Honda 2016 Annual Report Download - page 28

Risk Factors
Risks Relating to Honda’s Industry
Honda may be adversely affected by market conditions
Honda conducts its operations in Japan and throughout the world, including North
America, Europe and Asia. A sustained loss of consumer confidence in these
markets, which may be caused by an extended economic slowdown, recession,
changes in consumer preferences, rising fuel prices, financial crisis or other factors
could trigger a decline in demand for motorcycles, automobiles and power prod-
ucts that may adversely affect Honda’s results.
Prices for products may fluctuate
Prices for motorcycles, automobiles and power products in certain markets may
experience sharp changes over short periods of time. This volatility may be caused
by various factors, including fierce competition, short-term fluctuations in demand
caused by instability in underlying economic conditions, changes in tariffs, import
regulations and other taxes, shortages of certain materials and parts, a steep rise in
material prices and sales incentives. There is no guarantee that such price volatility
will not continue for an extended period of time or that price volatility will not occur
in markets that to date have not experienced such volatility.
Overcapacity within the industry has increased and will likely continue to
increase if the economic downturn continues in Honda’s major markets, leading,
potentially, to further increased price volatility. Price volatility in any of Honda’s
markets could adversely affect Honda’s results.
Risks Relating to Honda’s Business in General
Currency and Interest Rate Risks
Honda’s operations are subject to currency fluctuations
Honda has manufacturing operations throughout the world, including Japan, and
exports products and components to various countries.
Honda purchases materials and components and sells its products and
components in foreign currencies. Therefore, currency fluctuations could affect
Honda’s pricing of materials purchased and products sold. Accordingly, currency
fluctuations have an effect on Honda’s results and financial condition, as well as
Honda’s competitiveness, which will over time affect its results.
Legal and Regulatory Risks
Honda is subject to various governmental regulations
Honda conducts business operations in countries worldwide. As such, changes in
regulations in these countries related to emissions, fuel economy, noise, vehicle
safety, factory pollution levels, climate change or other factors could adversely
affect Honda’s business, financial condition, or results.
Honda is reliant on the protection and preservation of its
intellectual property
Honda owns or otherwise has rights in a number of patents and trademarks relat-
ing to the products it manufactures, which have been obtained over a period of
years. These patents and trademarks have been of value in the growth of Honda’s
business and will continue to be of value in the future. Honda does not regard any
of its business operations as being dependent upon any single patent or related
group of patents. However, an inability to protect this intellectual property gener-
ally, or the illegal infringement of some or a large group of Honda’s intellectual
property rights, could have an adverse effect on Honda’s operations.
Honda may be subject to legal proceedings
Honda could be subject to suits, various investigations and legal proceedings
under relevant laws and regulations of various jurisdictions. A negative outcome in
any such current or future legal proceedings brought against Honda could
adversely affect Honda’s business, financial condition or results.
Risks Relating to Honda’s Operations
Honda’s Financial services business conducts business under
highly competitive conditions in an industry with inherent risks
Honda’s Financial services business offers various financing plans to its customers
designed to increase the opportunity for sales of its products. However, customers
can also obtain financing for the lease or purchase of Honda’s products through a
variety of other sources that compete with our financing services, including com-
mercial banks and finance and leasing companies. The financial services offered
by Honda involve credit risk as well as risks relating to lease residual values, cost
of capital and access to funding. Competition for customers and/or these risks
may affect Honda’s results.
Honda Motor Co., Ltd. Annual Report 2016 27
7Financial Section
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contents page
1The Power of
Dreams
2Financial Highlights
3To Our Shareholders
4CFO Interview
5Review of
Operations
6Corporate
Governance
8Investor Relations
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