Bayerische Mtrnwrk U/Adr

Good morning, ladies and gentlemen. Welcome to our annual conference. 2025 will be a milestone year for the BMW Group in many respects, as we set the course today for our success in the decades to come. Despite volatile global conditions, we remain firmly committed to growth in the current financial year. And at the same time, we are bringing our largest future-focused project, the Neue Klasse, to the roads. We have a clear plan. We remain sharply focused on innovation and sustainable growth. In 2025, we expect sales figures to rise once again. And at the same time, capital expenditure will decrease as planned. This will enable us to increase our free cash flow. And there are four reasons for our confidence. First, our strategy is robust and gives us a clear path forward. We are setting the pace in key areas. Our technology-open approach remains successful and is gaining ever more traction. Policymakers and competitors are pivoting in our direction, which we continue to pursue systematically. Second, the BMW Group is one of our industry's few true global players. Our extensive global footprint creates opportunities. It makes us resilient and it provides the flexibility we need to respond effectively to external influences. And third, with BMW Mini, Rolls-Royce and BMW Motorrad, we have four strong brands. And all of them are incredibly popular around the globe. Each has its own distinct identity and delivers emotionally compelling products for different target groups. And fourth, our Neue Klasse, no other manufacturer has a project as ambitious and groundbreaking as ours about to enter production. I will come to this in the second part of my presentation today. Let's now start with the first topic, our strategic direction. Our technology-open approach is market-orientated. It allows us to fully leverage the available potential across all markets and regions. and we make no distinctions whether we are talking about combustion engines, plug-in hybrids, all electric vehicles, or from 2028 onwards, a hydrogen powered car. We consistently implement design principles, innovation, and the latest technologies in all our vehicles. No one masters this technological diversity better than we do. Numerous national and international accolades confirm this. Our approach is also gaining increasing recognition in political circles, and even our competitors are pivoting towards our strategy. We have proven that technological openness, growth, and CO2 reductions are very much compatible. Let's take a look at 2024. we met our adjusted targets for the year. We delivered more than 2.45 million vehicles and achieved an EBIT margin of 6.3% in the automotive segment. Our vehicles with highly efficient combustion engines remain in strong demand worldwide. At the same time, battery electric vehicles continue to be our main growth driver. Several other manufacturers, including some that only produce electric cars, saw a decline in sales. But we achieved growth with our all-electric vehicles, even in challenging market conditions. In 2024, BEV sales once again climbed significantly year on year, increasing by more than 13%. Fully electric vehicles accounted for over 17% of total sales last year. And including plug-in hybrids, nearly one in four vehicles sold was electrified. We are targeting further growth in e-mobility in 2025. We will hit two major milestones this year. We will reach the total of more than 3 million electric height vehicles and over 1.5 million BEVs sold since the launch of the BMW i3 and i8. Our customers can choose among 15 BEVs across all our brands. One example is the new edition of the BMW iX. The recently presented model update boasts an impressive electric range of over 700 kilometers in the WLTP cycle with significantly more drive power. That is BMW Efficiency Dynamics. Our combination of electrified vehicles and highly efficient combustion engines also have a positive impact on our climate footprint. In 2024, the BMW Group once again outperformed its European CO2 fleet target by more than 30 grams. Based on our internal calculations, our fleet emissions fell below 100 grams per kilometer in the WLTP cycle for the first time. We will continue to ensure that our customers always have access to the latest technology across all drivetrains. And the key to achieving this lies in our production network's high level of flexibility. And that brings me to my second point. Our global footprint. The BMW Group is a true global player. Very few automotive manufacturers have such a comprehensive presence across all relevant economic regions as we do. Be it in sales, research and development, production or our supplier network. And this combination gives us a strategic advantage that sets us apart from the competition in increasingly fragmented world. We remain committed to expanding our local for local approach. We are constantly improving our access to different market regions and strengthening our resilience, especially along our supply chains. One example of this is our high-voltage battery assembly plants in the three major sales regions, Europe, the Americas and China. In total, five new assembly facilities for the next generation of high-voltage batteries are being built near our production sites worldwide, complete with a local supplier network. In this way, we are already creating the necessary conditions today for successful growth in the future. We are gradually adapting our production network to rising sales of electric vehicles. And late this year, our new plant in Debrecen, Hungary, will become our first facility to exclusively produce all-electric vehicles. Our main plant in Munich will follow in 2027. Our production follows the market and our product range aligns with demand. We build roughly the same number of vehicles in our three key market regions of Europe, the United States and China, as we sell there. This balanced distribution is another key differentiator for the BMW Group. At the same time, Germany and the United States serve as key export hubs for us. In 2024, we manufactured over one million vehicles at our plants in Germany. This represents about a quarter of the country's total car production. 56% of these vehicles are then exported outside the European Union. I think this is an impressive proof of the BMW Group's significant contribution to industrial value creation in Germany. In the United States, one out of every two vehicles from our plant in Spartanburg, South Carolina is exported. Last year, we achieved an export value of over 10 billion US dollars. This once again makes the BMW Group the largest automotive exporter in the United States by value. We benefit from an integrated global economy, and that is why we continue to advocate for open markets and free trade. Moving on to my third point, the performance of our brands. The success of the BMW Group is built on the global appeal and resonance of our four brands. At the same time, we know how to fulfill the specific needs and preferences of our customers in different markets with our products. Last year, Our core BMW brand leveraged its strength to the full. In three out of four regions, BMW grew sales and gained market share. This has enabled BMW to maintain its number one position in the global premium segment. BMW performed particularly well in Europe. Italy, Spain, France and the United Kingdom led the way with all reporting double-digit growth rates. With a 6% increase, the brand significantly outperformed the overall European market, which only grew by just over 1%. In the United States market, we achieved record sales for the second consecutive year. And here too, the strength of our market-driven approach to drivetrains is delivering its results. Thanks to our steadily growing BEV portfolio, we sold more than 50,000 electric vehicles in the United States for the first time. And with this momentum, we are optimistic about the year ahead as we celebrate 50 years of BMW North America. In our markets outside the main sales regions, we also posted growth in a declining environment overall. In this region, we led the premium segment in total for the first time ever. And the main growth drivers here included the South Korean, Australian and Indian markets. China remains a key market for the BMW Group. In 2024, we sold more than a quarter of all our vehicles there. The market is highly dynamic and characterized by increased competitive pressure. In this environment, BMW maintained nonetheless its position as number one in its segment with a market share of 3%. This put us within our target range. In 2024, we delivered over 100,000 BEVs to customers in China for the very first time. This makes China our biggest single market for electric vehicles, even though our sales performance there was damped last year by persistently low consumer sentiment. The high-margin vehicles built by BMW M once again played an important role in our market success in 2024. For the 13th consecutive year, M sales increased. Nearly one in 10 BMWs sold carried the letter M. Demand for the sportiest BMW models has continued to grow, especially in China. 2025 is the first year with a complete new MINI family available. And we will exploit this potential further. There are a total of five unique models now to choose from, three of them BEVs. The fully electric MINI models with a MINI Cooper Electric leading the way are being particularly well received. With an increase of 24% year-on-year, sales of MINI BEVs also saw highly dynamic growth last year. Nearly one in four MINIs is now powered by an electric heart. In the ultra-luxury segment, Rolls-Royce continued to set the benchmark. At more than 5,700 units, Rolls-Royce sales remained high And most notably, the all-electric Spectre exceeded expectations in its first full year of sales. Every third Rolls-Royce sold now is fully electric. BMW Motorrad also impressed in 2024, achieving a new all-time sales high of over 210,000 units. BMW Motorrad remains the undisputed number one in the global premium motorcycle segment. Ladies and gentlemen, all of this shows that the BMW Group is well positioned across all brands, drive technologies and segments to continue on its growth path. With our global approach, we have the right answers to challenges worldwide. This has often enabled us to offset fluctuations in demand in individual markets. And now it's time for Walter Mertl to present the Group Financial Statements for 2024 and look ahead to our goals for 2025. Thank you, Oliver.

Ladies and gentlemen, good morning. As Oliver emphasized, we continue to follow our course and implement our long-term strategy. At the same time, we are focused on our operational business to consistently deliver on what we say. The BMW Group proved this once again in Q4 2024. We successfully reduced inventory impacted by the integrated braking system or IBS. And we achieved a sequential improvement in retail sales and profit versus Q3. For the full year, we achieved our revised guidance in all parameters. As anticipated, we reached peak levels of R&D and capital expenditure in 2024, particularly to prepare for models of the Neue Klasse. Starting this year, both the R&D and CAPEX ratios will decrease meaningfully as we start production of the Neue Klasse and lay the foundation for the long-term success of our company with over 40 new and updated models by 2027. Through our global positioning and the flexibility of our operations, we can adapt to the geopolitical landscape and short-term market dynamics, proving our resilience. Let's take a look at the financial figures for the full year. 2024 was a year of two halves. While the first half year was in line with our original planning, Sales performance in the second half of the year was impacted by delivery stops in connection with IBS, as well as the persistent subdued demand in China. As expected, Q4 marked an improvement on the Q3 result. Group revenues totaled 142.4 billion euros. The moderate decrease compared to 2023 was mainly driven by the decline in sales volume and intense price competition in the Chinese market. Earning before tax at group level amounted to 11 billion euros, significantly under 2023, but as expected in our adjusted guidance. This resulted in a group EBT margin of 7.7% for the year. If we look at the key financial results of the individual segments. Automotive delivered an EBIT of 7.89 billion euros and EBIT margin of 6.3%. Motorrad hit an EBIT of 198 million euros, representing a margin of 6.1%. Financial services saw an EBT of 2.54 billion euros and a return on equity of 15.1%. And finally, other entities generated €837 million in EBT, while elimination amounted to a negative €146 million. So, let's take a look at the automotive segment in detail. For the full year, BMW Group delivered 2.45 million BMW Mini and Rolls-Royce vehicles to customers worldwide. This represents a slight decrease of 4% from the previous year, in line with our adjusted guidance. Market dynamics in China remain weak, which impacted sales performance. However, the BMW brand achieved growth in every other major region. In Europe, order intake in Q4 improved month by month. In the US, we experienced a strong recovery from IBS in Q4 with growth quarter over quarter of just over 50% and year over year of 8.9%. Worldwide BMW Group sales performance in Q4 saw sequential improvement over Q3. Global deliveries grew by nearly a third quarter on quarter, including double-digit growth coming from the mid and upper segment together. All electric vehicles remained a key growth driver for us. BEV deliveries totaled over 426,000 units for the year, significantly above 2023 by 13.5%. Overall, BEVs therefore made up 17.4% of total sales. Our plug-in hybrid vehicles also remained very popular, with over 166,000 units sold in 2024. Electrified vehicles, meaning all electric vehicles and plug-in hybrids, made up nearly a quarter of total sales. Revenue in the automotive segment amounted to nearly 125 billion euros, a decrease of 5.6% from 2023. Earnings before interest and taxes reached 7.9 billion euros. This resulted in an EBIT margin of 6.3%, which was within our adjusted guidance corridor of 6-7% for the full year. Excluding the 1.3 billion euros depreciation resulting from the purchase price allocation of BVA, the automotive EBIT margin came in at 7.4% for the year. looking to the operating result in detail. Compared to 2023, EBIT for full year 2024 saw a tailwind of 1 billion euros from the net balance of currency and raw material positions. Year-on-year, the net effect of volume, model mix and pricing weighed on automotive EBIT. The headwind resulted partly from the volume decrease, particularly in China. Pricing headwinds, including the effects of a highly competitive Chinese market and dealer compensation in China, amounted to more than half of the overall decrease of 4.4 billion euros. The headwind of 1.4 billion euros from other cost changes was driven by inflation in material costs and supply chain support. The effect from warranty expenses was a tailwind year-on-year. Overall, lower additions to warranty provisions for specific topics were necessary in every quarter throughout 2024 compared to the previous year. An exception was Q3 due to the impact of IBS. For the full year 2024, the P&L impact of quality issues trended in a positive direction year-on-year, as planned. Our R&D activities and investments focused on our ongoing electrification and digitalization strategy across the entire portfolio. As anticipated, R&D and capital expenditure reached peak levels in 2024, both in absolute terms and in ratio. Group expenditure for research and development for the full year reached 9.1 billion euros. compared to 7.8 billion euros in 2023. The R&D ratio, according to the German Commercial Code, was 6.4%, 1.4 percentage points more than in 2023. Group capital expenditure totaled 9.1 billion euros and increased from 8.8 billion euros in 2023. This resulted in a capex ratio of 6.4% compared to 5.7% in 2023. As we begin to roll out models of the Neue Klasse, we will see a decline in R&D and capex. This means in both absolute and relative terms, back towards our strategic corridors of between 4-5% for R&D, and less than 5% for CapEx by 2027 at the latest. Turning to free cash flow. As you know, we steer this on an annual basis. Starting with EBT delivering a full-year result of 7.5 billion euros, working capital contributed positively with 200 million euros to free cash flow. Whilst inventory levels had risen due to sales stops related to IBS in Q3, we managed to successfully reduce stock by 5 billion euros in Q4. As a result, year-end inventory reached nearly the same level as it was at the beginning of the year. For the full year, the net effect from capital expenditure and depreciation reduced free cash flow by 3.3 billion euros. The development of provisions reduced free cash flow by 700 million euros. The position other reflects several positive effects, including interest received. In line with our adjusted guidance, free cash flow reached 4.9 billion euros in 2024. This is even after we invested 18.2 billion euros. 9.1 billion euros in capex and another 9.1 billion euros in R&D, paving the way for our future and demonstrating our financial strength. This strength is underscored by our automotive net financial assets, which benefited from the strong development of free cash flow in the fourth quarter. At year-end, the automotive NFA came in at almost 46 billion euros, which is around the same level as the start of the year. Moving on to the financial services segment. New business development in the segment remained robust throughout the year. A total of almost 1.7 million new financing and leasing contracts were concluded, a solid year-on-year increase of nearly 10%. Overall, new business volume even increased significantly by 12.5% to 64.5 billion euros due to higher average financing volume per vehicle. Penetration rates for lease and loan offerings rose by 4.4 percentage points, reaching 42.6%. Without China, the penetration rate was over 50%, with growth in particular in the US and the UK. Segment earnings before tax amounted to 2.54 million euros and were therefore significantly lower than the previous year, and this was mainly due to higher credit and residual value risk costs than in 2023, but well within our expectations. We continue to see gains from the sale of off-lease vehicles, yet at lower levels due to market dynamics. The credit loss ratio of 0.26% across the entire credit portfolio was well within our expectations and below industry levels. Return on equity for the full year reached 15.1% within our adjusted guidance range of 15-18%. Ladies and gentlemen, in our BMW Group Report, you will note that we have voluntarily adopted the full European Sustainability Reporting Standards for the first time as the framework for reporting all sustainability-related disclosures in our combined non-financial statement. The BMW Group only reports on sustainability topics that have been assessed as material, according to ESS. However, this does not mean that topics which are assessed as not material are necessarily less important. We view sustainability holistically and as a competitive advantage. That is why we disclose our sustainability performance to our investors and customers. You will note that the implementation of ESIS requirements has contributed over 100 additional pages to our report. Due to the company-specific materiality assessment, comparability between companies remains limited, even within the same industry. Indeed, it can be questioned how much value the additional scope and limited comparability offer to stakeholders. Accordingly, we welcome the proposed regulatory changes in the draft of the so-called Omnibus Package and look forward to the draft updates and reduced scope of the ESRS. Ultimately, we want added value for our stakeholders, meaning relevant and concise information. It's not just about reporting and compliance. One important element of our stakeholder orientation is our shareholder return strategy, which the BMW Group remains committed to. The Board of Management and the Supervisory Board will propose a dividend of €4.30 per share of common stock and €4.32 per share of preferred stock to the Annual General Meeting. This results in a total dividend payout of 2.7 billion euros. The proposed dividend for 2024 represents a payout ratio of 36.7%. This is within our long-term strategic target range of 30-40% and notably higher than the payout ratio in 2023. On January 2nd, we began the final tranche of our ongoing second share buyback programme, which should be completed by latest April 30th. This will conclude the second programme with 2 billion euros, more than half a year earlier than initially planned. By this point in time, we will have reduced a total of 47 million shares in circulation since the start of the share buyback authorisation in 2022. This corresponds to over 7% reduction in share capital. At the upcoming AGM, the Board of Management of BMW AG plans to propose an agenda item seeking a new five-year authorization to acquire Treasury shares amounting to up to 10% of share capital. You will have noted that we have made a step change in our approach since 2021. Starting in 2022, we added Share-by-Bags as an additional instrument alongside dividend payments. We have also increasingly used the range of dividend payout corridor. And we increased the share of automotive free cash flow distributed to the shareholders from the previous year's levels to almost 100% this year. So, let's move to the outlook for 2025. Looking to the market development, due to stabilising inflation and declining interest rates in many countries, we expect to see a rise in demand. So, how will the BMW Group sales performance develop this year? Given the robust economic situation, we anticipate a solid market development in the US In Europe, we do expect growth driven by electrified vehicles. The market dynamics in China, however, will remain challenging. For the full year, revenues per vehicle in the automotive segment are expected to be in the same range as 2024. Our guidance reflects the current status of our planning, including all the tariffs increases in force as of March 12, 2025. So what do we expect for our key performance indicators in 2025? Let me focus on selected guidance parameters. In the automotive segment, we are forecasting a slight increase in deliveries of BMW Mini and Rolls-Royce vehicles. In terms of profitability, the total impact of the tariff increases in place as of March 12th amounts to approximately one percentage point on the auto EBIT margin. As a result, the EBIT margin is now expected between 5 to 7%. Consequently, return on capital employed in the automotive segment should be within a range of 9 to 13%. In the financial services segment, we anticipate a return on equity of 13-16%. The Group's pre-tax profit is expected to remain at the previous year's level. Starting January 1, 2025, we have adjusted the outlook range for group EVT guidance and the existing bandwidth was just too narrow to reflect the underlying movements in the segments. For details, please refer to the glossary of the BMW Group Report. The full outlook for 2025 for all key performance indicators is also available in the BMW Group Report. For the full year 2025, we expect a free cash flow in the automotive segment of over 5 billion euros. Ladies and gentlemen, the BMW Group remains fully focused on achieving our short-term results without compromising our long-term strategic objectives. We remain committed to our long-term target corridor of 8-10% EBIT margin in the automotive segment. To that end, we are constantly enhancing our operational business to ensure we achieve our strategic priorities and optimize our returns. So, after the peak in 2024, we not only expect to see a turnaround in R&D expenditure and CapEx in 2025, but also a turnaround in operational costs. And here I mean a cost decrease in nominal terms, covering the effects of inflation. This will become visible over the course of the year. At the BMW Group, strong brands and emotional products have long built the foundation of our success. As the technological boost from the Neue Klasse across the entire portfolio, we look forward to seeing the benefits from our investments start hitting the road later this year. you

Ladies and gentlemen, growth and innovation. These are two of the main topics we will be focusing on this year. At the same time, we stand on the threshold of a new era. Late this year, we will launch our Neue Klasse, a project that is unprecedented in both form and significance in the history of the BMW Group. With the Neue Klasse, we will be turning the mobility of the future into reality. Driving dynamics, drivetrain, battery technology, operating concept, digitalization including AI. We have refined each of these aspects and in the case of design, even skipped a generation. In this way, we are redefining not only the BMW brand, but also the future of individual mobility. Standing here next to me is the BMW Vision Neue Klasse X. The serious version of this vehicle will kick off the Neue Klasse. Production will ramp up at our new plant in Debrecen late this year. And after that, the rollout will continue in rapid succession, including a sporty sedan at the core of the BMW brand in 2026. We are deliberately starting out in high-volume segments. We want our innovations to have a broad impact, not just in niche segments. Between now and 2027, we will release more than 40 new or updated BMW models onto the market, from electric to plug-in hybrid to vehicles with combustion engines. Each of them will have the DNA of the Neue Klasse. The Neue Klasse is BMW, and BMW is the Neue Klasse. The Neue Klasse is more than just a single vehicle. It marks the beginning of a completely new generation and introduces our technology boosters for the entire brand. Regardless of the drive technology, all future BMW models will benefit from the technologies of the Neue Klasse and, of course, also from the new design language. Allow me to share a few examples of our groundbreaking advances in technology. With a BMW panoramic iDrive, we are reimagining our typical BMW driver orientation. The all-new BMW panoramic vision is the centerpiece. And this newly developed head-up display projects content across the full width of the windscreen. Seamless integration of various display and operating elements enables a completely new level of intuitive interaction. From the launch of the very first model of the Neue Klasse, all future BMW models will come with BMW panoramic iDrive. The sixth generation of our BMW eDrive technology will make e-mobility even more appealing to our customers. The new BMW round cells promise 20% higher energy density, 30% faster charging and at least 30% more range. In certain models, even more. And within just 10 minutes, enough energy for another 300 kilometers can be recharged. For the first time, the Gen 6 high-voltage batteries also feature the latest 800-volt technology and enable bidirectional charging. And compared to the current fifth generation, we have reduced the cost of the new eDrive system by 40 to 50 percent on a comparable electric range basis. The electronics architecture has also been completely newly redesigned. Going forward, its four high-performance computers will control key customer functionalities. For example, driving dynamics, automated driving and infotainment. These super brains deliver more than 20 times the in-vehicle computing power than current systems. This makes our models future-proof for software and functional updates, as well as new AI features. We've also greatly simplified the electrical system, dividing it into four zones with intelligent control. 600 meters less wiring, a 30% reduction in weight and a 20% increase in energy efficiency are just some of the few improvements we will achieve with this. And of course, we are also harnessing technical opportunities to take driving dynamics to a whole new level. The BMW Vision driving experience showcases the potential of the technologies introduced in the Neue Klasse. We are pushing driving dynamics to its physical limits. This highly emotional driving machine will thrill more than just BMW fans. The VDX is the most powerful development prototype BMW has ever built. and we are using it to test our heart of joy, one of the four super brains in the Neue Klasse. We developed the software for the driving dynamics control system entirely in-house. This will be used in all future electric BMW models, setting completely new standards for dynamic performance and efficiency at the same time. It is hard to put it into words exactly how it feels behind the wheel. You simply have to experience it. Well, I guess you can't fake that kind of enthusiasm. Our board of management already had the chance to drive the serious version of the Neue Klasse. And let me tell you, we were all equally excited about the driving experience, but not just in terms of pushing the physical limits. Most importantly, we were deeply impressed by the added value our technologies create for our customers in everyday situations. This is truly the next level of sheer driving pleasure. Ladies and gentlemen, we first announced the Neue Klasse at our annual conference back in 2021. You remember. Today, just four years later, we are entering the final stretch. Standing next to me is one of the prototype vehicles we have been producing in Deppertun since late last year. What is still hidden under camouflage foil here will be unveiled at the IAA Mobility in Munich in early September. There, we will present the production model that will be available to our customers next year. I can already reveal one key detail to you today. This BMW will be released onto the market as the BMW iX3. This is how we continue the success story of the first all-electric BMW X model that has won over BMW fans worldwide since 2020. Testing of the new BMW iX3 is in full swing. These impressions show that the next BMW iX3 is a typical X model and a BMW through and through. As I'm sure you saw at the end of the film, the final phase of development for the sporty sedan, the second Neue Klasse vehicle, is also progressing rapidly. Ladies and gentlemen, what has always set the BMW Group apart is that we keep our sights set on operational performance in the here and now. At the same time, we lay the foundation for our long-term future success. We will continue to consistently pursue our BMW path with foresight, customer focus, self-confidence, and in the knowledge of our strength. We are ready, more than ever. Thank you very much.

So, ladies and gentlemen, now it is your turn. At 9 a.m. we will start with our first Q&A session for journalists, which will be held in German. An English translation will be offered through the streaming site and all members of the Board of Management will be available for your questions. The second Q&A for investors and analysts in English will begin at 11 a.m. For this session, Oliver Zipse and Walter Mertl will take your questions. Now we are looking forward to having you in our Q&A sessions shortly. Feel free to video call so that we can see you here in the room. We would appreciate if you already start dialing in. We will now get the studio ready and see you again at 9 am. Thank you very much.

Ladies and gentlemen, colleagues, welcome back. I would now like to introduce to you the members of our board of management, and I will start on my right. Milan Nedeljkovic, production. Next to him, Ilka Horsmeier, people and real estate. Then Walter Mertl, responsible for finance. To my left, our chairman, Oliver Zipse. Directly next to him, Frank Weber. member of the Board of Management for Development. Then we have Jochen Goller, responsible for customer, brands and sales. And next to him, Joachim Post, purchasing and supplier network. We will, of course, hear your questions here in the room. Of course, we're also happy to have you join us via video broadcast. Please use the raise hand feature if you have a question. Please also Note that your video is going to be visible on the big screen behind us until your question has been successfully answered. Once again this year, we have participants from all over the world joining us today, so please do understand if there are some small technical delays, possibly. Please also note that the Q&A is going to be taking place in German. Of course, we offer a simultaneous interpretation into English, so you're also welcome to ask your questions in English. Our board members will then answer in German, and again, you will receive the simultaneous interpretation of the answer. Now, that's it with my introduction. However, before we jump into the first question, I would like to hand over to Mr. Zipse, as he would like to comment on the changes in the Board of Management, which we announced yesterday. Oliver, over to you. Good morning, ladies and gentlemen. The announced change that we had approved by the supervisory board yesterday is something that, of course, Frank Weber is affected by, and I would like to thank him very much. It was an excellent process and a very trusting process, so I would like to thank him very much for that. Frank Webber and his entire development team for over four years now have worked on the Neue Klasse very diligently. And of course, the series production is now ready for showtime. And already today, we know that this is a quantum leap in BMW's technical development. Such an extensive program that impacts all technology clusters is something that today's competition doesn't have. Now, the car is fully developed. That is why, of course, the timing of this change for you, dear Frank, is quite perfect. And I'm really looking forward to the reigning weeks with you on the board and, of course, I'm really looking forward to the collaboration with Joachim Post as your successor and, of course, also with Nikolai Martin as the new board member for purchasing. But thank you again, Frank Weber. Thank you, Oliver. Frank.

Thank you very much, Max.

Now, just a quick comment on my side. I've been in the automotive business for 35 years, 14 of which here at BMW. And I believe I can say that it was always a privilege and a joy to take on these positions of responsibility because I was fortunate enough to take my passion for cars, my passion for technology, my passion for innovation and really live it. And I can also tell you that the absolute pinnacle of my professional career is the Neue Klasse. And then at the same time, it is also BMW's biggest project ever. Now, immediately after I joined the board in 2020, we decided together, the way that we're sitting up here, to tackle the Neue Klasse and with that, of course, develop a completely new and groundbreaking toolkit, and with that, generate something that is going to impact a whole new model generation, fully new technologies, a completely new aesthetic, and that for the entire product portfolio. Now, of course, we started with a blank sheet of paper, and I can tell you today that this future project, the Neue Klasse, is in its home stretch. And again, this impacts BMW's entire future journey. The pre-series vehicles are finalizing the testing. All in all, we did one and a half million testing kilometers. And in just a few months, we're going to unveil the series version of the Neue Klasse to the global public. With that, of course, we connect to the fact that now is the right time to clarify my succession. Now, as we always do this at BMW, we want to... set the right tracks for BMW 2030 early. And that's why I mentioned this to the supervisory and the Board of Management to clarify my succession early on. And we've had this final answer since yesterday. And I'm very happy to have my esteemed colleague Joachim Post and a real connoisseur of the E-Division and have him be my successor in my position. Thank you very much.

Frank Weber.

Right. And this will bring us to the Q&A session. The first question is from Christina Amann from Reuters. Ms. Amann, over to you. Good morning, Mr. Schirbel. Good morning, Mr. Zipse. Good morning, Mr. Mertl. I have a few questions. In your forecast, you mentioned that the tariffs are included with 1%, but only the tariffs that are in effect until two days ago. Now, of course, there's also a few other tariffs that are looming on the horizon, especially, of course, tariffs between the EU and the United States. Now, on the one hand, what would be the impact? What would be problematic? Higher tariffs? in the US for EU imports or the other way around? And can you already give us a rough idea of what it could mean for BMW if these tariffs materialize the way that they are currently saying, 25% for European cars. The second thing, the IBS brake topic was a big topic in the second half of last year. Is this topic fully finished or is there going to be an impact in the ongoing year? And the third question is on the China business. What are the impacts there? It didn't really go super well. When are you seeing any potential improvement? Thank you very much, Ms. Amann. When it comes to tariffs, I would like to break this answer up. First, Mr. Zipse could deliver a general comment on tariffs, and then Mr. Mertel. Oliver, please.

Good morning, Ms. Amann.

maybe just generically on tariffs. Free trade is the essence of a global business model. In today's interconnected world, especially, of course, on the technological side of things, you know, just think of the long supply chains for raw materials, the world is inextricably linked with one another, even though the final products may or may not be produced locally. So tariffs, tariff discussions, you know, trade wars harm everyone. Now, we do hope that soon everyone will notice. that there's no winners in such a situation. Now, we have taken a rather conservative approach and, you know, created these provisions amounting to around about 1 billion. So, again, it's rather conservative. But we also assume that all the tariffs that we have today won't remain until the very end of the year. Thank you very much, Oliver. Now, the second part on tariffs, Walter Mertl. And again, IBS is going to be taken care by Mr. Post. And then China, Jochen Goller.

Walter.

Yes, we dealt intensively with your question on the tariffs and the changing landscape. You know, according to our forecast, that we have included everything as of March 12th. That's the best that we can do. This is, of course, applicable. Of course, no one knows how long these tariffs will be taking place or will be in effect and how they will change to the positive or negative. And, you know, the one percentage point EBIT compared to the previous year would suggest that the tariffs stay in place until the end of the year. Ms. Amann, you also asked about potential additional tariff increases. Now, let me just Let me say the following. If instead of two and a half, all of a sudden we have 10 percentage points as imports tariffs, as of today, you know, in effect as of today, we would probably speak of another roughly half percentage point if this were to stick around until the end of the year. But again, we don't speculate about these tariffs. We keep a keen eye on it. We evaluate them. We have mitigation measures. And I think that's exactly how we should be doing it. But you have the forecast, including the 1%, and that's all the information we have at the moment. Right. Moving on to the brake system topic, whether it's fully finished or whether there's any other impacts. Joachim Post. Mr. Amann, thank you very much for your question. Together with the supplier, BMW has taken effective hardware and software measures, which have been made available for quite a while, for all the customer vehicles impacted. The technical action is carried out with the respective authorities according to our plan in the individual markets. Regarding the impact in 2025, I can tell you that at the moment we don't have any delivery stops because of the breaks, and therefore we can also operate our sales. trade and retail operation properly. Next question was on the China business and the impact of that in 2025. I would like to ask Jochen Koller to answer that. Good morning, Ms. Aman. Thank you for your question. The advantage is, of course, of a globally acting company that we can balance these regional volatilities. We grew a lot in Europe. We also really proved ourselves in America and rest of world. And therefore, we're able to compensate sort of several topics i think in china you know i don't really need to explain the market environment it's about consumer confidence it's about structural topics but we remain optimistic we continue to invest in china we have expanded our r d footprint and we are currently working on several measures with the team including restructuring of our dealership network there. And we're going to be launching 10 new models in China, including the ramp-up of our X3 long-wheelbase, which is, of course, specifically developed for the Chinese market. And that's why we would assume that we'll absolutely be able to stabilize the China business and then, looking at the Neue Klasse, actually get it back to a growth path.

Thank you very much, Ms.

Amann. The next question is from Markus Wasser, Handelsblatt. Good morning. I would like to continue talking about China because you are impressively stable in all of the markets. However, in China, you're just as under pressure as the competition. And that's why I would like to take a closer look at that. What has changed on a structural level? You're speaking of structural changes and also muted demand. one doesn't primarily have anything to do with the other, correct? So maybe you can give us an idea of the potential structural changes, and why do Western brands, and you as well, struggle so much with the Chinese competition? Maybe you can take us on that journey as well. And also, what are your answers to that challenge? Speaking of the restructuring of the dealership network, are you closing locations? What are you doing? What was the plan? And... Will the Neue Klasse be enough as a platform in China, or would you possibly also have to consider other pathways? Speaking of Audi, they are collaborating with a Chinese partner. Is that an option that you would also consider or would have to consider even? And then when will we see growth? in our sales or in your sales in China. Thank you very much, Mr. Fasse. I think this could be a long presentation on China by Jochen Goller. So we'll start with Jochen Goller and then maybe Frank Weber.

Right.

Like Mr. Schiebel said, I could have a rather long presentation, but I'll try to focus on the core topics. For one, the fact that in China the Chinese manufacturers are growing is nothing unusual. If you look at Europe and America, of course, even in those markets, the local and regional manufacturers are dominating those respective markets. So the growth of the Chinese manufacturers is nothing surprising to us. On the flip side, it's a market with 25 million units sold. And we also mustn't forget that in China we have a market share of 3 percent. You know, everybody's always looking at the relative sales that have gone down, but it is by far our largest market. And we also have 3 percent. We are the number one in the premium segment. I think you have to put it in perspective and see it in relative terms, structurally. What do I see with this? Of course, we see the consolidation of a dealership network, which is good, by the way, and it also has nothing to do with the BMW brand. It's just a general thing, number one. Number two, of course, the market in China is also... responding to the new energy vehicles, so the XEV, battery electric racks, and also plug-in hybrids. And therefore, we are very optimistic that both with the cars that we are now launching on the market, as well as with the Neue Klasse, we are going to hit that nail on the head and really tap into these market segments. And we assume that this year, together with the Chinese team, we are going to be able to consolidate our performance And like I said, this year we're going to be introducing 10 new models in 2026 and 2027. All in all, it'll be 20 models, including the Neue Klasse models that have been specifically developed for the Chinese market. And that's why we are very optimistic that on the one hand, we can rely on our strong performance in the ICE industry, market, which you mustn't forget. So we're expecting that we can continue this and expand our position in NEV or XEVs, as we call it in Europe. And then that will bring us back into a growth trajectory as well. Right. There was another question on the dealership sites, Jochen. Right. Our network strategies and the dealership strategies, we're not discussing those in public, of course. I think there's a healthy consolidation all in all on the dealership side across the industry. And I think this would lead to the fact that we have stronger groups being created in the midterm, and I think it's going to be good for the industry. Thank you very much, Jochen. Then we heard something on the Neue Klasse as a platform or potential other pathways for our technology.

Frank Weber.

Right. Thank you very much for your question. I would have answered the question in a way that the Neue Klasse represents a quantum, a technological quantum leap across the board. It's about the drive train, the digital architecture, driver assistance systems. And that's why we also don't believe it is necessary to look for an OEM partnership, because we believe that we are fully competitive with what we will offer in China.

Thank you very much, Mr. Fasse from Handelsblatt. And the next question comes by Wilfried Eckeldorner by Bloomberg. Good morning, everybody. I've got two brief questions. On the one hand, again, about tariffs.

Now, in Mexico, in your factory,

You do not comply with the US MCI requirements, which means you've got to pay higher tariffs already out of Mexico. Now, my question is, do you have any ideas to cushion off these tariff effects which are related to USMCA, which means to obtain or achieve that USMCA compliance, and how much would that cost? And the second question which I have is about the China business and also your sales expectations. Many OEMs and several competitors of yours also think about reducing their workforce, especially in China, where the market is not doing so well. Is this also an option for BMW, which you're thinking about, so to kind of shrink or even close factories? Thank you very much, Mr. Ekeldorna. Now, Mexico and USMCA, that's something for Mr. Nedeljkovic, our head of productions. Thank you very much, Mr. Ekeldorna, for that question. Now, as you know, our global value add is distributed across the global regions according to the markets and their sizes. So we've got a fairly strong footprint also in the American market. And our plant in Mexico, of course, ships vehicles through, yes, but also to other markets. And within our production network, we've got a high level of flexibility and the ability to exchange volumes and also change the mix. And that's why we now will also use our production network to mitigate potential tariffs, which we are going to face in order to try to compensate for them as much as we can. Now, regarding USMCA, looking forward, we also see an increasing potential for localization, which we are going to analyze very thoroughly and then decide what we want to do. Now, the second question of your question, Mr. Ekeldorna, was to reduce the workforce or reduce the size of the factories, and maybe that's a combination of Mr. Horstmeister and Mr. Nedeljkovic. Well, first of all, thank you very much for this important question, Mr. Eckeldorner. Let me give you nevertheless a somewhat more general answer, because that's so important in these days. Now, for everything that we are facing in the future, we need a highly motivated team that is willing to work hard. And that's we need to find a good balance in our HR policy between being an attractive employer on the one hand, where BMW is really one of the leading companies, and of course we also need strong performance of the employees and we need a resilience in our personnel structures and here the question is do we have the right employees at the right place at the right time with the right skills and i can tell you in the last couple of years we qualified and retrained a large number of our staff. You know that we invest more than 100 million euros in training and reskilling our employees. And therefore, we feel well prepared for the task we are facing this year. And that's why this year our workforce level will be on the same level as in the previous year, according to our expectations. And then last year, together with our negotiating partner in collective agreements, we reached an agreement on the benefits, the fringe benefits, which we pay in addition to the elective agreement. We compared this to our peers and made some adjustments. Profit sharing, Jubilee bonus and also Christmas bonus were modified to a certain extent. And these changes will become effective, fully effective this year. And then, of course, what's most important, last but not least as well, is flexibility and the ability to respond quickly and the genetic code of our production network already includes flexibility and ability to respond quickly and that also manifests itself in a large number of working time models and also working time accounts which we use intensely if there are changes in the production volumes And of course, we also use flexible staff, for example, to deal with specific peaks, for example, seasonal peaks. So we feel well prepared to be able to respond to these changes. Milan, you want to add anything to the factory structure in China? Mr. Eckeldorner, Ms. Hossmeier already indicated very clearly that our key strategy is based upon a flexible production network. And flexibility means technological flexibility, but also flexibility in terms of capacity. And that's why we also have flexibility modules in terms of workforce at all of our locations, which allow us to breathe in accordance with the volume of demand. And that's why no workforce restructuring plans have been developed for China. Of course, we do somewhat shift the workforce between individual factories, depending on their capacity utilization. And, you know, we've got a high degree of flexibility in Zhenyang, and thus we have a high degree of flexibility all in all. Then we've got the next question by Daniel Zwick from Die Welt. Hello and good morning from Berlin. I hope you can hear me. Yes, we can hear you, Mr. Zwick. Go ahead. And we can also see you, by the way. Hello. I've got questions about the political environment in Germany and in the EU. On the one hand, on the EU level, now, It seems that for the CO2 targets this year, there will be a longer period of transition, which is good for your competitors, but not even really necessary for you. So what's your view on this? And which expectations do you have regarding the ban on ICs 2035, which is going to be reviewed now? So what would be your expectation on this on the level of the European Union? And then secondly, in Berlin now, a new German government is being formed. And we do have some first indications from their negotiations that there's going to be a BEF bonus again and that the commuter bonus is going to increase as well. Do you think that's going into the right direction? I'd like to ask our CEO, Oliver Zipse, to answer both questions. Well, good morning, Mr. Zwick. You're quite right. There's an intense discussion in Brussels about the CO2 regulation in 35, 30 and 35. Now, one thing must be very clear. The introduction phase for the CO2 target achievement that has been extended by 2027 does not mean that it's going to be easier. It's like a banking system. If you don't achieve it in the first year, you can compensate for the next two years. But all in all, you still have to achieve that overall target. And that's why we at BMW are quite confident, no matter what happens, whether it's going to be changed or not, we will be able to achieve it. Nevertheless, it is not in our interest to see an influence on markets stemming from regulations, which would then result in a rag race, where in the 11th hour then some electric vehicles are pushed into the market. So that's why we are very much in favor of this transitional regulation. agreement, but that's not going to make it easier for all parties involved. And then your second question, what's going to happen in 2030 and 2035? Well, the easy exercise would be 25 to 27, because that's only 25 percent stretch in CO2 target achievement in the fleet. In 2030, it's already going to be 50 percent. And the markets in Europe, they are not that easy, although at the moment we are growing with our BEV share in Europe. You know our position on 2035, namely that technology openness is the only means to make sure that sustainability, CO2 target achievement, markets, and prosperity to achieve all of this at the same time. And for that reason, we are quite confident by now that the review that will now take place earlier, namely in 2025, now we welcome that very much, to get a path for 2030 and 2035, which takes sustainability into account, but also makes sure that the industry can operate in a sound environment. If that does not happen, then we must expect this industry to be reduced by 50% in the next 10 years. Your next question is about BEF incentives and bonuses. Now, we are against that kind of an incentive, because once you've introduced it, you quickly have to think about how you can remove it again. So that leads to a distortion in the market, because by its sheer design, it has to be removed at some point again, and that's something we are not in favor of. Now, the commuter bonus, which has a structural effect, now, that, however, we feel moves into the right direction, in addition to the subsidies for the charging infrastructure. Thank you very much. Now, we've got Christoph Rehmeyer from DPA with the next question. Good morning. Now, I'd like to bring the focus back onto the local scenery. I apologize. Now, the forecast at your workforce level is going to remain on the same level. Now, does this also apply to Germany? In your forecast for the U.S., you're expecting a sound and robust economic development. Now, they're the first experts, however, who say that the back and forth that is currently happening there might also kind of erode consumer confidence and massively impact economic development. How high is that risk in your view? Thank you very much, Mr. Rirmai. Well, that's not just local. I mean, the German market is for us just as important as all the others in the world. So first, workforce forecast for Germany. That's a question for Ilka Horstmeier. And then secondly, U.S. robust development. That's for Jochen Goller. Now, the simple answer is, yes, this also applies to Germany. But let me once again emphasize at this point that within BMW AG, and especially in Germany, we have consistently started restructuring our workforce. We also reskilled people, and we... bank very much on training in the future as well. And this year, once again, 12,000 apprentices will start their apprenticeship with BMW on September 1st. And that's a very important pillar which we invest in, and especially here in Munich, where major modification is progressing. And here we need qualified and highly motivated employees in order to face exactly these challenges. Thanks, Ilka. And now the question on the U.S., Mr. Zipse, has been to the U.S. recently, and we had a good impression of the U.S., but Jochen Goller can certainly elaborate on this a bit further. Yes, happy to do so. Now, first of all, the U.S. business, we performed very well there also last year, and this shows that our model policy is well received there. You know that our biggest plant worldwide is in Spartanburg with a large footprint, and our standing in that market is extremely good, which we also see in our sales numbers. In terms of sales last year, we had a good start into the year and we now will ramp up the new X3. Yes, of course, we also read the newspapers, but I can tell you, order intake, dealer confidence, all of these are very positive criteria and that's why we expect a robust demand. And with our model portfolio, of course, we want to benefit from this in an above-average manner. All right, thank you very much. The next question is by an English colleague from Wall Street Journal, Stephen Wilmot. Stephen, please.

Hello there. I just wanted to get a couple of clarifications relating to some of your comments on tariffs. Firstly, you've already spoken a little about the possibility for USMCA compliance. I think your board member for production said there was a potential for localisation that you were looking into. I just wanted to understand exactly what you're referring to. Is that the localization of drive trains to meet local content requirement or the further localization of final assembly. Can you just clarify that? Secondly, when you talk about the one percentage point hit to your automotive operating margin from the tariffs in place as of this week, are you assuming that the 25% tariffs on Mexican production continue beyond this month? Are you assuming that lasts the whole of the year, for example, even though the arrangements are likely to change in April? I just wanted to understand how that kind of guidance is formulated. And thirdly, a more general question. The three series was, which is obviously made in Mexico, among other places, it was historically a really key product for you in the US and remains a key product for you globally. It's diminished in popularity in recent years. Is that because of the SUV trend in the US or is that something else going on? Perhaps you could just speak about the 3 Series as a kind of icon, I guess, in the US and globally.

Thanks, Steven.

Now, just for a sequence, USMCA, that's for Milan Nedeljkovic. And then we'll talk about tariffs once again. That's a question for Mr. Merzl. And the third part of your question was about the three series, Mexico. That's for Jochen Goller. So Milan first, please.

Thank you very much, Mr. Wilmots, for your question. Please, I'm sorry if I gave you an answer that wasn't very clear. Now, looking ahead, even in North America, we are driving electrification. With the electrification, of course, it's also about taking battery cells, high-voltage components and other components, and localizing them in the Northern American room. These potentials are, of course, getting us closer to any potential USMCA regulatory elements. If that is enough or if any additional steps would be necessary, we'll see in the future. Thank you very much, Milan. Walter. Mr. Hello. I would like to point you to page 261 in our forecast report. Yes, we assume that, as it says on the forecast, that until the end of the year, all tariffs as of this week will be in place. However, we also wrote that it could change at any given moment. The percentage point that you mentioned, the change of the one percentage point, assumes that anything that was in place as of March 12th will remain until the end of the year. If it changes, that percentage point will also change. Yes, this was page 261 in the report. Page 261 in the report outlines this in more detail. Excellent. And part three was the three series. It's a very meaningful and important product in the United States. SUV trends and which role the three series plays in the United States. I would like to ask Jochen Goller to speak on this. Right. So the three series is and will remain, of course, the core of our brand. And if you calculate the 3 Series, of course, also the i4, which is basically also our flat BEV, and the 3 Series Touring, we are very happy with the performance. Of course, we do see sort of a trend from sedans to SUVs all around the world, that is. However, our 3 Series is really proving itself at the market. And Mr. Zipse was also saying today that... The first car of the Neue Klasse is going to be our iX3. And we also showed you a flat concept car. So in the next 12 to 18 months, you can expect some surprises in this segment. Thank you very much. That was Steven Wilmot from the Wall Street Journal. Next question is from Henning Hintze, Manager Magazine. Right. Good morning. I have noticed that you are very much speaking about the reduction of investment, R&D, CapEx. However, I haven't heard too much on growth plans because the uncertainty is what it is. I would like to understand whether you see it in this way that BMW is maybe facing some sort of a dry spell, that growth is a bit uncertain, and that's by investments and costs being reduced as much as possible. And I would like to know specifically whether 3 million cars until 2030, if that's still the goal. And if I understand correctly, in BEF sales, 70%. You're a little bit behind what you said in Munich. I think Malte Mertl said it in Munich, 20% he said initially. Maybe you can comment on this. And then maybe another question to Joachim Post. We see some sort of a technological development that has now finished, also regarding the investment cycle. So what is the technological task for your time in the board, in the new position in development, and how long will that last? Right. I would like to say one thing. Of course, we have a board member for development. This is going to be his remit. He's going to answer that. What Mr. Post is going to do, he can answer later. But we'll definitely start with the first part. This was about investment, growth plans, etc. And I would like to hand over the floor to Mr. Zipson. Mr. Hintze, good morning. The Decline of investment from this absolute peak doesn't mean that we're facing a dry patch. It just means we are done with the investment, right? We've finished it. And of course, we spoke about the Neue Klasse, which, by the way, we're very excited about. And nothing's changed in this regard. Why are we doing the Neue Klasse? It's because we would like to grow. We want to grow around the globe. And if you look at the world, if you look at it in more detail, if you look at the numbers and if you ignore the break issue from last year, which, of course, had a huge impact, and if you look at the individual markets, we grew everywhere, everywhere in the world. And you can, of course, also see our very wide-ranging product portfolio, five brand-new minis, the new iX3 just coming on the market. And all the other vehicles are basically in the market. The X1, very successful, the X3, by the way, has ever-increasing incoming orders. You know, this is all pretty much hitting the target. So, the plan is not really changing. So, again, you have to kind of ignore the break issue. Now, we spoke about China. We spoke about the challenges. I don't need to rehash that. But it means that BMW is on a growth trajectory, especially because of the fact that next year we will have the neue Klasse.

Right.

That's that. That was growth. And then the technological tasks for the future. And again, I would like to first call upon Frank Weber. Thank you very much for your question. Technology leadership is something that is essential to BMW's brand. And our approach, if you look at what's coming our way, what we want to do is, of course, more efficient dynamics, more digital, more autonomous driving, more intelligence. And I think that's also the easy summary of, you know, what the challenges are going to be for my successor. And the technological development is only going to expedite. It's not going to slow down anytime soon. So I think that is going to be a big chunk of the challenge. Right. And then Jochen Goller, because it was a short comment on BEF sales that have gone slightly down. What the outlook is there?

Jochen.

Sure. I would like to differentiate between an absolute and a relative performance? You're correct. Absolute numbers, yes, we are below what we wanted to do, but relatively speaking, we actually further increased our lead to the competition. We grew across all global regions. We have more than 50,000 electric vehicles that we sold in the United States, far, far more than our competition, over 100,000 electric vehicles in China. So, yes, you are correct, absolute numbers. We wanted to achieve more relative numbers. I believe we dominated the market. And that is before the Neue Klasse. So I believe this was a really good performance. And we're really looking forward to the next two years and the great electric vehicles that are coming our way. Thank you very much. Henning Hintze from the Manager Magazine. We have another question from an English colleague. This is from FT, Patricia Nielsen. Over to you.

Good morning and thank you for taking questions. Another question on tariffs, I'm afraid. I just wanted to ask, could you please clarify when you talk about tariffs as up to 12th of March? My understanding is you're talking about US tariffs on steel and aluminium, early Mexico tariffs and EU tariffs on imported electric vehicles from China. Is that correct? And could you guide on sort of what is the most significant tariff here? My second question is also on forward guidance. You mentioned that supply chain costs will be an issue this year. Can you give a bit more detail as to what you mean? Is this mitigating impact of tariffs? And what concrete steps are you taking? Thank you very much.

Right. We will start with Walter Mertl first, and then Joachim Post. Good morning, Ms. Nielsen. Now, up to and including March 12th means that we are taking into account the tariffs for our import from China. This is a mid-triple digit million euro amount. We are also taking into account the tariffs from Mexico to America. This is also a triple digit million euro amount. Aluminum is also affected by this. This amounts to a high double-digit million-euro amount. The same is the tariffs between China and the United States and between the United States and China, so the other way around as well. This is also a low triple-digit million-euro amount. Right, and the second part was on the cost of the supply network and which impact the terrorists would have here. Joachim Post. Ms. Nielsen, thank you very much for your question. As you heard before, We are following a local approach with our production across the different regions. We're following where the markets are. The supply chain follows production into these markets. And therefore, of course, with our local for local approach, which also applies to the supplier network, we generally have very good preconditions to tackle these topics and mitigate such effects. Of course, we evaluate on an individual basis what impacts the tariffs have. And we have the individual opportunity to take a global supplier network and be flexible around the globe, and in an individual case also optimize costs and potentially even avoid tariffs where we can. Thank you very much. The next question is Frank Volk, Automobilwoche. Mr. Volk, are you with us? We cannot see you. Ah, here you are.

Yes, now we can...

Now we can hear you. Thank you very much. I have three questions. One of them is a bit longer, dealing with the Neue Klasse and two short follow-ups. On to the Neue Klasse. How long was the development time for the Neue Klasse? Can you tell us a bit more about the capex and R&D spent for Neue Klasse? And would you say that the solutions you have now achieved both on the technical side when it comes to digitalization and efficiency and the general pace of development that you are now on what I would like to call China speed. This is one of the topic one of the big topics because of course they have these very short development cycles. So are you on Are you on eye level with China? And then the last very short question. The big topic in electromobility, of course, is China. Why don't you start the Neue Klasse in China? And then the two other questions. You didn't speak much on MINI, Mr. Zipse. You mentioned that there are big expectations with the BEV models coming into the market. Now, you said that the BEF production in Oxford is currently on pause. Why is that? And when will you continue? And then in the report, and this is my third question, in the report, it says that there are significant expenses for the supply chain support. What's the situation there? Are you expecting potential bankruptcies in the supplier network? Because, of course, the situation of the suppliers is relatively critical across different areas at the moment. So are you expecting any closures, any defaults with your core suppliers? And how are these needed supports going to develop this year or maybe even next year? All right, thank you very much. I hope we can answer all of these questions that you just sent our way. We're going to give it our best shot. First off, the big complex of the Neue Klasse. Of course, Frank Weber is particularly prepared for that. How long was the development time, CAPEX, R&D? Is everything satisfying? Why not in China? And so on and so forth. So I would like to hand all of this over to Frank Weber. Frank, over to you. Thank you very much. I will give my best to give you a short answer. First, it took us almost two years that we took out of the development process. And you have to always consider the Neue Klasse is not a car in the sense of the word. It is a complete technology toolkit, if you will. that is going to be used for the entire BMW portfolio. So we're always focused on the fact that we create solutions, not of individual components in individual cars, but instead take something that we can slot into the overall BMW system. So I think the speed with which we created these truly groundbreaking toolkits are absolutely impressive. And we said many, many times that the investment and the development performance that was brought into the Neue Klasse are and were the biggest across BMW's history, which is necessary because, of course, as you mentioned, you can see that technology governs your competitiveness. I am very optimistic, but I hope that you do understand if I don't break down the numbers in detail, this could be a competitive issue. Now, A few numbers, though. Digital means four super brains, four supercomputers that are largely developed and produced in-house, 20 times more performant than what we're using today. And on efficiency, I kept saying efficient dynamics is BMW's core domain. And with whatever is coming this year, we will be able to withstand any comparison with our efficient dynamics. We're happy to go toe-to-toe with any competitor, and we are going to have more than 20 percent increased efficiency compared to what we do today. Last question that I would like to answer. What's happening in China? And you, of course, know BMW well enough for that. We are not starting here and there. We're always starting globally. This, of course, is on purpose, and that's why China is not less important, just because it's coming 12 weeks later. The Neue Klasse, of course, has a global SOP. The second part of your question was MINI, a very important brand for us, of course, and I would like to break this down into two parts. Number one, Jochen Goller and Milan Nedeljkovic. Jochen, maybe you can give a general take, and then, of course, production, Oxford. This would be going over to Milan.

Good morning, Mr. Volk. On the MINI. Now, last year, we switched to new models for all of the MINI models. We've completed that. And in March, the convertible is going to be launched. And then we will have five outstanding models. And that's why we're very confident about MINI's growth this year. The feedback that we are getting on the new products is excellent, including our electric models. And that's why... Just from the point of view of sales and the brand, we expect that this year and also in the years to come, the MINI will perform very well. And regarding Oxford, I'd like to hand over to my colleague. Yes, production Oxford, BEV, Milan. Well, production follows the markets. And as you know, the new generation of ICE engines has just been launched in Oxford. And our plan is to take... and localize the minis that we are manufacturing in China with a joint venture. Now, with the ramp-up of electric mobility being delayed, we, of course, are also somewhat more slower with our investments in Oxford. And then was the last question about how to support the supply chain. Do you expect any insolvencies of core suppliers? Mr. Post, please. Now, as you know, numerous companies are facing a challenging environment in which they operate, and some companies do have a need for restructuring to improve their competitiveness and their productive excellence. Now, we keep a close eye on our supply chain, and we monitor their situations very closely. And we've got various tools allowing us to respond quickly if that's necessary. And so far, we have not had any production stops. And we believe that we can mitigate such things beforehand through respective measures. But we'll continue to keep a close eye on this to ensure that this remains so in the future. This brings us to the last question by Lutz Meyer from Capital. Well, thank you very much. I hope you can hear me. Yes, we can hear you. So thanks a lot. Once again, I've got two questions. The first one is about the CO2 limits. Now, Mr. Goller said... that the rat race will, especially towards the end of the year, will be somewhat slowed down. Now, to what extent have you already seen pressure in the market from your European competitors? And that new regulation that has been announced by Ms. von der Leyen, what would this mean for your own best share? taking especially into account that you had already been close to complying with the requirements in the first place. And my second question is about battery supply in Europe. And I'm asking this also in the context of the North Volt development. Now, what's your view on this? Does Europe need its own battery production and supply? Has this become more difficult? You never became involved in cell production yourself at all, but maybe you're also interested in a diversity of suppliers in this segment. So to what extent should Europe try to ensure that Europe has got its own independent cell production in the future as well? Thanks, Mr. Meyer. Now, I suggest that the first part is a question for Mr. Zipse and the second part for Oliver Post. Good morning, Mr. Meyer. Now, back again to the CO2 fleet targets. Now, we would have achieved them anyway in the years 25, 26, and also 27. So, for us, it does not make a difference. And it's not that simple. It's not only a relief for 25. Because if you don't make it in 25, you still have to do it in 26 or 27. So it's not so easy to achieve that if, structurally speaking, in terms of your architectures and your markets and in terms of your capacities, if you're not prepared in that regard. So it's not going to be that easy, but we are currently not very much worried about that. However, I caution against subsidies distorting the markets. That would be a very dangerous undertaking. However, now we have also to look forward to 2030 and 2035. And we will fight for technology openness. Why do we do so? Because the investment behavior of the European and global supplier industry is already looking at 2030 and 2035. And there's one thing that must not happen. Namely, even before the regulation becomes effective, we must not shut down certain technologies. That's why we are very much in favor of this early review. Thank you. And the second part of your question was about battery supply and battery production in Europe. Now, generally speaking, in order to grow in e-mobility, Europe needs a local well-functioning battery supply chain. However, one has to acknowledge that the lead which suppliers from China and South Korea have is quite substantial. And here I'm not talking about developing battery cells, but I'm talking about a highly efficient production which is able to manufacture battery cells at a top quality at relatively low costs. So that's a challenge, and of course, That is something the strategy for e-mobility in Europe has to take into account, because that did not happen overnight. So the proper environment for investments in Europe has to be created in order to incentivize companies to localize such production facilities in Europe. This is certainly much better than trying to impose bans or tariffs. And therefore, Europe has to make sure that it creates this kind of conducive environment. Thank you very much, Mr Joachim Post. Ladies and gentlemen, dear colleagues, this brings us to the end of our press conference. I'd like to thank you very much for your attention. Thank you for having joined us and for having asked your questions. Stay tuned, and we will continue to work hard at BMW. Best regards from Munich, and servus.

Good morning, ladies and gentlemen. Welcome to the 2025 BMW Group Annual Press Conference Analysts and Investor Call. I'm delighted to be here today. My name is Ritu Chandi, Corporate Treasurer and Head of Investor Relations for BMW Group. and delighted to be joined by our CEO, Oliver Zipzer, our CFO, Walter Myrtle, and given the dynamic sales developments across our regions, our board member for Customer, Brand and Sales, Jochen Goller. You've heard from Oliver earlier how BMW's robust strategy and technology openness, attractive product portfolio, and a resilient global footprint allows us to forge our own path, as well as setting new paradigms when it comes to tech design and user experience with the Neue Klasse. Walter has shared how we've navigated 2024, closed the year and delivered on all our guidance parameters, updated guidance parameters, despite the IBS headwinds and subdued China situation. We have also provided a comprehensive and reliable guidance for 2025, factoring in all known and decided aspects of uncertain geopolitical backdrop and tariffs. To start off, I believe you all have the technical instructions for the analyst and investor call. And to get this call started, we have the first question from Patrick Hummel, UBS. Good morning, Patrick. Please go ahead.

Good morning, and thanks for taking my question. Good morning, everybody. If I may, I will have two questions for you. My first one is in regards to your capital allocation. I think it's well appreciated you're increasing the payout ratio for 2024. But you've also talked in a quite bullish manner in the past few months about the upside to capital allocation. Now, the formality is to get the AGM approval for the 10%. share buyback. But of course, I think what we and many investors were hoping for is to get a bit more granularity how the actual cash return in the next couple of years is going to look like. What's the run rate of share buybacks? Is it going to accelerate? from the one billion per annum level or is it going to remain at this one billion per annum level and why did you not decide in favor of increasing the payout ratio i'm just wondering uh with the free cash flow guidance you've put out i mean you did five billion almost five billion last year you got for more than five billion this year um You don't want to build on your net financial asset position. That was my understanding, at least. So why haven't you just provided a framework for more generous cash return? That's my first question. And my second question, I just want to hear from you. Yesterday, there were the news out about Frank Weber's departure. I'm well aware of the age limits, but it's nonetheless quite unusual just ahead of Neue Klasse, which I guess is the biggest project in the company's history from an R&D standpoint. You execute such a management changeover. If you can just give us a little bit of background on that decision and the timing right now. Thank you very much.

Thank you very much, Patrick. We'll start with the first question on capital allocation, payout ratio, share buyback run rate with Walter. Over to you, Walter.

Good morning, Patrick. So you are well aware of our capital allocation strategy. So we utilize our 30% to 40% corridor for our dividend payout. And just let me underpin that our new dividend payout ratio is the highest ever we utilized. plus optionally, of course, share-buy bags. You see that since 2022, we are utilizing our share-buy bag program, also despite the fact the pace eventually has slowed down the last two years. First one, we've been quite fast, and the last one was also then finally, by end of April, half a year earlier finished than eventually announced. Now, with respect to our HEM proposal for the next preparation of the 10% for the next five years. Well, we will not announce and request another AGM approval for share buybacks if you're not starting it. And we will then start the program three in time, and you will get all the details of run rate, et cetera, at the time of the announcement. With respect to free cash flow, the five billions be guided for 2025. We generate then cash return and the limit is, of course, still free cash flow. And how much we pay out as a dividend in 2026 for the year 2025 will be announced in 12 months. Thank you.

Thank you very much, Walter. And now to your second question on Frank Weber and the background on the management decision. Oliver Zipser, please.

Hello. Good morning, Patrick. As Frank said himself this morning, the timing is actually perfect. And as you know, BMW, our strategy for putting talented into specific positions is always long term. And it's planned. It's no surprises. So the timing of Frank's departure end of May is actually perfect because the serious development of the Neue Klasse is finished. Now we have to launch it and we have to bring it to the market and convince customers that this is a very good buying decision. So a new era is coming now. And actually, it's from my point of view, having worked with Frank for the past five years on developing the Neue Klasse is actually perfect. And I feel very comfortable with the view to work now with Joachim Post as the new director for R&D and also bringing Nicola Martin into the board. I look very much forward to that and it will give BMW even more stability.

Thank you very much, Oliver. Thank you, Patrick. We will now move to our next caller, Jose Asmundi, JP Morgan. Good morning, Jose. Please go ahead.

Good morning. Good morning. Thank you very much for taking the question. A few questions, please. Maybe the first one for Jochen. Can you talk a little bit about how has the competitive landscape changed in China since you were there? And what are the key product launches that you're looking forward to launch? in 2025 to maintain that market share and sales momentum in the region. The other two questions go to Walter and to Oliver. When I look at the margin guidance or the margin trajectory in 2024, there were a couple of things that surprised me. I think one was the declining sales we had in China, particularly in the first and second quarter of 2024. And the second was the recall on the break topic. So on the first topic, Walter, are you looking for a stabilization of sales in the Chinese market in Q1 and Q2, sequentially versus Q4 in your budgeting? How do you think about China in that sense? And then second, Oliver, on the recall, what have been a little bit the lessons learned in 2024 when you think about your quality control and your relations with your suppliers. Thank you.

Thank you very much, Jose. We'll start with Jochen, please, with regards to the competitive landscape in China and our product offensive. Thank you, Jochen.

Yeah. Well, good morning, Jose. So let me first maybe just refer to the global perspective. And as a global player, that's a benefit that we have four regions and we're able to buffer in a way volatilities across regions. And as you as you have seen from the numbers, very strong in Europe, very strong in US and especially also strong in the rest of the world, meaning we are able to cover some of the impact of China market, number one. And that is, of course, something which is the strength of BMW Group. Secondly, when you look at the Chinese market, it's quite complex. You have some external impact, for example, consumer confidence, and you also have some industry impact. Let me first say the fact that Chinese players are taking a higher market share in their own market should not come as any surprise. And we have always foreseen this because when you look at Europe, European OEMs are dominating and in the US, of course, the US one. So the fact is known and has been factored in. China market is very big. You talk about 25 million units per year. And even if, let's say, there's a 20-25% share, for European manufacturers. You're still talking about a huge amount of marketplace, number one. Number two is what you see is, of course, on the one side, a restructuring of the market, strong growth of new energy vehicles comprising of fully electric and plug-in hybrid and REX cars. and as well as of course consolidation of the dealer network structure. So therefore our outlook for China is we are working heavily intensively with the team. I've been over a few weeks across January. I'm going to go the next week and we're working very closely on a lot of measures including restructuring our dealer network. At the same time this year we're introducing 10 new models in China and in 26 and 27 another 20. So the good thing is that we are really at the start of our what we call model offensive and therefore we're quite confident that we're able to stabilize our business in China and of course with the launch of the new cars are able to return onto the growth pace. And for example, we just started a few weeks ago with the launch of our brand new China X3 long wheelbase. And the incoming order intake is very, very promising. So I think the market is restructuring. I would say we were prepared because we also have offers in all segments. You know, some of our competitors, they only have electric cars. But there is still a 50% market share of combustion engine cars in China. And maybe it's 40, and maybe it's 30, but 30% of 25 million is still a huge marketplace. And we are able to offer very convincing products in the combustion engine segment, very convincing products in plug-in hybrid, and with the Neue Klasse over the next years, We are also able to compete. So in a nutshell, yes, at the moment there are many, many impacts we have to face in China. We will consolidate the business and I'm pretty sure with our technology open approach that we will be one of the winners of the Chinese markets in the years to come.

Thank you very much, Jochen. Moving to your second question, Jose, specifically margin guidance 2025, expectations regarding the Chinese market development in the margin guidance for first half. Walter, please.

Hello, José. So in our guidance, you, of course, raised the question, what's included? We assume China flattish. And we assume also that the first half year is running more or less on the run rate of Q4. Last year in 24, we had still a strong Q1 in China. And in Q2, it started to get impactful and then peaking in Q3 with our IBS issue. And based on that one, finally, we had to go ad hoc on September 10th, ending with two core reasons. One was IBS in 24, and the second one was also that the market dynamics in China was different than we expected in July. 24. So that means ultimately for our guidance, run rate on Q4, 24. Also for the first half here, flattish volume in China. Thank you.

Thank you very much, Walter. Jose, to your last and final question, IBS recall, lessons learned and relationship to suppliers. Oliver, please.

When we look at the supplier landscape, which is a global one, As we all know, a lot of things are changing. Raw materials, refined materials, stability of suppliers, quality issues. We put a lot of effort to keep the quality promise. And even with the IBS, with the integrated brake system, there were no cars going out to customers which affected their driving abilities. So that is why we had the effect, because we simply kept the cars back. The flexibility with which we reacted to this circumstance, I think it's also a strength of BMW. Now, in March, we are not affected anymore of that issue, despite the size of the problem we had. We lost about 100,000 units last year, as you know. But we have the ability to react quickly. We created even more transparency about our supplier landscape. And quality remains always at the heart of BMW, and that is a promise.

Thank you very much, Oliver. We're moving on to Tim Rocosa from Deutsche Bank. Good morning, Tim. Please go ahead.

Yeah, thank you very much. And thank you very much for taking my questions. I have two, please. The first one is on the margin target as well. When we look back at the Mercedes capital markets, there was a lot of focus on costs. We didn't hear much on that from you today. You may say you have costs well under control always, but actually 5% to 7% margin is obviously not really your midterm addition. And the biggest potential hit from a tariff side, EU into US, is potentially still outstanding. China is not really improving. So what are you doing on the cost side to mitigate this? Would there be a proper update on that also from your perspective? And related to this, Walter, How should we think about the margin development this year? Will it be a softer starting Q1 and then slowly progress? Very strong Q4 finish. What is your thinking on that side? And then secondly, I guess, Oliver, to you, how should we think about the future for BMW in the world that gets smaller now? You've always had a very strong local for local approach, much stronger than some of your peers. The market really liked you for your ability to faster adapt to a changing environment. and show more stability. Now you also got pretty hit hard by a supplier issue, by the Chinese market development, by the tariffs, and the world doesn't get any easier from here. How should we think about you bringing back BMW to this reputation of being much more agile in a more dynamic environment than some of your peers, especially from a KPI perspective on the financial side? Thank you.

Thank you very much, Tim. We'll start with Walter first with regards to margin guidance 2025, cost structures and the quarterly development. Thank you, Walter.

Hello, Tim. So I guess as you certainly read our page 261 of our prognosebericht, I assume, you will certainly have noticed that we are one of the only ones who precisely wrote which terrorists we included, ending with all the classification and assuming in our prognosis this would last until end of 25, with this more or less 1% hit in our EBIT margin. Others didn't do so. So, and of course, I also would like to underpin, we said, given the volatility of the geopolitical situation, it is of course possible that tariffs may be reduced or further increased. But just in time, that's it. So that means without all these tariffs lasting currently, we would have got at 6% to 8%, right? So it's just the other way around. That's the first comment I would like to do. The second one, of course, with respect to cost, of course, we are not making... a big thing out of it because we are just doing it consistently and constantly on all relevant parameters, whether we speak about material cost, direct cost, costs in the budgets, capex, you name it. And we also highlighted that 2024 was the peak year of not just R&D and capex, but also of operational costs. And I mentioned in my speech that you will see also the turnaround on operational costs in the quarters to come whenever we report them. So we have a lot of line business functions who have their targets and they do know what they have to do. And by the way, it was always planned that way. We had the setup of the Neue Klasse. For the last two years, we're working to it. And that's why we also communicated two years ago already that 24 will be the peak year of CapEx and R&D. We didn't speak so much about operational cost, but that's, of course, the point. And with it, you will see that we will turn around also on the cost side. So that's... Our promise with respect to the margin development, you do know that we are not guiding on a quarterly basis. But of course, I assume it is softer than in previous years, certainly because we have guidance which is lower than previous year. Absolutely right.

Thank you very much, Tim. And your second question with regards to the future of BMW. I guess this could take a while. But Oliver, to respond to Tim's question on the future of BMW, supply landscape, geopolitical headwinds, please.

Tim, you asked the resilience question. To begin with, nobody is safeguarded of singularity events like with us last year, the break. You just have to flexibly deal with these issues. But if you take that away, all the resilience we've built into the company proves that we are on the right track. First of all, technology openness. We're not depending so much on singular drive train developments in different markets. Look what is happening in the United States. Look at the NEF development in China. Just for example, we sold more than 100,000 BEFs, which are NEFs cars, in China last year. we can react very swiftly on different markets developments, as you see also in Europe. So this gives us resilience and stability. The second one is the global aspect, which is not a global aspect in itself. It's the sum of local for local footprints we have. Let's take the tariffs from the United States. 50% of the sales volume is built in the United States, which is not... targeted or which is not hampered by the tariffs, you know, which gives us again stability and resilience. And furthermore, you have to be an innovation leader. With the Neue Klasse coming up, as Frank Weber mentioned before, it will be in many respects, it will be a benchmark in the industry. We're not just catching up or something like this. This will be in terms of range, in terms of user interface in terms of digital performance, it will be a benchmark in this industry. Also, that gives stability because it's not only new tech clusters for the electric cars, it will be for all of BMW. So if you ask that resilience question, we feel even more because we see these rapid changes in the environment, we feel even more safeguarded with what we have built in the last years.

Thank you very much, Oliver. We'll move on to our next caller. It's Stephen Reitman from Bernstein. Stephen's joining us on audio only. Stephen, please go ahead.

Yes, thank you very much. I have a couple of questions, please. First of all, maybe technically, obviously a lot of impressive detail about the Neue Klasse today. Can you comment a bit more about the cadence of the launches? How quickly will you be ramping up production at Debrecen? Obviously, you're in the pre-production phase at the moment. And also then in Munich as well in 2026 with the second vehicle. And could you comment on how we're going to see R&D costs develop, particularly in terms of capitalization versus amortization? With the acceleration, obviously, the amortization as the vehicle now actually gets to be commercialized. My second question is a more general one about the United States. Your principal plant, Spartanburg, South Carolina, is in a very red state. I think it carried the Republicans by about, Trump carried about two-thirds, the one-third. How are you able to communicate that? the impact of policies on the state level about what's going on in terms of tariffs and these other kind of policies and how it's impacting your business and potentially impacting employment that is obviously hard to talk for in the states as well. Thank you very much.

Thank you very much, Stephen. We'll start off with your first question with regards to the ramp up of Neue Klasse with Jochen, please. Jochen, over to you. Yeah.

I think I would start and then maybe Oliver, if you'd like to add a few things. So in terms of market introduction, I think it will be rather quickly because Neue Klasse, very important, is not a car. It's a complete family. And so we're going to start by the end of the year with the start of production and the first introduction of our iX3. And then within only two years, we will have six Neue Klasse models on the market worldwide. Indeed, we will start here in Europe. But very quickly, we will also bring Neue Klasse to our markets, US and China. So, first of all, by the end of the year, we will press the button. Next year, you will see the iX3 in all our markets. And then, as I said, within only two years, a family of six. In addition, of course, to other cars. So we must not forget that we are technology open. So very important is at the same time, we also introduce brand new plug-in hybrid and combustion engine models. And the Neue Cluster technology, your IOX and some other technology is in all of those cars. And I would suggest that Oliver, maybe you add some more comments.

As Jochen mentioned, it's not only about the first car, the iX3, which will be launched this year. And you're right, we are in the pre-series phase. And in November, we will launch the car. And very early in 2026, the first car of the Neue Klasse will be in the market. But it's much more. It's the basis for... 40 new models or reworked models until 2027. And the technology clusters of the NOAA cluster, whether it's the batteries, whether it's the digital functions of the car, you will see in many other cars inside of two years. So it's not only about that one car. And we are right on track, by the way. There will be no postponements in any launches. We are ready to go. And as we said this morning, this car has already 1.5 million kilometres driven. So we will get a very high quality, stable product. And whenever we drive the cars, and we drive them a lot, we are super excited about the sex of these cars. On the United States question, we started to invest in the United States 30 years ago. We have now invested overall $14 billion. We're currently spending another $2 billion in the United States. So whatever is happening now... We kind of preempted it already, what is happening there, because that is clear for many, many years now. If you want to be a major player in a big market, you have to be a local player. That is in China the way. Of course, in Europe, that's the case anyway, but also in the United States. And what is happening now, as I said before, it kind of gives us some tailwind what we've done in the past. And we will have to look now in the next coming years Whether we need in specific technologies to do more investments, we will have to see, but we are not in a rush with that.

Thank you, Jochen. Thank you, Oliver. Going back to your question on capitalization and depreciation, especially with Neue Klasse and what that means for the P&L. Walter, please.

Hello, Steven. So with respect to our R&D as well as CapEx position, we will have a meaningful reduction in both 24 versus 25. First of all, on the R&D side, we will have more or less the same level of capitalization as you saw end of 24. And with that in total, you see finally also a positive effect already on the free cash flow in 25. I think that is the most relevant thing. And that was the question. And on the operational side, I mentioned already that we also have a turnaround there.

Thank you very much. Our next caller is Horst Schneider from Bank of America. Please go ahead, Horst.

Yes, good morning, and thanks for taking my questions as well. The most important ones that I have is on Neue Klasse and the outlook for the pricing. We heard from Mercedes at their full-year figures that they don't expect that EVs can be priced higher than ICE vehicles in the future. I'm not totally clear. What's your view on that matter? So maybe you can explain that a bit. And the other questions are as well on pricing. I know it's for you difficult to talk about pricing in these calls, but maybe you can explain us why you expect price mix in 25 to be better than in 24. And when we talk about tariffs, you aim then to pass the tariffs on to customers or how is the mass working here on the net perspective? Thank you.

Thank you very much, Horst. As you know, we do not give price indications on calls. And in fact, it's difficult to comment on pricing across different markets and regions. But I will hand over the question on Neuer Klasse pricing to Walter, followed by the price differentials between Bevanice as well as the 2025 expectations. Walter, please.

Thank you. Hello, Horst. So as we can say more or less worldwide, we have a different pricing set anyway because the pricing is always depending on the market potentials and we utilize all potentials in the individual markets. And we have markets where EV cars have more or less the same price like ICE and we have the one way or the other way around. So that is not the key, ultimately. We just aim for the right price in the right market. And with respect to your question whether pricing is getting better, so what we mentioned also in our statement of our prognosis report, we just said that the revenue, the average of the revenue per unit, will be on previous year's level. That means on the average of 2024. And this is in sync with our planning. So the pricing eventually you refer is eventually a transactional price in individual markets. But of course, we have to consider the net sales revenue per average in our books. Thank you.

The question with regards to us passing tariff increases in the United States on to our customers, particularly with regards to three series. Jochen, if you'd like to take that question, please. Thank you.

Yes. I mean, there was one communication because we obviously have customers who ordered cars and this is basically where we price protect those cars, which I think is fair in the sense of the customer. How we deal with this in the long term, to be honest, has to be seen because the situation is extremely volatile and we will deal with that once we know how the customs and tariff situation is developing. I think what we are doing right now is clearly, in our opinion, a very fair business behavior and has been agreed with our dealers.

Thank you very much, Jochen. We're moving on to Henning Kostmann from Barclays, audio only. Thank you, Henning. Please go ahead.

Yeah, hi, thank you so much for taking my question. Perhaps we can stay on that particular topic. Can I just ask conceptually, if tariffs are in a magnitude of 25% and, you know, we're now in a margin corridor of five to seven, can you just help us understand a little bit what the potential offsets are? I mean, there's not a lot of room to absorb very much. you know, if you would have had to pass through a 25% price increase to offset the tariff. But can you just explain conceptually? Is there any room or any appetite on your part to digest any of it? Are there other parts of the supply chain, perhaps the dealers, that could swallow some of it? If you could just help us conceptually a little bit. And then the other question is more on the financials. Walter, sorry to come back on the seasonality. I understand you don't guide by quarters, but... You know, your Q1 in 2023 was still 12%. Last year was 9%. So I think I should assume it would be down on the prior year Q1s. Can you perhaps say if it's inside the corridor, in the full-year corridor, or could it be outside the bottom end of the corridor? Because a lot of your European OEM peers have suggested quite a second half-loaded margin trajectory. And perhaps finally, if I can squeeze one more, just to understand what would take you to the top or bottom of the margin guidance range as well, because my understanding is the tariffs are excluded. So the current ones are obviously included, the potential additional ones are excluded, but still we have a 2.5 billion wide margin range. So if you could just help us understand a little bit what would take you conceptually to the top or bottom. Thank you very much.

Thank you very much, Henning. Before we jump to the questions, I've just been asked to again give everybody a reminder, please, to raise your hands, to ask your questions. We have a couple more people waiting in line, but please do so. Going back to your very first question, Henning, with regards to tariffs, what has been included in the guidance for the year and what would be the impact of a larger tariff and what would we be able to swallow? Over to you, Walter.

Hello, Henning. So I'm pleased to mention again which terrorists we included. So first of all, the European Commission had extra terrorists for EV cars imported from China, and this will have an impact, should they last until the end of this year, over mid-three-digit euros. Furthermore, the Mexico-Canada tariff into the US was 25%, you mentioned. If that would last until the end of this year, that would also have a mid-three-digit million impact. And then furthermore, we have, of course, aloe and steel imported into the USA. This one we classified as a high double-digit million euros impact, whilst the current tariffs between China and the US, forwards and backwards, would have an impact of a low three-digit million impact. This is what we classified, and this ended up to our judgment of roughly 1% impact on our EBITs. That's why we had at current tariffs in place as per March 12th, the new guidance of 5 to 7. Without it, it would have been 6 to 8. That is what we code. Page 261. Just for reference. And I guess you also raised the question with respect to the seasonality on the quarter. Yes, it will be inside the full year corridor. And in quarter one, it's usually the upper side than the lower side. That seasonality is more or less still the same.

Thank you very much, Walter. And again, to reiterate, with regards to the guidance, there are no mitigation measures, to your other point, no mitigation measures that are factored into the guidance, as Walter described. We're moving on to our next caller, Michael Punset from DZ Bank. Michael, your line is open now. Please go ahead.

Yes, Michael Punset, good morning. I have two questions. First one is a clarification. In the press call, you mentioned that you have built up provisions of 1 billion for tariffs. Can you explain, was it booked in the automotive segment in Q4? That is my question on this topic. And the second one is, can you also explain a bit of the possibility to offset US tariffs for imports with your cars exported from the US? Thanks.

Thank you very much. Michael, a question again on the billion euros tariff potential and the offset. Walter, please.

Hello, Michael. Well, I guess there's a misinterpretation. The one billion euro is just what I mentioned to Henning. That is our classification. There is no provision booked. There is no provision booked for these tariffs. Tariffs just will hit, first of all, on my balance sheet once we have imports transactions, and will hit my P&L, of course, once we sell the car. So that is clear. There is no provision for tariffs, certainly not. And with respect to offset of US tariffs on imports, so let's speak about export. First of all, once we produce cars in Spartanburg and we export those ones into the world, These tariffs, as far as we have the right understanding on all the rules on papers, will not hit the cost of these exported cars, but certainly the imported, these ones which will stay in the US. That is our clear understanding. And with respect to other offset potentials, of course, we are observing the way. We have different instruments. We are looking for the supply chain, first of all. We have a look on the mix. we could produce more cars in Spartanburg for the US. So we have different aspects we will foster. And, of course, we have the understanding that hopefully these tariffs will not stay until the end of this year and we will have, hopefully, the positive impact automatically.

Thank you very much, Walter. Our next caller in line is Daniel Schwarz from Stifel. Good morning, Daniel.

Yes, good morning. One question again on cash allocation. As you stated, highest ever dividend payout ratio for 24, but it's still a significant cut here over here. And my question is, given the huge amount of net cash you have, would you consider maybe less focus on the payout ratio going forward and more focus on the Absolute dividend, even if that means that occasionally it's above 40%. And the second question is a more technical question on Q4. Could you clarify what the year-over-year impact was from guarantee provisions? Did you release provisions in Q4, and did that have a positive impact on the EBIT margin? Thank you.

Thank you very much, Daniel. Starting with your first question, probably a very popular question today, Walter. Cash allocation, dividend payout and what it means for the corridor going forward. Please.

Hello, Daniel. So with respect to our principles, how we use the cash allocation for dividend as well as since 2022 for share buybacks, that hasn't changed per se. But I just want to underpin again that we have this highest payout ratio this year. which should be already a signal to the world that we are sharing more ratio on the dividend payment than before. And of course, optionally, we utilize the share buyback on top of it. And if you do the calculation, we spent this year already, with respect to 2024, the full free cash flow per dividend or share buyback, so close to 100%. And on top of it, if you calculate that on a payout ratio, inclusive to share buybacks, then we cross the road of 40%, not just for 24, but also already a little bit for 23. So I think we currently still stay to our principles, and I think that is good for our company. And with respect to your question on the warranty side, I think we have to have a look into the year 23 Q4 because in 23 we had an extra warranty provision step up and that didn't happen in Q4 2024. And that's the reason why it eventually looks like we would have had a release or less provisions for and ultimately in Q4 2024 we had less additional provisions than we had in Q4 2023. That is the key differentiation.

Thank you very much, Walter. Ladies and gentlemen, we have come to an end of our investor and analyst Q&A today. Thank you very much for joining us and thank you for your time. The team and I remain at your disposal for any follow-up questions you may have. We look forward to seeing you in person at our AGM on May 14th here at the Olympic Hall in Munich, and also at our Investor and Analyst Day on July 15th and 16th, where you will get a preview and experience of the Neue Klasse and get to interact with management and many experts. Thank you very much.