication on the “EU Green Deal,” which is intended to be the most ambitious package of measures that the European Commission has ever proposed, aiming for Europe to become the world’s first climate-neutral continent (economy) by 2050. The Green Deal is designed as a set of 10 deeply transformative policies and more than 50 supporting legislative actions. One of the policies (Sustainable and smart mobility) includes “Euro 7 as more stringent pollutant emissions standards for combustion-engine vehicles.” 16 Table of Contents In November 2022, the European Commission proposed new emission standard “Euro 7” which, if finalized, will apply to all new vehicles sold after July 2025. “Euro 7” requires updated RDE test method, on-board monitoring (OBM) systems, on-board refueling vapor recovery systems and measurement of particulates from break wears and tire abrasions. In March 2024, the European Parliament adopted a provisional agreement reached with the Council, regarding Euro 7. As a result, vehicles will need to comply with Euro 7 standards for longer, ensuring they remain cleaner throughout their lifetime. For the first time, EU standards included limits on brake particle emissions for cars and set minimum performance requirements for battery durability in electric and hybrid cars. However, the requirements for on-board refueling vapor recovery systems (ORVR) were not adopted in Euro 7 regulation. In September 2025, the European Commission published Regulation (EU) 2025/1706 regarding procedures and test methodologies for the implementation of Euro 7, as well as Regulation (EU) 2025/1707 concerning the formats, data, and communication methods for On-Board Fuel and Energy Consumption Monitoring, OBM, driver warning and inducement systems, and the Environmental Vehicle Passport. Through future amendments to these regulations, additional requirements are expected to be established for obtaining certification under “Euro 7A”—the first mandatory emission stage—for new vehicle type approvals from November 29, 2026, and for newly registered vehicles from November 29, 2027. China China implemented Step 6b regulations in July 2023. The President of China, Xi Jinping, proclaimed at the 75th session of the United Nations General Assembly held between September 2020 and September 2021 that China would address “reduction of greenhouse gas emissions.” In response, the relevant regulatory authorities are proceeding with research and formulation of the new emission standards. Thailand The Thai Cabinet has decided to introduce Euro 5 regulations from 2024 and to implement Euro 6 regulations from January 2025 with a 1 year grace period. Malaysia The Malaysian government decided to introduce Euro 5 regulations for new models from July 2028, and for all models from January 2030. Brazil Based on CONAMA Resolution No. 492/2018, Brazil implemented PROCONVE L8 starting in 2025. PROCONVE is a unique Brazilian emission regulation, created in reference to European and US regulations. 2. Fuel Economy / CO2 Japan In June 2010, MLIT and the Ministry of Economy, Trade and Industry (METI) jointly established a committee and commenced a study to formulate new fuel economy standards for passenger motor vehicles for 2020. The new standards were announced in March 2013. The next term fuel economy standards improve the 2015 standards by 19.6% and adopt the Corporate Average Fuel Economy (CAFE) calculation method. 17 Table of Contents In March 2018, MLIT and METI jointly established a committee and commenced a study to formulate new fuel economy standards for passenger motor vehicles for 2030. The new standards, announced in January 2020, require an improvement in fuel efficiency of 32.4% over the 2016 standards and adopted the CAFE calculation method. In April 2020, it became mandatory to measure the fuel consumption of fuel cell electric vehicles in WLTP mode and electric mileage of electric vehicles in WLTC mode. In June 2021, METI released “Green Growth Strategy Through Achieving Carbon Neutrality in 2050” and announced their target that 100% of new passenger vehicle sales would be made up of electric vehicles (including battery vehicles, fuel cell electric vehicles, plug-in hybrid electric vehicles and hybrid electric vehicles) by 2035. In July 2021, MLIT revised its rules to establish a new technical standard for in-vehicle measurement devices for fuel/energy consumption. In March 2023, MLIT revised fuel economy standards for passenger motor vehicles applied in 2010 by increasing the number of levels from 8 to 17. At the same time, MLIT revised the fuel economy standards for passenger motor vehicles for 2030 by adding one higher level. The United States The National Highway Traffic Safety Administration (NHTSA) and EPA issued a regulation in August 2012 regarding GHG / CAFE regulations from the 2017 through 2025 model years. The standard for the 2025 model year is 163 g-CO2/mile or a 54.5 mpg industry average. The CARB also issued a regulation that was nearly equivalent to the EPA’s GHG regulations in August 2012. In December 2012, the CARB amended its GHG regulation so that a manufacturer is also deemed to comply with the CARB GHG regulations if it complies with EPA-GHG from the 2017 through 2025 model years. When GHG / CAFE regulation was legislated in 2012, the EPA and the NHTSA announced that they, in coordination with the CARB, would perform a mid-term evaluation re-examining the appropriateness of limit values for 2022-2025 model years by April 2018. Accordingly, the EPA, the NHTSA and the CARB jointly issued a joint technical assessment report in July 2016 (a technical report, and not a decision document). In January 2017, the EPA solely issued the final determination that they would not change the 2022-2025 model years standards established in 2012. The CARB decided in March 2017 not to change the GHG regulations applicable for the 2022-2025 model years, and, on April 2, 2018, the EPA announced that the GHG requirement for 2022-2025 model years needs reconsideration. On September 27, 2019, the EPA and the NHTSA jointly issued Part 1 of the “Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule Part 1: One National Program” replacing the then current GHG / CAFE regulations. The SAFE Vehicles Rule Part 1 clarified that federal law supersedes state law and withdrew a preemption waiver (Federal Priority) previously granted to allow the state of California to set its own GHG emission standards different from the federal standards set by EPA. In March 2020, the EPA and the NHTSA jointly published the SAFE Vehicles Rule Part 2. Under the new SAFE rule, both GHG and CAFE requirements will increase in stringency by 1.5% per year during 2021-2026 model years. The CO2 standard for the 2026 model year is industry average of 199 g-CO2/mile. 18 Table of Contents In September 2020, the Governor of California signed an executive order stating that 100% of in-state sales of new cars and light trucks would be ZEV by 2035. Following the California Governor’s announcement, a number of states have followed suit. In January 2021, the Biden administration issued an executive order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis which called for such as review of SAFE Vehicles Rule and other regulations. In accordance with this executive order, in December 2021, the EPA issued the revised GHG emissions standards which are more stringent than the SAFE rule standards in each model year from 2023 through 2026. Moreover, in December 2021, the NHTSA repealed “SAFE Vehicles Rule Part One: One National Program” and withdrew federal law’s preemption over state laws in CAFE regulation. In May 2022, the NHTSA issued revised CAFE standards for model years from 2024 through 2026, which increase in stringency by 8% each year relative to the prior year for model years 2024, 2025 and 10% for 2026 model year. The CAFE standards will reach approximately 49 MPG in the 2026 model year (U.S. fleet average), up from 36 MPG in the 2021 model year. In April 2023, EPA announced proposed GHG regulations together with multi-pollutant standards (Tier 4) to be effective from 2027 to 2032 model years. The finalization of GHG regulation was announced on March 20, 2024. The projected combined fleet target of CO2 is 85 g/mile for model year 2032. The final rule that followed was published in the Federal Register in April 2024. In August 2023, the NHTSA proposed CAFE standards for model years from 2027 through 2032. The CAFE standards will reach approximately 57.8 MPG in the 2032 model year (U.S. fleet average). Following in change in administration, in January 2025, the Trump administration issued Executive Order 14148 entitled “Initial Rescissions of Harmful Executive Orders and Actions,” rescinding the Executive Order on Protecting Public Health and the Environment and Restoring Science to tackle the Climate Crisis. Separately, in January 2025, the Secretary of the U.S. Department of Transportation signed and issued a memorandum directing the reset of CAFE standards. This directed the immediate review and reconsideration of CAFE standards for all vehicle models produced after model year 2022, including in particular rules covering 2024-2027 model year passenger cars and light trucks and beyond and heavy-duty pickup trucks and vans for model year 2030 and beyond. In July 2025, H.R.1 (commonly referred to as the One Big Beautiful Bill), which included the invalidation of civil penalties under the CAFE program and the repeal of tax credits for clean vehicles, was enacted. In the same month, the NHTSA issued a letter stating that the civil penalties imposed on manufacturers that fail to comply with the CAFE standards would be set at $0.00. Canada The government of Quebec in Canada finalized the standard to mandate each automaker to sell a certain minimum number of ZEVs starting from the 2018 model year. In May 2019, the government of British Columbia also adopted a bill to mandate ZEV sales from 2025. In June 2019, the Environment and Climate Change Canada signed an agreement with the CARB in the United States to promote cooperation in reducing GHG emissions. 19 Table of Contents In September 2023, the government of Quebec adopted regulatory amendments to the Quebec’s ZEV regulations which increase the percentage of ZEV sales that a manufacturer must achieve each year from 2025 to 2035. The percentages are 32.5% in 2025, 85% in 2030 and 100% in 2035. In December 2023, the federal government adopted a national ZEV mandate from model year 2026 as a part of GHG regulation. The regulation mandates sales of new vehicles to be ZEVs at the rate of 20% in 2026, 60% in 2030, and 100% in 2035 model year. Europe In 2014, a new regulation was issued, requiring EU fleet-wide target of 95 g CO2/km for 2020 based on NEDC testing procedure. The current European type-approval procedure for fuel consumption and CO2 emissions of cars based on NEDC has been gradually replaced with WLTP beginning from September 2017. During the transitional years, WLTP-measured CO2 values are calculated to NEDC CO2 values to check compliance to the NEDC based CO2 target. On November 8, 2017, the European Commission proposed a new CO2 standard beyond 2025. The European Parliament and Council reached a provisional inter institutional agreement on the European Commission proposal during the fifth trilogue meeting on December 17, 2018. The agreed target beyond 2025 is negative 15%. The agreed target beyond 2030 is negative 37.5% for new passenger cars and negative 31% for light commercial vehicles, respectively, compared to the 2021 average of all manufacturers’ EU fleet-wide target. The agreement also provides that, for zero- and low-emission vehicles, a benchmark equal to 15% share of the respective fleets of newly registered passenger cars and light commercial vehicles has been applied from January 1, 2025, and a benchmark equal to 35% share of the fleet of newly registered passenger cars and a benchmark equal to 30% share of the fleet of newly registered light commercial vehicles shall apply from January 1, 2030. On December 11, 2019, the European Commission released its communication on the EU Green Deal. See “—Outline of Environmental and Safety Regulation for Automobiles—1. Emissions—Europe.” One policy in the EU Green Deal (EU’s climate ambition for 2030 and 2050) includes “CO2 performance of cars.” On April 25, 2023, regulation (EU) 2023/851 was issued in the EU Official Journal, setting CO2 emission targets for newly registered passenger cars and light commercial vehicles, which contains a new provision establishing a 100% reduction of EU fleet-wide targets compared to 2021 from 2035 onwards. Furthermore, the European Commission will issue the methodology for the assessment and the consistent data reporting of the full life-cycle CO2 emissions of passenger cars and light commercial vehicles by 2025. In June 2025, the European Commission published Regulation (EU) 2025/1214, which introduces temporary flexibility in emission calculation regarding manufacturers’ compliance with CO2 emission performance standards for new passenger cars from 2025 to 2027. The average specific emissions of CO2 shall be calculated as the average over three years of the annual average specific emissions of CO2 weighted according to the number of new vehicles registered by the manufacturer in each calendar year. In December 2025, the European Commission published a proposal to revise the CO2 emission standards for passenger cars. The proposal decreases the 2035 reduction target from 100% to 90%, and introduces a compensation mechanism utilizing synthetic fuels, alongside incentives for EU-manufactured small electric vehicles. 20 Table of Contents China China adopted a fuel consumption regulation for passenger vehicles in 2004. Step 5 of this regulation was implemented in 2021. And in mid-2025, the requirements of the Step 5 regulation were revised. The revised GB standards (Chinese national standards issued by the China Administration of Standardization) are listed below. + Test methods for energy consumption of light-duty hybrid electric vehicles + Test methods for energy consumption and range of electric vehicles— Part 1: Light-duty vehicles + Conversion methods for energy consumption of electric vehicles The Standards Center of the China Automotive Technology and Research Center, which is in charge of vehicle carbon emission management policies, was proceeding with research and formulation of a new carbon emission management system throughout the entire vehicle life cycle. The following GB standards related to the ‘new carbon emission management system’ were issued and have been in effect since January 2026. + Fuel consumption limits for passenger cars + Energy consumption limits for electric vehicles— Part 1: Passenger cars + Fuel consumption evaluation methods and targets for passenger cars. Brazil Ministry of Development, Industry, Trade and Services (MDIC) issued Decree No. 12435/2025, “Mover Program,” on April 16, 2025, which stipulates requirements for vehicle energy efficiency in tank-to-wheel cycle and carbon dioxide emissions in well-to-wheel cycle. It also mandates compliance with essential requirements regarding the carbon footprint throughout the lifecycle of new vehicles, effective on January 1, 2027. 3. Recycling / End-of-Life Vehicles (ELV) / Chemicals and hazardous substances Japan Japan enacted the Automobile Recycling Law in July 2002, which required manufacturers to take back air bags, fluorocarbon and shredder residue derived from end-of-life vehicles (ELV), which became effective on January 1, 2005. ELV processing costs are collected from owners of cars currently in use and purchasers of new cars. Europe On December 30, 2006, the European Union adopted the Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), which became effective on June 1, 2007. From June 1, 2008, any manufacturer or importer of chemical substances is required to submit a registration to the European Chemicals Agency, based on annual production or import quantity levels. Submitting a pre-registration between June 1 and December 1, 2008, will allow the manufacturer or importer to extend the deadline for submitting the registration for existing chemical substances. The list of Substances of Very High Concern (SVHC) is amended periodically to include new substances. Upon a request by a consumer, a supplier of a product containing SVHC must provide the consumer with sufficient information, including at least the name of the substance, within 45 days. On February 18, 2011, the first set of substances which require authorization for use after specified dates were announced. Manufacturers using these substances in Europe must either be authorized for use after submitting an application or use substitute substances. Substances which require authorization will be added periodically. 21 Table of Contents The European Union has issued a regulation amending the EU Battery Directive to the EU Battery Regulation in 2023. This regulation adds requirements related to carbon footprints and information disclosure of remaining life for recycling, among others. The EU Battery Regulation came into force in 2024. The European Union has published a draft regulation amending the ELV Directive to the ELV Regulation. The proposed regulations would add requirements for recycled content and expanded producer responsibility. China On June 23, 2017, China implemented automobile recycling laws partially following the regulations established by the European Union. 4. Safety Japan Japan Automobile Standards Internationalization Center (JASIC), which is organized by the MLIT and Japan Automobile Manufacturers Association (JAMA), among others, has started to review a proposal for the unification of Safety/Environment Standards, vehicle categories and certification in order to promote further internationalization of standards and certifications. JASIC made the proposal to other contracting parties of the 58 / 98 Agreement in 2009 and reached an agreement among the contracting parties by 2017. Inspection of on-board diagnostics (OBD) will be required from October 2024 for inspections of vehicles with electronic control devices. In 2023, the MLIT adopted UN R165, which regulates “Reverse warning devices and signals.” In 2023, the MLIT adopted UN R166, which regulates “Vulnerable Road Users in Front and Side Close Proximity.” In 2024, the MLIT adopted UN R171, which regulates “Driver Control Assistance System.” In 2025, the MLIT adopted UN R173, which regulates “Safety-belt installation, (i-Size)(ISOFIX) (child) restraint systems.” In 2025, the MLIT adopted UN R174, which regulates “Safety-Belt Reminders (SBR).” In 2025, the MLIT adopted UN R175, which regulates “Acceleration Control for Pedal Error (ACPE).” In 2025, the MLIT adopted UN R176, which regulates “a Vehicle Type with regard to its Field of Vision Assistant Systems.” In 2025, the MLIT adopted UN R177, which regulates “system power of hybrid electric vehicles and of pure electric vehicles having more than one electric machine for propulsion.” In 2026, to implement the provision in the Japan-U.S. Agreement on Tariffs (Joint Statement on the Japan-U.S. Framework Agreement of July 22, 2025) stating that “passenger vehicles manufactured in the United States and certified as safe in the United States shall be accepted for sale in Japan without additional testing,” a certification system for U.S.-manufactured passenger vehicles has been established. 22 Table of Contents The United States In November 2021, the Biden administration signed the Infrastructure Investment and Jobs Act (H.R.3684). The act requires government agencies in the United States to enact various rules and regulations. In particular, the act mandates agencies to implement rules regarding vehicle safety, mandatory installation of collision avoidance systems and drunk driving prevention technology, as well as surveys on connected vehicles. However, in January 2025, the Trump administration issued Executive Order 14148 entitled “Initial Rescissions of Harmful executive Orders and Actions” and, accordingly, the Infrastructure Investment and Jobs Act (H.R. 3684) was withdrawn. In December 2024, the NHTSA issued a final rule that amends time series data requirements of 49 CFR Part 563 EDR (Event Data Recorders). This final rule changed the recording time of EDR time-series measurement data from 5 seconds to 20 seconds for pre-collision data, and changed the data sampling frequency from 2 Hz to 10 Hz. The purpose of this revision is to increase the recording time and recording frequency of pre-collision data in order to analyze the behavior of the vehicle before a collision occurs. The application applies to the vehicles manufactured after the first September 1st of the year following the publication of the final rule. The effective date of this final rule is September 1, 2027. In the United States, state laws stipulate privacy protection laws aimed at protecting the privacy of consumers within the state, and as of April 2025, California, Virginia, Colorado, Utah, Connecticut, New Hampshire, Maryland, Minnesota, Rhode Island, Delaware, Nebraska, Texas, Tennessee, and Oregon have enacted such privacy protection laws. In May 2024, the NHTSA issued a new FMVSS that would require all new light vehicles to be equipped with automatic emergency braking (AEB) systems. It provided mandatory installation of forward collision alarms and AEB for lead vehicles and pedestrians by newly establishing FMVSS 127 “Automatic emergency braking systems for light vehicles” and 49 CFR Part 596 “Automatic Emergency Braking Test Devices.” The final rule permits manufacturers to allow the AEB system to be temporarily disabled under specific conditions, compared to the proposed rule which did not address temporary disablement. The final rule mandates compliance beginning September 1, 2029, except for vehicles produced by small-volume manufacturers, final-stage manufacturers, and alterers, which must comply by September 1, 2030. In November 2024, the NHTSA issued a technical amendment to the May 2024 final rule on AEB systems for light vehicles in response to petitions for reconsideration. The effective date of this amendment was delayed from the original effective date of January 27, 2025 to March 20, 2025 due to the Presidential Regulatory Freeze issued January 20, 2025 (which delayed effectiveness of then-pending U.S. federal regulations by 60 days, or until March 20, 2025, the “Presidential Regulatory Freeze”), but the compliance deadlines for FMVSS No. 127 remain unchanged. In January 2025, the Alliance for Automotive Innovation initiated litigation in the U.S. Court of Appeals for the D.C. Circuit challenging the final rule on AEB systems, which challenge remains pending. In January 2025, the NHTSA issued a final rule to revise FMVSS101 “Controls and displays” and FMVSS208 “Occupant crash protection.” In addition to driver’s seat, it provided to install a seatbelt reminder system in the passenger and rear seats and a stringent audio-visual warning system for driver and front passenger seat which keeps the alert active until the seatbelts are fastened. Vehicles manufactured on or after September 1, 2026, will be subject to the front seat requirement, and vehicles manufactured on or after September 1, 2027, will be subject to the rear seat requirement. The effective date was originally set for March 4, 2025, but was changed to March 20, 2025, as a result of the Presidential Regulatory Freeze. In April 2026, the compliance date for the seatbelt reminder system was postponed from May 2026 to September 2028. 23 Table of Contents In September 2023, the Senate proposed AM Radio for Every Vehicle Act of 2023, a bill that would require the Secretary of Transportation to issue a rule requiring access to AM broadcast stations in motor vehicles. According to the bill, the Secretary of Transportation rule must be issued within one year after the enactment of this act (if passed), and the requirement to install radios will take effect in two to three years after the rule is issued. However, the bill did not pass before the end of the 118th Congress. In February 2025, the AM Radio for Every Vehicle Act of 2025, a bill that would also require the Secretary of Transportation to issue rules requiring all new passenger vehicles to have AM radio capability as standard equipment, was introduced in the House of Representatives. There was no change to the requirement that the Secretary of Transportation’s rule must be issued within one year after the enactment of this act (if passed), and the requirement for manufacturers to install AM radios will take effect in two to three years after the rule is issued. In December 2023, the NHTSA issued a final rule revising FMVSS213 “Child restraint systems; Applicable unless a vehicle or child restraint system is certified to § 571.213b” and established FMVSS213b “Child restraint systems; Mandatory applicability beginning December 5, 2026.” FMVSS213 is applicable to products manufactured before December 5, 2024, and FMVSS213b applicable to products manufactured on or after December 5, 2026. In October 2024, the NHTSA issued a final rule in response to a petition for reconsideration of the December 2023 amendments to child restraint system rules, which among other changes, formally established FMVSS No. 213a, clarified the applicability of FMVSS No. 213b, and aligned the compliance dates of FMVSS Nos. 213 and 226. As a result, the effective dates of FMVSS 213 and 213a are June 30, 2025, and FMVSS 213b will become mandatory for applicable products manufactured on or after December 5, 2026, with optional early compliance permitted. In January 2024, the NHTSA issued an initial rulemaking document providing for the gathering of information necessary to develop performance requirements and require that new passenger motor vehicles be equipped with advanced drunk and impairment driving prevention technology. The purpose of this information collection is to develop new FMVSS to reduce crashes and fatalities caused by alcohol-impairment driving. In January 2025, the NHTSA issued a final rule FMVSS307 “Fuel system integrity of Hydrogen vehicles” and FMVSS308 “Compressed hydrogen storage system integrity.” These safety standards are informed by GTR No.13, but differ in some requirements and test procedures. The effective date is July 16, 2025 and the applicable date is September 1, 2028. In December 2024, the NHTSA issued a new FMVSS305a “Electric-powered vehicles: Electrolyte spillage and electrical shock protection” to replace FMVSS 305. The NHTSA proposed compliance date would be two years after the publication of the final rule in the Federal Register. For FMVSS 305a, in addition to lightweight vehicles, heavy vehicles with GVWR over 4,536 kg (10,000 pounds) have been added to the scope of application. New safety requirements for batteries (Rechargeable Energy Storage System (REESS) requirements) and test procedures have also been introduced. Europe In March 2019, the Committee of the Permanent Representatives of the Governments of the Member States to the European Union approved amendments to the General Safety Regulation, which have been applied to vehicles since July 2022. Under the revised General Safety Regulation, in addition to the mandatory installation of advanced driver assistance systems, legislation concerning automated driving vehicles is scheduled to be enacted in 2026. With respect to these developments, practical and technical discussions are ongoing, including the proposal by the European Commission in March 2025 of Guidelines on EU wide harmonised procedures. 24 Table of Contents Furthermore, the revised General Safety Regulation also mandates requirements related to cybersecurity management systems and software update management systems. For the first time, process approval has been introduced into cybersecurity management systems and software update management systems for vehicle type approval. This is not only for vehicles, but for everything from development to production and sales. This is to ensure that manufacturers are taking protective measures against cyber-attacks in the scene. As an important block of the European Data Strategy of February 2020, Regulation (EU) 2023/2854 of the European Parliament and of the Council (the Data Act) was announced as the primary regulation governing the assurance of data value and management. In December 2023, the Data Act was finalized and published in the EU Official Journal. The Data Act applies to manufacturers and service co-owners, users and providers of products in the EU market with the aim of ensuring data management and accessibility of data between the private and public sectors. For vehicles, with the aim of supporting the implementation of the Data Act in the automotive sector, the European Commission issued, in September 2025, guidance on vehicle data accompanying the Data Act. China Vehicle safety regulations in China were drafted with reference to the UNECE standards and cover almost the same matters as the UNECE standards. However, these regulations also include unique provisions that take into account the distinctive characteristics of the Chinese market environment and the rules differ from the latest UNECE regulations. In addition, as rulemaking related to autonomous vehicles accelerates, in November 2023, “Notification of Intelligent and connected vehicle entry and road traffic pilot business activities” was published, making road tests and test operations of intelligent connected vehicles (ICV) possible. In June 2022, the Shenzhen Special Economic Zone ICV Management Ordinance has been issued. In August 2023, local standards of Shenzhen were published specifying technical requirements for ICV products. In February 2025, the Ministry of Industry and Information Technology (MIIT) issued the “Notice of the Ministry of Industry and the General Administration of Market Supervision on the Entry of Intelligent Connected Car Products” (Notification No. 45 of 2025), which strengthened the entry control and recall supervision management of intelligent connected car products. In August 2025, the State Administration for Market Regulation (SAMR) and MIIT issued a notice (draft for public comment) on strengthening the supervision, management, and promotion of product recalls and production consistency for intelligent connected new energy vehicles, imposing more and stricter requirements regarding corporate responsibility. Future safety regulations are described as follows: Newly published GB and GB/T standards (Chinese national standards issued by the Standardization Administration of China) include: + Motor vehicles – Devices for indirect vision – Requirements of performance and installation + Amendment to connection set for conductive charging of electric vehicles – Part 1: General requirements + Establishment of technical requirements related to cybersecurity, and + General technical requirements for software updates of vehicles + Amendment to measurement methods of net power for automotive engines and electric drive trains 25 Table of Contents + Test method for powertrain system power of hybrid electric vehicles and pure electric vehicles having more than one propulsion electric machine + Amendment to hybrid electric vehicles – Power performance – Test method + Amendment to battery electric vehicles – Power performance – Test method + Drive motor system for electric vehicles + Protective device against unauthorized use of motor vehicles + Intelligent and connected vehicle – Data storage system for automated driving + Electric vehicles traction battery safety requirements + Technical requirements and testing methods for advanced emergency braking system (AEBS) of light-duty vehicles + On-board accident emergency call system (AECS) + Technical specifications of remote service and management system for electric vehicles – Part 2: On-board terminal + Electric vehicles safety requirements + Steering system of motor vehicles–Basic requirements + Technical requirements and testing methods for passenger car braking systems Newly established GB and GB/T standards (not yet published) include: + Basic requirements of security processing for intelligent and connected vehicle spatio-temporal data + Basic security requirements of spatio-temporal data sensing system of intelligent and connected vehicle + Intelligent and connected vehicle - Safety requirements of combined driver assistance system + Intelligent and connected vehicle - Safety requirements for automated driving system + The stipulation protecting drivers from being injured by motor vehicle steering mechanism + Technical specifications for safety of power-driven vehicles operating on roads Thailand In August 2025, the Department of Land Transport (DLT) issued “DLT Notification on Type Approval of vehicles with regard to the installation of lighting and light-signaling devices” corresponding to UN R48-07. Further, in September 2025, the DLT also issued “DLT Notification on Type Approval of vehicles with regard to the protection of the occupants in the event of a frontal collision,” equivalent to UN R94-04. In addition, the DLT also issued “DLT Notification on Type Approval of vehicles with regard to the protection of the occupants in the event of a side collision,” equivalent to UN R95-05. All above three notifications will apply to new type models domestically manufactured or imported on and after January 1, 2028. A new “Uniform Provisions Concerning the Approval of Vehicles with Regard to Electromagnetic Compatibility (UN R10)” is being considered for new type models domestically manufactured or imported on and after January 1, 2028. 26 Table of Contents India In December 2022, the Ministry of Road Transport and Highways, Government of India (the MoRTH) issued the 25th amendment of the Central Motor Vehicles Rules, which requires traction battery for electric power train vehicles manufactured on and from April 1, 2023 to be approved by the Annex IX-K to Automotive Industry Standards (AIS)-038. MoRTH issued regulations on August 14, 2024 that requires the installation of seat belt reminders on rear seats in M1 category vehicles manufactured on or after April 1, 2025. This regulation requires the seat belt reminders that comply with the Indian standard AIS-145-2018. Brazil Conselho Nacional de Trânsito (CONTRAN) issued a regulation to establish requirements for rear warning and monitoring systems installed in vehicles in December 2018. It is scheduled to be implemented from January 1, 2025 (new models) and January 1, 2027 (all models). CONTRAN issued a regulation to establish vehicle performance requirements in the event of pole side impact in December 2018. It is scheduled to be implemented from January 1, 2026 (new models) and January 1, 2030 (all models). CONTRAN issued a regulation that establishes requirements for occupant protection and fuel system integrity in vehicle collisions in December 2018. It is scheduled to be implemented from January 1, 2024 (new models) and January 1, 2026 (all models). CONTRAN issued a regulation to establish pedestrian protection requirements in the event of a collision in December 2018. It is scheduled to be implemented from January 1, 2025 (new models) and January 1, 2030 (all models). CONTRAN announced a second proposal regarding the obligation to install and technical requirements for the AEBS installed in vehicles in November 2022. For moving obstacles, it is scheduled to be implemented from January 1, 2026 (new models) and January 1, 2029 (all models). For fixed obstacles, it is scheduled to be implemented from January 1, 2029 (new models) and January 1, 2031 (all models). CONTRAN announced a proposal regarding the obligation to install and technical requirements for the Lane Departure Warning System (LDWS) in vehicles in November 2022. It is scheduled to be implemented from January 1, 2026 (new models) and January 1, 2029 (all models). In accordance with Decree No. 12435/2025 “Mover Program,” MDIC issued GM/MDIC ORDINANCE No. 215/2025 on 22 August 2025, which sets forth the requirements for compliance with structural performance and driver assistance technology requirements for Category M1 and N1 vehicles and the submission of documentation. Outline of Environmental and Safety Regulation for Motorcycles 1. Emissions Europe Euro 5 requirements other than catalyst monitoring of Onboard Diagnostics Regulation (OBD) started to apply to new vehicle models from January 2020 and started to apply to all vehicles registered from January 2021. Catalyst monitoring has applied to new vehicle models from January 2024 and has applied to all vehicles registered from January 2025. 27 Table of Contents On December 11, 2019, the European Commission released its communication on the EU Green Deal. See “—Outline of Environmental and Safety Regulation for Automobiles—1. Emissions—Europe.” China In April 2026, the Ministry of Ecology and Environment issued a notice stating that China will introduce Euro 5—level emission and noise regulations starting in 2029. India India published BS VI regulation (Euro 5 level exhaust emission regulation), which became effective from April 2020. OBD II is introduced in two stages, Stage II-A and II-B. Stage II-A became effective from April 2023 and Stage II-B became effective from April 2025. Other Asian Countries Thailand published the 7th phase (Euro 4) level emission regulation, which has been implemented from March 2020. Vietnam The Ministry of Transport has implemented Level 4 (Euro 4) emissions regulations starting in July 2026. Indonesia and Philippines Indonesia and Philippines are implementing emission regulations based on European regulations (Euro 3). In addition, they are considering the introduction of Euro 4. Pakistan Pakistan government has implemented UN R 40, emission of motorcycles for both domestically manufactured motorcycles and imported motorcycles, from September 2025 and June 2026 respectively. Brazil Brazil published a new emission regulation called PROMOT 5 (Euro 5 level exhaust emission regulation), which has applied to new motorcycles from January 2023 and to all motorcycles registered from January 2025. The OBD stage 2 requirement has applied to new models of motorcycles from January 2025 and will apply to all motorcycles registered from January 2027. 2. Recycling / Chemicals and hazardous substances Europe The same REACH compliance required for motor vehicles is required for motorcycles. The European Union has a plan to implement motorcycle recycling laws in near future. The European Union has issued a regulation amending the EU Battery Directive to the EU Battery Regulation in 2023. This regulation adds requirements related to carbon footprints and information disclosure of remaining life for recycling, among others. The EU Battery Regulation came into force in 2024. The European Union has published a draft regulation amending the ELV Directive to the ELV Regulation. The proposed regulations would add requirements for recycled content and expanded producer responsibility. Furthermore, the regulation is expected to apply not only to passenger cars but also to large vehicles and motorcycles, and discussions are continuing in Europe. 28 Table of Contents China China has a plan to implement motorcycle recycling laws in near future. India India has announced a plan to implement motorcycle recycling laws in near future. India has issued a final regulation called Battery Waste Management Rules on August 22, 2022. This final regulation requires the achievement of certain recovery targets for waste batteries and sets targets for value of use of recycled materials in new batteries. All batteries are required to display an EPR number. With the revision on February 24, 2025, it has been decided that the EPR number can also be displayed in the form of a QR code. Vietnam Vietnam implemented motorcycle recycling laws on January 1, 2018. 3. Safety Europe In January 2019, the European Commission issued a regulation complementing Union type-approval legislation with regard to Brexit. In October 2025, the European Commission published Regulation (EU) 2025/1455, incorporating UN Regulation No 155 into the type-approval framework for L-category vehicles (two- and three-wheelers and quadricycles). For the first time, manufacturers must obtain approval for their Cyber Security Management Systems (CSMS). This ensures that protective measures against cyberattacks are integrated across the entire vehicle lifecycle—from development and production to post-sales. These requirements shall apply to new vehicle types from December 11, 2027 and to existing vehicle types from June 11, 2029. China Newly established GB standards (mandatory national standards) and GB/T standards (voluntary national standards) include: + Technical requirements related to cybersecurity + Security requirements for automotive data collection + Lighting device requirements, Installation requirements for lighting devices India The Ministry of Road Transport and Highways, Government of India, has promulgated technical requirements for batteries that include India’s own requirements called AIS-156 (Amd3). The standard was enforced in two phases, item by item, with Phase 1 in effect on December 1, 2022, and Phase 2 in effect on March 31, 2023. In June 2025, the MoRTH, issued draft notification on Anti-lock Braking System , mandatory for all motorcycles from January 1, 2026. However, the final notification has not been issued yet. 29 Table of Contents Other Asian Countries Thailand The Department of Land Transport has applied the safety regulations for electric two-wheeled vehicles (UN R136) from January 2023 and the regulations for the fitting of lighting fixtures (UN R53) from January 2024. The Determination of Identification of Controls, Telltales and Indicators (UN R60) has been adopted and enforced from January 2026. A new “Uniform Provisions Concerning the Approval of Vehicles with Regard to Electromagnetic Compatibility (UN R10)” is being considered for implementation from January 2028. Indonesia and Vietnam Indonesia and Vietnam have been introducing various regulations regarding lighting and braking based on UN Regulations. Recently, Indonesia is considering the introduction of various regulations based on UN regulations, including horns (UN R28), speedometers (UN R39), lighting installation (UN R53), and brake systems (UN R78). Philippines Since June 2023, the Philippines has begun considering additional regulations to include an AHO function that automatically turns on the headlamps when the engine is running. Pakistan Pakistan government has introduced UN R 3, retro reflecting devices, UN R 28, audible warning devices, UN R 39, speedometer, UN R 75, tires of motorcycles, UN R 78, brake of motorcycles, UN R 136, electric safety of electric motorcycles, UN R 148, light-signaling devices, and UN R 149, road illumination devices, for both of domestically manufactured motorcycles and imported motorcycles, from September 2025 and June 2026 respectively. Outline of Environmental and Safety Regulation for Power Products 1. Emissions The United States In September 2022, the CARB published a final regulation to accelerate the transition of equipment using small off-road engines to zero-emission equipment, requiring most small off-road engines sold in California on or after January 1, 2024, to be zero emissions. In accordance with this, the evaporative emission standard value has also been changed. In April 2023, the U.S. Consumer Product Safety Commission (CPSC) initiated a rule-making process to establish safety standards regulations, including CO2 emissions (g/h) limits for portable generators. In January 2025, the EPA issued a waiver for the CARB’s new Tier 4 emission regulations. Consequently, the CARB issued a Manufacturers Advisory Correspondence , mandating that the new standards established in September 2022 apply starting from the 2026 Model Year. Europe On December 11, 2019, the European Commission released its communication on the EU Green Deal. See “—Outline of Environmental and Safety Regulation for Automobiles—1. Emissions—Europe.” 30 Table of Contents In December 2022, the European Commission published an amendment to Delegated Reg. Monitoring Non-Road Mobile Machinery (NRMM) in service engines of less than 56kW or more than 560kW. China The phase 3 exhaust emission regulation is currently under development. India The Central Pollution Control Board regulates generator emissions through the Environment (Protection) Third Amendment Rules, 2022, which introduced enhanced Phase 3 emission standards commencing in July 2023. 2. Recycling / Chemicals and hazardous substances The United States The Toxic Substances Control Act (TSCA) is the US hazardous substances legislation restricting Phenol, Isopropylated Phosphate (PIP) (3:1) for the first time in the world. PIP (3:1) is mainly used as a flame retardant. The first rule implementing this restriction was issued in January 2021, but relevant industrial associations objected that the transitional period, which was to last only 60 days, would make it impossible to comply in a timely manner. As a result, the compliance date has been extended to November 2024. Subsequently, EPA reconsidered the PIP (3:1) rules based on industry comments, and on November 19, 2024, EPA finalized revisions to exempt PIP (3:1) and products containing PIP (3:1) for the use in circuit boards and wire harnesses from the prohibition. Europe The same REACH compliance required for motor vehicles is required for power products. In June 2011, the European Union Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment (RoHS) had been wholly revised and most power products were within its scope after 2019. The European Union has issued a regulation amending the EU Battery Directive to the EU Battery Regulation in 2023. This regulation adds requirements related to carbon footprints and information disclosure of remaining life for recycling, among others. The EU Battery Regulation came into force in 2024. China On July 1, 2016, a regulation similar to European RoHS has entered into force. The first list of target products was published on March 12, 2018. India India has issued a final regulation called Battery Waste Management Rules on August 22, 2022. This final regulation requires the achievement of certain recovery targets for waste batteries and sets targets for value of use of recycled materials in new batteries. All batteries are required to display an EPR number. With the revision on February 24, 2025, it has been decided that the EPR number can also be displayed in the form of a QR code. 31 Table of Contents 3. Safety Japan In June 2021, the Snow Thrower Safety Council revised safety standards to add performance criteria allowing snow throwers to stop safely when moving backwards. In March 2025, the Agricultural Technology Innovation Engineering Research Center of National Agriculture and Food Research Organization issued a revision to the scope of agricultural machinery subject to safety inspections and updated related standards. The scope of application was clarified, and notably excluded rotary axle tillers from the category of agricultural tractors (walk-behind). The new standards came into effect in April 2025. Compliance with the new 2027 standards is also an available option. The United States In November 2016, the CPSC promulgated a notice of proposed rule-making in the Federal Register, which proposed to restrict the carbon monoxide emission from portable generator rated 19kW and below. This regulation was proposed to address the carbon monoxide poisoning injuries occurring from portable generators. In December 2023, the Portable Generator Manufacturers’ Association (PGMA), a trade association that seeks to develop and influence safety and performance standards for the industry, revised ANSI/PGMA G300-2018 and approved a new standard, ANSI, G300-2023. It became effective in January 2025. In June 2024, the Outdoor Power Equipment Institute (OPEI) published new safety requirements for combustion engine powered rotary lawnmowers and cylinder lawnmowers (ANSI/OPEI 5395-1/-2/-3). These requirements apply to consumer and commercial combustion engine powered rotary lawnmowers and cylinder lawnmowers, depending on operation type. These standards will be effective two years after the June 6, 2024 publication date. In July 2025, the American Boat & Yacht Council (ABYC) issued new safety requirements for “Mechanical Propulsion Control Systems (P-14)” and “Electric/Electronic Control Systems for Propulsion and Steering (P-28).” ABYC recommends compliance with these standards for all boats, associated equipment, and systems manufactured after July 31, 2026. Europe The European Commission plans to enhance existing noise regulation applicable to equipment intended to be used outdoors. This is a comprehensive rulemaking including expansion of the scope of regulation, enhanced noise limits and change to the conformity assessment system, among other things. In 2020, discussions to revise the Low Voltage Directive and Recreational Craft Directive have been initiated. In January 2022, the European Commission issued a regulation on cybersecurity to supplement the Radio Equipment Directive. In June 2023, the European Commission has adopted Regulation (EU) 2023/1230 on machinery safety. The new regulation expands the scope of the Machinery Directive, and introduces requirements addressing new areas such as emerging technologies, including AI and machine learning, cybersecurity, and digital documentation. It will be applicable from January 2027. As of June 2026, the list of harmonized standards to be used for making declarations of conformity has not been published. 32 Table of Contents In December 2024, the European Commission adopted the Regulation (EU) 2024/2847 (Cyber Resilience Act) . The requirements apply to products with digital elements and such products must comply with cybersecurity requirements. As of June 2026, no harmonized standards are available to assess compliance. In January 2025, the European Commission published an Official Journal Decision to introduce harmonized standards that address the cybersecurity requirements under the Radio Equipment Directive. In May 2025, the European Commission proposed revisions to several directives and regulations under the New Legislative Framework (NLF) to introduce common specifications as an alternative to standards for document digitalization. The digitalization of documentation for NLF products is expected to be required in the future. In January 2026, the European Parliament released a further proposal regarding the regulation to introduce common specifications and document digitalization. China The publication of a new “Safety technical specification for agricultural machinery,” which specifies safety requirements for agricultural machinery in general, is under consideration. Preparing for the Future Please note that the forward-looking statements contained herein are judgments made by Honda as of the filing date of this Annual Report and may differ materially from actual results because of uncertainties that may arise in the future, including those discussed under “Item 3. Key Information—D. Risk Factors.” Management Policies and Strategies Honda has two fundamental beliefs: “Respect for the Individual,” and “The Three Joys” (the Joy of Buying, the Joy of Selling, and the Joy of Creating). “Respect for the Individual” calls on Honda to nurture and promote these characteristics in our company by respecting individual differences and trusting each other as equal partners. “The Three Joys” is based on “Respect for the Individual,” and is the philosophy of creating joy for everyone involved in Honda’s activities, with the joy of our customers as the driving force. Based on these fundamental beliefs, Honda strives to improve its corporate value by sharing joy with all people, and with its shareholders in particular, by practicing its mission statement: “Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality, yet at a reasonable price for worldwide customer satisfaction.” 33 Table of Contents Driven by our dreams, Honda is striving to further advance mobility products and services with our original technologies and ideas. By doing so, Honda aspires to be a comprehensive mobility company which will play a leading role in making a better society. In 2023, Honda redefined the Global Brand Slogan, “The Power of Dreams,” to clearly articulate our desire to offer a broad range of mobility products and services as a comprehensive mobility company while addressing the two major societal challenges: environment and safety. We hope to deliver the values of “enabling people to transcend constraints of time and space” and “augmenting their abilities and possibilities.” Powered by our dreams, Honda will continue taking on challenges while fully demonstrating our original ideas and technologies. Business Environment and Direction of Our Responses The business environment surrounding Honda has come to a major turning point. Values are diversifying, the population is aging, urbanization is accelerating, climate change is worsening, and the industrial structure is changing due to progress in technologies such as the use of electric-powered motors, autonomous driving and IoT, all on a global basis. Additionally, the outlook for the international situation remains uncertain, including the situations in Ukraine, the Middle East and the South China Sea, and, including ongoing uncertainty in the trade policies of various countries, geopolitical risks have also become heightened. In these circumstances, in order to achieve future growth, Honda believes that it needs to build positive relationships with all stakeholders involved in our corporate activities to solve long-term social issues, as well as constantly working to improve the quality of value we offer. In Automobile business, we made a major strategic shift towards the popularization of EVs with a view that it will be the optimal solution from a long-term perspective. However, the expansion of the EV market in the U.S. has slowed down due to several factors, including the easing of fossil fuel regulations and revisions to EV subsidies. Due to a combination of factors, including our inability to flexibly respond to these changes in the business environment and deteriorating profitability of internal combustion engine (ICE)/hybrid vehicles caused by tariffs, Honda’s automobile business has fallen into an extremely challenging earnings situation. In order to respond flexibly to rapid changes in the business environment, Honda is reorganizing our strategic framework and reestablishing our competitive strengths. In light of the slowdown of the EV market expansion in the U.S., we will reassess our resource allocations and strengthen our hybrid models. In particular, Honda plans to reallocate all excess capacity at its auto plants in Ohio to production of ICE and hybrid vehicles and to make all of its auto plants in North America capable of producing hybrid models. As for regional markets, in addition to Honda’s main markets, namely Japan and the U.S., we seek to enhance the model lineup and cost competitiveness in India, where market expansion is expected. In other countries in Asia as well, we will strive to enhance our competitiveness by releasing next-generation hybrid models and reassessing resource allocations. Moreover, Honda will indefinitely suspend the previously announced project to build a comprehensive EV value chain in Canada and continue to reassess its procurement strategy. 34 Table of Contents In Motorcycle business, driven by population and economic growth, demand continues to grow particularly in the Global South, including India. While we believe that EVs will be the optimal solution from a long-term perspective, given that demand for EVs has not grown as much as expected, we are making improvements in fuel economy and deploying flex-fuel models* for ICE vehicles, in addition to expanding our lineup of electric motorcycles, in ways tailored to the realities in each region and the needs of our customers. Honda seeks to seize the dynamism of these growing markets and lead their growth by swiftly introducing competitive products and providing high-quality services that are tailored to our customers’ needs. In Power products and other businesses, while we believe the long-term global movement toward carbon neutrality will remain unchanged, the pace of electrification is slowing in certain markets due to factors such as relaxed environmental regulations and changes in trade policy trends. To respond to multifaceted changes in the market environment, we need to strategically strengthen both ICE and electrification and enhance our business resilience. Going forward, in ICE, Honda will work to establish a stable revenue base by further strengthening the business structure, while accelerating resource investment in electrification and future technologies to enhance competitiveness in anticipation of the next generation. * An internal combustion engine vehicle capable of using multiple types of fuel (fuel with different blending ratios), such as gasoline mixed with ethanol. Financial Strategy To enhance corporate value, we recognize the need to utilize both financial and non-financial capital to achieve sustainable cash flow growth and improve capital efficiency. To realize these goals, we will work on “strategic resource allocation over the medium- to long-term”, “strengthening management with an awareness of capital costs” and “improving management quality and transparency through proactive dialogue.” With the goal of achieving carbon neutrality for all products and corporate activities which Honda is involved in by 2050, we made a major strategic shift towards the popularization of EVs with a view that it will be the optimal solution to realize carbon neutrality for small-size mobility products, including passenger cars, from a long-term perspective. However, the profitability of Automobile business is currently declining due to the impact of changes in U.S. tariff policies on ICE and hybrid vehicles, a decline in the competitiveness of our products in Asia stemming from the impact of the allocation of more resources to EV development, and intensifying competition with the rise of new EV manufacturers. Furthermore, the expansion of the EV market in the U.S. has slowed down due to several factors, including the easing of fossil fuel regulations and revisions to EV subsidies. Given the changes in the market environment, as part of the revision of our product launch plans, we decided during the fiscal year ended March 31, 2026 to cancel the launch and development of certain EV models in the U.S., and to discontinue production or reduce production volume for EV models jointly developed under a certain alliance agreement in the U.S. Furthermore, on March 12, 2026, we reassessed our automobile electrification strategy and made additional decisions, including the cancellation of development and market launch of certain EV models that had been planned for production in North America. In addition, for certain EV models jointly developed with Sony Honda Mobility Inc., our joint venture with Sony Group Corporation, and scheduled to be manufactured by the Company’s subsidiary in North America, Sony Honda Mobility Inc. decided to cancel their development and market launch. In China, while the EV market continues to grow, competition has intensified due to the rapid emergence of new EV manufacturers. Based on this challenging and competitive environment, we have also revised our product launch plans for certain EV models in China. As a result, we recognized losses and expenses of ¥1,577.8 billion for Automobile business for the fiscal year ended March 31, 2026 in the consolidated statements of income. Moreover, we expect that additional expenses and/or losses will be incurred in the fiscal year ending March 31, 2027, and may be further recorded or later. 35 Table of Contents To respond flexibly to these EV-related losses and current rapid changes in the business environment, Honda is reorganizing its strategic framework and reestablishing our competitive strengths. In line with the reassessment of resource allocations following the EV lineup reduction, we plan to enhance the hybrid model lineup and strengthen our cost competitiveness. a. Strategic resource allocation over the medium- to long- term (Capital generation) Over the three-year period ending March 31, 2029, Honda will focus on rebuilding our Automobile business structure. Then, in the following two fiscal years, based on the rebuilt business structure, Honda plans to introduce new products flexibly and in an agile manner and put its Automobile business on a trajectory of further growth. By the fiscal year ending March 31, 2029, Honda expects to eliminate EV-related losses. Combined with further advancement of its structural transformation and enhancement of the lineup of new products focused on key markets, Honda will seek to improve substantially the profitability of its Automobile business. By further building on this with the growth of our Motorcycle and Financial services businesses, which already have solid profitability, Honda will strive to achieve an all-time high fiscal year operating profit in the fiscal year ending March 31, 2029. In the fiscal year ending March 31, 2031, Honda will strive to realize its long-standing ROIC (Return on Invested Capital)*1 target of 10%. *1 [Profit for the year attributable to owners of the parent + Interest expenses (excluding Financial services business)] /Deployed Capital*2 *2 Equity attributable to owners of the parent + Interest-bearing liabilities (excluding those from Financial services business). Deployed capital is calculated using the average of the beginning and end of the period. 36 Table of Contents (Resource investment) During the three-year period ending March 31, 2029, Honda plans to reallocate resources it had scheduled to invest in EVs to hybrid vehicles, and control EV-related investments at a level of approximately ¥0.8 trillion. Honda plans to invest ¥1.0 trillion in software technologies and ¥4.4 trillion in ICE and hybrid vehicles, resulting in total resource investment of ¥6.2 trillion during this three-year period. As for operating cash flow after R&D adjustment*, by targeting a return to profitability in its Automobile business and striving to maintain strong cash-generating capability in its Motorcycle business, Honda believes that this cash flow will allow it to continue making investments while delivering shareholder returns. In the fiscal year ending March 31, 2030 and onward, Honda will carefully assess EV demand trends and make decisions regarding investments in EVs. Honda will further improve investment efficiency by proactively leveraging external resources without being overly focused on internalization of resources. * Cash flows from operating activities (CFO) excluding R&D expenses (CFO of non-financial services businesses + R&D expenditures – amount transferred to capitalized development cost) (Shareholder returns) We position shareholder returns as one of the most important management priorities. Honda will maintain stable and continuous dividend payments, with a target DOE (ratio of dividend on adjusted equity attributable to owners of the parent)* of 3%. * Adjusted “equity attributable to owners of the parent”, which serves as the basis for DOE (ratio of dividend on adjusted equity attributable to owners of the parent), is based on adjusted figures that exclude “other components of equity”, which are highly volatile due to the effects of currency exchange rates and market conditions. b. Strengthening management with an awareness of capital costs In order to respond flexibly and appropriately to changes in the business environment and enhance corporate value, Honda is embedding management practices that are conscious of capital costs, developing multiple scenarios based on different time horizons, and implementing flexible resource allocation. During this transformation phase, investments for the future will take precedence. At the same time, we are making investment decisions based on capital costs by utilizing net present value (NPV), while aiming to maintain company-wide ROIC above capital costs as a management bottom line. c. Improving management quality and transparency through proactive dialogue To ensure that stakeholders, including investors and individual shareholders, properly understand and evaluate the Company’s management direction, the management team itself will take the lead in engaging in more proactive dialogue than ever before through events, individual meetings, and other opportunities. Through these dialogues, we seek to convey management’s and each technology leader’s commitment to our growth strategy, while directly understanding the expectations of the capital markets and reflecting them in our management and business strategies. In doing so, we aim to continuously enhance corporate value and remain a company that stakeholders look to with high expectations. Challenges to be Addressed Preferentially Honda first comprehensively identifies societal issues from the perspective of sustainability, prioritizes them in line with Honda’s direction, and then decides areas to focus on to determine the “priority issues.” Specifically, we have identified five areas: “environment” and “safety,” as well as “people” and “technology,” which are the driving forces behind Honda’s growth, and “brand,” which can be considered the sum of all corporate activities. By linking initiatives in these nonfinancial areas with our financial strategy, we aim to create social and economic value. 37 Table of Contents “Five Key Themes” 1. Realization of a zero environmental impact society Honda has set achieving a “Zero Environmental Impact Society” as one of the company-wide key themes for efforts to exhaustively reduce inter-linking environmental impact to achieve sustainable corporate activities. In our efforts to achieve a Zero Environmental Impact Society, we are working towards our vision of achieving CO2 emissions neutrality, 100% utilization of carbon-free energy, and 100% use of sustainable materials in 2050. This vision is encapsulated in the concept of Triple Action to ZERO, a concept that consolidates three key initiatives: Carbon Neutrality, Clean Energy, and Resource Circulation. We position Triple Action to ZERO as the core concept guiding our efforts. For more details, please refer to “Concepts and Approaches to Sustainability.” 2. To realize a zero traffic collision society Honda aims to achieve zero traffic collision fatalities involving Honda motorcycles and automobiles worldwide by 2050*1. As a milestone, Honda aims to halve the number of global traffic collision fatalities involving Honda motorcycles and automobiles worldwide by 2030*2. All motorcycles and automobiles registered, not limited to new vehicles, are included in the scope. *1 Traffic accidents that occurred while riding Honda motorcycles and automobiles (including collisions with other parties such as pedestrians and bicycles). However, cases involving intentional and malicious violations of traffic rules or cases of driving while impaired by the use of alcohol, drugs, or other substances, are excluded. *2 To halve the number of traffic collision fatalities per 10,000 vehicles involving Honda motorcycles and automobiles worldwide by 2030 compared to 2020. For more details, please refer to “Concepts and Approaches to Sustainability.” 3. The evolution of human capital management Honda’s management of human capital refers to initiatives aimed at enhancing future competitiveness and corporate value by maximizing the capabilities of individuals and organizations and creating customer value, in pursuit of realizing the company-wide policy of “sustainably creating the joy and freedom of mobility and becoming the power that supports individuals who are trying to advance toward their dreams.” Based on this recognition, we have identified two key human capital materialities* to be addressed from both medium- to long-term and short- to medium-term perspectives. * Materialities: We select “Priority Issues” by comprehensively analyzing social issues from the perspective of sustainability, aligning them with Honda’s strategic direction, and defining the particularly focused issues for each priority issue as “materialities”. For more details, please refer to “Concepts and Approaches to Sustainability.” 4. Creation of innovative technologies We are committed to expanding the possibilities of mobility and to achieving a future society with zero environmental impact and zero traffic collision fatalities. Having defined key focus areas, experts in each field lead technological development. Furthermore, Honda collaborates with various research institutions worldwide to explore and integrate global knowledge. Strengthening collaboration with external parties through initiatives such as venturing is also one of our efforts for technology creation. We established a department responsible for corporate development in 2021, and have continued to strengthen its functions to enhance corporate competitiveness by consolidating internal and external knowledge, experience, and expertise. In addition, Honda is actively creating new businesses through a bottom-up approach, leveraging associates’ unique ideas and technologies, and is taking on the challenge of solving social issues and creating new value. 38 Table of Contents 5. Brand value enhancement Honda’s brand has been built over time through all of its corporate activities alongside its customers since its founding. Even in the midst of a significant transformative period said to occur once in a century, enhancing Honda brand and continuously increasing its value for the future is one of the most important challenges. To achieve this, Honda redefined the Global Brand Slogan (GBS) established in 2001 to “The Power of Dreams”, in 2023, and positioned it once again as the “starting point for all brand management.” Honda will continue to place the GBS at the core of brand management and, through various products, services, and corporate activities, integrate individual brand identities with the valuable consistency of Honda, further enhancing the overall value of Honda brand. In brand management, we believe it is crucial to create synergies between “common values and thought as a company” and “the diversity and uniqueness of products and services” based on the unique personality of Honda brand. As part of this, we are working on developing and expanding “brand assets” that serve as guidelines for various communications and branding practices to ensure valuable brand commonality on a global scale. We will aim to create an environment in which all associates working at Honda can independently improve the quality of the brand. Through these company-wide activities, Honda aims to be a company that society, which includes our shareholders, our investors and our customers, wants. Concepts and Approaches to Sustainability Please note that the forward-looking statements contained herein are judgments made by Honda as of the filing date of this Annual Report and may differ materially from actual results because of uncertainties that may arise in the future, including those discussed under “Item 3. Key Information—D. Risk Factors.” Sustainability-Related Financial Disclosures 1. Governance (Governance Bodies) Honda is promoting corporate activities grounded in the Honda Philosophy. The Honda Philosophy consists of three components: the fundamental beliefs, the company principle, and the Management Policies. Honda’s long-term management policies and medium-term management plan are approved and resolved by the Executive Council and the Board of Directors. The Board of Directors is the final supervisory body for important matters, covering actions to address sustainability issues, including climate change issues. The Executive Council deliberates in advance on matters to be resolved by the Board of Directors and discusses important management matters within the scope of authority delegated to it by the Board of Directors. We also designate “ESG and Sustainability” as one of the required skills for our directors, from the perspective of addressing diverse risks associated with business activities and overseeing business operations for the sustainable development of society and Honda. As our challenge to sustainably provide people’s freedom of mobility, Honda aims to achieve carbon neutrality through all Honda products and corporate activities and zero traffic collision fatalities by 2050. Therefore, we believe that insight into ESG and sustainability issues, such as the environment (including climate change issues), safety, and human rights, is essential, and based on these perspectives, we appoint Directors. With respect to the development of directors’ skills in this area, the Company enhances directors’ understanding through regular reporting to the Board of Directors on initiatives related to our Priority Issues, such as the realization of a Zero Environmental Impact Society and a Zero Traffic Collision Society. 39 Table of Contents In addition, the Office of the Board of Directors supports directors, primarily to outside directors, to help them fully perform their functions. With respect to non-financial management indicators*, we generally review progress once a year at the Board of Directors level and approximately one to three times a year at the Executive Council level. In making decisions with respect to our long-term management policies and medium-term management plan and in overseeing our risk-management processes and related policies, we take into consideration our Priority Issues, including the realization of a Zero Environmental Impact Society and the realization of a Zero Traffic Collision Society. In doing so, the Executive Council and the Board of Directors conduct multidimensional deliberations balancing responses to social issues, such as reducing environmental impact, and profitability and other management priorities, and they reflect these considerations in decision-making. The Board of Directors is responsible for supervising key goal indicators (KGIs) and the Executive Council is responsible for executing key performance indicators (KPIs), and they regularly monitor the progress of these to improve management governance. Please refer to Item 6 B. “Compensation.” for details of the executive remuneration system linked to financial and non-financial indicators. * Management indicators are KGIs for which the Board of Directors holds supervisory responsibility and KPIs for which the Executive Council holds execution responsibility. (Management’s role) Each Operation and Unit and subsidiary formulates and promotes action plans and measures based on the company-wide long-term management policies and medium-term management plan, and important matters are reported and approved by the Executive Council as appropriate. In each area of environment, safety, human resources, human rights, occupational safety and health, quality, and supply chain (purchasing and logistics), conference bodies have been established to promote global management through information sharing and discussions. For important cross-departmental issues such as addressing climate change issues, a cross-departmental task force is formed under the direct supervision of management members to consider and propose action plans and measures as appropriate, and important matters are reported and approved by the Executive Council. Compliance and risk management related to each area are operated based on the Company’s basic policies for the development of internal control systems. 40 Table of Contents 2. Risk management Honda has established the Honda Global Risk Management Policy and has been conducting activities that will lead to sustainable growth and stable corporate management by actively controlling risks. Under the supervision and monitoring of the Risk Management Officer, we categorize, manage and address risks defined as potentially inflicting significant damage or loss on Honda’s tangible and intangible assets, corporate activities and stakeholders of Honda and possibly affecting our corporate management. Each organization identifies and evaluates risks. Based on the results of its evaluation, the Risk Management Officers of each Operations identify priority risks of respective Operations. Based on the recognition of risks within Honda and reflecting external risk trends, we also identify, check and discuss the response status to the company-wide priority risks deemed particularly important for the entire corporate entity. Important matters related to risk management are discussed by the Risk Management Committee established within Honda, and details of their activities are reported to the Executive Council as appropriate. 3. Strategy Honda views “environment” and “safety” as the most critical societal issues that Honda, being a comprehensive mobility company, must address with the utmost sincerity. Under the theme of realizing a society with “Zero Environmental Impact” and “Zero Traffic Collision Society” we are committed to developing and implementing effective measures with speed. 41 Table of Contents (Environmental Strategy) Honda recognizes that all business activities may have environmental impacts. To address these challenges, it is important to consider the environmental impacts of each stage of the product lifecycle. Honda identifies the main environmental impacts as greenhouse gas emissions, use of fossil fuel-derived energy, extensive resource extraction and waste and impacts on biodiversity. Honda, aiming for sustainable business practices, has set achieving a “Zero Environmental Impact Society” as one of its company-wide priority issues. To comprehensively reduce interlinked environmental impacts, Honda has established four materialities* to guide its efforts. * We select “Priority Issues” by comprehensively analyzing social issues from the perspective of sustainability, aligning them with Honda’s strategic direction, and defining the particularly focused issues for each priority issue as “materialities.” Triple Action to ZERO In our efforts to achieve a Zero Environmental Impact Society, we are working towards our vision of achieving CO2 emissions neutrality, 100% utilization of carbon-free energy, and 100% use of sustainable materials in 2050. This vision is encapsulated in the concept of Triple Action to ZERO, a concept that consolidates three key initiatives: Carbon Neutrality, Clean Energy, and Resource Circulation. We position Triple Action to ZERO as the core concept guiding our efforts. The three initiatives of Triple Action to ZERO are closely related and we aim to maximize synergistic benefits by considering their linkages. The Triple Action to ZERO initiatives are also linked to the international demand for preserving biodiversity and fostering harmony with nature. In advancing these initiatives, we will consider Nature-based Solutions* as well. * Nature-based Solutions (NbS) involve advancing societal challenges while conserving and restoring natural ecosystems. 42 Table of Contents Key Initiatives and Milestones for Achieving Materiality Honda supports the Paris Agreement* and, with the goal of realizing a Zero Environmental Impact Society, aims to achieve carbon neutrality across all products and corporate activities involving Honda by 2050. Of the four materialities in the environmental domain, we are prioritizing efforts toward “addressing climate change issues” and “addressing energy issues” for achieving carbon neutrality. As priority actions, the Company is working on reducing CO2 emissions from product use and corporate activities, breaking these efforts down into more specific initiatives that the Company plans to implement as concrete actions. Specifically, CO2 emissions are tracked for various product groups within each business segment, as well as for individual product plants and manufacturing equipment. This approach helps quantify CO2 reduction amounts for each product and factory. While carefully assessing market conditions and demand trends in each region, Honda will accelerate a multifaceted approach to carbon neutrality by combining EVs, hybrid vehicles, carbon-neutral fuels, and carbon offset technologies For long-term impact reduction measures related to the materiality of “efficient utilization of resources,” there are initiatives that may require business transformation beyond existing frameworks. Honda is currently in the preparatory phase for reducing future CO2 emissions across the entire product lifecycle from resource extraction (upstream) to disposal (downstream). 43 Table of Contents We also recognize the importance of advancing these initiatives while considering our impact on nature, such as the materiality of “biodiversity conservation.” Honda aims not only to achieve “carbon neutrality by 2050” but also to pursue a long-term perspective to realize a Zero Environmental Impact Society. * The Paris Agreement sets as a global long-term goal to keep the rise in average global temperatures well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C. (Safety Strategy) Honda is addressing various factors leading to collisions by evolving and combining “Human Ability (awareness-building activities),” “Mobility Performance (technological development),” and “Traffic Ecosystem (collaboration, development of systems/services).”—collectively referred to as Honda’s three elements of safety. Honda recognizes the need to reduce fatal collisions involving motorcycles in emerging countries as a major challenge toward 2030. To address this issue, Honda will actively develop instructor training programs, corporate training at Traffic Education Centers*, and schools for individuals under “Human Ability (awareness-building activities).” Under “Mobility Performance (technological development),” for motorcycles, Honda will expand the application of advanced braking systems such as ABS and CBS (Combined Braking System) as well as lights with high visibility for both riders and other road users. For automobiles, Honda will actively promote the functional evolution and widespread use of advanced driver-assistance systems (ADAS), such as Honda SENSING with a motorcycle detection function in emerging countries and Honda SENSING 360 in developed countries, tailored to the local realities of each region. Under “Traffic Ecosystem (collaboration, development of systems/services),” Honda is strengthening its collaboration with international organizations such as the United Nations in relation to traffic safety. Honda will support safety policies such as institutional reform, awareness-building, and infrastructure development by providing the knowledge and know-how cultivated through Honda’s long-standing safety activities to countries around the world, with a focus on emerging countries, through such organizations. A major challenge for 2050 is to reduce traffic collision fatalities among pedestrians, bicyclists, motorcyclists, and other vulnerable road users. To address this challenge, Honda will accelerate efforts related to “Traffic Ecosystem (collaboration, development of systems/services).” Specifically, Honda will promote research and development relating to “Safe and Sound Network Technology” and standardization of technologies for social implementation. 44 Table of Contents Safe and Sound Network Technology provides information through telecommunications to help all road users prepare for and avoid the risks of collision before they occur. * Traffic Education Centers: Honda facilities where internal and external traffic safety instructors are trained and driving safety education is provided to corporations, schools and individual customers. 4. Metrics and targets (Environmental targets) Honda intends to execute certain initiatives to realize a “Zero Environmental Impact Society.” Please refer to the chart below. Management indicators Scope Targets Fiscal year ending March 31, 2031 KGI Reduction rate of CO2 emissions from corporate activities (compared to FYE Mar. 31, 2020) Honda Group 46% Total CO2 emissions from products Honda Group Not disclosed Reduction rate of industrial water withdrawal (compared to FYE Mar. 31, 2020) Honda Group 12% Reduction rate of industrial waste (incineration and landfill disposal) (compared to FYE Mar. 31, 2020) 20% KPI Reduction rate of product CO2 emissions per unit (compared to FYE Mar. 31, 2020) Motorcycles Automobiles Power products 15.0% 13.6% 13.4% Usage rate of recycled and biomass materials Motorcycles Automobiles 30% of motorcycles produced in Japan, for European market30% in EVs produced in Japan During the current consolidated fiscal year and from the end of the current consolidated fiscal year to the filing date of this Annual Report, we reviewed our targets with a target year of the fiscal year ending March 31, 2031. With respect to the reduction rates of product CO2 emissions intensity, the targets were revised from 34.0% to 15.0% for the motorcycle business, from 27.2% to 13.6% for the automobile business, and from 28.2% to 13.4% for the power products business. These revisions reflect our reassessment of our powertrain portfolio and product launch plans in response to changes in market conditions and developments in trade policies. In addition, while we have previously used the sales ratio of electrified products as a management indicator, we determined—after taking into account the increasing complexity of market conditions, customer needs, and business viability—to shift from using the sale of electrified products as a measurement toward contributing to the reduction of greenhouse gas emissions across society as a whole, which is a more fundamental approach. Based on this approach, we will proceed with the assessment of specific target levels for the fiscal year ending March 31, 2036, on the premise of shifting our management indicators from the sales ratio of electrified products to the reduction rate of total greenhouse gas emissions across the entire life cycle. 45 Table of Contents Furthermore, we have established more fundamental and challenging targets aligned with our desired 2050 state related to efficient utilization of resources. For the fiscal year ending March 31, 2031, we revised our KGI from “waste reduction rate (compared to BAU*)” to “reduction rate of industrial waste (incineration and landfill disposal) (compared to FYE Mar. 31, 2020)’’ and from “water intake reduction rate (compared to BAU)” to “reduction rate of industrial water withdrawal (compared to FYE Mar. 31, 2020)”. In addition, we newly established “usage rate of recycled and biomass materials” as a KPI and set a corresponding target level. * Business As Usual: The estimated result for the fiscal year ending March 31, 2031 based on our production plans but without implementing our reduction strategies. (Safety target) Honda aims for zero traffic collision fatalities involving Honda motorcycles and automobiles*1 globally by 2050. As a milestone, Honda targets to halve the number of traffic collision fatalities involving its motorcycles and automobiles worldwide by 2030 compared to 2020 levels*2. This includes not only new vehicles but all registered Honda motorcycles and automobiles on the market. To realize the 2030 milestone, moving forward, Honda will particularly focus on enhancing collision safety performance and promoting the evolution and application of ADAS for automobiles. For motorcycles, Honda will expand the application of advanced braking systems such as ABS and CBS, as well as lights with high visibility for both riders and other road users. To track the progress of these initiatives, Honda has defined KPIs for advanced safety technology application rates, including Honda SENSING 360 for automobiles in developed countries*3, Honda SENSING for automobiles in emerging countries*4, and advanced braking systems (ABS/CBS) for motorcycles in emerging countries*5 so as to set targets to ensure steady progress. Metrics and Targets Management Indicators (KPI) Targets Fiscal year ending March 31, 2031 Advanced Safety Equipment Application Rate Automobiles in developed countries*3 Honda SENSING 360 100% Automobiles in emerging countries*4 Honda SENSING 100% Motorcycles in emerging countries*5 Advanced Braking (ABS/CBS) 100% *1 Traffic collision involving Honda motorcycles and automobiles (rider, driver and passengers), as well as pedestrians and bicycles and other involved parties (excluding intentional violation of traffic rules with malicious intent and cases of willful incapacitated status due to use of alcohol, drugs, or other substances). *2 Halve the number of traffic collision fatalities per 10,000 vehicles involving Honda motorcycles and automobiles worldwide by 2030 compared to 2020 levels. *3 Japan, the United States, China, and Europe *4 Representative measurement countries: India, Indonesia, Malaysia, Thailand, and Brazil *5 Representative measurement countries: India, Indonesia, Vietnam, Thailand, and Brazil 46 Table of Contents Human Capital Strategy, Indicators and Targets 1. Strategy (Honda’s Human Capital Strategy) Honda’s management of human capital refers to initiatives aimed at enhancing future competitiveness and corporate value by maximizing the capabilities of people and organizations and creating customer value, in pursuit of realizing the company-wide policy of “sustainably creating the joy and freedom of mobility and becoming the power for people who are trying to advance toward their own dreams.” Honda has long placed “respect for the individual” at the center of its approach and has emphasized generating new value through the integration of diverse individuals, driven by each individual’s intrinsic motivations. However, the business environment surrounding Honda has undergone significant changes, driven by factors such as shifts in market structures, accelerated technological innovation, the ongoing transition to AI-driven operations and decision-making and increasing uncertainty. In addition, in light of revisions to business strategies and changes in financial conditions, we face an environment in which more rigorous prioritization and allocation of management resources and business operations are required. Even under such circumstances, we do not regard human capital management initiatives as matters that should fluctuate in response to short-term financial performance. Instead, we view such initiatives as a critical foundation supporting our medium- to long-term competitiveness and will continue to pursue the maximization of human capital value. In this context, we recognize the need to move beyond conventional approaches that focus on monitoring the status of human capital or the allocation of resources to priority areas to more consistently understand how human capital management initiatives contribute to the creation of customer value. Based on this recognition, we have identified two key human capital materialities (*1) to be addressed from both medium- to long-term and short- to medium-term perspectives. The first materiality, which we intend to address from a medium- to long-term perspective, is “activating associates’ intrinsic motivations and fostering the integration of diverse individuals.” We aim to create an environment in which each and every Honda associate is motivated by the dreams they seek to realize through Honda and where pursuits of such dreams lead to the creation of customer value. At the same time, we promote the development of an organizational culture in which diverse individuals are respected, can exchange opinions with a sense of security, and can fully demonstrate their capabilities. This initiative represents a key effort to sustainably enhance the capabilities of people and organizations, which constitute the source of Honda’s distinctive value creation. The second materiality, which we intend to address from a short- to medium-term perspective, is the “strengthening the human and organizational foundation for future competitiveness.” We believe that, even in periods characterized by significant changes in the business environment, short-term performance fluctuations, and heightened uncertainty, it is essential not to halt efforts to build a human capital foundation that supports future value creation. Accordingly, we do not treat investments in human capital as subject to revision based on short-term financial performance, but rather position them as forward-looking investments that shape future competitiveness, and monitor both their level and continuity. Furthermore, we have established main themes for each human capital materiality, and have set management indicators (*2), targets through the fiscal year ending March 31, 2031 and priority initiatives to be implemented, thereby promoting activities toward the achievement of these objectives. 47 Table of Contents In addition, beginning in the fiscal year ended March 31, 2025, we have established an advisory body to the Executive Council to deliberate on key issues relating to people and organizations, thereby enhancing the alignment between business strategy and human capital strategy. Perspective Human capital materialities Main themes medium- to long-term Activating associates’ intrinsic motivations and fostering the integration of diverse individuals 1. Advancing people management to drive value-creating behaviors and enhancing organizational vitality 2. Cultivating an organizational culture where diverse individuals can fuse and thrive short- to medium-term Strengthening the human and organizational foundation for future competitiveness 3. Investment in human capital to support future value creation *1 Materialities: We select “Priority Issues” by comprehensively analyzing social issues from the perspective of sustainability, aligning them with Honda’s strategic direction, and defining the particularly focused issues for each priority issue as “materialities”. *2 Management indicators: KGIs for which the Board of Directors is responsible for supervision and KPIs for which the Executive Council is responsible for execution. The scope is determined for each indicator based on our strategy, and categorized into Global (including the Company and its subsidiaries in Japan subject to labor contracts with our union and overseas consolidated subsidiaries) and Japan (the Company and its subsidiaries in Japan subject to labor contracts with our union). 2. Indicators and Targets (Human Capital materialities (Medium- to Long-Term Perspective): Activating associates’ intrinsic motivations and fostering the integration of diverse individuals) - Main theme 1. Advancing people management to drive value-creating behaviors and enhancing organizational vitality • Management indicator (KGI) and Achievement/Target KGI Scope Achievement Target Fiscal year ended March 31, 2026 Fiscal year ended March 31, 2026 Fiscal year ending March 31, 2031 Associate engagement scores Global*1 Percentage of positive responses 66%*2 Percentage of positive responses 60% or more*2 Percentage of positive responses 65% or more *1 The Company and its subsidiaries in Japan subject to labor contracts with our union, and overseas consolidated subsidiaries. *2 Because the calculation methodology has been revised beginning with the fiscal year ending March 31, 2027, the actual result and target for the fiscal year ended March 31, 2026 are presented for reference based on the previous calculation methodology. 48 Table of Contents • Concept behind Management Indicator (KGI) At Honda, we believe that, in order to drive value-creating behaviors, it is important that associates possess aspirations they seek to realize through Honda and demonstrate a willingness to take on challenges toward achieving those aspirations. In addition, acting from a customer-centric perspective and having managerial support that encourages such challenges are considered critical factors in enabling these behaviors. While we have historically emphasized a customer-centric approach, we recognize that, in light of changes in the business environment and evolving management challenges, it is necessary to further strengthen this perspective and more clearly monitor the linkage between human capital initiatives and value creation. Based on this recognition, we have established an associate engagement score as a metric that more explicitly reflects “value-creating behaviors from a customer perspective,” in addition to the previously emphasized elements of “intrinsic motivation of associates” and “management support and encouragement.” Through this approach, we seek to continuously monitor whether associate-driven aspirations—rooted in Honda’s core concept of “dreams”—are effectively translated into the creation of customer value. • Calculation Formula The average percentage of positive responses (ratings of 4 or 5 on a five-point scale) to the following three questions in the annual associate survey conducted in each region: “having the willingness to challenge oneself toward high goals,” “acting from a customer perspective,” and “supervisors actively support challenges.” For the fiscal year ending March 31, 2027, the calculation methodology has been revised, including the addition of a question on “acting from a customer perspective,” to more explicitly reflect value creation activities from a customer perspective. - Main themes 2. Cultivating an organizational culture where diverse individuals can fuse and thrive • Management indicators (KPI) and Achievement/Target KPI Scope Achievement Target Fiscal year ended March 31, 2026 Fiscal year ended March 31, 2026 Fiscal year ending March 31, 2031 Inclusion score Global 3.7 Points (5-point scale) — — Ratio of women in management positions Japan* 2.1 times compared to fiscal year ended March 31, 2021 2.1 times compared to fiscal year ended March 31, 2021 4.0 times compared to fiscal year ended March 31, 2021 * The Company and its subsidiaries in Japan subject to labor contracts with our union • Concept behind Management Indicator (KPI) (Inclusion score) We believe that achieving diversity and inclusion (“D&I”), in which diverse individuals are respected, accepted, and able to perform to their full potential with a sense of security, constitutes a critical foundation supporting the creation of value. 49 Table of Contents Based on this perspective, we have established an “inclusion score” as a metric to assess the degree to which inclusion is embedded within the workplace environment. (Ratio of women in management positions) In Japan, we also utilize the ratio of women in management positions as a supplementary indicator to assess the appointment and advancement of diverse talent. Through the use of this indicator, we seek to continuously monitor not only the level of inclusion as an organizational culture, but also the progress of achieving diversity within the organization. • Calculation Formula (Inclusion score) Average scores of responses to questions addressing acceptance of diversity, sense of belonging and individuality in the organization, and psychological safety in the annual associate survey conducted in each region. (Ratio of women in management positions) Multiples of the number of women in management positions in Japan as of the fiscal year ended March 31, 2021. (Human Capital materialities (Short- to Medium-term Perspective): Strengthening the human and organizational foundation for future competitiveness) - Main themes 3. Investment in human capital to support future value creation • Management indicators (KPI) and Achievement/Target KPI Scope Achievement Target Fiscal year ended March 31, 2026 Fiscal year ended March 31, 2026 Fiscal year ending March 31, 2031 Human Capital Investment Global Not disclosed Not disclosed Not disclosed • Concept behind Management Indicator (KPI) We believe that, in order to strengthen the human and organizational foundation that supports future competitiveness, it is essential to position human capital initiatives not as elements subject to fluctuation based on short-term financial performance in a given fiscal year, but as forward-looking investments aimed at future value creation, and to continue such investments on an ongoing basis. Based on this perspective, we have established “human capital investment” as a metric to assess the extent to which resources are allocated to people on a company-wide basis. Using this management indicator, we monitor the total amount of human capital investment across the organization and, within such total, also track the portion allocated to priority areas. Through this approach, we seek to continuously assess both the overall scale of investment in human capital and the effectiveness of its allocation to key focus areas. 50 Table of Contents • Calculation Formula The aggregate amount of investments related to recruitment, development, placement and utilization support, retention, and the development of HR infrastructure. Investment in priority areas is separately identified as a subset of total human capital investment. Climate Change-related Disclosures (Response to the TCFD Recommendations) Honda has declared its support to the Task Force on Climate related Financial Disclosures (TCFD), established by the Financial Stability Board (FSB), and discloses information in line with the TCFD-recommended disclosure framework. 1. Governance Please refer to “Concepts and Approaches to Sustainability—Sustainability-Related Financial Disclosures: 1. Governance.” 51 Table of Contents 2. Risk management Honda has established the Risk Management Committee to identify, check and discuss the status of “company-wide priority risks” which are deemed important for the entire corporate entity. Climate-related risks such as risks related to environmental regulations and natural disasters caused by climate change are also managed and monitored by the Committee, which leads to promoting more effective risk management activities while considering the characteristics of respective Operations. The Corporate Strategy Operations evaluates and identifies climate-related risks by conducting scenario analysis in line with TCFD recommendations, reflecting external and internal risk information, which includes company-wide priority risks. The results of the scenario analysis of climate-related risks are shared with the Risk Management Committee. Climate-related risks are mainly addressed by the Corporate Strategy Operations, Business Operations and Regional Operations as well as by each respective Operation, Unit, subsidiary and cross-departmental task force. Important matters related to risk management including the responses to the climate-related risks are discussed by the Committee, and details of their activities are reported to the Executive Council as appropriate. For more explanation of the risk assessment and management process, please refer to “Concepts and Approaches to Sustainability—Sustainability-Related Financial Disclosures: 2. Risk management.” 3. Strategy (Identification of climate-related risks and opportunities) We have identified climate-related risks and opportunities that are reasonably expected to affect our business activities and outlook by reference to a 1.5°C scenario, which assumes a rapid transition to a low-carbon society, and a 4°C scenario, which assumes insufficient progress in climate change mitigation measures, as set out below. Key Risks Classification/Scenario Risk Time horizons*1 Potential Impact*2 Transition Risk 1.5°C Payment of fines or suspension of vehicle sales due to failure to meet fuel efficiency regulations Medium/Long-term High Drop in unit sales of internal combustion engine (ICE) vehicles due to more stringent fuel efficiency regulations, etc. Long-term High Increased costs due to the introduction of carbon tax and Emissions Trading System (ETS). Medium/Long-term Medium Physical Risk 4°C Operational impacts on production bases and the supply chain, including potential asset damage, resulting from natural disasters Long-term High Key Opportunities Scenario Opportunity Time horizons Potential Impact 1.5°C Expansion sales of electrified products Long-term High Reduction of business operation costs through introducing the higher energy efficiency production facilities and utilization of renewable energy Medium/Long-term Expansion sales of fuel-efficient vehicles, including HEVs Medium/Long-term 4°C Rising demand for products that can be converted into emergency power sources during disasters Long-term 52 Table of Contents *1 The time horizons are defined in alignment with the planning periods used in Honda’s strategic decision-making processes. Honda defines the time horizons based on when the impacts of risks and opportunities are reasonably expected to occur, as follows: Short-term: Within one year from the end of the reporting period (aligned with the annual action plan period) Medium-term: The period after the end of short-term through the fiscal year ending March 31, 2031 (aligned with Honda’s medium-term management plan period) Long-term: The period after the end of medium-term through 2050 (2050 being the benchmark year for Honda’s carbon neutrality goals). *2 In assessing the magnitude of impacts of risks and opportunities, we apply quantitative monetary thresholds where financial impacts can be quantified and qualitative thresholds in other cases. Based on these criteria, the impacts are classified as follows: High: ¥100 billion or more, or impacts at the company-wide level Medium: ¥10 billion or more but less than ¥100 billion, or impacts spanning multiple regions Low: ¥2.5 billion or more but less than ¥10 billion, or impacts limited to a specific region (Impacts on the business model and value chain) Areas where climate-related risks and opportunities are concentrated The majority of our greenhouse gas emissions are attributable to CO2 emissions generated during the use phase of our products. As a result, among climate-related transition risks, we recognize that, with respect to the risk of penalty payments or sales suspension due to failure to meet fuel economy regulations, climate-related risks and opportunities are concentrated in our automobile business, and that the risk of a decrease in new internal combustion engine (ICE) vehicle sales due to the tightening of fuel economy and other regulations is concentrated in both our motorcycle and automobile businesses. Accordingly, we consider that climate-related risks and related opportunities are concentrated in these businesses. The remainder of our greenhouse gas emissions arise from direct emissions from our corporate activities, indirect emissions from energy use, as well as emissions related to activities such as resource extraction and waste disposal. These areas are where climate-related risks and opportunities are concentrated, particularly the risk of increased costs resulting from the introduction of carbon pricing mechanisms, such as carbon taxes and emissions trading schemes (ETS). In addition, because our business model involves the use of water in our manufacturing processes, we recognize water-related risks associated with natural disasters as key climate-related physical risks. Among the regions where our vehicle assembly plants are located, we recognize India, Thailand, Vietnam, and Mexico as regions where physical risks are concentrated, given their elevated exposure to flood risk. Current and future impacts of climate-related risks and opportunities Honda is working toward achieving carbon neutrality by 2050 and has set up milestones to prioritize the reduction of CO2 emissions from the use of sold products, which account for a significant portion of our total emissions, as well as the reduction of CO2 emissions from our own corporate activities, which falls within our operational responsibility. 53 Table of Contents The operating environment surrounding the automotive industry is changing rapidly, and uncertainty in our business environment is increasing due to factors such as changes in environmental regulations and developments in trade policy. Over the medium to long-term, if fuel-efficiency regulations or regulations promoting zero-emission vehicles (ZEVs) are strengthened, there is a possibility that Honda could face risks such as a decline in sales volumes of new ICE vehicles and the payment of penalties or the suspension of sales if regulatory requirements are not met. While carefully assessing market conditions and demand trends in each region, Honda will accelerate a multifaceted approach to carbon neutrality by combining EVs, hybrid vehicles, carbon-neutral fuels, and carbon offset technologies. With respect to CO2 emissions arising from our own corporate activities, we recognize a risk of financial impacts—such as increased tax burdens—associated with the expected introduction or expansion of carbon taxes and ETS. We intend to reduce CO2 emissions from corporate activities within our area of responsibility via three main categories of technologies, experience and expertise: (1) improving production efficiency and implementing energy-saving measures, (2) electrification of production equipment, and (3) utilization of renewable energy. Beyond our own corporate activities, we are advancing CO2 reduction initiatives across the entire product life cycle—from the procurement of materials and components through design, development, production, logistics, sales, use, and end of life processing—in collaboration with a broad range of global partners. (Impacts on strategy and decision-making) Addressing Climate-related transition risks and opportunities We position electrification, including EVs, as a long-term climate-related opportunity in achieving carbon neutrality by 2050. At the same time, in light of current demand trends, we are reviewing our powertrain portfolio and have made decisions to reallocate development and production resources, with a near-term focus on hybrid vehicles, which are experiencing strong demand, in order to enhance environmental performance. In making these decisions, we have taken into account the trade-offs between accelerating CO2 reductions through electrification and responding to the market environment. Taking into account region-specific market environments and demand trends, we will accelerate a multi-faceted approach to achieving carbon neutrality by combining EVs, hybrid vehicles, carbon-neutral fuels, and carbon offset technologies. With respect to EVs, we plan to continue to introduce more competitive EV hardware platforms and advance research and development of next-generation batteries, including all-solid-state batteries in the long-term. In the short to medium-term, as we plan to continue sales of products equipped with internal combustion engines, we will also continue to improve the environmental performance of our motorcycle, automobile, and power products. While electrification contributes to reducing CO2 emissions during the use phase of our products, CO2 emissions may still remain depending on the level of renewable energy adoption and application across countries and regions. In addition, we recognize the need to address the adoption and expansion of carbon-neutral fuels for ICE vehicles, including the vehicles owned. Accordingly, Honda is committed not only to reducing CO2 emissions during the product-use phase but also to promoting the broader decarbonization of energy, through both increased use of renewable energy in our own operations and engagement in external policy and stakeholder initiatives. Furthermore, Honda will consider opportunities to contribute more directly to the supply of clean energy to customers. Through these efforts, we aim to support the expansion of clean energy across society as a whole. 54 Table of Contents We designate production sites that have effectively achieved zero CO2 emissions from our corporate activities as carbon-neutral factories, and we are promoting initiatives to reduce CO2 emissions across our corporate activities. At the Saitama Factory Automobile Plant, one of our automobile production bases, in the fourth quarter of the fiscal year ending March 31, 2026, Honda achieved its first carbon-neutral factory, which is currently in operation, through the application of three key elements: (1) improvements in production efficiency and the implementation of energy-saving measures, (2) electrification of production equipment, and (3) utilization of renewable energy. We will continue working toward realizing carbon-neutral factories at all of our automobile production sites worldwide. For information on our transition plan toward achieving carbon neutrality by 2050, please refer to “Concepts and Approaches to Sustainability—Sustainability-Related Financial Disclosures: 3. Strategy (Environmental Strategy).” For details related to resource allocation, please refer to “Item 4. B. Business Overview.” Key initiatives and progress by business segment In the motorcycle business, Honda unveiled its first electric motorcycle, the Honda WN7, at EICMA (held at the Fiera di Milano) in November 2025 and began supplying it to the European market. In January 2026, the Honda UC3 equipped with a fixed battery was launched in Thailand and Vietnam. In both countries, Honda will expand charging infrastructure by installing CHAdeMO charging stations for fixed-battery electric motorcycles, while also advancing the deployment of battery-swapping stations. In the automobile business, to achieve carbon neutrality by 2050, Honda is promoting the steady adoption of EVs and reliable CO2 reduction through HEVs, while responding flexibly to changes in the market environment. In the EV sector, we will steadily expand our lineup, beginning with the launch of the N-ONE e: in September 2025, followed by the rollout of the Super-ONE in Japan, the United Kingdom, and other Asian countries starting in 2026. Furthermore, the global strategic model Honda 0 a will be launched primarily in Japan and India, further strengthening the lineup in 2027. At the same time, to maximize environmental contributions during the transition to EVs, Honda is strengthening the use of highly efficient hybrid technologies. In addition to the PRELUDE launched in September 2025, the Company will apply next-generation hybrid system technologies developed in-house, expanding their use particularly in mid-size and large vehicle segments, where demand is high in the North American market. Physical climate-related risks and adaptation measures We assess flood and other water-related operational risks by using external water-risk assessment tools such as WRI’s “AQUEDUCT” and WWF’s “Water Risk Filter,” supplemented by adjustments based on inundation analyses (including CaMa-Flood*) and hazard maps. The assessment results are used to inform site-specific countermeasures and improvement plans. At production sites located in regions with high physical risk, we implement measures to reduce potential impacts on our business operations, including securing elevation during site construction, installing backflow-prevention mechanisms for sewer lines during high-water events, and enhancing drainage capacity to prevent inland flooding. In addition, for regions exposed to water-scarcity or depletion risks, we implement water-saving measures and introduce recycling systems in areas where water-intake or discharge regulations are stringent. Through these initiatives, we work to reduce operation-related risks at each site. * CaMa-Flood: A global-scale inundation simulation model used to estimate river discharge and flooding. 55 Table of Contents (Climate resilience) We conduct climate-related scenario analysis annually as part of our climate-related risk assessment process for the relevant reporting period. The disclosures presented in this report are based on the results of the analysis conducted during the latest reporting period. Overview of scenario analysis To assess and consider the potential impacts of climate change on our business, we have selected the following climate-related scenarios for our scenario analysis: (1) a 1.5°C scenario that reflects significant policy transitions aligned with the Paris Agreement goal of limiting global temperature rise to below 1.5°C; and (2) a 4°C scenario in which environmental regulations do not strengthen and physical risks become more pronounced. Our scenario analysis covers our motorcycle, automobile, and power products operations, as well as the operational sites associated with these businesses. We assess climate-related transition risks, physical risks, and opportunities, and we quantify—where reasonably possible—the potential medium- to long-term financial impacts under each scenario. In quantifying the potential impacts, we apply a medium-term and long-term time horizon for transition risks and a long-term time horizon for physical risks. The key assumptions under each scenario are as follows: • 1.5°C scenario Under the 1.5°C scenario, Honda refers to the International Energy Agency’s “Net Zero Emissions by 2050 Scenario (NZE)” and the Intergovernmental Panel on Climate Change (IPCC)’s AR6 “SSP1-1.9” pathway. This scenario assumes that, over the long-term, global measures toward achieving carbon neutrality by 2050 will advance, leading to the wider development and use of new technologies, broader adoption of carbon-free products, and increased utilization of renewable energy. Although uncertainty in the business environment is increasing due to factors such as changes in environmental regulations that affect the pace of EV market expansion across regions and developments in trade policy trends, this scenario assumes that, over the long-term, fuel-efficiency regulations and zero-emission vehicle regulations will be further strengthened. As a result, demand for EVs and fuel cell electric vehicles (FCEVs) is expected to increase, particularly in developed markets. • 4°C scenario Under the 4°C scenario, we referred to the IPCC AR6 “SSP3-7.0” pathway. In this scenario, continued high levels of greenhouse-gas emissions lead to further temperature increases. As a result, the scenario assumes an increased frequency and severity of extreme weather events—such as typhoons and flooding—along with changes in rainfall patterns and rising sea levels, which collectively contribute to the heightened manifestation of physical climate-related risks. 56 Table of Contents 4. Metrics and Targets Our climate-related targets are as follows: Management Indicators Scope Targets Fiscal year ending March 31, 2031 KGI Reduction rate of CO2 emissions from corporate activities (compared to FYE Mar. 31, 2020) Honda Group 46% Total CO2 emissions from products Honda Group Not disclosed KPI Reduction rate of product CO2 emissions per unit (compared to FYE Mar. 31, 2020) Motorcycles Automobiles Power products 15.0% 13.6% 13.4% (Greenhouse Gas Emissions Target) In pursuit of achieving carbon neutrality by 2050, we have established greenhouse gas emissions reduction targets with the fiscal year ending March 31, 2031 as the target year. These targets cover Scope 1, Scope 2, and Scope 3 (Category 11) greenhouse gas emissions of Honda. The reduction rate for CO2 emissions from our corporate activities is set as an absolute target based on the gross emission amount from Honda. In line with the Paris Agreement, this target aims to achieve 46% reduction in GHG emissions compared with the fiscal year ended March 31, 2020. The target applies to Scope 1 emissions—including CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3—and Scope 2 emissions measured using the market-based method. In establishing this target, we did not apply the Science Based Targets initiative (SBTi) sectoral decarbonization approach; instead, the target was calculated using the SBTi cross-sector absolute contraction approach. To address CO2 emissions arising from the use phase of our products, which represents a significant portion of Honda’s Scope 3 greenhouse gas emissions, we have established targets covering CO2-related Scope 3 emissions (Category 11). These targets include a total CO2 emissions target for products and a target for reducing the CO2 emissions intensity of products, measured as the reduction rate per unit compared with the fiscal year ended March 31, 2020. These targets have been established with reference to the principles of the Paris Agreement and the SBTi Sectoral Decarbonization Approach. Although we are advancing various measures and initiatives to reduce and limit CO2 emissions across our operations, we recognize that certain emissions may remain difficult to eliminate entirely. For those residual emissions, we consider the potential use of high-quality credits as one option within our broader approach to addressing climate change. (Target setting, review, and monitoring processes) Honda has identified ”Priority Issues” that it must focus on in order to achieve its ambitious goals for 2050 and realize its long-term vision. Based on these priority issues, we establish goals that look ten years ahead and are updated every five years, while also setting annual goals and formulating, executing, and evaluating strategies each fiscal year as part of our management processes. 57 Table of Contents To monitor progress toward these targets, we set management indicators, including KGIs overseen by the Board of Directors and KPIs for which the Executive Council holds execution responsibility. Both bodies regularly monitor progress, thereby strengthening our governance and oversight of target achievement. In addition, the Board of Directors and the Executive Council exercise their monitoring functions to assess, as necessary, whether adjustments to the targets are warranted in light of changes in the business environment. We have not obtained third-party assurance for these targets or for the methodologies used to establish them. For details of the revisions to our climate-related targets during the reporting period and the period from the end of the reporting period to the date of issuance of this report, please refer to “Concepts and Approaches to Sustainability—Sustainability-Related Financial Disclosures: 4. Metrics and Targets.” 58 Table of Contents C. Organizational Structure As of March 31, 2026, the Company had 53 Japanese subsidiaries and 229 overseas subsidiaries. The following table sets out for each of the Company’s principal subsidiaries, the country of incorporation, function and percentage ownership and voting interest held by Honda. Company Country of Incorporation Function Percentage Ownership and Voting Interest Honda R&D Co., Ltd. Japan Research & Development 100.0 Honda Finance Co., Ltd. Japan Finance 100.0 American Honda Motor Co., Inc. U.S.A. Coordination of Subsidiaries Operation, Research & Development, Manufacturing and Sales 100.0 American Honda Finance Corporation U.S.A. Finance 100.0 Honda Development and Manufacturing of America, LLC U.S.A. Research & Development and Manufacturing 100.0 Honda Canada Inc. Canada Manufacturing and Sales 100.0 Honda Canada Finance Inc. Canada Finance 100.0 Honda de Mexico, S.A. de C.V. Mexico Manufacturing and Sales 100.0 Honda Motor Europe Limited U.K. Coordination of Subsidiaries Operation and Sales 100.0 Honda Finance Europe plc U.K. Finance 100.0 Honda Motor (China) Investment Co., Ltd. China Coordination of Subsidiaries Operation 100.0 Honda Auto Parts Manufacturing Co., Ltd. China Manufacturing 100.0 Honda Motorcycle & Scooter India (Private) Ltd. India Manufacturing and Sales 100.0 Honda Cars India Limited India Manufacturing and Sales 100.0 P.T. Honda Prospect Motor Indonesia Manufacturing and Sales 51.0 Honda Malaysia Sdn Bhd Malaysia Manufacturing and Sales 51.0 Asian Honda Motor Co., Ltd. Thailand Coordination of Subsidiaries Operation and Sales 100.0 Honda Automobile (Thailand) Co., Ltd. Thailand Manufacturing and Sales 89.0 Thai Honda Co., Ltd. Thailand Manufacturing and Sales 72.5 Honda Vietnam Co., Ltd. Vietnam Manufacturing and Sales 70.0 Honda South America Ltda. Brazil Coordination of Subsidiaries Operation 100.0 Moto Honda da Amazonia Ltda. Brazil Manufacturing and Sales 100.0 Honda Automoveis do Brazil Ltda Brazil Manufacturing and Sales 100.0 Banco Honda S.A Brazil Finance 100.0 59 Table of Contents D. Property, Plants and Equipment The following table sets out information, as of March 31, 2026, with respect to Honda’s principal manufacturing facilities, all of which are owned by Honda: Location Number of Employees Principal Products Manufactured Yorii-machi, Osato-gun, Saitama, Japan 3,707 Automobiles Hamamatsu, Shizuoka, Japan 1,758 Power products and transmissions Suzuka, Mie, Japan 5,318 Automobiles Ozu-machi, Kikuchi-gun, Kumamoto, Japan 2,511 Motorcycles, all-terrain vehicles, power products and engines Greensboro, North Carolina, U.S.A. 742 Aircraft Burlington, North Carolina, U.S.A 121 Aircraft engines Marysville, Ohio, U.S.A 5,252 Automobiles Anna, Ohio, U.S.A 2,794 Engines East Liberty, Ohio, U.S.A 2,512 Automobiles Lincoln, Alabama, U.S.A 4,567 Automobiles and engines Greensburg, Indiana, U.S.A 2,468 Automobiles Alliston, Canada 4,775 Automobiles and engines El Salto, Mexico 506 Motorcycles Celaya, Mexico 5,127 Automobiles Gurugram, India 2,038 Motorcycles Alwar, India 2,624 Motorcycles and automobiles Narasapura, India 2,414 Motorcycles Ahemdabad, India 1,138 Motorcycles Karawang, Indonesia 2,445 Automobiles and engines Melaka, Malaysia 1,846 Automobiles Batangas, Philippines 1,820 Motorcycles Prachinburi, Thailand 1,798 Automobiles Bangkok, Thailand 3,623 Motorcycles and power products Phuc Yen, Vietnam 4,736 Motorcycles and automobiles Duy Tien, Vietnam 795 Motorcycles Buenos Aires, Argentina 1,035 Motorcycles Itirapina, Brazil 1,580 Automobiles Manaus, Brazil 8,657 Motorcycles and power products In addition to its manufacturing facilities, the Company’s properties in Japan include sales offices and other sales facilities in major cities, repair service facilities, and R&D facilities. As of March 31, 2026, the Company’s property, with a net book value of approximately ¥2.7 billion, was subject to specific mortgages securing indebtedness. Capital Expenditures Capital expenditures in the fiscal year ended March 31, 2026 were applied to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of sales and R&D facilities. 60 Table of Contents Total capital expenditures for the year amounted to ¥3,515.6 billion, decreased by ¥155.8 billion from the previous year. Also, total capital expenditures, excluding equipment on operating leases, for the year amounted to ¥751.3 billion, increased by ¥213.9 billion from the previous year. Spending by business segment is shown below. Fiscal years ended March 31, 2025 2026 Increase (Decrease) Yen (millions) Motorcycle Business ¥ 75,156 ¥ 104,457 ¥ 29,301 Automobile Business 457,436 631,111 173,675 Financial Services Business 3,122,445 2,761,083 (361,362 ) Financial Services Business (Excluding Equipment on Operating Leases) 149 193 44 Power Products and Other Businesses 16,415 18,977 2,562 Total ¥ 3,671,452 ¥ 3,515,628 ¥ (155,824 ) Total (Excluding Equipment on Operating Leases) ¥ 537,427 ¥ 751,380 ¥ 213,953 Intangible assets are not included in the table above. In Motorcycle business, we made capital expenditures of ¥104,457 million in the fiscal year ended March 31, 2026. Funds were allocated to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of sales and R&D facilities. In Automobile business, we made capital expenditures of ¥631,111 million in the fiscal year ended March 31, 2026. Funds were allocated to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of sales and R&D facilities. In Financial services business, capital expenditures excluding equipment on operating leases amounted to ¥193 million in the fiscal year ended March 31, 2026, while capital expenditures for equipment on operating leases were ¥2,760,890 million. In Power products business, capital expenditures of ¥18,977 million in the fiscal year ended March 31, 2026, were deployed to upgrade, streamline, and modernize manufacturing facilities, and to improve R&D facilities. Plans after FYE Mar. 31, 2026 Our management mainly considers economic trends of each region, demand trends, situation of competitors and our business strategy such as introduction plans of new models in determining the future of projects. The estimated amounts of capital expenditures for the fiscal year ending March 31, 2027 are shown below. Fiscal year ending March 31, 2027 Yen (millions) Motorcycle Business ¥ 199,900 Automobile Business 1,034,300 Financial Services Business 1,500 Power Products and Other Businesses 14,300 Total ¥ 1,250,000 The estimated amount of capital expenditures for Financial services business in the above table does not include equipment on operating leases. Intangible assets are not included in the table above. 61 Table of Contents Honda announced in April 2024 that we will start a full-scale study to establish a comprehensive EV value chain in Canada in order to strengthen the EV supply system for the future increase in demand for EVs in North America. While we previously announced in May 2025 our decision to postpone this plan due to a slowdown in EV demand, in light of the reassessment of the automobile electrification strategy announced in March 2026, we have now suspended this plan indefinitely. In order to secure stable battery procurement in North America, the Company established an unconsolidated affiliate to manufacture lithium-ion batteries for electric vehicles in the United States during the fiscal year ended March 31, 2023. The affiliate began construction of a new battery plant early in 2023 and completed construction in 2024. During the year ended March 31, 2026, the Company’s consolidated subsidiary agreed with the Company’s affiliate to proceed with transactions involving the purchase of the buildings owned by the affiliate and the lease back of those assets to the affiliate with the subsidiary acting as the lessor for the lease term of 12 years. In May 2026, pursuant to this agreement, the purchase price of the assets and the lease payments were agreed upon between the Company’s consolidated subsidiary and the affiliate. The purchase price of the assets is US$2,530 million. Furthermore, due to the reassessment of the automobile electrification strategy in North America, Honda is considering repurposing the lithium-ion batteries production line for electric vehicles at the acquired facility for ESS(energy storage system) and HEV(Hybrid Electric Vehicle) batteries. For information on Honda’s funding policies, see Item 5.B “Liquidity and Capital Resources—Overview of Capital Requirements, Sources and Uses”.