Let us now begin Nissan's First Quarter Financial Results for Fiscal Year 2022. We are very appreciative of the high number of participants for this session. We have with us COO, Mr. Ashwani Gupta; and Mr. Stephen Ma, CFO. First, our COO, Mr. Gupta, will give you the first quarter financial results. The floor is years, Mr. Gupta.

Hello everyone. Welcome to Nissan’s first quarter results for the three-month period ending June 30, 2022. Let me begin with thanking our employees and partners for supporting us through yet another resilient quarter. Indeed, this quarter was even more demanding with challenging macro environment and continuing global uncertainties including the fall-out from geopolitical issue. While the pandemic understandably remains a priority challenge, with persisting semiconductor shortage, raw material price hikes, and knock-on impact from lockdowns in China, supply chain remains constrained, affecting production and leading to delay in deliveries. We also see adverse effects on TIV in key markets especially in passenger vehicle segments. At the same time, we experienced tail winds with favorable foreign exchange rates. Our approach and discipline in implementing Nissan NEXT transformation plan helped us keep the momentum. My sincere thanks to our customers for their patronage, patience and understanding. We apologize for the inconvenience caused by delays of certain models in some markets. Nissan is fully committed to delivering your desired models as soon as possible. Now I will take you through our latest quarterly results. Turning to our key metrics for the latest quarter, the retail sales in the first quarter decreased by 22% year-on-year. This is primarily due to the difference in inventory availability. In FY21, we made good use of our inventory for sales. However, our inventory was already at a minimum level last quarter, which limited the opportunity to meet growing sales demand utilizing existing inventory levels. Due to the challenges mentioned earlier, our production volumes were flat year-on-year at 812,000 units. Nissan teams around the world worked hard to deliver every unit that we produced resulting in our retail sales being at the same level of production at 819,000 units. Even in this challenging backdrop, we are pleased by the growing customer acceptance of newly introduced models in the markets that we believe are the key our long-term performance. Our exciting core model line-up is delivering value to our customers and supporting growth in important vehicle segments. Our segment share for the Note and Aura in Japan reached 17% in the first quarter, while the net revenue per unit before any currency effects increased by 4%. We are also proud of the Note and the Aura continuing to be the number one selling electrified vehicles in the first half of calendar year 2022. In China, the segment share of the Sylphy also reached 17% in the three-month period, with a 22% jump in net revenue per unit. We also saw an improving performance in the US for the all-new Frontier, with its segment share reaching 11% and net revenue per unit rising 19%. And the all-new Qashqai now accounts for 5% of the European crossover segment, with revenue per unit up 26%. We have also won further awards for new products, with the zero-emission Nissan Ariya named car of the year by Auto Express and winning the iF Design Award and the 2022 Red Dot design award. In the important mini-vehicle segment, we have received 23,000 customer orders for the all-new Sakura electric vehicle, more than half of whom are new customers for Nissan. We are confident that the Sakura will accelerate the democratization of electric vehicles in Japan. Further, the recently announced all-new X-Trail for the Japan market has become a dedicated e-POWER model available with e-4ORCE. It has received positive reviews and our dealers are feeling a very strong response from customers. Winning customer acceptance for new models to our wider transformation plan and the fact that more and more new customers are choosing Nissan vehicles endorses our commitment to innovation that excites. Now let us look at the Q1 financial performance. This is the income statement for the three months ending June 30, 2022, on an equity basis which excludes contributions from our China JV operations. Net revenue increased by JPY 129.1 billion from the previous year to JPY 2.14 trillion, despite the decline in sales volume. The increase was driven by the improvement in net revenue per unit, as well as the weakening of yen. Operating profit decreased by JPY 10.8 billion from the previous year to JPY 64.9 billion, representing an operating margin of 3.0%. Net income decreased to JPY 47.1 billion. This was primarily because last year’s net income included an extraordinary gain on the sale of Daimler shares, which amounted to JPY 76.1 billion. Turning now to the operating profit variance analysis for the first quarter. This slide shows the variance factors from the first quarter of last year to this year. Foreign exchange had a positive impact of JPY 25.7 billion, primarily due to the strong US dollar. The increase in raw material prices had a negative impact of JPY 50.7 billion, primarily driven by price hikes in materials such as steel, aluminium and plastics. Sales performance had a positive impact of JPY 53.5 billion. Continued improvement in quality of sales and pricing of our products based on customer value, as well as the continued tight supply-demand balance offsets the negative impact of raw material prices even including the negative impact from the decline in sales volume. Monozokuri performance had a negative impact of JPY 15.8 billion, primarily driven by increases in manufacturing fixed cost such as additional investments in our products and facilities and inflation in logistics costs. Other items deteriorated by JPY 23.5 billion from the previous year, mainly due to one-time gains in the prior year from the release in sales finance provisions and increased used vehicle prices. Without the impact of last year’s one-time gains, the operating profit improved year-on-year by JPY 24.2 billion. It is encouraging that, despite heavy headwinds, operating profit for the quarter was JPY 64.9 billion, setting a steady step towards delivering our fiscal year outlook of JPY 250 billion. This slide shows our key financial performance indicators on both the China JV proportionate basis and equity basis for the first quarter period. On an equity basis, which excludes contributions from our China JV operations, our net revenues rose to JPY 2.14 trillion from JPY 2.01 trillion in the same period of 2021. On the same basis, operating profit for the period was JPY 64.9 billion, with an operating margin of 3%. Net income was JPY 47.1 billion. Free cash flow for the automotive business was a negative JPY 304.6 billion, due to working capital usage due to low production resulting from supply chain disruptions. While net income and free cash flow declined year-on-year, if we exclude the impact from the sale of Daimler shares, our performance was better than the previous year despite lower sales volume. Net cash for the automotive business was JPY 826.4 billion. On a proportionate basis, which includes our China operations, our net revenue rose to JPY 2.48 trillion from JPY 2.32 trillion last year. Operating profit under this measure reached JPY 98.8 billion, representing an operating margin of 4%. Net cash for the automotive business reached JPY 1.34 trillion on this basis. Overall, Nissan continues to maintain strong levels of liquidity. Our cash and cash equivalents for the automotive business was approximately JPY 1.39 trillion on an equity basis. We also maintained approximately JPY 2.1 trillion of unused committed credit lines during the period. As mentioned earlier, this quarter saw a mix of both head winds and tail winds. In these rapidly evolving and challenging conditions, the headwinds we face are myriad. And given the pandemic lessons, other ongoing industry trends, and the potential for more disruptions in the year ahead, one thing has become clear, we must invest in building greater resilience. Hence, the measures we have undertaken not only address immediate concerns but will help us build a sustainable approach for the long-term. This quarter, Shanghai lockdown was on our top priority list. Our key immediate response was to address the logistics backlog in terms of shipments by using alternative ports other than Shanghai. We have been able to cut delays for container deliveries by 96%, which is encouraging. Currently, all of our suppliers have restarted their operations and returned to 100% operational levels, and 100% of Nissan dealerships have re-opened and showroom traffic is recovering, which should feed through into orders. Coming to the semi-conductor shortage. This has occupied our concern list for a longer period and exposed the need to look at the entire supply chain ecosystem. For the short-term, we have taken steps to secure inventory levels with chip suppliers and allocated chips to priority products and markets. In the mid-term, we are developing alternative semiconductors and also replacing custom-made semiconductors with general-purpose semiconductors. We will provide suppliers medium to long-term production outlook to ensure they align and meet supply commitment. The third challenge is the escalating raw material costs. We are focusing first on mitigating the impact by reducing the usage of precious metals, for example by developing a new generation of catalysts that use fewer precious metals and also developing cobalt-free batteries. As we look at the long term, we are exploring direct sourcing options for raw materials leveraging scale efficiencies. Furthermore, we are executing the physical and financial hedging in order to stabilize purchase prices. While we rise up to the challenges, we continue to leverage opportunities. First, quality of sales with Nissan NEXT transformation plan, we have been pursing quality of sales in every market of our results - resulting in a strong and sustainable foundation. Stronger customer demand for our new products is contributing to higher revenue per unit. Next is our focus on diligent operational efficiencies. We have become more agile and resilient to adapt to changing external environment. Added to this is a tailwind from weaker yen to US dollar. In conclusion, we are taking these headwinds as an opportunity to further improve the way we operate. With strong business continuity plans and agile strategies, Nissan is striving to recover production as much as possible and keep costs under control. As always, we move forward with cautious optimism, while challenging ourselves to maintain 4 million sales outlook for the fiscal year. We are strategically managing our operations to mitigate and manage risks from macro conditions and diligently managing our financial discipline. We remain optimistic to deliver our targets JPY 250 billion operating profit for the full year and net income of JPY 150 billion. Let me reiterate. The Nissan Next transformation has built a strong foundation to sustain our business and with this qualitative progress, we are confident in our capability to be even more agile and resilient as we address a constantly changing external environment. Thank you for your attention

Thank you, Mr. Gupta. Now we would like to start the Q&A session. [Operator Instructions] Starting with Citigroup, Yoshida Sean, please. Yoshida Sean of Citigroup.

Yes, Hello. Thank you. This is Yoshida of Citigroup. The first question is Q1. How do you assess this? You have both headwinds and tailwinds, against the full year guidance, JPY 64.9 billion, this progress, it seems like it's better than what you initially planned. So what's your assessment about the results of Q1 so far compared with the full year. And 4 million units of global sales is the full year guidance. And what's the certainty of reaching this level? What I understand is in order to reach this after Q1, you need to sell at least 350,000 units every month. On the other hand, in June, the production volume is only 290,000 units, which much shorter than what you need to reach. From when the timing wise, can you come back to 350,000 units of monthly production? That's my question. Thank you.

Thank you. This is Ashwani. So thank you for your questions. So I think your first question is about the Q1 assessment. And as you correctly said, the Q1 result is better than our expectation. It is better than our expectation, not because only the tailwind coming from the foreign exchange, but it is coming mainly from number one, our quality of sales. But number two, the operational efficiency, which we could create despite the volume drop. And the volume drop quarter one has been 15%. So despite that, we were able to deliver the quarter one operating profit better than what we expected. I think that's what is our assessment for the one. Also, our sales performance has offset the negative impact coming from the raw material, but also the negative impact coming from the volume drop because of the Shanghai lockdown, as well as the semiconductor crisis. So that's what we believe is our quarter one assessment. Now moving forward, the production is recovering. And I think in the next three quarters, we are going to challenge our production because the biggest hit we got in quarter one was because of the Shanghai lockdown, which fortunately is opening up. So that's why in the next three quarters, we are recovering, and we will recover. Having said that, we are challenging the 4 million volume because still we believe that there may be some more disruptions, which may come in as recently we have seen the port conditions. But on the other side, when we look at our operating profit and the net income in quarter one, with a 15% less volume we could do JPY 64.9 billion, which means in the three quarters ahead of us, with a little bit more production, definitely, we are confident of achieving our operating profit, as well as the net income. And maybe I look at Stephen to talk about. Stephen, how do you think the three quarters ahead of us?

Thanks, Ashwani. Good evening, Yoshida Sean. So 350,000 units a month means roughly JPY 1 million a quarter. That's - I think your question is, can we do JPY 1 million a quarter. And as Ashwani mentioned in the earlier media session, the Q1, we did about 800 something, thousand of production in wholesale, 10 and 20 [ph] roughly that level, and it was about 15% less than what we expected. So if you do that math, normally, Q1 is a little bit lower and then Q2, Q3, Q4 each quarter is a little higher. For sure, what we have visibility now is Q2 will be better than Q1, that we know for sure, as based on current outlook that we just done. And then the Q3, Q4, we assume that the recovery will come back. And the question again, just like last year is how fast or what is the pace of recovery? This is why we are still uncertain. We don't know. We know it's going to recover, but how much, we're not sure. But that's why Ashwani said, that we are challenging to make sure we hit - which were challenging to hit the 4 million. But as you indicated, it acquires how we do more than 1 million a quarter. Yeah. I think Q2 probably be slightly less than 1 million. And Q3, Q4 will be slightly more than 1 million by quarter. I think that's the way to look at it.

Is that okay, Yoshida Sean?

Yes. Thank you, gentlemen.

Thank you very much. Next, Goldman Sachs. Yuzawa [ph] please.

This is Yuzawa. I hope you can hear me.

Yes, we can hear you clearly. Please go ahead.

Thank you. First question. Again, Q1 profit was strong, units will go up and ForEx was to your favor than your expectations. So you said that JPY 250 billion will be upheld, but something after July, are there any visible risk factors or deceleration of the economy? And what are the factors behind your keeping JPY 250 billion? You can talk about ForEx or 4 million units. You think that you will be able to do, but you've factored in some risk. So can you explain the connection between first quarter performance and JPY 250 billion? Now sales finance are profitable, but the segment sales finance was supposed to drop. But in the second half, do you expect any risk factors to the sales finance, should we factor in some deceleration? Thank you.

Thank you. This is Ashwani. Thank you for this question. And I think this is one of the first time we prepared this conclusive slide to be very transparent with our stakeholders and shareholders. Of course, the challenges of Shanghai lockdown are getting over and we are getting better and better. Semiconductor shortage I can say that we better, but we are not at our 100% potential. Our sales demand can go up to 4.7 million, as I shared before also. So that's why we are doing our best to get more and more semiconductors and the raw material price hike. Of course, as I said in my speech that the raw material price hike is coming from steel, aluminum and the plastics. On the other side, you would have seen that some of the other precious metals, especially the battery, the lithium, the nickel, have been increasing significantly. So – but on the other side, there are some materials which are going down. So now moving forward, we have risk, let me say, of still that COVID is not finished. Our plants are not running at 100% efficiency because we have to keep the people's safety first and the social distancing and so on and so on. On the other side, the demand is strong. And then I look at Stephen, but we discussed that do we reforecast just because we have a tailwind of foreign exchange. That is a big discussion we have to do. Why we don't want to reforecast only because of the tailwind because then we believe it will affect our operational efficiency if we change our assumptions of the foreign exchange. That's why we want to challenge our operational excellence with a stable exchange rate, which we announced for 2022. And first mitigate all the risks coming from semiconductor shortage, raw material price by the diligent operational efficiencies, but also the quality of sales. And at the end, we all know that there is a favorable U.S. dollar to yen. And maybe, Stephen, how do you think that this is favorable to us.

Yeah. So Yuzawa, so why we did not change the outlook. And that's what your main question is, and if everything else was constant and just exchange rate, I will have no doubt about changing outlook. No issue, okay. And it's just a question of how much you change? The issue is, I think, what Ashwani very nicely put on this slide on the left side. We have - we have how many waves of COVID. And now after Delta, Omicron, we had BA.4, BA.5 and you see the record number of COVID cases in Japan now. I mean, on a daily basis, reaching a new record, even though it's not as severe in terms of symptoms, but it's spreading faster. So we don't yet know. And this is what - worry to us a little bit. So yes, we know we probably have a net upside to what we have in the 250 because the yen is so weak. But until we have one or two more month of looking how the COVID situation develops, we want - we don't want to change yet. The other assumption, which is volume, like you know, as you know, in Q1, we already saw a lower volume than what we planned by 15%. So we think it's going to increase or recover a little bit, but maybe it will not recover as fast as we think. That's why we loop it - we said in the speech, Ashwani said very nicely, we're cautiously optimistic. We're cautious right now, but we watch in the next one or two months. And then when it comes in the first half, we will be ready if the assumptions are more stabilized, and we can share you updated visibility. That's how largely, our thinking went behind this. Of course, you're looking at the FX now and you can look at our Q1 results, you can know pretty much our sensitivity of FX even with the hedging we've done even with the summer material with hedging we’ve done. Raw material hedging, as we mentioned last time, we only do about roughly 10% of exposure of some raw materials, that is our fiscal hedging. FX, we did some hedging, but not all of it. So that means our sensitivity is less than before. So roughly JPY 1 move is about JPY 10 billion in profit. That will give you a good indicator of thinking how to estimate, how things will move. I mean, I'm being very transparent with you. The only reason we did not this because we're not sure about the supply chain and the volume.

Yuzawa, is that okay?

Yeah. That was very clear. The second one, the sales finance, please. There was a question of sales finance.

Who is our Treasurer, also Head of Sales Finance, he's here. So maybe Rakesh, please?

Yeah. Thank you. Thank you for the question. So sales finance, we already said that this year, the profitability is going to be lower simply because last year we had onetime provision release, which is not going to happen. Now we have additional headwind of higher interest rates. So certainly, when the rates go up, there is an impact on the penetration. Also semiconductor availability means less car sales and means less assets. So those headwinds are there. But on the tailwind on the better side, the credit losses continue to be lower. Used car prices continue to be high, residual volumes continues to be good. Customers continue to pay well. So I think we will balance out. And you know, in summary, we still expect a very solid sales finance here, and I don't anticipate - I think the risk and opportunities are balanced as we get to the second half. Does that answer your question?

Yes. Thank you. Gupta, Stephen's, Kochhar, under your leadership, you are raising the realistic objectives that you are always announcing. And thank you for your clarification.

Okay. Thank you. Moving on to [indiscernible] please?

[Foreign Language] Thank you for the explanation, BofA. I have two questions. First of all, first quarter volume, you said you underperformed by 15%. You've been repeating that number. What are the factors behind? Can you elaborate on the factors behind? Semiconductor shortage was more serious or the Shanghai lockdown impact was more negative than you had estimated. So you said that you will challenge JPY 4 million for the full year. So I don't think that's stretched the scope [ph] But why you underperformed in Q1 in terms of volume. Can you elaborate? And can you also repeat your explanation regarding how you intend to catch up to that target? That's my first question. And secondly, have you any plans for revising price? Can you update us on increase of price with raw material costs surging. I'm sure you're taking actions to increase price, but there's still opaqueness in the macro economy and emerging opaqueness of macro economy. So in 2Q and in the quarters to follow, do you need to change the concept with regards to pricing? So that's my second question.

Thank you, Neoan [ph]. So out of 15%, 8% is coming from the Shanghai lock down and 7% is coming from the global semiconductor crisis. There is some direct link, there is some indirect link. So we just can't have a black and white, but roughly, I would say half and half. And that's why half of it is, for sure, has recovered. And the global semiconductor crisis which today only restricts to, let me say, 7 to 8 commodities which was the case last year, 40 to 50 commodities. So it is improving. But are we at the maximum of the maximum of the potential, I would say, no. And that's where I think this is a new normal and semiconductor crisis is going to continue. Now the question is how we can minimize the shortage. And that's where we have developed second sources. We have signed the midterm supply contracts and so on and so on. Now regarding your second question, are we increasing the prices? I would say, yes, we are increasing the prices. But are we increasing the prices just because we have to pass on the raw material cost increase to the customer? Answer is no. We are definitely increasing our net revenue per unit. Net revenue means, we are increasing the price by selling the values. You see Sakura, you see Ariya, you see new frontier in the United States, you see Qashqai in Europe, you see Sylphy in China. And on the other side, we are reducing our incentives, but reducing our incentives is also the consequence of the supply and demand gap, but selling the value is purely our performance. And on the other side, we are pushing our costs, optimizing our cost to go down. So that's what we are doing. So that's why at the end, we are able to generate our net revenue per unit. Because at the end, we are monitoring what customer is willing to pay. And looking at our net revenue per unit, the customer is paying higher prices to us on the new models with respect to what they used to pay in the old prices.

[indiscernible], did that answer your question?

Yes. Thank you. Yes, excuse me. How about the second question. There's a lot of increasing uncertainties in the macro economy, which is generally set. Under these circumstances, the pricing strategy based on the value proposition will be kept? Or will this be possible? Or are you going to change the approach? I'm being persistent. I'm sorry about this.

For us, we will be persistent on our pricing strategy, which is focusing on the value, reducing our incentives in line with the market and working more on the cost structure. But definitely, as we said, quarter one result is mainly driven by the sales performance and also after sales performance because after sales is also driven by the price and cost. And sales and after sales performance has completely offset the negative impact of raw material and the volume drop. So which means when volume drop becomes lesser and lesser, which means that sales performance is going to supersede the negative impact of raw material and the volume drop. This is what we are planning to do in quarter two, quarter three and quarter four.

If I may add to that, Ashwani. Ashwani, and the whole team is want to make sure that we are demonstrating the value of our new products and the customer recognizing and therefore, willingly pay the price. And your question is, are we going to keep this pricing strategy? Of course, on a normal circumstances on a very - even if frequent environment, we do. As you can also see in some of our more hyperinflationary environment, like South America or Turkey, et cetera where hyperinflation, we view price for the inflation or FX. So it depends on how extreme the changes are in terms of the macro environment. At this moment, I know how you are thinking U.S. inflation 9% is still extreme or not. I mean this is a question to be asked, how persistent this will go going forward? And with that in mind, what we're looking very carefully now is what the competitors are doing also. And we are also making sure, as we mentioned last time when you guys asked the question, we want to make sure we maintain competitiveness. We don't want, again, to Nissan to be viewed as a cheap brand, but we want to make sure our value for - value for what we have in the cars relative to others, and they're willing to pay for it. So the strategy is still we want to make sure the value is fully recognized and willingly pay for. That's the main comment. Sorry, I add a little more complexity there, but does answer your question?

Yes. Understood. That was very clear. Thank you, gentlemen.

Again, Nomura Securities, Kunugimoto Masataka, please.

Thank you. Can you hear me?

Yes, we can hear you very well.

I have two questions. First, U.S., North America. Macro economy is slightly to decline and there is interest rate hike and inflation. You said prices have increased. What about the dealer traffic and your outlook of demand? Have you changed your expectations, especially second half of '22 and demand for '23, what are your prospects? That's my first question. Going to my second question on China. Since June, they've announced reduction of tax and ICE [ph] cars, the purchase tax has been reduced, for gasoline cars. So are you going to change your sales approach or policy? And equity method, Chinese entities, what's the profitability today? And what are your prospects going forward? Those are my two questions.

Thank you, Kunugimoto Masataka, Ashwani here. So I think you put the right question in front of us, which is U.S. economy. I'm not a financial astrologer, but based on all the recessions which we have seen in United States first decision happened, but the recovery also happened very fast. On the other side, when recession happens, normally the automotive industry is among the top two or top three to get hit. But this recession because the demand is so higher than the supply, I think automotive industry will be the one of the last to get hit because customers and especially after pandemic, the need for private mobility has increased. So I do believe that demand will continue. But yes, there should be a line when the customer will start talking about the affordability when the demand and supply becomes a normal. Now when you look at Nissan, and this also answers your question on dealership. When you look at Nissan, I would say that, we have five things which are going in the right direction in the United States. Number one is, all of our products have a very good momentum and customer acceptance. Second, our customer-facing transaction price is increasing. And definitely, it's increasing by value, and it is decreasing by incentive. And number three is the lean inventory with a very high sales efficiency, which is giving our dealerships a very good return on profitability. Of course, we can debate upon the higher used car prices, the higher residual values are also helping our dealers to have profit. So our dealers are keeping and, in fact, increasing their profitability. Number four is because our products are doing great because dealers are profitable and because dealers have confidence now in Nissan, so their engagement score is still keeping very high. Of course, a lot of challenge coming to us because of the supply, but no challenges coming to us because of product, because of profitability. And last but not the least, is Nissan was far ahead than others to announce the electrification investment in United States, especially in Canton and announced the two brand-new cars, on Nissan and one Infinity, which means our business today and tomorrow is moving in the right direction. And in future, we are announcing the investments. Having said that, cost of funds and inflation definitely remains the challenge from consumer affordability viewpoint. But I think as far as Nissan is concerned, we have enough tailwinds to offset these headwinds. This is what we think at least in FY '22 and the first half of FY '23.

And to your second question about China tax. As after the Shanghai lockdown, obviously, China government tried to spur the growth again. And I believe, announced a tax support for lower - smaller displacement engine and fuel-efficient engine – fuel efficient vehicle. And obviously, that benefits many of the Japanese OEMs, as well as Nissan because we have many - our key model is Sylphy, which has a smaller displacement engines. So of course, we are trying to take advantage of those benefits and so forth. For equity method, I believe this, your question about the profit. Q1 agreement, there was JPY 65 billion on a proportional consolidation which is 29 million. So the difference is 34. I mean that's basically DFL contribution [indiscernible] and the contribution to OP margin is 1%, 3% are equipped based and 4% are proportion based, that's very simply how to look at it Of course, you asked then what about Q2 because Q2, when we consolidate China, it's actually calendar Q2, which is in the midst of the Shanghai lockdown. So we will not have as much contribution from China in our Q2 results, but then it will come back in Q3, Q4. So that's give you a little bit of visibility in the next few quarters.

And regarding the change in the sales policy, definitely, we are focusing more on Tier 3, Tier 4 cities especially with the engines, which we have less than two liter. So I think this is an opportunity for us to really explore the customers in the Tier 3 and Tier 4 cities. Thank you.

Kunugimoto Masataka, did that answer your question?

Yes. Thank you.

Next JPMorgan, Simotosan [ph] please.

Thank you. Kishimoto [ph] of JPMorgan. Thank you for this opportunity. I have two questions. First of all, you said the quality of sales has improved and on incentives. Against the full year plan, Q1 in U.S. and Europe saw improvements in incentives. In North America, the production level has gone up. So do you think that competition is going to intensify? So if so, what do you think about the sustainability of incentive improvement? So that's my first question. And secondly, auto business free cash flow, last fiscal year, second half surplus was recorded. But then there was impairment in the first quarter incurring losses with production recovering in Q2. And - do you think - what's the likelihood of profits in free cash flow for the auto business? You said that interim dividend is undecided. So in that context, can you elaborate on your prospects? Thank you.

Thank you. I think I will take the second question, the free cash flow, and I will ask Ashwani to answer the incentive in U.S. market, even when – it was stabilized. So free cash flow, last year, second half free cash flow is positive as we have declared. And I think you understand perfectly well in Q1 of this year, free cash flow was negative not because of our profits, we actually have cash in from P&L items, but it's mainly working capital. And the reason its negative working capital is because the volume is less than what we thought, as well we had a buildup of parts that we were planning to use for production that we couldn't use. So inventory for parts and raw material was higher than expected. And as well, we made some - produced cars finished, while its not completed finished. So we didn't have the chip. So we keep the factory on [indiscernible] to do some finance sitting there. So that will resolve itself very quickly in the next quarter, Q2 and Q3. So the difference between last year is that I believe Q2 this year should be free cash flow positive. I think we just discussed in cash earlier. Q2 onward, we should be positive. Now again, that all depends on the volume and the recoverability of the semiconductor and supply chain. For the auto profit, if you pay attention to our YUHO [ph] disclosures, the auto business profit, it's about minus 21%, 22%, almost the exact same number as we had in Q1 last year. But the important point here is with less volume. So which means with less volume, we kept the same - roughly the level of profitability or loss, I'm sorry to say, but still, minus 20 is almost a breakeven. So that's an important point for us as to watch very carefully. We are now just very eagerly waiting for volume to come back. If I volume come back, we have a very good chance of auto profit to be positive. When it will happen? I cannot tell you right now and when our full year will be? I don't know yet. It all depends on the volume, probably cost back. What we can tell you is that we are very diligent about keeping increased cost low, and we are very diligent about making sure that we don't have too much expenses, making sure we keep the breakeven point as good as we can for as long as we can. But there are some, as you saw in the step chart earlier in the announcement, there are some fixed expense that will go up like manufacturing side because we invested the depreciation for Sogo [ph] So that's just a consequence. But we're trying to offset everything and make sure that the overall fixed costs still stay stable. And in Q1, fixed cost has not significantly increased versus Q4 last year. So that's additional information for you. All right. Maybe Ashwani answer the incentive in U.S. market.

Yeah. Thank you. I think the control of incentives are going to continue. And for us, we are really reducing our incentives. However, I think as stability of incentives will come when supply will be same as demand, which is - we don't believe it is going to happen, at least in 2022 and 2023 because we clearly know that global semiconductor crisis is not going to finish tomorrow morning because the discussions which we are having with suppliers, it is going to continue even in 2023. So which means it's going to continue. But on the other side, I think what will be very important is how we control the value of the product. And this is where our pricing strategy linked to the life cycle events of the product will help us in keeping and increasing our profitability in the United States. Hope it answers your question. Thank you

Kishimoto, did that answer your question, sir?

Yes. Thank you very much, gentlemen.

Okay. Moving on to the next question about Daiwa Securities, Sakamori [ph] Itsyours now.

Yes, hello. This is Sakamori. Do you hear me?

Yes, we do.

Do you hear me?

Yes, we do.

Thank you. So - there are two topics other than the financials. The first one is KEV Sakura. Wow, it's selling very well. Once again, so far, Gupta, Ma or other people, KEV or EV market in Japan, how do you project it? What's the assessment of the KEV market in Japan compared to what you initially assumed? Is there more room for penetration? Or do you think that because the infrastructure issue, it will go step by step for the EV dramatization? Is there any change in the projection of EV market in Japan, that's one? The second one, Nissan's brand value in order to stabilize or enhance Nissan brand, Infinity brand will be one of the big contributor. I can say, if I may, but if you look at the sales volume and appreciation, it's very – its still weak. So could you take this opportunity to elaborate what is the position on Affinity and what are the challenges? And what do you want to do with the Infinity brand. These are the two questions. Thank you.

Thank you for these questions. So number one is KEV market in Japan, I still remember two or three years before, of course, I was in Mitsubishi at that time when we were discussing about K, there were two opinions in Nissan and Mitsubishi. The one opinion was absolutely with autonomy of 180 kilometers to a charge. KEV cannot be successful in Japan. Another opinion was, look, there is a great opportunity in Japan because 40% of the market is K and most of the customers are in the countryside area who have to drive 20 to 30 kilometers every weekend to get the gasoline. So there were two opinions. And finally, we both companies decided to go for the opinion that there is a great opportunity in Japan. This is how this program was approved. Now when we look at today, who are our customers? Our customers are 53% new customers to Nissan. Why? These are the customers either they are young or they are female or they are the customers who are living in countryside. Why? They want to - why they are buying KEV. They are buying KV, number one, because it's nowhere it is a K from a space viewpoint from the driving acceleration viewpoint and especially from the engine noise viewpoint, especially in the uphills and the downhills the kind of engine noise in the normal K car is honestly is terrible. So definitely, they are buying for it. And the most important reason what we have come to know is 180 kilometers, the average running of these customers is 15 to 20 kilometers a day, which means they need to charge just twice in a week and that too with the home charging, which we are giving as optional. Definitely, if we have a car and especially with the smart charging, midnight, the electricity cost can be cheaper. And on top of that, cherry on cake is the government subsidies towards the customers, which means that number one, the entry price for customer is almost at par with the ICE K. Number two, the total cost of ownership is much better because within one year, the difference between the KEV and the ICV is finished and then no need for gasoline and so on and so on. Hence, we believe that Japan definitely will go for it. Now the question is why the Japan is not moving faster then the other continents, especially the Europe. This, I don't think this is only because of the infrastructure. This is also because the Japan does not have still the domestic competition. We are the only one today as the Japanese OEM who is having a big presence in Japan, like last plus months, we did more than 75% market share. The number one is Ariya, number one is Nissan EV, number two is Nissan EV and number three Nissan EV. To make a good awareness in the Japan market, we need competition, and we love competition because competition teach each other. So that's why I do believe that in the near future, our competitors will be ready with the EVs so that the competition creates awareness and awareness create market, that will be a great opportunity for all of us to move forward. And regarding the Infinity. Infinity, we have revitalized - I think you raised a real question. Two years before, we brought back Infinity headquarters from Hong Kong to Japan and now we have Infinity, which is under the umbrella of the Nissan Motor Company, which means Nissan and Infinity, both are two equal brands of Nissan Motor Company. Then as a next – so that was the first step. The second step we took was to Infinity to use the Monozokuri assets of Nissan to enjoy the economy of scales. And you saw that in the United States, in Canton, we announced two brand-new cars, which will be manufactured in Canton. But with the same platform, of course, with the two different brands distinctiveness. Now there is a fortunate and unfortunate event that we launched QX55 and QX60. And at the time of launch, we had the semiconductor crisis. Even then, the United States, Infinity is doing extremely good. And in China, it has just started, and I think we are waiting for the next new model to come in. I think these are the two markets, which definitely we want China and United States, we want Infinity to grow and move forward. Hope it answers your question. Thank you.

Yes. Thank you. Just one thing. Gupta-san, in U.S., do you think Infinity is strong. Do you think that Infinity is strongly in U.S.? I think there are more opportunities you need to hunt for?

Yes. You're right. This is what I'm saying. There's a big, big opportunity in the United States with QX55, QX60 and QX80 and we launched and we had this crisis of semiconductor. We have big opportunities. You're right.

Sakamori, does that answer your question?

Yes. Thank you very much.

Thank you for joining us. Are there any other people attendants, who have questions. There seems to be none. So a bit earlier than scheduled, but with this, we will conclude the fiscal year 2020 first quarter financial results. Again, thank you for your participation. We're most appreciative.