Bayerische Motorenwrk Ord

Ladies and gentlemen, colleagues, good morning, and welcome to our conference call, quarterly statement for the third quarter 2021. We have here Oliver Zipfel, the Chairman of the Board of Management, and Nicola Peter, member of the Board of Management, Finance. As always, the gentleman will give you an overview of business development, and after that, you have an opportunity to ask your questions. Herr Peter has the floor. Thank you, Max. Good morning, ladies and gentlemen. BMW Group's positive business development in the first nine months of the year confirms our strategic course. Throughout the semiconductor crisis, our employees have delivered outstanding performance month after month. That is how we were able to raise our expected targets for the year again in September. All segments are on track to meet our guidance for the year. We continue to focus on gearing the BMW Group towards emission-free mobility, funding the investments needed from our ongoing business. We will keep our performance programme going with a main focus on the consistent exploitation of market potential. Moreover, we are picking up the pace in the digitalization of processes across the entire company. And we will continue to work consistently on the optimization of our working capital, in particular on our logistics. Let's start with the financial figures for the group. Group revenues for the first three quarters of 2021 climbed by 19.2% to 82.83 billion euros. Third quarter revenues increased to 27.47 billion euros. As expected, group earnings before tax for the year to the end of September were significantly higher than the previous year at 13.15 billion euros. The figure for the first quarter was 3.42 billion euros. The group EBT margin for the year to the end of September was 15.9%. and in the third quarter it was 12.4%. We therefore can be confident that we will not only achieve significantly higher group earnings for the year, as previously announced, but also surpass our long-term target of at least 10% for group EBT margins. After a strong first half year, Third quarter vehicle sales were, as expected, lower than the prior year quarter due in part to the ongoing semiconductor supply bottlenecks. Strong customer demand is reflected in continuing positive pricing effects, while the model mix has also continued to improve. Sustained high prices on the international pre-owned car markets also resulted in very favorable income levels from the resale of end-of-lease vehicles in the third quarter. This has enabled us to more than offset the decrease in volumes. Ladies and gentlemen, with the market launch of the two all-electric iX and i4 models in November, we reached another major milestone. New orders for both vehicles are very strong. we continue to push forward with the electrification of our entire model range as planned. As previously announced, we are also making further investments in digitization. This will be a particular focus for us this year and in 2022 with respect both to our vehicles and our processes. By the end of the year, the BMW Group will have the largest fleet capable of over-the-air upgrades among the competition with around 2.5 million vehicles. This clear long-term approach is also reflected in our R&D spending. As previously announced, research and development spending for the third quarter was up by almost 200 million euros on the previous year at 1.6 billion euros. This was also higher than the preceding quarters. The R&D ratio increased to 6.5% for the quarter and 5.3% in the first nine months of the year. We continue to expect the R&D ratio for the full year to be on par with the previous year at about 6%. At around 915 billion euros, capital expenditure is also higher than the previous year's quarter as planned. This represents a CAPEX ratio of 3.5% for the third quarter, and 3.2% for the year to the end of September. We will expect the ratio for the full year to be well below our target figure of 5%. Through the overall positive market development, the BBA result and the financial results continued to improve in the third quarter. Ladies and gentlemen, let's move on to the individual segments starting with the automotive segment. As expected, semiconductor supply bottlenecks slowed down sales in the third quarter. However, thanks to our ability to respond quickly and the high level of flexibility in our global production system, we were able to limit the impact on vehicle manufacturing. In line with strong customer demand, revenues increased to more than 70 billion euros in the year to the end of September. Third quarter revenues totalled €22.63 billion, around 3% more than the previous year. The segment also achieved a new all-time high with an EBIT of €7.95 billion at the end of September. Despite the decrease in volumes due to the supply bottlenecks, EBIT for the third quarter rose by nearly 19% to €1.76 billion. This represents an EBIT margin of 11.3% for the year to the end of September and 7.8% for the quarter. As expected, the earnings momentum weakened at the start of the second half of the year compared with the first half year. In addition to the semiconductor issues, increased raw material prices and higher fixed costs due to the growth in research and development spending also had an impact on earnings. However, this was offset by positive pricing effects resulting from supply shortages and positive trend in residual values. This development is also reflected in the contribution of our Chinese joint venture BBA to the financial result. The total third quarter at equity result was 35 million euros higher than the previous year. The strong earnings momentum and consistent ongoing management of inventory levels are also evident in the segment's free cash flow. At the end of September, free cash flow totaled almost 6.3 billion euros despite higher capital expenditure, scheduled cash outflows for personnel restructuring measures and payment of the fine imposed by the European Commission in connection with its antitrust proceedings. This means we are on course to meet our upwardly adjusted target for 2021 of around 6.5 billion euros. We anticipate a further increase in capital expenditure in the fourth quarter, as well as significantly higher advance tax payments. Due to the supply bottlenecks I mentioned, earnings development will also weaken slightly compared to the first nine months of the year. The financial services segment once again delivered a strong performance. More than 1.5 million new financing and leasing contracts were concluded with retail customers in the year to the end of September. This means the number of new contracts is also higher than in 2019 before the pandemic. Between January and September, segment earnings before tax climbed by nearly 1.9 billion euros to more than 2.9 billion euros. The figure for the third quarter increased to €988 million. A key factor in this development remains the exceptionally positive trend in pre-owned vehicle markets worldwide, leading to higher income from the resale of end-of-lease vehicles. Expenses for credit risks also remain low. In the prior year, we adjusted risk provisioning for the pandemic which had a dampening effect on segment earnings. The motorcycle segment also performed well in the first nine months of the year. More than 156,000 motorcycles were delivered to customers in the year to the end of September, a fifth more than in the same period of 2020. The segment's operating earnings almost tripled to 323 million euros, The figure for the third quarter was 39 million euros. This represents an EBIT margin of 14.3% for the first nine months and 6.1% for the quarter. Ladies and gentlemen, let's now move on to the outlook for our key financial and non-financial performance indicators. We expect to see a significant increase in group pre-tax earnings for the full year. The number of employees is projected to be slightly lower than last year's. In the automated segment, we're forecasting a solid increase in the number of vehicles delivered to customers compared to the previous year. Electrified vehicles will account for a significantly higher percentage of total volume. By the end of September, we had already sold more than twice as many battery electric vehicles than in the previous year. we will once again significantly reduce the CO2 emissions of our new vehicle fleet. However, the current uncertainty over semiconductor supplies will continue to disrupt production in the fourth quarter. As previously announced, high raw material prices and the increase in fixed costs towards the end of the year will also impact earnings. We expect the EBIT margin in the automotive segment to be within the range of 9.5% to 10.5% as previously communicated. The main reason for the positive adjustment of our guidance in September was continued positive pricing for both new and pre-owned vehicles. In the financial services segment, we expect a return on equity of between 20% and 23% in line with strong business development and a positive residual value and credit risk situation. In the motorcycle segment, we anticipate a significant increase in deliveries. The EBIT margin will remain within our target range of 8 to 10%. Our guidance assumes that political and economic conditions will not deteriorate significantly. Ladies and gentlemen, as previously announced, we expect a stable earnings development in the fourth quarter. Customer demand will remain strong. However, the semiconductor supply bottlenecks will be a main influencing factor. Our strong performance in the first nine months of the year once again proves our operating strength. At the same time, we continue to focus on the further technological development of our products. That is why we will enter the new year with full confidence. Thank you. Thank you. and now Oliver Zipzer has the floor. A very warm welcome to all of you, Dr. Peter. Already told you, the BMW Group is profitable and the company is growing. This is thanks to our customers around the world, as well as the strong demand for our diverse range of products and drive train technologies. We delivered 1.9 million BMW Mini and Rolls-Royce vehicles to customers in the first nine months of the year as well as 156,000 BMW motorcycles and scooters. This represents an increase of 18 and 21% respectively above the previous year. BMW once again gained market share and captured 3.4% of the global market as a premium manufacturer. we were also able to expand our strong competitive position in key markets such as US and China. BMW leads the premium segment in numerous countries. In addition to China and the US, this is also the case for Mexico, Brazil and other markets in South America as well as South Africa and several European countries, including our domestic market here in Germany. This shows that we are maintaining our successful business development. And we can therefore confirm our adjusted guidance for 2021. Our profitability is of extreme importance. In this way, we're laying the foundation for continued investment in relevant future areas of activity. This ambidextrality is needed now more than ever. Just think about the ambitious political guidelines diversified economic and social developments around the world, new technological possibilities and geopolitical tensions and many other examples. As a global company, we have a responsibility to ensure the BMW Group's business model is viable in a long-term and all possible conditions. On the one hand, this means we have to approach short-term changes in our environment with flexibility but also with consistency. At the same time, we continue to follow our strategic direction in line with our long-term goals and we're making the necessary decisions. I would like to discuss this ambidexterity in more detail today. What are we focused on right now? And how are we setting ourselves up for the years after 2025? Let me get to the first point. we have demonstrated once again that we're capable of overcoming difficult situations. This applies equally to the lingering effects of the coronavirus pandemic, as well as to the current situation with semiconductor supplies. Our purchasing development and production divisions, as well as sales and marketing, are working together very closely on this and exhausting all possibilities. Our stable and trustful relationship with suppliers worldwide also mean that we have been able to cushion the impact for our customers better than many of our competitors. Not only all our brands, but also all major regions of the world saw significant growth until September. Europe, more than 10%, Asia, almost 20%, the Americas, over 30%, plus 33% for the US alone, that is, and the other markets were almost 30%. As expected and as previously announced, the sales momentum for our electrified vehicles is particularly strong. Our deliveries of electric vehicles and plug-in hybrids doubled between January and September compared to the previous year. Our best sales were even 120% higher year-on-year. Our new innovation flagships, the BMW i4 and the BMW iX, have recently begun rolling off the production line, are pre-ordered several months out. Many members of the media and car experts from around the world have already experienced the i4 and the iX for themselves. And some of you were there personally, and all of them were thrilled. We on the board of management get to test our products on a regular basis, of course. Recently, our senior managers had the same opportunity. They drove almost 600 kilometers In the IX, from Munich to just outside Cologne, fully electric and with all the latest digital features. And the conclusion of Barbara Reichsleiter was, e-mobility has fully arrived in our everyday lives. However, the charging infrastructure isn't keeping up. In Germany and all across Europe, it needs to be expanded swiftly and noticeably, following a binding and ambitious plan. I am also advocating this as the ACEA president. The growth of electric cars already exceeds the growth of current charging capacity in Germany by a factor of five. Many EU countries still don't have a charging network at all. Without a coherent framework, however, no technology can be implemented or become widely accepted. This applies both to e-mobility and hydrogen. That is why the next steps towards tighter CO2 reductions in Europe after 2030 should only be decided based on the charging infrastructure that has actually been built by then. A review in 2028 can then define the right specifications for the rest of the journey. A fundamental requirement is that our customers are already enthusiastic about eDrive today and we can state that we are on the right track here. To quote a recent headline, the best four series is electric. The new BMW i4 is getting a lot of praise like this and this is how we create desirability. We're building the new i4 at our oldest plant where people of more than 50 nationalities work together right in the heart of the city. Please allow me a brief digression because this is where the change is most visible. we are gradually relocating our engine production to other sites without cutting jobs. Instead, an assembly plant for electric cars is being built on the same site. That gets us moving quickly. By 2023 already, at least half of all vehicles from the Munich plant will have an electrified drivetrain, the overwhelming majority of them fully electric. With its new vehicle assembly, the plant will also be able to produce up to 100% beds from 2026 onwards. This will be determined entirely by demand. That is how systematic transformation works. At the same time, we're also working on emission-free transport logistics for our main plant here in Munich. No one will get left behind. We have already trained more than 50,000 specialists worldwide for e-mobility. And starting this month, the i4 and iX will also be available alongside our electric pioneer, the BMW i3, our successful urban model, the Mini SE, and the BMW iX3, which is built in China. Over the next two years, these will be joined by the fully electric versions of the Hydroium BMW 5 Series and X1, as well as the 7 Series. For our customers, this means that by 2023, you will have at least one fully electric model in about 90% of our current market segments, giving our customers the ability to choose. Nevertheless, we still have a long way to go until all customers in all countries around the world are able to ride solely in electric driving. But when it comes to climate protection, every single gram of CO2 that we can avoid today counts. Why should we commit to a single technical solution early in the process when that means leaving considerable potential untapped in the here and now? This explicitly includes further CO2 reductions through the use of state-of-the-art conventional drive technologies. From 2022 onwards, our modular motors will receive second-generation 48-volt technology. This leads to a further significant increase in efficiency. For some models that now jump straight into the second stage, this can result in less CO2 of up to 20%. We need competition between technologies in the interest of customers and for less CO2. Anything else would put us on a consolidation course. Our intelligent vehicle architectures will allow us to continue to offer markets worldwide the right technologies for the individual circumstances and pace of change. Now let's move to my second point. How are we setting ourselves up for the years after 2025? We see technological change as a tremendous opportunity to strengthen our business model for the long term at BMW. Technology can protect the climate. We are systematically gearing the BMW Group towards climate neutrality. So what does that include? Well, first, continuing to ramp up e-mobility for all of our brands, meaning Rolls-Royce will be exclusively all electric from the early 2030s on. We will be taking our core BMW brand into a new fully electric dimension with the Neue Classe from 2025 onwards. The same applies to the digital experience of mobility for our customers. Second, our strong commitment to climate neutral mobility. To achieve this, we have again tightened our ambitious sustainability goals for the supply chain, production, and the use phase. And third, our focus on the circular economy. We showed what this looks like in practice at the IAA Mobility. We have received extremely positive feedback worldwide on the BMW iVision Circular. It is made of 100% recycled material and is itself 100% recyclable. We don't just make announcements, we let our actions speak for themselves. For the Neue Klasse, for example, we are sourcing green steel manufactured using hydrogen and green power from the Swedish start-up H2 Green Steel. In this way, we can drastically reduce CO2 emissions right at the beginning of the supply chain. The real question after all is, what is a vehicle's overall carbon footprint throughout its life cycle? From the use of raw materials, through industrial manufacturing and active use, all the way to recycling. The credibility of this is measured by whether concrete action can be verified at the end. That is why the BMW Group became the first German automotive manufacturer to join the business ambition for 1.5 degrees. This entails a commitment to climate neutrality by 2050. And our path to achieving this is scientifically validated, transparent, and measurable. It's absolutely clear resources are becoming increasingly scarce. And as a result, prices for raw materials are rising. That is why we're already thinking about the next logical step in the transformation, how to significantly reduce our resource consumption. This will be a crucial lever to achieving sustainable development and profitable growth in the future. The BMW Group will gradually increase the percentage of secondary material it uses in its vehicles to 50%. This is a challenge for all of us, and that is why we can no longer think in a fragmented way. In light of the ongoing UN Climate Change Conference in Glasgow, I will address these issues at the COP's Sustainable Innovation Forum next Monday. Our shared goal of lowering CO2 emissions quickly and on a massive scale demands cooperation at the global level. And this applies specifically to CO2 pricing. We support pricing as the most efficient measure to curb carbon emissions. provided it is regulated across national borders and in a uniform manner above all. It is very important that the steering effect of policy is aimed in this direction. In all sectors, sustainability and digitization have long been closely linked. That is precisely why we have established the industrial flagship project, CatenaX, which we now seek to strengthen further. CatenaX creates transparency from small suppliers to OEMs. This cross-sectoral connectivity is a real advantage for Europe as a manufacturing location. Today's modern vehicles are already shaped largely by software, with research and development activities at 10 locations worldwide, our own and also at our joint ventures. We have a total of around 10,000 IT and software specialists working on the digitization of vehicles. We have been moving forward with connectivity in our vehicles for more than two decades, and we're seeing this again right now. By the end of this year, the BMW Group will have the world's largest fleet of vehicles on the road with over-the-air update and upgrade capabilities. With remote software upgrade, our vehicles always have the very latest technology, just like the updates we're all used to on our smartphones. is something our customers benefit from directly. Their vehicle is not only always up to date, it also keeps on getting better because we can access every line of program code in the vehicle. Our customers can also purchase or subscribe to new functions and features. With high-end connectivity, such as 5G in the iX, our vehicles are transformed into a smart device within the customer's own digital ecosystem. Standardization is key to the digitization of our cars. We believe it makes sense to develop common standardized basic elements for vehicle operating systems in conjunction with other OEMs and suppliers. The use of open source software is highly relevant in this respect to make sure we are all speaking the same language. There's no need to reinvent the wheel. We can ensure a high level of economic efficiency and at the same time make use of existing digital ecosystems, such as Google's Android open source project. In this process, we are working with tech players like Apple, Amazon, Tencent, Google, and Intel, while still competing with them. I see this less as a clash between OEMs and tech giants and more as a sign of market reality in a digital age and a way to guarantee further progress. Ladies and gentlemen, in a multi-layered transformation process, employees are a meaningful seismograph that provides a valuable indication of the state of a company. We received over 100,000 responses to our employee survey in October, the highest ever. and the results show a very positive trend in all categories compared to the surveys in 2017 and 2019. They showed that the vast majority of our global team are confident about the future of the BMW Group across all divisions and hierarchy levels. This spirit and optimism demonstrate to me that our team really sees the transformation as an opportunity We have the right balance of disruption and stability, and we consistently combine change and responsibility. We're finding solutions and moving fast, and taking our people along with us. This is how the BMW Group will remain on course for long-term success, by being profitable, innovative, and responsible. Thank you. Thank you, Oliver Zipser. Dear colleagues, we now have time to take your questions. please hear the technical instructions for the conference. Ladies and gentlemen, if you'd like to ask a question, push the keys 0 and 1 on your telephone. Your questions will then be taken in the order asked. In order to withdraw a question, please push the keys 0 and 2 on your phone. If you're listening over the loud speaker today, please pick up the receiver to ask your question. Thank you, and a moment for the first question, please. First question. Well, good morning. I'd like to know, How does it continue in the third quarter? Will there be any production to be run down? Will there be fewer cars this year? Will there be fewer sales revenues? Or is this only something that happens within a limited time? Thank you, Mr. Wirth. Mr. Peter will answer. Well, Herbert, you're asking two core questions, the first one How about the fourth quarter? How does that continue? Well, I have stated that we continue to assume that there'll be between 9.5 and 10.5%. If you look at the third quarter, I think we are right on track. And I assume, I mean, the first month of the fourth quarter has already passed and there have not been any major surprises, even if the production issues that we'd already announced have actually now become a reality. I still assume that the fourth quarter will go as planned and we will remain right in our range between nine and a half and ten and a half percent. The formula is not fewer sales more earnings, no. What we have to do is we have achieved a good price enforcement and And we have to maintain that level. Logically, we're planning. We're making investments. We're planning to further grow. Of course, we want to grow. But at the same time, we want to maintain the contribution level per vehicle on the same level. And for this very reason, it was that as part of our performance program, we have set up a number of initiatives that have exactly that as a goal. And that concerns the automotive segment and the financial services segment. Thank you, Mr. Peter. Next question, please. Thank you. Good morning, gentlemen. I have three short questions. First question concerns electrified vehicles, the BEV. There is great customer demand for the BMW i3. You told us that manufacturing depends on demand. Well, there's high demand for that car, but as it appears, you will phase it out in the next six months, which is probably related to your supply situation. It would be too expensive to extend production. Maybe you can explain, because how do you align supply and demand here. My second question, the chip crisis as such seems to be a blessing for the BMW Group. I mean, you've just said that the formula is not fewer sales, more revenue, but that's what it looks like. Now with GSB, you could say, couldn't that chip crisis last a little longer? Because you can cope with it quite nicely. So would you subscribe to my hypothesis? And then my third point, I have to talk about the share prices of a competitor in the US. It went up to a trillion. And so it's an entirely different sphere, as it seems. Sure, we know about the circumstances. But is that food for thought for you? Or are you just looking at it in awe? Thank you, Mr. Haegler. I suggest Mr. Zipze begins with the i3 and the chip crisis and the share price. That will be Mr. Peters. Good morning on the i3. I can say that this car will have had a lifetime of more than nine years. And there's no other car in BMW's history that had been running for so long And it has been extremely popular over the past few years. But please understand that we cannot make any comments on our future plans. The time of end of production of the BMW i3 also depends on the fast-growing model family of BEVs. But what we can say for sure is even after the end of the BMW i3, we will continue to have a BEV module in the compact car segment. However, a successor will not necessarily have the name BMW i3. Still, of course, we're very happy about the great success of this car. Mr. Peter, please. Well, Mr. Higgler, semiconductor crisis is definitely not a blessing. Why not? That's because we have a high number of incoming orders that we cannot serve as quickly as we would like. And if you look at the improved price enforcement and the improved earnings situation per vehicle, then this is a trend that already began before the semiconductor crisis here at BMW. And it's also caused by a very precise control on the model level, on the market level. So this is not exclusively due to the shortage of supply because of semiconductor issues. Now, the share price of other companies, I would like to focus on our own job here and the things we have to face. I think the core job, and Mr. Zipzer has said this in quite clear words in his speech earlier, it's the transformation of the industry in the years to come. I think we're in a very strong position starting from, as I said, our capabilities that we have due to the quality of our earnings, our strong financial position due to our strong balance sheet. We continue to have the second best rating of all OEMs worldwide and the best of all European car manufacturers. And because of all of this, I think that we are able to shape this transformation, to fund this transformation, and that affects two topics in particular. That's emission-free driving on the one hand and digitization of products and processes on the other hand. Thank you. Next question, please. from . Thank you. Good morning. I have two questions. First one, on magnesium, as you've already said, there is no shortage yet, but we also know that even if China were to ramp up production, it'll take or could take several months until the product reaches Europe. So we should ask ourselves, how is BMW getting or preparing itself for this situation? Could you perhaps explain how exactly Does BMW manage its magnesium supply? Do you have direct supplier contacts, or do you only buy finished products that contain magnesium, or are you now undertaking steps to diversify your supply or your sources? Second, could you give us a little more information on the outlook for 2022? I know there will still be a chip crisis, but could you perhaps elaborate some more? Thank you, Mrs. Battersea. Magnesium. Well, thank you for your question. BMW only has one component that consists of magnesium, one larger component. It's an instrument support. But otherwise, we do not source any direct magnesium products. And most of the magnesium goes into the production of aluminum. So except for that instrument carrier, we do not use any magnesium. if magnesium production in China gets shortened, this will not have any repercussions on our production. We are always in very close contact with all of our sources and suppliers, and our forecast is that this will not have any repercussions on us. Then, well, the exact outlook for 2022, this is something that we will give you in March next year, but maybe just a couple of thoughts on 2022. Yes, semiconductor issues, will definitely accompany us in 2022, also the second half of the year. But despite this, we are determined to continue on our very successful track. This applies in particular to the fully electrified vehicles in 2022. I've already mentioned that we have a full order book not only from the new products, the i4 and the iX. Hegla also talked about the i3 earlier, but also the fully electric Mini. We have a lot of orders coming in for that, and correspondingly, we are very confident that in 2022, there will be yet further increases. We will grow more so that our long-term goal going towards 2030 will probably be achieved. Thank you. Next question, please. Good morning and thank you. Mr. Zipzer, earlier you talked about openness in terms of technology. So I have a question on the capital allocation. I didn't quite understand. Your friends in Stuttgart, you know, with them it's like this. They're saying they're not developing any plug-in hybrids anymore. They're not investing into new combustion engines either. So all their investments will go to an electric platform. So how about you? You're having an open technology approach. So will there be further generations of plug-in hybrids, further generations of combustion engines that you will develop, or will all of this be purely electric? Thank you, Mr. Hubig. Mr. Zipser? Well, please understand, this is such a complex topic, the drivetrain allocation. I cannot give you an answer that summarizes everything in one sentence. Going back to the combustion engines, perhaps all manufacturers will have to prepare themselves for EU7. This will cost some money. And I haven't heard anybody say that they are stopping this now and they're no longer doing EU7. Nobody says that. We expect that's the next level of emission laws, and that will be on the market in 2025. And I think at that point in time, nobody will want to exit combustion engines completely, so we're preparing for that by the way this technology has already been fully developed. And we will be able to do EU7. I assume this will come, or the law will be announced first quarter of next year. Now, if you look at the world markets, There are two possibilities. Either you have the capability of serving all of the markets worldwide, depending on their global differences. I guess I don't need to tell you the world is very, very diverse, even within Europe. Now, if you have the capability, then from our point of view, this is something you should do, and that's something we will do. Because we have that capability, we are able to develop all types of drive trains. We can connect them. via modular kits and we have flexible platforms and we will use all of this to grow. This is confirmed this year already and this will continue in the next years. Now the greatest growth in terms of percentage and most of our investments of course will go into e-mobility because we're investing a lot of money to convert our plants, we're investing in products, developing new products to follow that increasing market. all of this has happened simultaneously and a lot of our investments that we have made has already been made in the transformation of plants and in all of these preparations that need to be made that means of course we will invest into pure beds plug-in hybrids a focus will be on beds of course we believe that in this decade and here i'm talking about a worldwide scenario regardless of The question is whether you're promoting something or whether there's market demand. And for this decade, we are still expecting the market for plug-in hybrids to be quite robust, even if it will not grow as fast as the purebreds anymore. Thank you. Next question, please. John Lennert, Financial Times. Good morning. I have a question on the semiconductors. We're in Munich, by the way. You said, yes, but I'm in Frankfurt. That's what I said. Right. I said, oh, we heard you say good morning to Frankfurt. It was good morning from Frankfurt. Okay. Just wanted to clarify. We listen to what you're saying and nothing escapes us. Fine. We in Munich, it's important to us to make that statement. Just a joke, anyway. Okay, I have a question about the semiconductors. BMW didn't suffer from those bottlenecks, not as much as the competitors did. Could you explain in more detail why that is? Do you have a better overview of your supply chain? Have you gotten yourself an inventory or did you stock up on chips or did you pay more money for them? I mean, the argument in Brussels is that there should be more semiconductor production in Europe in order to prevent future bottlenecks. Now, in your opinion, is that truly the case, or is that more likely about better managing your supply chain? Thank you. Mr. Zipsit, please. Good morning. Mr. Miller, hello to Frankfurt from Munich. Well, the semiconductor crisis. And, you know, actually, I try to avoid talking about a crisis because a crisis is where you no longer know what to do. But this is not the case for us. We can respond quite flexibly in our value added chains, production suppliers, procurement of raw materials. We can respond quite flexibly. And we've always had a pretty good overview of our supply chain. And this is something that we now benefit from. We know exactly who our suppliers are. not only on the first tier level, but right down to the raw materials. So we have a pretty good overview. And in terms of how we handle our suppliers, we've always had a fair agreement, especially when things get difficult. And this is something that now pays off. Our value-added chain management is simply pretty good. And what's behind it are two things. First thing, what happens in investment cycles in a semiconductor industry where worldwide demand overall goes up? And the way I see it at the moment, this is everywhere on the world. Additional capacities, you know, investments are being made in additional capacities. However, these investments, you know, they take about 18 to 24 months. And we're exactly in that period of 18 to 24 months now. So I think all of this will be adjusted. You know, once we're done After that lead time and middle of 2022, I think the first investments will actually pay out. Your second question, that's more of a regional thing. That's about the distribution. Your question was, do we need more semiconductor production in Europe? Well, of course we do. That doesn't mean that all semiconductors have to be produced in Europe, but I think an appropriate share of them should in fact be produced here. using the most recent technology. Thank you from Frankfurt. Thank you. Next question please. Good morning from Berlin. I have three brief questions on beds mostly. You're writing that your growth target is plus 20% in the fully electric vehicles per year. Actually, it sounds not very ambitious compared to last year, where you grew by 120%. And it's only now that the large model initiative is starting. Couldn't it be more than 50% per year? Second question. also on semiconductors, your beds, are they supplied preferentially with semiconductors? Because at Volkswagen, I understood them to say that if there's a shortage, then they would mostly use those scarce parts for the electric vehicles. And my third question touches on what you just said, Mr. Zipzer, about the plug-in hybrids. You said they will continue to grow regardless of any subsidies. Do you think this will also be the case in Germany? Because at the moment, the future government coalition, they're having a discussion of actually changing subsidies or perhaps even abolishing them altogether. Thank you, Mr. Zwick. Mr. Zipser, please. Well, you've asked three questions. The first one, best growth. I think you have incorrect information here. By 2025, we'll be growing at at least 50% per year, and next year, more than 100%. Same as this year, by the way. This year, we also grew by more than 100%. And this will repeat next year. And on average, by 2025, we'll grow by more than 50%. I assume you had something with market shares and growth mixed up. So what you just said, I simply cannot confirm this. Your second question was, do we prefer BEF over other vehicles? Well, we actually don't prefer anything. We're trying to follow the market conditions, and that concerns the BEFs. They grow a lot. They grow a lot. This is why they get a lot of chips. But it's not only BEVs. And then the PHEVs, your third question. Now, regardless of subsidies or anything, this is a highly attractive customer offer for customers for whom the climate is important because PHEVs are better than any combustion engine car in terms of absolute consumption. And it's for those who haven't got the right climate conditions yet for being able to buy a BEV. I mean, there's a lot of demand on the market And this is what drives us. And if there's any funding or subsidies for that, then that's good. Okay, thank you. Next question, please. Christoph Robertson. Good morning. I have a question to Mr. Zipse. Had these recently followed what you said in terms of a possible software cooperation. Have you had another contact again, you know, between BMW, Volkswagen, and Daimler, or have there not been any contacts yet? I've heard that a couple of months ago there have been some initial talks that were not successful. Perhaps you could indicate whether you have resumed your negotiations or talks. Well, you see, any type of cooperation with other OEMs is subject to very strict compliance and cartel law requirements. So you don't just meet and talk, but it's a very straightforward process. And we talk to a lot of OEMs, and I don't really want to disclose any further details here and today. Thank you. Next question, please. Christian Hüttner, Fortune. Good morning. Two questions from me. First, semiconductor shortage. Some OEMs have now made new considerations. Volkswagen, for example, they're considering designing their own chips. So how about BMW? Second question. 2.5 million updatable fleet. What could BMW earn if this feed existed, which sort of revenue can it generate with that? Okay. First Mr. Zipser, then Mr. Peter. Well, the competence of managing, designing your entire software architecture, not all of this is done in-house. There is a high in-house share, but I would like to worm to define competence as exclusively being what's done in-house. And if you look at the IEX, for example, or the next generation Neue Klasse architecture, this will play a dominant role regardless of how much of this is done in-house. Mr. Peter? We're assuming that by the end of this decade, There'll be digital services that can be updated either export or over the air. We expect to make sales in a considerable amount. And the first pilots, especially as far as over the air updatability is concerned, not generating turnover. This has been going on since 2019, and we're doing pretty well with those. The $5 billion, is this? $5 billion per year, or by 2030, it should be $5 billion? Thank you. Then we have five minutes left. I'd say we'll do two more questions. Can you hear me? Yes, we can. I'll try to ask two short questions. The R&D share of the electric vehicles in your speech today, you explained your R&D expenses as you always do. So how much of that is for e-cars? And regarding earning more with fewer cars? A colleague has already addressed this, but I would like to know what are you learning from this experience? Do you perhaps see by prioritizing components, you know, to use them for cars that make more money, would that be a possibility in the future to reduce your entire product range? in the future let's say you know that there'll be certain models you won't need anymore thank you bill mr peter please well your first question first the r d share of e vehicles we're assuming that both capex as well as r d will go to way above In terms of more than 50% of that will go to CVS, which is quite conclusive. If you look at our goal, 50% fully electrified vehicles in 2030. So, you know, I've already said this earlier, what's quite a nice development, and that's not just the semiconductor crisis, but it was quite early. that we began with our particular performance management, we focused early on achieving more earnings per vehicle. And I think the past one and a half years have shown that we're doing quite well in this respect. And we can see this across all major regions. And a very important aspect is, and this is why I mentioned this explicitly in my speech, is that supply management is further optimized. And together with our sales partners and the dealers, we want to take a slightly different approach in the future. And this is independent of the semiconductor issue. So we recognize if you have an attractive product, as we do, then the customer is also ready to wait one or two weeks more to get their card. Thank you. Now the last question, please. Good morning. Thanks for taking my question. regarding the next few years. I have a question, perhaps it's self-explanatory, but anyway, Mr. Zipse, you announced this Neue Klasse. How do you now picture this? What ramp-up investment is required for this? I guess, you know, we're transitioning to e-cards and then there's all the digitization initiatives, but the way I understand this, that Neue Klasse is supposed to be more than just that, perhaps a new design. So from when on? Will you be required to make upfront investments? And if so, how much? And additional question, these over-the-air updates, Mr. Weber already told us once, $5 billion for 2030. How many of the regular basic functions will have to be put behind the paywall for the $5 billion? To me, that seems to be quite a high number. Okay, thank you. Mr. Tsitsipas, please. Well, Neue Klasse is coming at a point in time where other architectures would have had to be renewed. It's not like something that's just on top. And we can handle those investments at BMW and they'll start beginning of next year and then, of course, they will increase by 2025 when the first cars will roll off the production line. It's not just single cars. It's an entire architecture such as electrification, lightweight construction. So don't picture it as something that's been exclusively on top because the other architectures will not be turned off. But the point is that they will no longer be the only architectures. Well, Mr. Engelmann, I think the $5 billion, and I explicitly said this, this is works and updatable over the air and over the air here you have to consider one thing and that's something we experience every day the digital industries you know all the things that we have on our smartphones and I mean they develop and it's our clear goal to give our customers the possibility of to access those functionalities. Even if they were developed later, we want to allow them to get these functionalities. This is one thing, and this is also how we design our architecture. We wanted to be able to offer exactly that. It's not just about pushing things, you can provide X works to a later point in time. That wouldn't really make any sense economically. No. It's over the entire life cycle of the car. We want to make sure that the car is attractive and up-to-date digitally. Thank you, Nicola Peter. Thank you, Oliver Zipzer. Thank you to you, colleagues.