Volkswagen Ag Unsp/Adr

Welcome to the Volkswagen AG Investor, Analyst and Media Call half-year Q2 2025 conference call. I'm Moritz, the call's call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's a pleasure to hand over to Dr. Sebastian Rudolph, Vice President, Global Group Communications. Please go ahead, Sebastian.

Thank you, Moritz, and a warm welcome. Good morning to the half-year 2025 results call of Volkswagen Group. With me is Rolf Woller, our Head of Group, Treasury, and IR, because this is a joint call, media and investors and analysts. Our main actors are with us as well, Oliver Blume, our CEO, and Arno Antlitz, our CFO and Chief Operating Officer. A few more remarks before we start. So you should have received the press release, the interim financial report, and all other related materials which were published this morning. If you don't have received these documents, please give us a call or drop us an email and we will take care. And with this, Wolf, I hand over to you, and you guide us through the next time.

Thank you, Sebastian. Very good morning to everyone on the call, also from my side, and thanks for joining us today. Let's have a look at our agenda. Oliver will present the key developments of the first half year, and Arno will then take you through the financial results and the updated full-year outlook. This time, not an easy task. But this is why we have him, and he is super prepared. So we are looking very much forward to the explanations. Following the presentation, we will first host the Q&A session for the investor and analyst community, moderated by myself. And after this session and a short break, we will continue with the media Q&A, which is then hosted by Sebastian. Since our call will include forward-looking statements, the safe harbor language, and other cautionary statements on the slide, will govern today's presentation. I encourage you, as always, to read the disclaimer carefully, as all forward-looking statements are qualified by this language. In the interest of time, I will not read it out loud. And with that, I hand it over to Oliver. Oliver, go ahead, please.

Yeah, thank you, Rolf. Thank you, Sebastian. Oliver Blum is speaking. Good morning to everyone. Let me start by highlighting the key developments in the first half of the year before Arno walks you through our financial results. After that, Arno and I look forward to your questions and a lively discussion. The first half of 2025 was marked by major challenges, challenges that were not foreseeable at the beginning of the year. First and foremost, the sharp increase in US import tariffs and the associated trade policy uncertainties. Despite these challenges, we continued to consistently implement our strategic initiatives. Our model offensive is making great progress and we are successfully launching new models in our markets. This year, we are placing particular emphasis on our cost reduction and the execution of our group-wide performance programs. The results show that our measures are beginning to take effect. At the same time, they are initially causing high expenses. All these factors have a significant impact on our operating results. With overall stable sales, the Volkswagen Group generated sales revenue of 158 billion Euro in the first half of the year. This was on par with the previous year. The operating result declined by about a third to 6.7 billion Euro, mainly due to the aforementioned effects. The operating return on sales was 4.2%. Excluding the effects of increased tariffs and restructuring costs, the return on sales was 5.6% in the first half of the year. The second quarter, it was even slightly higher at 6.8%. This means that we are within the forecast range communicated at the beginning of the year. Given the challenges and in the face of extensive restructuring, this is a respectable result. But it also makes one thing clear. Volkswagen must consistently pursue the performance programs it has embarked upon. We need to shift our cost efforts into high gear and accelerate implementation. After all, we cannot assume that the tariff situation is only temporary. The changed import tariffs in the US resulted in expenses of around 1.3 billion euro in the first half of the year. If the current import tariffs remain in place, the burden would increase to several billion. We therefore have had to adjust our forecast for the full year. Our plea to the negotiation partners is therefore clear. We are counting on the EU Commission and the U.S. government to reach a balanced outcome on the tariff issue, an outcome that continues to ensure rule-based trade, open markets, and stable trade relations. This is the basis for a competitive economy on both sides of the Atlantic. North America and the U.S. market in particular are strategic growth markets for the Volkswagen Group. Investments of over 14 billion US dollar to date in local production partnerships and cutting egg technologies are clear evidence of our strong commitment to local investment and value creation. Added to this are significant investments in the construction of the new Scout plant in South Carolina, you can view it on the picture, and our partnership with Rivian. We intend to continue on this path. In 2025, we are continuing the most extensive product offensive in the Group history with increasing success. We increased deliveries by 1% to 4.4 million units in the first six months of 2025. By region, growth was driven by strong performance in Europe and South America. Here, our brand achieved an increase of 2.18% respectively. This was offset by a slightly decline of 2% in China. Deliveries to North America customers fell significantly by 7% due to the tariff situation. In the second quarter alone, the decline amounted to 16%. The overall positive development was driven by numerous new model launches across all brands from Volkswagen and Audi to Skoda and Cupra to Porsche. These market launches underscore our consistent focus on innovation, customer orientation and sustainable mobility in all market segments. Each new model strengthens our global competitiveness and reinforces our commitment to leading the industry's transformation for electrification and digitalization. Deliveries of battery electric vehicles recorded particular strong growth. They reached 465,000 units representing 11% of group deliveries and an increase of 47%. In addition, there were almost 200,000 plug-in hybrids, 40% more than the same period last year. Our bath share in Western Europe grew even more strongly. It doubled compared with the previous year to around 20% of our sales. We have succeeded in further expanding our leading position in electric vehicles in Europe. We now have a market share of around 28%. Four of the six best-selling baths in Europe this year come from the Volkswagen Group. We also increased our share in North America to 8%. In China, however, it declined to 4.5%. This is part of our value over volume approach. We are preparing for the market launch of our new models starting in the fourth quarter of this year. Our new models are well received by customers. We are receiving very positive feedback on the design, technical performance, software and features offered. New vehicles across all brands and drive types are in high demand, including VW ID.7 Tourer, Cupra TerraMask, Audi Q6 e-tron and Porsche 911 to name just a few. This is clearly reflected in our order intake, which has developed very positively in Western Europe with an increase of 19% compared to the previous year. BEF order are developing particularly dynamically, rising by 62%. The order backlog in Western Europe grew to around 925,000 vehicles by the end of June and extends well into the fourth quarter. Beth accounts for over 22% on this figure. With numerous new models coming to the market in the next month, we expect additional momentum. This shows our strategy is working and we are implementing it consistently. Our model offensive will also kick off in China in the fourth quarter with a new generation of intelligent connected vehicles that have been developed entirely in China for China and that are tailored precisely to the wishes of our customers. Our technology is state-of-the-art with our newly developed electric and electronic architecture and advanced safe Level 2++ ADAS systems. We cover the entire NAV spectrum with flexible drivetrain solutions, including BEVs, PHEVs, and EREVs. We will bring 30 new models to the road by 2027 and 50 by 2030. Thanks to consistent cost management and a structured fixed cost program, we have already reduced the material cost of our compact main platform by 40%. We have set ourselves a further target of 10%. This puts us on par with leading competitors in the Chinese market in terms of cost. This is our approach. customer-focused, cost-optimized, and technologically leading. We are making great strides in the automotive driving, even outside China. With the ID.Bus AD, we are putting Volkswagen's first fully autonomous series production vehicle on the road. It has been consistently designed for use in mobility services. Moya's turnkey platform gives cities and operators access to safe, scalable and intelligent ride-pooling solutions, initially in Hamburg and from 2026 also in the US. MUJA's comprehensive solution combines all components to turn an autonomous vehicle into a ready-to-use mobility system. Our software meets key regulatory requirements for Level 4 vehicles according to the SAE standard. The IDBus AD brings future technology to the market. This is an important step in our journey to become the global automotive tech leader in the industry. We have also achieved significant milestones in the implementation of our group-wide earning improvement programs. This includes, in particular, the Future Volkswagen Agreement, reached at the end of 2024. This agreement lays the foundation for the economically successful future of Volkswagen and our German locations. Besides of labor cost reductions, we will achieve 1 billion a year actually, and more than 4,000 employees have left the company since the end of the year. Further 20,000 departures have been contractually agreed and are already certain. In the medium term, we are expecting an annual savings of over 4 billion euros. Competitive personal and plant structures linked to the company agreements to accelerate implementation. We have agreed on similar approaches in Germany at Carriot and Porsche and also at Audi. In June, the brand group Progressive around Audi reached agreements with employee representatives on specific measures to reduce the workforce by around 7,500 positions, primarily in indirect areas. Performance-related pay will also be adjusted. In the medium term, Audi expects annual savings of more than $1 billion. These measures are part of a clear plan we are shaping change responsibly, proactively, and in dialogue with others. Future ready products and technologies will also be the focus of our presentation at the IAA Motor Show in Munich in September. We are taking this opportunity to invite you, our investors and analysts, to a product and technology update on the Volkswagen Group and its brand groups on September 9th in Munich. My colleagues on the Board of Management and I look forward to providing you with key insights to our product strategy and the convergence of our platform software, battery technology, electric electronic architecture, and other key innovations. And of course, we would also like to take this opportunity to engage in a personal dialogue and answer your questions. Our investor relations team look forward to receiving your registrations. Let us now take a closer look at the financial performance in the first half of the year. I will hand over now to Arno. Thank you very much.

Thank you, Oliver, and good morning also from my side, colleagues. Half-year results continue to tell a story with two sides. On the one hand, there are tremendous success of our products, combustion engine and electric vehicles. In Europe, every fourth vehicle comes from the Volkswagen Group, and we are making good progress in restructuring our company. On the other hand, operating results are down by 30% year-on-year. This is due to the continued margin illusion effect of the ramp-up of our electric vehicles. On top of that, U.S. tariffs and restructuring have left their marks. In the first half of the year, the burden from increased U.S. import tariffs amounted to 1.3 billion euro, restructuring added cost of 0.7 billion euro. Excluding these effects, results in the second quarter came in at 6.8%, which is at the high end of our expectations. This gives us the confidence that we are on the right track, both strategically and financially. But ultimately, it's only the cash in our bank account that counts. This is clear, and that's why it's necessary to decisively implementing the ongoing programs and, in some areas, take even further measures. With that, let's move to the details of the financial result. Vehicle sales totaled 4.4 million euros in the first six months, a slight increase of 1% compared with the prior year. The group sales revenue remained stable at 158 billion euros. The operating result totaled 6.7 billion euros minus 33% versus H1 2024. The operating return on sales stood at 4.2%. In the first half of 2025, our business was Marked by intense competition, high expenses related to U.S. import tariffs and restructuring costs as mentioned. U.S. import tariffs and restructuring costs had a total negative impact of 2.2 billion in the first half of the year, 1.7 billion in the second quarter alone. A look at the corresponding key figures before these effects show that the product momentum of exciting vehicles and our restructuring efforts are gradually paying off. Restructuring expenses will help us. to achieve leaner cost structures in the future. However, tariffs are likely to remain a permanent burden and we must increase our efforts to offset this effect. The development of profit before tax, after tax, and earnings per share follows largely the operating result with a positive effect from income from participation and a negative effect from interest result. Net cash flow in the automotive sector amounted to minus 1.4 billion euro in the first half of the year. The year-on-year decline in operating profit was largely offset by a lower cash flow, cash outflow from working capital and lower capex and R&D expenditures. On top of that, cash flow development was affected by cash out related to U.S. import tariffs of around 0.7 billion euro and payments of around €0.7 billion for restructuring measures. In addition, €0.9 billion was spent on the acquisition of additional Rivian shares, which was triggered as planned by Rivian reaching financial milestones. Net liquidity in the automotive business decreased by around €6 billion compared with the end of 2024. In addition to the operating performance, the following factors explain this development. M&A expenditures, 1.4 billion, dividend payments of around 3.8 billion in the second quarter, interest payments to hybrid bond holders in the magnitude of 0.4 billion euro. Overall net liquidity remained at a solid level of 28.4 billion euro at the end of the second quarter of 2025. Let's move to the performance of the divisions. Passenger cars generated an operating result of 4.4 billion euro in the first half of 2025 down 40% versus prior year. This corresponds to an operating return on sales of 3.7%. Commercial vehicle recorded a decline of operating profit to 1.2 billion euro and the margins stood at 5.9%. The financial services division performed well with an operating result of 1.9 billion euro. Let's now take a look at the drivers of earnings development in the passenger car segment. Volume had a positive impact of 0.8 billion euro compared with the same period last year. Price mix had a negative impact of around 2 billion euro. This was mainly due to the significant increase in PV share and a negative product mix and brand mix. CO2 provisions had a cumulative negative effect of around 0.5 billion euro on earnings in Europe and the U.S., and Forex had a negative effect of 1.1 billion euro, mainly due to the valuation effect of balance sheet items in foreign currencies. The development of product cost and fixed cost had a positive effect, the latter improving by 0.1 billion, despite continued restructuring efforts and the ramp-up of new businesses. Looking at the development of our overhead cost, the automotive division was able to keep overhead cost stable. Overhead cost ratio improved slightly, specifically in the second quarter. An increase at Trayton and Brent grew progressive, as well as a ramp-up of our new businesses were fully compensated by positive effects from restructuring measures throughout the group. A key factor in this development is the consistent implementation of efficiency programs particularly at Volkswagen AG. Future Volkswagen is having an increasingly positive impact, partly due to progress in realigning the workforce. The new collective agreement which has now come into full force is also having an effect. In the six months of the year, the number of active employees at Volkswagen AG was again reduced by 4,300. Since the end of 2023, the reduction has amounted to almost 9,000. Well, the programs are being developed and implemented at Audi, Porsche, and Carriot, and the programs have been extended to all units, entities, and regions of the group. As a result, the number of employees at group level has been reduced by a net total of 10,600 in the last six months. And the corresponding positive effects on our cost structures will be reflected in our accounts in the subsequent portals. Let's move on to the development of the brand groups, platforms, and financial services. Within the passenger cars, the brand group core achieved overall a solid result with sales revenue up 5% in the first half of the year. Operating profit amounted to 3.5 billion euro and the margins to that 4.8% in line with the previous year. Brand group progressive also achieved a 5% increase in sales revenue driven primarily by the continued product offensive Positive volume effects were offset by ramp-up costs for new models. U.S. import tariffs and the provisioning connection with the agreement on the future of Audi burdened the results with approximately €750 million. All in all, the brand group achieved an operating profit of €1.1 billion. The margin stood at 3.3%. Excluding the effects of restructuring and U.S. tariffs, the margin would have stood at 6.1% if the brand group progressed. Bosch vehicle sales declined by 11% to approximately 135,000 units, with the Macan emerging as the best-selling model, 25,000 of which were fully electric. Sales revenue dropped by 9% to €16.1 billion. Operating results fell to €0.8 billion primarily to the external charges driven by battery-related activities, US tariffs and strategic alignment measures totaling of about 1.1 billion Euro in the first half of the year, according to Porsche AG. Porsche AG will report on its half-year results at July the 30th. Let me outline some effects of Brand Group Co-op. Koda impressively demonstrated that exceptional performance is possible even in a difficult market environment. This first-class product on Volkswagen Group platforms combined with a competitive cost base would achieve the best quarterly results in its history with around 740 million euros. The operating margin of 9%, even 9.5% in the second quarter speaks for itself. Volkswagen passenger cars recorded stable sales development. Nevertheless, the brand increased its reported operating margin by 30 basis points to 2.5 and achieves an operating result of €1.1 billion, 20% above prior year. The efforts are starting to pay off. The consistent implementation of measures agreed at the end of last year is beginning to have first positive effects on the cost structures of Volkswagen brand and our component business. On top of that, an advance booking from our China business, which had actually been expected for the second half of the year, had a positive effect. Leaving aside all non-operational effects, the operational performance was even slightly stronger. U.S. import tariffs and further expenses in connection with restructuring activities and the diesel issue had a negative impact. Excluding these effects, Brandt Volkswagen operating margin after six months stood at 4.2% in line with the target set for the full year. And Brandt Group Core achieved almost 6% margin before restructuring and tariffs. But again, one word of caution here, restructuring expenses burden the result now, but help us to achieve leaner cost structures in the future. However, we need to prepare for a scenario where tariffs are to stay in a certain level as part of our operating business, and this clearly means the restructuring worth has to continue, and we even need to speed up the measures. period reported rising license revenue supported by higher volumes on software platforms 1.1 and 1.2. Revenue rose by 32% to around 0.6 billion euro. The operating results was minus 1.2 billion euro, roughly on par with previous year. PowerCore is making good progress in ramping up battery production in Salzgitter, which is scheduled to start production at the end of the year. And the company reported an operating loss of 0.6 billion euro, around 400 million more than in the first half of 2024, mainly related to the ramp-up activities for battery production at Salzgitter, at Valencia, and at Ontario, Canada sites. Recent recorded decline sales in the first half of the year due to weaker demand in Europe and customer restraint in North America. As a result, revenue fell by 7% to around €21 billion. The lower volume, higher fixed cost combined with the impact of exchange rate fluctuation led to a significant decline in operating profit of 39% to 1.2 billion euro. Triton results have been released this morning. The financial services business developed positively in a reported period. This was due to an increase in contract volume by roughly 10%, particularly in Europe. The credit loss ratio was broadly stable and the operating profit rose by 35% to 1.9 billion euro. Investment and expenditures on R&D in the automotive business declined by around 6% to 16.3 billion euro in the first half of the year. This corresponds to 11.4% of automotive sales revenue and is slightly below our forecasted range for the full year. However, the magnitude overall reflects the high upfront investments from the transformation and the ramp-up of future businesses, such as batteries and autonomous driving. We intend to and will bring down investments by leveraging group synergies even more consistently and reducing complexity beyond the level of today's range. Let's move on to the performance of our joint ventures in China. In a market environment that remained highly competitive and characterized by intense price pressure, deliveries declined by 2% to around 1.3 million vehicles in the first half of the year. The proportionate operating profit of our joint venture activities in China amounted to 506 million in the first half of 2025, and based on the current sales and earning development, we are reiterating our expectation of reaching the upper end of the forecasted range of 0.5 to 1 billion Euro for the full year. And this brings me to the full year outlook. The continuation of model offensive and the renewed product portfolio of exciting vehicles across all brands support mixed effects and the second half of the year. We also expect to see increasingly positive effects from the consistent implementation of our cost programs and ongoing restructuring measures. At the same time, we expect the increase in the share of battery electric vehicles to continue to have a negative impact on the margins. Furthermore, we anticipate negative effects from the increased import tariffs with a chance resulting from potential mitigation measures. As promised in Q1 call, we have now factored all these effects into our outlook for 2025. Our adjusted annual forecast is based on two scenarios. The lower end of the range for the operating margin assumes that the current U.S. import tariffs of 27.5% of imports from Europe and Mexico to the U.S. will remain in place. On a 12-month basis, tariffs at this level would impact us by around 200 basis points before any mitigation measures. At the upper end of the operating margin, we assume a scenario for much of the second half of the year in which the current tariffs are reduced to 10% for both deliveries from Europe to US and from Mexico to US. With this tariff, the impact would be around 60 basis points on an annual basis before any mitigation. As a result, we now expect revenues at the previous year's level based on US tariff scenarios just outlined The operating return on sales is now expected to be in the range between 4% and 5%. The CapEx ratio in the automotive division is expected to remain between 12% and 13%. We expect automotive net cash flow to be in the range of 1 to 3 billion euro. These figures include expected cash outs of around 2 billion in connection with the implementation of restructuring measures, of which 1.3 billion will be in the second half of the year. We now expect net liquidity to be in the range of 31 to 33 billion euro. One more comment on the outlook. We have taken note of Triton's mandatory announcement from last night. We will be able to reflect the new range for the operating result of the industrial business of Triton within our existing range of 4 to 5% return on sales for the Volkswagen Group. for the new forecast of net cash flow from trade, and that means that we will end at the lower end of the range for the net cash flow. And from here, we will increase in our efforts to work our way back towards the midpoint of our guidance. Ladies and gentlemen, our model offensive is proving successful for both combustion engines and electric vehicles. In Europe, one of four vehicles now comes from the Volkswagen Group. Our cost reduction measures are beginning to take effect. At the same time, we are pushing ahead with the implementation of our strategy by continuing our extensive product offensive. In China, we are working towards the model launches of new locally developed and highly competitive models. In the U.S., we ramp up activities for Scout and the new model lineup for Volkswagen brand. In view of the renewed challenges, we must increase our efforts and accelerate the implementation of our performance programs and continue absolute cost discipline so that we are well prepared and on a stable footprint for the future. Thank you very much.

And with that, I hand back to Wolf. Thank you, Arno. And with this, we conclude the prepared remarks. And let us now enter into the Q&A session. To ask a question, please press star 1. And if your question has been answered, you can remove your question by pressing star 2. So we give it a little time in order to see the Q&A row piling up. And we would start the Q&A session with the first question coming from Tim Rocosa from Deutsche Bank. Tim, please unmute yourself and go ahead.

Thank you very much, Ross. It's Tim from Deutsche. Arno and Olli, probably to both of you, Firstly, thank you for giving us the tariff sensitivity. I think that's very useful to work with. Now, the Japan-US deal seems to be the most likely scenario also for an EU-US deal at the moment with 15% tariff. Can you quantify what impact that would have on you regarding EBIT and free cash flow? And also to that, Olli, probably more you, do you also think that a 15% tariff is now the most likely outcome, not anything that involves investment credits or export credits that the industry was actually pushing for? And secondly, probably again to both of you or maybe more, Olli, to understand the underlying business X all of this obviously very material tariff noise. In contrast to Stellantis and Renault, your mass market business seems to do very well in Europe. Do you feel like you have cut the corner when it comes to restructuring and product improvements on the mass market business? Are we going to see further strength from here?

are we know also pretty much there for audi is already going to improve from here thank you yeah tim thanks for your question yeah look up we promise to give transparency now in in the second quarter um and we gave you all the scenarios so it's it's a lot of math we need to do to start with the tariffs of potentially 15%. Look, the 25% on top, and now the 27% we have today is 25% on top. And the 15% would basically 12.5% on top, and that's exactly 100 basis points. So mathematically, you would roughly end in the middle of our guidance if we would end at the Chapman deal. But to I must make sure that this is completely understood. That has to be applied for Mexico then and for Europe both because the combined figures we gave are always for Mexico and for Europe. We have a significant import from Mexico to Europe as well. To give you a rough idea, it's more like 60, 65% from Europe. But that means that you can also do the math then if there would be a deal from Europe and not from Mexico later on. And a second word of caution, obviously, we are already in July. So the longer we go into the second half of the year, the longer we – the more we tend to the lower end of the guidance. That's clear as well.

Yeah, Tim, good morning. And from my point of view, we hope that it will come to a well-balanced deal between US and EU, which allows fair trade between the regions. And yeah, we are expecting a deal around 15%. And for us, it's important being able to continue with a specific additional deal for Volkswagen. We have a very attractive investment package we will do there. We are acting with eight brands in the US. Between these eight brands, also two American brands, the Scout and International. And I think that this package is very attractive for the US government. We have been already in good discussions with them and we need then the opportunity after the EU deal to enter with a specific deal. Coming to your second question, we see a positive trend, especially in the EU. And when we look to our market share, we were able to improve to over 25% overall market share and electromobility. We are by far market leader now with 20, 28%. And what's positive for the future is a very promising order intake. Overall, drivetrains 20% and electric vehicles 60% better than last year. And the positive momentum is there are a lot of more products to come. There are huge investments of the past are paying off with improved design, improved technologies, and also the quality aspect. And what we have mentioned also in the second quarter is a positive momentum on our product costs. And finally, our restructuring programs in all brands are step-by-step way to pay off. So there is a positive momentum on the EU market, and we will use also this momentum for the rest of the world. Talking about Audi, our expectation is that we will touch the bottom this year at Audi. As you know, at Audi, we implemented a huge restructuring process on the organization, but especially also for the product strategy. We developed a completely new design language. The first glimpse we will show at the IAA. but also the technological concept. And we are facing now a huge product momentum. And on the other side, also Audi is working heavily on restructuring the company and reducing the costs. And I would give you an additional point because Audi and Porsche are also discussed right now. A Porsche situation is a bit different. Porsche has got a very positive substance and in spite of a complete new product lineup, this year is very weak. Why? Porsche is in a sandwich positioning because of 100% export to the US on China. China and the US are the by far biggest single markets of Porsche. And so at Porsche, We have had the need to restructure also the company in terms of cost to adapting this to this new situation. And we adapted also the product strategy in terms of the development of electromobility in the different regions of the world. Porsche is strong in electromobility. For example, the electric cars in Europe count already on 60% volume share in between Porsche from the 60%, 36% are BEVs. So electromobility is working for Porsche, but the market is still very, very small. So we decided to adapt the product strategy to even more taking investments for more flexibility in between the different model lines. And on the other side, as you have mentioned, also from the media, We kicked off a structuring program in Porsche to reduce labor costs to adapt the employees, and we will enter in a second package in the second half of the year. So for both companies, Audi and Porsche, we are expecting that we will touch the bottom this year with positive momentum from 26 onwards.

Very clear. Thank you both. Thank you, Olli, for the comprehensive answer. And the next one in line is Jose from Jesse Morgan. Jose, please go ahead.

Thank you, Wolf. Morning, Olli and Arno. Great to see the progress done so far in the year. Arno, one question on cash flow. I'm looking at all the exceptionals you have this year and last year, right, in terms of cash outflows, investments in Xpeng, Rivian, exceptional restructuring cash outflows, battery investments, etc., So the question is, you know, beyond the quarter, when you look at the year and you look at your free cash flow guidance, if you exclude the exceptional restructuring cash outflows and M&A, et cetera, what is the underlying free cash generation of the group? I think this is very important because, obviously, if you can go back again to that $6 billion to $8 billion or more than $8 billion free cash flow for the group in 2026, this will be definitely, I think, a game changer for Volkswagen. Olli, on Robotaxi and Level 4 and 5 autonomous driving, I think, look, I would love to get your comments in the light of the strong progress done by Tesla and Waymo deploying Robotaxis in the U.S. What is Volkswagen doing about this technology, and do you think this is vital for VW to be present in this field to ultimately ensure the competitiveness of the group? Thank you.

Thanks for your question. Look, perhaps you could see it quite nicely on the exhibit we provided for the first half. We report the net cash flow and then also the clean cash flow. And the clean cash flow is before M&A and diesel. So, obviously, the revenue transaction is not included. And if you look then at the two box, the info in the box we provided, it's basically 0.7 billion related to restructuring and 0.7 billion related to U.S. tariffs. So if you want then basically kind of underlying take out from the clean net cash flow, the 1.4 billion, you end up roughly on the cash flow from previous year. And this is the current cash flow performance in the first half.

coming to robot taxis. And the expectation, especially for the 30s, is a huge, huge market of around 400 billion US dollar yearly. And we worked heavily on this field, making good progress. And we were happy to present during the last weeks our concept with the ID Bus autonomous driving. And there we feel also comparing this competition, as you mentioned, Waymo or for example, Tesla, we are in a good position. We have a kind of turnkey solution. We have everything in our hands. We have a very advanced technology and that's nothing for the 30s. We will be in the market already in 26 still with a driver, and our aim is to be able in 27 driverless, making good progress in our test fields in Germany, in Hamburg and Munich, and in Austin in the U.S. Then we have the car in our own hands, and that gives us the opportunity for scale effects, also beside a very attractive car with the ID bus. And then, and that makes us special, we have a platform for the whole fleet management, And we have the platform for the customer management already implemented with Moja. And so we are, for us, it's very promising. We have a lot of interest of many cities in Europe and Middle East, for example, wants to implement our solution. We have the first external customer with Uber starting in 26 in Los Angeles. And so we are ready to compete. And you know, around 50% of the market cap of Tesla is counting on this. And so I think there's still also the potential for Volkswagen Group at the market cap for Volkswagen. And we will speed up the process. And this could be an interesting business field for Volkswagen Group. Thank you.

Thank you, Jose. Muchas gracias. And the next, I'm sorry, the next one in line is Patrick Hummel from UBS.

Patrick. Thank you, Rolf. Good morning, everybody. Hi, Arno. Hi, Olli. First question maybe for you, Olli, regarding your U.S. investment strategy. To which extent are these U.S. investments going to be dependent on a Volkswagen-specific tariff deal post a potential 15% EU-US deal. And more specifically, as far as the Scout brand is concerned, and I know we shouldn't think in presidential election terms, but right now it's definitely not a great environment to launch electric or range-extended rugged SUVs or pickup trucks. But you do have cash cows in the US that even after a tariff deal would still face a significant tariff. I'm talking about the Audi and Porsche vehicles. So I'm wondering to which extent you've got flexibility here to maybe come to a very efficient use of your investment or existing footprint even, rather than spending several billions more to deal with an US tariff environment. And my second question, Arno, that's probably for you regarding the cash flow. To which extent do you factor in significant working capital tailwind for the second half? It seems you can only get to that free cash flow guide number if you do get such a tailwind because your investments tend to be skewed towards the second half or specifically for Q. And does that free cash flow guide now include Any further disposals? There was just an article, I think, yesterday in Manager Magazine talking about the series of smaller assets that could be up for disposal. So any comment on that would be appreciated. Thank you.

Good morning, Patrick. Thanks for your questions. We will intend to discount the tariffs as far as possible. We will make a clear calculation behind what would it mean for investments and So we have a scalable program we could offer there. All of these projects connected with a clear positive business case and linked to our growth strategy. You're right. We have very, very strong products, especially in the ICE and plug-in hybrid segment. You mentioned Porsche, Porsche and Audi for Porsche. the U.S. were able to achieve a historic deliveries in the first half of this year. So our product momentum is very, very strong. And so we are counting on a better tariff situation at Audi. Audi is the same. Also, we can think about localizing Audi products there. And besides of Porsche, Audi, also for Volkswagen, we see opportunities. We have successful cars and making them even more American is our intention. And besides of this investment, on the one hand side, we focus on American brands like Scout and International, like school buses and heavy trucks. And on the other side, technology. As you know, our partnership is Rivian. and which started very well. And we see more opportunities there. And so that's a whole package there and everything linked with a clear business case and then entering into the discussions with the government.

Patrick, concerning the cash flow, we expect a tailwind in the second half of the year that has two effects. First and foremost, it's like a typical effect on the industry. towards the end of the year, towards Christmas, pipelines are basically lowered. Factories are shut down. And then in January, you start up the business, you fill the pipelines. So we expect, by and large, inventory of working capital on the level of last year. But this is easily said, what we did two to three years ago, we started really an extensive working capital management project. We look at inventories on deliveries, on other effects. And in terms of percentage of sales, this team did so far a very good job. And we also going forward, our target is to by and large keep inventories on the current level while growing the business slightly. So that would mean that also going forward, we expect a positive effect from the from the teamwork, finance, production, sales on our net liquidity going forward. So this is the situation on that side. Yes, positive effect, but typically in industry, not a one-off for this year. And in terms of disposal, on our capital markets day in, I think, Hockenheim, We said we look into our non-controlled shareholdings. We gave you a number of that. There's a team in place. We extensively work on that. For obvious reasons, we cannot go into details there. We don't expect major cash inflows today for this year, for the second half. But rest assured, we work on that topic, and you could expect some, I would say, success stories from this team as well. Going forward.

Very clear. Thanks, Arno and Nolli.

Thank you, Patrick. And we move on to the next question, which is coming from Horst Schneider from Bank of America. Horst, welcome.

Yeah, thank you, and good morning. First of all, I want to give you my congratulations for these numbers, especially in the brand group core. Not too long ago, I think you were taking Stellantis as a benchmark, and now you are maybe benchmark for Stellantis and also for Renault. So just a side remark from my side. But in that context, we have seen warnings from these two peers. Renaud talked about increasing commercial pressure, particularly in Europe. Can you give any comment what you see in the European market? I think your order intake also lately came a little bit down. Is the outlook still good? Is it concentrated on certain segments, markets? And in that context, also to Olli, Olli, you mention all the time that you are value over volume. I think Stellantis is the proof that this does not really work. So how do you look at this value over volume approach for the Volkswagen mass market business? Is that really good strategy? And then the last one on that, Brand Group Core, the great EBIT margin we have seen in Q2. Was that now peak? Will that come down? Why will it come down?

Thank you. First of all, thank you very much for your comment. That is really very motivating for us to continue on that path. Look, if you look at the EBIT bridge, the pricing is minus $0.5 billion, and this is largely due to the ramp-up of PVs. and we see a pretty stable pricing environment on our combustion engine cars, but this might be also due to the great product substance. If you look at our cars, brand new Tiguan, brand new Passat, a Golf, and also from Audi, the cars are doing very well in the market. And on top, we have the ramp up of the electric vehicles, which are margin dilutive. In the price segment, there's obviously a positive pricing effect from last year and an incentive burden from this year from the BVs. But all in all, the 0.5 billion is significant. even slightly better than we originally thought. And there's also some effect in the mix. A mix is obviously also diluted by the electric vehicles and some brand mix, obviously. And yeah, this is on that side. And you remembered, you mentioned the great success or the great steps of our volume brands. specifically brand Volkswagen and the brand group and before I also referred to Skoda almost 10% in the second quarter shows basically what can be done in this environment with good product substance combined with a good cost structure and Volkswagen brand is on the way to achieve that cost structure it will take some quarters obviously we gave you the outlook that we reduced the head count by 35,000 in Volkswagen AG, but that takes some years. And this is also the reason why for the, for the full year brand Volkswagen guides for roughly 4%. And so that's also the answer to the question Q2 will be from the single quarter will be peak with basically two reasons. First, it's, from a seasonality point of view, is always the best season. Q3 will be burdened by summer shutdowns, and so this is one effect. And the other effect, we had a slightly positive effect from China, and this will not repeat in the magnitude, but we are on a very good way to achieve the basically the 4%, but one word of caution, excluding the effects we had. This is, I think, very clear. And the last word, at the end of the day, we have to achieve 4% and more than also in a situation where tariffs are here to stay. So this is why I said we have to anticipate and speed up some of the measures and increase our efforts so that we are able at Brand Group eventually to deliver also the four and the six and a half percent in a potential scenario with tourists.

And also, let me come to your point, value over volume, which still is our orientation. And I would like to answer coming from our product focus. That was one of the main points restructuring Volkswagen Group, bringing in order software, improving design, improving quality, improving technologies. And then when you're able to deliver exciting products to the market, which are convincing the customers, it has got an impact also on discounts and incentives. And so this is bringing us step by step in a stronger position and the product momentum is just to start. So that's the positive aspect. On the other side, we have to differentiate when it comes to BEVs because there we need to fulfill the CO2 regulations. We were happy to come to averaging between 25 and 27. But beside of this, we need to fulfill the target. And therefore, we are leveraging sometimes in between putting incentives into. But the positive feedback we are getting from the market in terms of order intake allows us to be more restrictive with discounts and incentives. And everything is driven by the products we are bringing to the market right now. That's core. And there we will focus in the future as well.

But then just quick follow-up, you don't see deterioration of the market in terms of volume or pricing at the moment in Europe?

Look, when you look to the European market, the European market decreased during the last five years of over 15%. We have in many segments three times more products in the market. But we don't expect any more effects. For Volkswagen, we are stable. That's a clear message. And everything is driven by the strong product momentum. That gives us more space than others and even more for the future, what we see right now.

Okay. Thank you.

Thank you all. And we are moving on to Adrian, Adrian from Redburn. Good to have you back, Adrian.

Morning. Morning, Rolf, and morning, everybody. Thanks for taking my questions. Just a couple from me. So I was curious to know a little bit more in the Q2 earnings bridge, some of the benefits from both the product costs and the fixed costs in Q2 were impressive, almost a couple of billion between the two. Give us a little bit more color on the sources of some of those. And I guess also importantly, the outlook into H2. So that's kind of my first one. I guess the second one is a little bit more tactical. The tariff costs were a little over a billion in terms of the P&L, a little bit less than that in the free cash flow. So clearly some timing mismatch. Just curious your thoughts on how that plays out through the rest of the year as well in terms of the mismatch. Thanks.

Adrian, thanks. Yeah, Q2, if you do the math and deduct it, there was actually really a strong element from product cost and the other first positive designs, I would say, from fixed cost. I'll start with the fixed cost. We see really a positive design. signs in the fixed cost, in the overhead cost, and that's despite the ramp-up of new businesses like Scout, like Battery, and others. So, in this quarter, the first time, and we want, of course, we want to continue on that path, we want to lower the overhead cost despite the ramp-up of these new businesses, and we need to do that, and we want to do that in order to compensate for the marginal illusion effect of the bbs and and if you look at the just the reduction overhead um of the 4 300 we're on a good path there and just to remind you uh several programs are underway at audi and porsche like oliver mentioned audi communicated reduction of 7 000 and this is like they are slightly behind in terms of schedule and then they will kick in also in the next in next quarters in terms of product costs there The majority, of course, is the material cost. There were some burdens last year that we don't see this year again. We saw some first improvements of product, and there's also, I don't know what's in English, there's a first small sign is on the product cost, also the cost of our factory cost, so productivity. And first signs of productivity improvements, are also now seen in the product cost, specifically in the German plants. They make really good progress in Emden, in Wolfsburg, in terms of factory costs, not in the magnitude as planned, but significant progress. And this is also seen under the product cost improvement in the second quarter.

giving you an additional information about product costs and to reduce product costs does not happen from alone. And I mentioned the reduction we have done in China, for example, which was 40% of our product cost. It's a very detailed hard work. We are doing there thousands of measures and we implemented over all our model lines, product events where every area has come together and fighting for a recent. Now that's an ongoing going process. But now we have a structured process like we implemented it with the performance programs in all brands. And also with our executive board members, we are watching on this process regularly.

Thank you, Janos, actually for your questions. And then with the green shoots, we are moving on to Philippe Bourgeois from Jefferies. Philippe.

Thank you, and good morning. I've got a couple of questions. The first one is, to be clear, on the reduction in the revenue guidance from up to 5% to flat, is it right to assume most of that is demand destruction in the U.S. as a result of tariffs? And to what extent are you also factoring the fact that so far I don't think you have increased prices in the U.S. to compensate? When should we start to see price increases? And again, is that all factored in? What drives the cut in the revenue expectation? Or are there any other factors? And my second question, if possible, is on this whole discussion we hear in Germany about private-public investment to catch up on infrastructure. I'm curious to have your views on that. What would you like to see as investment in Germany to improve your competitiveness and think about the telecommunications and stuff like that that would be worth investing in? And to what extent, if you do participate in that effort, how does it impact your ambitions to reduce the investment ratio initially 12% to 13% and eventually 10%? Would that be a headwind to that ambition? Thank you.

Yeah, Philipp, I take the first question, and I assume the second one is answering. Yeah, the answer is very clear, yes. Basically, the reduction in outlook is due to the reduction in sales in the U.S. due to the tariffs. If I have it rightly in mind, I think June, the single month June was 25% down in the U.S., And that makes it even more clear that we need a good compromise and a solution on that topic that both fits the needs of, of course, of the American administration and us as a company, but it has also an impact of our local organization and our dealers and their families. So it's really, as you can see on the single month of June, of course, they are, mitigation measures. If you look at the industry, there were some first announcements. For obvious reasons, I cannot talk about price increases in public. It's very clear. But in our sensitivity analysis of the impact, when we said, for example, if it stays at 27.5% and the 200 basis points, we clearly indicated this is before mitigation measures. And as soon as we have more clarity, we also look at potential mitigation. That's very clear.

And let me come to the initiative made for Germany. We have had a kickoff meeting this week together with the German Chancellor, which was very positive. Sixty companies in Germany. We put together our investments in Germany. to an amount of over 630 billion. We will invest during the next four years. This initiative is more than investments. It's to bring a positive momentum to the German economy. And this one is linked with improving all the framework conditions for investing and for doing business in Germany. That's the main part. And in the past, there have been also a lot of good ideas but what missed was the execution and therefore it's very important and I've had the opportunity also for meeting with the Chancellor afterwards to talk about a very professional product and program management with milestones, targets, responsibilities, clear transparency to execute these programs and therefore that was a very good kickoff of the initiative and we will follow up. In terms of Volkswagen, we have a part of this amount of 60, 30 billions, over 10%, but everything is included into our planning round, no additional investment. That is what we have planned, and the main investments are going to product, and our engineering we do have in Germany, and everything is completely in line with our restructuring program we are doing into Germany. And so we think for Volkswagen Group we are well prepared, and we support to improve the business situation in Germany.

Very clear. Thank you.

Thank you very much, Philipp. And we are moving on. We still have two questions in line, and with the next one is Henning Kostmann from Barclays. Henning, please go ahead.

Yeah, good morning. Thanks very much for taking my question. I wanted to talk a little bit about the true underlying margin that we can. We have the 6.8% in the second quarter, but we understand that this China license payment pull forward is a little bit inflated, but you haven't really included any of the Porsche restructuring or indeed the 500 million impairment. So if we just broadly consider think that's a wash perhaps between the two. I wanted to ask you to talk about a bit where you see the true underlying on a group level. Is the 6.8 a good number? And then we can make our own tariff assumption to get to a reported figure, or would you want to highlight any particular puts and takes?

Yeah, Henning. So the thing is, We gave some transparency, but, of course, it's really now it's not very easy to dig even deeper into that. We said underlying is basically in the second half was the 6.8. Sorry, in the second quarter was a 6.8. In the second half, 5.6%. And you're quite right. There was anticipation on brand Volkswagen from China. On the other hand, there are some restructuring on the operative basis, not including that. So I think it's a good view to say it's basically a wash. If you look at the second quarter, I talked about seasonality. And so the second quarter is typically the strongest one. And we are basically... that we could achieve that significantly on the upper end of our guidance due to what we said before, strong products and restructuring. So now, if you look out on the second year and you take out all the one-offs, you could expect the second quarter, call it underlying roughly in nine performance-wise in the first quarter. Due to seasonality, we expect a slightly higher sales, but margin roughly on par on the first half.

Okay, thank you.

That's helpful.

To be very clear, Henning, we meant the second half to be roughly on par underlying with the first half. So the $9 billion in the first half underlying second half to be roughly in line with that.

Okay, thank you. And can I just ask you the second question with respect to the investment? Sort of a relatively wide range now, still at one percentage point with the second half, first half was below the corridor. Could you just help us understand what would take you to the top or bottom end of that? And, yeah, are you hoping to come perhaps in at the bottom end of that given the discipline performance in the first half? Thank you so much.

Yeah. First and foremost, as I said before, we have set up a comprehensive program to really increase efficiency on investment, both in CapEx, but specifically R&D, without making compromise on our ramp-up of products and the new businesses like Battery and Scout and others, which will help us in the future. So the what's very clear we see the effect of the tariffs and we have even to then to compensate some of the effect that might be a small chance on that. But on the other hand, it's also a significant seasonality in our spending specifically in R&D. And so the guidance of 12 to 13% ending is roughly where we expect to end also for the full year. And we gave us very specific outlook now for sales, basically on par this prior year, 325 billion. And that gives you an indication what we expect in terms of R&D and CapEx.

Appreciate it. Thank you.

Thank you, Henning. And that brings us to the final question here, which is this time best for last. Mike Tindall, Mike from HSBC, please go ahead.

Thank you, gentlemen. I've got two very, very quick ones. The first one, just regarding the guide, am I right in assuming there's very limited mitigation in that? You've talked about 200 basis points on margins for tariffs, and that's X mitigation. Is that true in the 4% to 5% as well? And then the second question is just a little bit of confusion here. In the cash flow walk, you've got $0.7 billion for tariffs. but it was 1.3 billion in the P&L. Is that just a timing issue or is there something else in there that I've missed? Thanks.

Yeah, you're quite right. We set 200 basis points at 27.5% tariffs before mitigation. So mitigation is a chance either for the guidance, for the outlook, or to compensate for potential additional headwinds. This is clear. And, yeah, when we now, it becomes very technically. Look, I make one example why it's different, what we see in the P&L and in the cash flow. And that example makes it hopefully clear. Expecting tariffs for the future, that means all the accruals we have to do, for example, for warranty, We have to take up because the parts for the warranty, which comes from Mexico and which comes from Germany, will in future be more expensive. So this is one technical effect why the P&L burden is right now slightly higher than the cash flow burden. But, I mean, at the end of the day, the two figures will be the same. Got it.

Can I quickly follow up? So if the tariff was then to fall, would you see a possible reversal of those provisions? Can you say it again? Sorry, if the tariff was to fall, would you potentially see a reversal of that provision then for the warranty, the higher part cost?

If they're in a world where we find hopefully an agreement that's below the 27.5%, we would see a small improvement. because some of the, not all, but some of the accruals would be partially reversed. But also a work of caution, we always talk about Europe and Mexico, and we must not forget that in order to make that happen, we need basically improvement on both sides.

Yeah, got it.

Thank you. Thank you, Mike. Thank you, gentlemen, for the very comprehensive Q&A session. We are now at the end of the investor and analyst call, and as always, if you found anything was left unanswered, please contact the IR team in Wolfsburg. Thank you already in advance for keeping us employed. Our next event will be the Volkswagen Group product and tech update in the context of the IAA in Munich on September 9th, and the nine-month results will be released on October 30th. Thank you very much for attending. We have now a short break, and we'll continue after that, five minutes about, and we'll continue after that short break with a question-and-answer session for the journalists. Thanks very much again for your numerous participation. We hope you will have a great summer holiday and some time with your families, and take care and speak soon. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Bye. Thank you. . . Thank you.

Moritz, can you hear us? Moritz? Yes, I can hear you. You are already live.

Okay, great. Then let's get started. Just to hear, Rolf Woller. He is of course still with me in the room. Sebastian Rudolf here. Greetings to all colleagues. Oliver Blume and Arno Antlitz, both here to talk Also in English, if you can also ask questions in English, then press star one to ask a question. Then you appear here on the dashboard and I will... We'll put your name on, and then you can ask a question either to Oliver Blume, our CO, or to Anu Antets, our Chief Operating Officer and CFO. And with this, I switch to German, because the first question comes from Christian Müskens, FAZ, and he is German-powerful.

Christian, please. Yes, good morning. Can you tell me if you can hear me?

Yes, we can hear you well.

Yes, good morning, thank you very much. I have two questions. One, of course, to America. That's an important topic today. Could you please say once how the situation is with your own investment there on site? In any case, build an Audi factory, depending on the outcome of this customs conversation or does it depend on certain things now? How is the stand there? And maybe a little thing followed up. Since you express yourself so positively about the robot taxis, can you imagine getting investors in there at Moja or EDMT or Finac?

Yes, good morning, Mr. Miskens, Oliver Blume. I would start with your question about the USA. We were there in the USA, had very constructive conversations with the Ministry of Trade, and have now continued to do so over the past few weeks. What we can offer is clear to the US government. This is a scalable package. In the end, of course, it will also depend what we get for it on the other hand. We have now let that rest for a few weeks in the current phase, because it was also a clear measure that a deal must first take place between the USA and Europe. And as soon as this one is in place, we will continue to record the conversations. The signals we get are positive to our commitment. And that is very diverse. That goes, for example, in the direction in which we invest in the American brand Scout. But it also goes into technology topics, software, which we have there together in our joint venture with Rivian, but also investments for Volkswagen and Audi. We can't say any more details at the moment, because that depends on how the EU closes and what opportunities we get to work on the whole thing again. Yes, to the robot taxis. I had already described in the investor call what potential we see there. We are the only European company that offers this. We have the entire process chain. This makes us unique worldwide. We have very good progress. and to claim ourselves there in the competitive environment. This is not a topic only for the 1930s, but in the 1920s we are also starting to acquire external customers there. Uber is one, for example, but they are also going strong, for example in Europe, in cooperation with cities. And to accelerate the whole thing, we definitely have the idea to give a smaller part of the current phase to the market. We are especially thinking of technological and strategic partners who are now engaging there. This can be customers, this can be technology partners who are involved there. The potential is at least huge. For the 30s, agencies and consultancies will expect a market of over 400 billion US dollars a year. And yes, we are now ready to start and it will start soon. And those of you who are on the IAA, we will then also give a few more information about it and also the product to touch on.

Thank you. Then we go from the FAZ to the Handelsblatt and to Lazar Bakovic. Please.

Hello, good morning. Can you hear me?

Yes, we can hear you well.

Very good. All right. Then thank you very much for your time, also just in the I have three questions. One is a follow-up to what has already been said in the investor call. Mr. Blumel, you said it's an attractive package. You also said it's a scalable package that you offer to the US government. Maybe you can still say once again what a possible Audi plant is, also for the unloading of Audi in Mexico and its works there in total. and also the expansion of Audi in Germany, if that were to happen. So you would then have to store production capacities. The second question is about the product roadmap. We might be able to record it once, because there is always a lot going on about how the timeline for the SSP models is. So which brand is the pioneer and how does it go on with the different brands? Exactly, if you listen to the different brands, you get the feeling Everyone is a first-time user and it would be good to know who comes first and when. And the last question is actually your long-term goals. In recent years, you actually always wanted to create a 10% operational margin in the company by 2027. Do you hold on to this goal this year?

Mr. Bakovic, to complement the US question. We are also considering, if we think about an Audi factory now, of course, also new products that are very specific to the American market. Of course, we will always see everything in the balance sheet. What does a load on European locations look like? But especially the new products, they would of course trigger something like that, which we would first launch in the USA. and then later consider whether we will export there. And you always have to see it that way. This is often discussed in Europe. Then investments from Europe flow into the USA. We see this as a package that we had in mind in our growth plan anyway. And if the stocks remain at a very high level, then that would of course also have negative consequences on Europe. And in this respect, you have to see this always balanced, that such investment packages also have the advantage of reducing interest rates and we then also have the possibility to export from Europe and keep the volume high here. And that's what it's all about. And the approach is then essentially about new cars. to our products. First of all, we have made massive updates. Next year or at the end of this year, at the beginning of next year, we will come up with great products with an extended MEB plus and also on the PPE platform. There are significant issues with the product properties, but we have also made huge leaps with the software. We are now in the situation that we are winning in the software test. The Volkswagen Group is at the forefront and now we are moving into the next phase. And we have the products on the market for many years now. And then we are now in preparation for the SSP, which will then use 2028 years in a row, over different levels. Then also with new software generation, zone architecture, that we are currently developing from the joint venture that we are currently doing together with Rivian in the USA. In terms of returns, 10%. For the future, of course, our ambition remains to come in this direction, but we are currently dealing with an environment that we cannot foresee. We also do not yet know how it will develop forward. But if you look at the performance now, and we have shown this Q2 before, without these special effects, where we are already at around 7% returns. And then we haven't even calculated the effects with what China is now, what the high efforts in the transformation are that we have to do there. The whole supplier environment, which currently also has contradictions, Insofern war es für uns jetzt erstmal wichtig, unser Kerngeschäft in Ordnung zu bringen. Die Rahmenbedingungen können wir nur bedingt beeinflussen. Und wenn es sich dann mal wieder ein Stück aufhält, dann sind wir da. Und dann ist durchaus diese Perspektive da, die wir immer rausgegeben haben.

Dann schaue ich auf den Zettel, sehe von der DPA Frank Johannsen und der hat das Wort.

Yes, hello, just a second. So, once off, so that there is no feedback. Thank you for the question. A small follow-up question to the US cells. So so far you have not increased the prices there, so you don't actually pass it on to the customers. If I understood that correctly from the analysts, are you actually waiting for which solution to come at the end? And if you have an overview there, dann könnte sich da dann doch was tun. Das spricht, dass Sie dann unter Umständen über Ausgleichsmaßnahmen nachdenken und die Zölle erhöhen. Ist das richtig? Und können Sie da vielleicht schon mal irgendeine Indikation geben, welcher Größenordnung das dann sein könnte? Danke.

Ja, das ist korrekt, dass wir da jetzt nochmal den Ausgang abwarten. Das ist für uns auch ein Stück weit Verantwortung, die wir unseren Kunden gegenüber haben. Und mögliche Preismaßnahmen werden dann am Ende natürlich davon abhängen, wie hoch das Niveau ist. Prices of course look different when you are at 15% versus 10%. We will adjust that exactly. We will also put that in one ratio, how much the demand for our products is, how much we are in competition there. This is also a question that I answered with the investors earlier. For example, also in Europe, where we currently have a great advantage that our products arrive so well, that we have put so much work into it. we will of course also have a more stable price position. And that's exactly what we're going to weigh down. So we can't make a statement at the moment because we don't know the outcome yet. Neither a EU conclusion with the USA and what is then possibly possible for us in the second step.

Good, then we come to capital and Lutz Mayer, please.

Hello, good morning, can you hear me?

Yes, very nice.

I wanted to ask you if you could give a short update on the CO2 limits in Europe. The best figures you have mentioned and the sales are, from your point of view, very happy. And in terms of share, are you already well there? Can you already give a forecast for this year, even if we now have the extended three years, are you there? in line with the requirements that come from Brussels. And the second question then refers to the profit in the context. If I understood you correctly, you said before, since you now have to meet these requirements, you have to buy the reduced profit level, because there is not yet so much margin in the BEPS. And then with the second part, but you hope that the products will arrive better now, to stabilize that. Can you then give an overview of when you hope that the margin will be on the same level with the world of burners due to this effect? And maybe also for this three-year period, as you want to come to terms with the limits. Thank you.

Yes, Mr. Mayer, thank you very much for your question. So, first of all, we are very satisfied with how we are doing with electromobility. It works for the Volkswagen Group. We are by far market leaders in Europe. We were even able to expand it to 28 percent. In addition, there is also a very positive momentum in terms of order entries. That suits us first of all. Also brands like Porsche, for example, have an electrification ratio. The hybrids are part of that. 60% in Europe. That works excellently. The point is, of course, that the market is still relatively small. That means it is a smaller cake and even if we have a large piece of cake, then we will not be full, figuratively speaking. Now it is on the one hand, we will of course continue to invest, also bring in great products. Now comes the generation of the New Urban Cars. next year for 25,000 euros from the Volkswagen Group, Volkswagen, Cupra and Skoda. Then the whole thing is followed up again by the ID.2 for 20,000 euros, which then also generates volume again. And we see a very positive step in regulatory matters that has been made, that we now form an average value between 2025 and 2027, which is of course not an excuse for us to rest somewhere. So the goals are still punishment. It was not taken away from the CO2 targets in total, but only the time frame. And our claim is that we will now take advantage of these three years so that we can get around without fines. We still have something to do there, but of course we are also confident with the product momentum, also with the order entries that we have. In relation to That is absolutely correct at the moment, that the margins there are not yet at the level of the combustion vehicles. Now to sell fewer electric vehicles is also not a solution, because we have to achieve the CO2 targets on the other side. And now it is our task that we continue to work on our costs. These are the structural costs that we have in the company, which also affect the products. But also the product costs are material costs. And we have already raised it in the investor call that we have now set up a very systematic program over all construction lines to achieve this. Another view, there we are also now in discussions with the EU. In September, the next appointment will take place there, how the transition periods 2030 and 2035 will be designed. We also rely on reality checks to see how the markets develop, because I can do as a manufacturer so much more. If the market does not develop, and that depends on the right energy prices, it depends on the infrastructure, it depends on funding, all that has to be created. That you then define from this reality check how these transition periods are to be designed. And there we also rely on a certain flexibility, because alone as a company we cannot do it.

The next question goes to Reuters and Christina Ammann, please.

Hello, good morning, Mr. Blume, Mr. Antlitz. You have already spoken about the prices. Mr. Antlitz, you spoke earlier in the call with analysts that China is the first place where these signals can be recognized. Maybe you can talk a little bit more about that. And Mr. Blume, this US deal, so that I understand it correctly, your offer is, we invest in addition, if we can import it cheaply, does this direct young Tim exist? Or maybe you can tell us a little bit more about what your idea is and how realistic it is. that this second part, not only the investments from your side, but also the import opportunities actually come.

Thank you very much. Yes, Ms. Mann. In China, we actually see first, subtle, positive signals on the price side. We can all understand and read how the position of the Chinese government is regarding the competition that is taking place there. But what is even more important, we have to look at the topics that we have in our hands. And I'm very confident about that. We have a whole new generation of vehicles on a new platform in development with our local team, local for local. And also together with local tech partners, for example, Reisen Robotics for autonomous driving, part autonomous driving, then Inca Entertainment with Thundersoft or also the back end with Chaupeng. And an important element of this For example, the topic of batteries. We will also switch to LFP batteries in China. Very competitive. And in total, the team has already worked out a platform that is absolutely competitive in terms of technological and product properties. And at the same time, 40% lower costs. um That's a smart compromise from our point of view between price and then the result, because we have now also seen the partial operational result of one billion or half a billion in the first half year and between half a billion and one billion for the whole year. And the reason is because we simply don't go along with this price fight, but because we make smart compromises and now give up about a percentage of the market share again this year. But with this new generation of products on the electric side and the strong burners, we will attack the competition again in the second half of 2026.

Mr. Vormann, then I would take over your second question to the US sources. First of all, it is clear that we have a step. First of all, a deal between Europe and the USA must take place. We assume that it is a balanced deal and also a order of magnitude that we can then reasonably set up and that we can then make a specific deal for the Volkswagen Group. which is then also for all brands of the VW Group. We are there with eight brands in the USA in use. Our offer to the US government is, and we have already presented this in detail in some conversations there and has been boosted to positive resonance, that we make an offer, figuratively speaking, that we get a dollar in interest for every dollar invested. This would also include exports. And the logic behind it is that if the USA takes in a dollar, then it is a one-off effect. If we invest a dollar, then there is a much better multiplier behind it, also for the American society. We create employment about it, that is positive. An supplier network is created through investments, through technology investments that we make there, for example in the software area. know-how is created, IPs are created that are developed there in the country. And all of this is of course a positive source of income, continually directed forward, also in relation to taxes that the Americans can then raise. And in this respect, this is a very, very positive business case and in the end a win-win situation. For us, it pays off on our growth rate in the USA and it gives the Americans positive impulses in relation to the development of their economy. And that's why we're sitting on it. that we have the opportunity to apply it again to the EU deal and then work the whole thing down accordingly, so that it is also economically bearable for us to operate a trade with the USA in the future.

May I ask a follow-up question?

Of course, please.

Mr. Antlitz or Mr. Blume, you have always emphasized in the call, also in the speech, that you have to accelerate the savings, have to add a bit, Does this mean additional plans beyond what has already been communicated? Or is it primarily about planned site demolition, I don't know, to introduce conversion plans?

Yes, I said earlier that we have to increase our efforts. Currently, it is essentially about introducing measures that we have already agreed on on the timeline. You know, our program, for example, for Volkswagen AG, And the Volkswagen brand is designed for 2030, both in terms of capacity and productivity, and therefore, of course, in terms of factory costs. And at the moment we are discussing the main thing is to carry out the agreed measures. But we are not just rolling out this program on Audi and Porsche, as Oliver Blumen has done, but all over the world, in all regions, in all units, for example, South America, USA, and to make things easier for us, to improve the cost structure at the same time in growth in the USA, before there is a false information left hanging. And that can of course bring an additional positive effect, but in the core it is about implementing the agreed measures here in Germany and in the core earlier.

We look at the entire cost chain. It is often reported what we are doing on the staff side and on the labor cost side. For us, the development costs are exactly the same in focus, the material costs. Especially in these two areas, the biggest levers even lie. Then of course also what we have in sales costs, but then also the fixed costs. And as Arno Antlitz said, it is now more about acceleration. We need these effects now earlier, but that is all within the framework of the packages that we have just agreed in Germany. And to just give you a few numbers there, we have now reduced the staff by 4,000 in the first half of the year at Volkswagen. We have already agreed for 20,000 people who have registered there to then withdraw from the company via our instruments. And if we then include other brands for the first half year, we have reduced the staff by 10,000 people for the Volkswagen Group. And that shows that we have now taken pace and want to accelerate there again, because then we also have the effects faster and our economic situation can then be more stable.

Then we come from Reuters to Bloomberg. Monika, as you like, German or English. Please, the floor is yours.

Thank you very much. I have two questions. First of all, I would like a little clarity on the investment package that Mr. Blume just discussed. As far as I understand it, one dollar of investment is valued just as much as one dollar of a dollar reduction. Mit einem Blick darauf wollte ich fragen oder eine Nachfrage auf die Kommentaren während des Investors Calls. Wir haben dort gehört, also Herr Blume, Sie haben über Porsche und über Audi und über VW gesprochen, über die Gelegenheiten in den Staaten und dort haben Sie gesagt, we have successful cars and making them more American is our intention. Could you give a bit of clarity as to how possible it would be, for example, to have a Porsche model made in America? Or how much the current brands can then become more American?

First of all, to the US deal. That is now speaking figuratively. So one US dollar. invest and get a US dollar in interest for it. Of course, we are not at that point yet, but that is the basic tenor if we would do something like that. And then this can also be very attractive for us and, as I have also explained, of course also for the Americans. And a deal is always good when it is a win-win situation. We have a lot to offer and we want to proceed in this direction. make our brands even more American. I think a nice example for Volkswagen is the Atlas, which was specially designed and developed for America with great success in the USA. We are now going into the next generation, again a great vehicle, also very successful in the market. Or also the idea of going into the pickup segment, which is a third of the US market. even half of the sales of the entire US market. And then we made the decision with an American heritage brand, Scouts, to get in there. One or the other has certainly already seen the designs, what the cars look like. The feedback from the market is very, very positive. We have over 100,000 requests for this vehicle and it will take a while. We are currently building the factory until the vehicle is on the market. So we are very confident there. And then there are many other possibilities to meet the customer's wishes in the USA. Porsche is extremely established in the USA. The first half year was a historic record half year for Porsche in the USA. And then we also respect customer wishes. Americans like to drive a manual transmission in the 911, which is now very, very rare in Europe or the rest of the world. Now I switch to English because we're going to the Wall Street Journal and Steffen Wilmot.

Steffen, the floor is yours. Thank you. Can you hear me? Yes, we can.

Great. Yeah, well, to just follow up on that, and apologies if I've missed anything, because I've been following in German, but the... So you talked about this potential quid pro quo deal. So... if I understand it correctly, following a EU-US deal, there could be a special Volkswagen deal, or is this something that would be available also to the other companies? Maybe you can clarify that. And also, you talked, I think, earlier on the analyst call about the, or maybe it was earlier on this press call, sorry, about the possibility of exporting Audis, I think you were talking about. So investing in an Audi factory, which could then potentially be used for export. I guess that plays into this idea that you just mentioned of making American products and then perhaps using them for export. Does that mean you're also supporting the idea of exporting I think duty drawbacks, I think they're called in English, or the kind of compensatory kind of where you can count exports against imports for duty purposes. Maybe you can clarify those points in the way that you're thinking about how the U.S. situation could work out.

Thank you. Steffen, every company has got a special situation in the U.S. and therefore I think it should be possible to add a specific deal on company level in between U.S. and the automotive companies. And there are some companies that are exporting from the U.S. and therefore I think that's also positive to talk about exports credits or offsets, how do we call it, and the other approach are investments. And our idea is with our growth plan in the US, we can offer huge investments and then having the opportunity to discount the tariff level, but also with potential for the future to export cars from the US to other parts of the world. This is a Volkswagen model, and I think it should be open for European companies. That's not only automotive. That's pharmaceutical products or chemistry or whatever your deal, to make specific deals. In the past, also, when you invest in a region, sometimes you're getting support, local support, because a multiplier is much better. than in this case from the one-time effect having tariffs. And that is our aim to come to a win-win situation in between the U.S. government and then our company with a very attractive package.

And we have two more questions on the list. The first is Lesico. The second, Autocar. We start with Lesico and Thibault Madelin. Please.

Yes, hello, thank you for taking my question. Again, a lot of questions have been asked, but can you roughly say what order we are talking about now for investment and perhaps the reaction of the Americans, do you have the feeling that they have taken it more positively? Thank you.

So we don't give any concrete information about what we invest in there individually. We have the opportunity to offer a two-digit billion dollar contribution there. And of course, that also depends heavily on what opportunities are offered to us. We think that's very attractive, also with the possibility of what we are building there in jobs in the USA, what we are building on supplier networks. And that's always just the first step. You still have to see what infrastructure is available there, what opportunities there are up to retail, when invested there. In this respect, it is an attractive package that we have to offer there. Yes, the first resonances that we got there, also in the follow-up talks, were positive. And yes, now we are just setting it up, as soon as there is a deal between the European Union and the USA, that we can then link to it, also to the contacts that we have now made there with the Trade Ministry. Also, our ideas have already been presented to the President. And the last question for this call goes to Autocar and Mark Tischel, please, Mark.

Hello, a couple of quick ones for me. So Porsche seems particularly hard hit in its markets and its sales at the moment. How does Porsche turn it around? Is it on cost control or is it in terms of market appeal and products relevant to the market? And then just on China, what you presented this morning is really interesting. It kind of seems a bit at odds to what many Europeans are sort of pulling out of the European OEMs are pulling out of China. But your investment is huge. What are the risks of a Western OEM in China? Or is it having that level of investment with 50 new products to 2030 helps mitigate that risk?

Let me start with the Porsche situation. On the one hand side, Porsche invested a lot during the last years for the new product lineup, which is very well received in the market. For example, the record sales in the US is one example that the products are received well. On the other side, Porsche is in a special, I would call it a sandwich positioning, in between the development in China, there the market segment and there some figures were published in German Handelsblatt this week that luxury markets went down 34% last year and another 50% the first half of this year. And therefore, Porsche lost a lot of volume because of the structural effects in the China market. On the other side, Porsche is exporting 100% to the US from Europe, and the tariff level is hitting Porsche heavily. And why is Porsche in the sandwich positioning more than other manufacturers? Because China and the US are by far the biggest single markets for Porsche. Then the third effect is that the ramp-up of electric mobility is not as strong as expected. On the one hand side, Porsche is very successful with electric cars. As I mentioned before, in Europe, the volume share of Porsche is already 60% of electrified cars, BEVs and plug-in hybrids, and 36% BEVs only. And Porsche there is... in the top line of the traditional car manufacturers in terms of electrification. But all these effects together put the business model of Porsche under pressure. We reacted already with the first package in the first half of this year to improve the structural cost of Porsche, continued by a second package. We will negotiate now in the second half of this year And on the other side, to being more flexible in terms of product strategy, we kicked off a huge investment program for more flexibility in the program to having in between combustion engines and hybrids and electric cars. So kind of hatching, having more offers in each segment. And all of this is being done in this year. So we are expecting that we are touching the bottom. with a very positive perspective for the future because Porsche is counting on a great product lineup and on the other side, a great company structure. And so we have to adapt it in these framework conditions. And the second question was about China. In China, we are still market leader in combustion engine cars. We are one of only few companies in China still earning money. And what we have done around two or three years ago to switch our strategy completely with a clear product assessment. And we changed our product strategy. We changed our philosophy doing more business in China for China. We ramped up in the meantime a new engineering center in Hefei with over 3,000 colleagues working there. We implemented also with partnerships a new electric electronic platform, which will come at the end of the year, and a completely new lineup. We were able to reduce our costs of over 30%. We speeded up our engineering process of 30%, and now we will enter up to the end of 2027 with 30 new models to the market and up to the end of 2030 with over 50 new models to the market together with our joint venture partners. And the first feedback we are getting, we presented the first glimpse of our cars at the Shanghai Auto Show was very positive. And so we think that that's promising because we are on the level on the competition in terms of technology, what our Chinese customers are expecting. We are in line with our cost positioning, so pricing plays an important role in the market. And we have a big advantage because we have 50 million customers in China. We have very strong dealer partners, and we have a service network. And a lot of the new Chinese brands don't have this all-in-one solution. We are offering good products. great customer base, strong partner network, and service network, and high quality, what our customers are used from our brands. And so we think we need one or two years, and then we will have also a great comeback in terms of volume also in the electric segment.

Then I say at this point, thank you very much for all the questions and the exchange. Also here, thank you very much, Oliver Blume, Arno Antlitz. Ladies and gentlemen, the conference is now concluded and you may disconnect.

Thank you for joining and have a pleasant day. Goodbye.