Volkswagen Ag Unsp/Adr

Ladies and gentlemen, please hold the line. The conference will begin shortly. Thank you. Thank you. Ladies and gentlemen, welcome to the Volkswagen Group Investor Analyst and Media 9-month 2025 conference call. I'm Vicky, the call's call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star, then zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Pietro Zollino, Head of Corporate Communications. Please go ahead.

Good morning, everyone, and welcome to the third quarter 2025 results call of Volkswagen Group. This is, as usual, a call for both the media as well as investors and analysts, moderated by Rolf Voller, our head of treasury and investor relations, and myself, Pietro Zolino, head of corporate communication. With us today is Arno Antlitz, CFO and COO of the Volkswagen Group. Good morning, Arno. You should have received the press release, the interim financial report, and all other related materials, which were published this morning already. If you do not have them yet, You can find all documents on our Volkswagen Group website. In case of any issues, give us a call or drop us an email. Now let me hand over to my colleague, Rolf, who will give you a brief run-through of the next about one and a half hours. Rolf, please.

Thank you, Pietro, and good morning to everyone on the call. Thanks for joining us this morning. Let us have a look at our agenda. I will first present the key developments of the third quarter, And after that, we will take a closer look at the financial results and the full year outlook for 2025. Following the presentation, we will first host a Q&A session for the investor and the analyst community, moderated by myself. And after the session, we will have a short break before continuing with the media Q&A, which is then hosted by Pietro. Since today's call includes forward-looking statements, the safe harbor language, and and other cautionary statements on the slide will govern today's presentation. I encourage you to read the disclaimer carefully as all forward-looking statements are qualified by this language and in the interest of time, as always, I will not read it out to you loud. And with that, I hand over to Arno. Arno, please go ahead. Thank you, Rolf. Ladies and gentlemen, Our nine-month results continue to tell a story of two sides. On the one hand, there is a huge success of our products, combustion engine and electric vehicles. The positive momentum in auto intake in Western Europe persists and is reflecting the strong support from our customers. Our global BEV share increased to 11%. In Europe, every fourth electric vehicle is delivered from the Volkswagen Group. And we make further progress in implementing our strategy and in the restructuring of our business. However, operating result in Q3 was negative at minus 1.3 billion euro. Two main reasons for that. First, the successful ramp-up of electric vehicle continues to dilute the operative margin. On top, results were significantly impacted by headwinds of 5.3 billion in the third quarter. mainly by cost related to realignment of Porsche product strategy and the goodwill impairment of our stake in Porsche in the combined magnitude of 4.7 billion euro and the increased US tariffs of about 800 million euro. Including these effects, including these impacts, we achieved a 5% margin in Q3, which we consider to be a decent performance in the current economic environment. And I really want to say thank you to our teams worldwide for the efforts and the dedication and their commitment. However, we expect the tariffs to stay. Before special effects, but including tariffs, we stand at 4.5% margin after nine months and a net cash flow of 1.8 billion. These figures clearly show that we need to step up our efforts to reduce costs and increase productivity in all brands and units. to strengthen the resilience of the Volkswagen Group. With that, let us dive straight into the presentation with the key developments in the quarter before we continue with the financial results in more detail. As said, we continue to see strong product momentum as highlighted at the IAA in Munich. Here, Brand Group Corp. presented the new Urban BV family, complementing the BV product lineup with very attractive entry-level offering from autumn 2026 onwards. Audi unveiled its Concept C, which exemplifies the brand's new design philosophy and spirit. The third quarter also saw the launches of two key models, the all-new T-Roc, one of Volkswagen's brand's bestsellers, hitting the markets with enhanced design and state-of-the-art technologies. And the new E5 Sportback from Audi's China-exclusive four-letter brand has just been launched. The Audi A5 Sportback has been well received by the market and first deliveries to customers have been made. Back to the financial results and starting with volumes. Global deliveries to customers in the first nine months increased to 6.6 million vehicles, 1% above the prior year period. Auto intake in Western Europe continued its strong trajectory. on the combustion engine vehicle side and on the BEVs, reflecting the positive reception of our upgraded model portfolio by our customers. Order book in Western Europe stands at 885,000 vehicles at the end of September. This is about 4% above the level at the end of the year 2024. BEV order intake increased by 64%. And electric vehicles account now for 25%, of the total order book. We recorded strong delivery growth of 9% in Europe in the third quarter, thus accelerating the positive trend seen in the first half of the year. Year-to-date we stand at plus 4%. South America achieved even double-digit growth in the quarter and year-to-date. In contrast, North America recorded a decline of minus 10% in Q3. This is largely the result of trade uncertainties and the implementation of measures to mitigate effects from increased tariffs. Year-to-date, the standard is minus 8%. In China, we recorded a decline of 7% in the quarter and 4% year-to-date, in line with our planning. Despite lower PV sales in China, global deliveries of battery electric vehicles improved by 42% year-to-date, to 718,000 units. The share in group deliveries increased to 11% versus 8% one year ago. This was particular due to strong growth in Europe. Our BV share in Western Europe almost doubled in the first nine months, 2025 to more than 20%. With that, let's move on to the financial and operating performance of the Volkswagen Group in the first nine months of 2025. On the back of rising vehicle sales, group sales revenue increased by 1% to €239 billion. The operating result came in at €5.4 billion. This is 60% or €7.4 billion below the prior year. Accordingly, the operating return on sales stood at 2.3%. The result after nine months includes special effects in a magnitude of 7.5 mainly increased US tariffs in a magnitude of €2.1 billion, €2.7 billion from Goodwill Impairment Porsche, and €2 billion related to the Porsche realignment as announced on the 19th of September. Excluding these effects, the margin of the nine months stands at 5.4%, which we consider a decent performance in the current environment. However, as said before, we expect the tariffs to stay. excluding the non-recurring effects, but including costs related to the U.S. tariffs, the group operating margin would have amounted to 4.5%. And these figures clearly show that we need to intensify our cost reduction efforts, must advance or pull forward parts of the efficiency programs, and find new ideas. Profit before tax largely followed the development of the operating results, with higher income from participation than valuation effects, outweighing a more negative interest result. Profit after tax declined by 61% to €3.4 billion as a result of a higher tax rate, worth noting that the goodwill impairment is not tax deductible. Net cash flow in the automotive division totaled to €1.8 billion, Euro in the first nine months, here a significant improved cash flow from working capital management and lower investment spend, more than compensated for the lower operating profit. Operating cash flow includes cash out of 1.9 billion Euro for U.S. tariffs and about 1 billion related to restructuring measures. Not to forget the about 0.9 billion Euro we had to spend in the second quarter for the acquisition of additional shares in Rivian. For the MotivNet liquidity in the first nine months declined by 3.4 billion euro compared to year end 2024. Further to the operating cash flow major factors for the development of the net liquidity year to date were dividends and interest payments to hybrid bond holders of in total 4.4 billion euro and M&A expenditures of 1.5 billion euro. This was partly compensated by operating cash flow. The other bucket includes negative 1.2 billion effects from changes in lease liabilities. Overall, at €31 billion at the end of September, net liquidity is at a solid level. Moving on to the performance of the divisions. Passenger cars recorded an operating result of €2.2 billion in the first nine months of 2025, 74% below prior year period. Commercial vehicles saw a decline of 46% to €1.7 billion and this corresponds to an operative margin of 5.4%. The Financial Services Division strongly improved the operating result by 40% to 3.1 billion euro. Let's have a look on the drivers of the operating result in the passenger car segment. Volume had a positive impact of 1.3 billion euro. Price mix was combined negative at 3.0 billion euro. This was mainly the result of the dilutive effect from the higher BV share and unfavorable regional and brand mix effects. It's worth noting that volume price mix in Q3 was almost a wash and in line what we guided for at the beginning of the year. Provisions related to European and US emissions regulations had a negative net impact of 0.4 billion euro after nine months. Exchange rate movements posed a headwind mainly driven by negative valuation effects of balance sheet positions in foreign exchange rates. Product costs improved by €1.3 billion. Last but not least, fixed costs had a negative effect of €2.5 billion. However, when excluding the impact from Porsche alignment and the Goodwill impairment of in total €4.7 billion, fixed costs improved compared to the prior year period. This is also visible when taking a more detailed look at the overhead cost development. In the first nine months of the year, overhead costs in the automotive division are reduced by €1 billion. Accordingly, the overhead cost ratio, improved by 60 basis points with positive momentum in the second and third quarter in particular. Increases at Trayton and the ramp-up of new businesses like Battery and Scout are more than compensated for by improvements, specifically Brand Group Core and Brand Group Sport Luxury. The good news to our teams worldwide is the efforts to reduce cost base and increase robustness are paying off. more to come over the course of the following months and years. For BrandVolkswagen, as well as the group in total, the stringent implementation of the performance program is key to achieve a sustainable reduction of overhead costs. As you can see on the left side of the chart, the program ZukunftVolkswagen is delivering tangible results. In the first nine months of 2025, Volkswagen reduced the number of active employees at its German sites by around 6,000, Overall, since the end of 2023, headcount was reduced by approximately 11,000. In addition, Audi, Porsche and Carriot in particular are pushing ahead with their respective programs. As a result, headcount in Germany on group level has been reduced by a total of 7,000 in the first nine months. Let's now move on to the development of the brand groups, the platforms and the financial services business. Every business starts with the customer and the top line. Here, Brand Group Core recorded solid levels of revenue growth of 5%, respectively, year-on-year. The operating result amounted to €4.7 billion. The margin stood at 4.4%, broadly in line with the prior year figure, despite tariffs and restructuring costs incurred totaling almost €1 billion. Product momentum at Audi is increasingly paying off. Bank Group Progressive recorded sales revenue significantly above last year, with a plus of 5% driven by growth in unit sales. Despite the strong top line, operating results came in 26% lower year-on-year at €1.6 billion, corresponding to a margin of 3.2%. Positive effects from volume growth were compensated for, in particular by restructuring increased US tariffs and a strong increase in the BV share. Underlying margin calculated based like we said before, brand group progressive stands at 5.7% after nine months. Operating results of Porsche automotive business came in at minus 0.2 billion euro. The loss is largely due to costs incurred related to realignment of the product strategy, totaling 1.8 billion in the third quarter. In addition, headwinds resulted from a significantly lower sales volume, in particular in China. U.S. tariffs as well as extraordinary charges recorded in the first half related to further strategic realignment measures and for battery-related activities. Let's have a short look at the brand group core. Volkswagen passenger cars improved profitability by 30 basis points to 2.3% despite significant headwinds from U.S. tariffs. Skoda impressively continued their exceptional performance in a difficult market environment. first-class products on Volkswagen Group platforms combined with a competitive cost base. Whereas margin continued to stay strong at 8% at strongly improved unit sales and sales revenue, the slight decline in the margin of 30 basis points versus prior year period is a result of significantly higher BV sales, namely driven by the success of the LROC. Leaving the non-operational effects aside for a moment, the performance of the Brand Group Core and Volkswagen brand specifically was pretty solid. The increased U.S. tariffs and costs incurred for restructuring activities negatively impacted profitability. Excluding these effects, Volkswagen passenger cars recorded a margin of 4%, which is the target the brand has set itself in the beginning of the year. One point of caution here again, restructuring expenses burden the result now, but help us to achieve a leaner cost structure in the future. However, we need to prepare for a scenario where tariffs are to stay as part of the operating business. This clearly means the restructuring work must continue and we even need to speed up our measures. The period continues to increase license revenue, backed by increased sales volume on the 1.1 and the 1.2. Sales revenue rose accordingly to around $1 billion in the first nine months. Operating loss was reduced to $1.5 billion, mainly as a result of the implementation of the announced restructuring measures. The power core, the ongoing ramp-up of the Salzgitter plant, intensifying construction works at the Valencia and the St. Thomas plants, and the build-up of the organization are continuing. As a result, PowerCore recorded a significant expansion of the operating loss to €1.1 billion year-to-date. Brayton recorded a decline of 9% both in vehicle sales and sales revenue. Truck sales were weak, in particular in Latin America and North America. Sales revenue in Europe was stable. As a result of the lower sales volume increases in fixed cost and exchange rate, the operating profit declined by 46%. to 1.7 billion euro. Our financial services business continued to perform well in the period under review supported by improved contract volume plus 5% specifically in Europe and an expansion of the portfolio margin. In addition, the used car business benefited from still positive remarketing results while the normalization of used car prices continued in the quarter. The credit loss ratio continues to be on a solid level As a result, operating profit increased to a strong €3.1 billion. Investment spend for CapEx and R&D in the automotive division declined by €2 billion to €24.3 billion in the first nine months of the year compared to the prior year period. We remain fully committed to sustainably reducing investment spend in the years to come, despite significant investments required for the transformation of the portfolio and the development of new business. The initiatives to reduce complexity and actively manage our portfolio participations continue with full force as we speak. Moving on to the performance of our joint ventures in China. The market environment remains highly competitive, with pressure specifically in the premium segment. Pricing and incentives levels, however, seem to have stabilized sequentially, but on a sub-DU level. Unit sales were 1% lower year-on-year at 1.9 million vehicles, driven by declines in premium and BEVs. In contrast, ICE volumes held up very well. As a result, the proportionate operating result of our joint ventures in China came in at 744 million euros in the first three quarters of 2025. This is about one third below the prior year basis, but well in line with our target of up to $1 billion for the full year. This brings me to the full year outlook. Building on what we have achieved year-to-date, we factor in the following key assumptions for the final quarter. The current U.S. tariff situation is expected to pose headwinds in terms of cost, cash-out, and volumes. Continued support from the model offensive, a further increase in the BV share with respect to effects on price and mix, increasing contributions from the implementation of our performance programs, a sequentially improved financial performance of the premium brands, and at the same time, our forecast is based on the assumption that there will be no supply bottlenecks for semiconductors. On that basis, we confirm the operating return on sales safely in the range of 2% to 3%. Given the financial performance here to date, there's even a chance to close the year in the upper half of the range. Investment ratio in automotive division is expected to be in the range of 12 to 13%. We also confirm our expectations for the automotive net cash flow at around zero with a good chance to end positive depending on the operating performance and working capital movements in the fourth quarter. Ladies and gentlemen, we continue to make progress in the implementation of our strategy Our product offensive is increasingly paying off, as evidenced by the positive order intake and top-line performance. We delivered a decent financial performance in the first nine months before considerable headwinds from special effects. However, reported numbers matter, and the operating margins stand at 2.3% after nine months. And even before non-recurring effects, our margin amounted to only 4.5%. And this is not sustainable yet. for our business model, in particular in light of the ongoing volatile geopolitical situation and market environment. It once underlines that we must stay fully focused on driving our strategic initiatives, improving the cost base with full force, and continue our initiatives to reduce complexity and increase execution speed. With that, I hand it back to Rolf. Thank you, Arno, for that comprehensive overview of our nine-month results in the third quarter. Before we move on to the Q&A, let me provide you with a financial calendar 2026. The next group event will be the release of our full-year results on March 10th. I think this was for the sake of completeness because this wasn't missing, I think. Let us now enter into our Q&A session, starting with our analysts and investors. I think actually it's star one in order to ask a question, and we give it a couple of seconds before we see the first question on the screen, and here we go. The first one is from Patrick Hummel from UBS. Patrick, please go ahead.

Yeah, thank you, Rolf. Good morning, Arno. Thanks for taking my questions. I would like to ask first about the free cash flow. Obviously, Q3 was solid, working capital driven, and you sound confident that it's going to be above zero also for the full year. So I'm just wondering, looking a little bit further ahead, what's really the deal here with free cash flow? We've read stories in the media about a big gap in your cash flow planning for 2026. We talked about investments that might be required in response to the tariffs. So I know the planning round hasn't been finished, but can you just help us to get a clearer picture how we should think about the free cash generation of the business in 2026 and the investments? Are they going to be stable? Are they going to come down? Yeah, any call you can give, highly appreciated. And my second question relates to brand group Progressive or Audi specifically. Q3 run rate would not even closely get us to where the company wants to be on a full year basis. So either we're going to get a very strong fourth quarter or Audi is not going to make the goals. What's your latest take here? Should we expect such a steep increase driven by the product cycle at Audi in the fourth quarter? And what happens if they don't deliver? Does your group guidance already account for Audi delivering outside of their guidance corridor, or at least at the very low end of it. And yeah, how should we think about the trajectory in the coming couple of quarters at Audi? Thank you.

Patrick, thanks very much for your questions. So, I mean, for obvious reasons, I don't want to comment on the press speculation for the planning round for next year. But let me put a little bit in perspective what happens. Look, when we talked about the current planning round, we saw the transformation in the industry, supplier margins under pressure, competition in China, and we countered that with a huge program for Volkswagen Zukunft, Audi Zukunft, and that was basically part of the planning round last year. And we decided on a viable planning round, and since then, two factors have changed. First, the implementation of tariffs, which is a burden of about $5 billion on an annual basis of direct tariffs to be paid, and we lost some volume due to realignment effects. And since then, the situation in China, specifically in the premium brands, has also changed, which is reflected in the new guidance of Porsche. They had like um 15 to 70 percent guidance now they are at 10 to 15 and so this we have to factor in into the new planning round and this is where we stand and this is um what we work against and we work against counter measures because we are fully committed to to to come up with a plan that makes the volkswagen a brand even robust so this is where we stand and um in terms of free cash flow Next year, obviously, it's too early to give you an indication, but we are committed to ramp down the investment. We have an investment spend of $165 billion, and that spend, we always said it's front-loaded, so year over year, the investment goes now down in absolute terms, and this should increase the free cash flow rate. and cash conversion rate so this is still intact and I also guided for that the plan is 165 and if we decided on a factory in US for Audi which we are actually looking for then we would compensate that within 165 so this is even a chance so that means like on an operative basis we are further reducing R&D in capex and find more synergies in order to compensate for a potential factory in the U.S. So this is where we stand and we have the consensus for next year in sight and we will give you an indication next year. Thank you. And Brand Group Progressive is, yeah, they need a strong force quarter. This is clear. Main factors should be product momentum. They have the full availability of the Q5, which was not the case so far. They have new Audi electric vehicles, Q6 e-tron, E6, and with these great cars, they should be able to meet their targets for the fourth quarter.

Okay. Thank you very much, Arno.

Thank you, Patrick. And we continue with Jose Alamendi from J.P. Morgan. Jose, please go ahead. Thank you all.

Thank you very much. Morning, Arnaud. Three questions, just very quick ones. On tariffs, can you speak about some of the mitigation measures you're taking to offset tariffs in the US or any measures you've taken recently? Second, there is strong free tax generation of Volkswagen, right, underlying, but there are exceptional one-offs. Are there any of these one-offs that we're seeing on Rivian, Chopin, Scout? Do you see any of these one-offs reversing next year when it comes to CapEx? I hear you in your CapEx planning that you have for 26, but I think 25 CapEx has been hit and 24 by exceptional one-offs in terms of CapEx. Do you see some of these elements unwinding next year? And then three, we'd love to hear about your market share in Europe, where you're maintaining a very strong market share despite, I think, strong disruption from Chinese OEMs entering the European market. How do you think about your market share in the context of all the product launches you have? Thank you.

Thanks for these questions. In terms of tariffs, I gave you a very broad figure, up to $5 billion on a full year basis, and this includes basically the direct payment we have to do. This includes some countermeasures in terms of pricing, but it also includes some measures where we lose margin. Why is that the case? Look, an entry-level jet on entry-level cars from Mexico shipped to the U.S. in a terrorist regime of 27.5% is not feasible. So if you look at our sales in U.S. or North America in the first nine months, we were originally planning to increase the sales. And now you see basically an 8% decrease. So we were like planning for a 10% increase. It's always difficult to say what are the reasons, but Part of the tariff burden you also see in, let's call it, lost sales in the US. And this adds up to the up to $5 billion. And of course, we look into countermeasures, as I said before. The biggest countermeasure will be we have to compensate for that on the cost side. And we also said that we look at more localization specifically on the Audi side in Europe. but this is too early to give you an indication. In terms of capex, it's not really one-off. It's more like a continuous ramp down to the targets we gave you in terms of R&D capex combined. We have the effect that we basically, in the year now, 24, 25, slightly 26, we have that double investment in terms of keeping our combustion engine cars competitive and ramp up of our BVs. And that effect will likely go down. So we gave you a target of 10% for 2027, R&D CapEx combined. We're still in line with that target. And when you read in the press or when we communicate that we look into some measures to even improve the combustion engine side of stronger with adding additional models, adding PVs, plug-in hybrids, adding a HEF, for example, for the US. We will compensate that on the ramp-up of electrification. To give you one example, we originally had a plan at the very beginning of our journey of 15 billion capex for power core over five years. We reduced that to 12, and we reduced that to 10. And now we are significantly lower than 10 over the last five years because we just react in terms of adding capacity to the ramp up of electrification in the market. So this is where we stand and we absolutely commit the 10% target for 2027. And in terms of market share in Europe, we are very pleased with the current development. The PV share goes up, but the market share in ice holds very nicely. Now we see that, for example, in individual models. We are very pleased with the order intake of ID7, and still we are pleased with the performance of the POSART. And so this is where we stand. So this is a very good feedback for us and more great models to come. For example, the T-Roc, a very important model for Brent Volkswagen, and then the new small urban family. But going forward for our financial planning, we don't plan for an increase of market share. We plan for a stable market in Europe on the current basis, and we plan for a stable market share, perhaps a small increase. And that, for me, giving the current product substance is more a chance than a risk.

Thank you, José. And we continue the line with Horst Schneider from Bank of America.

Yes, good morning and thank you for taking my questions. I want to follow up to Patrick's question. I know that you cannot give at this point a guidance for 2026. I think we all not expect that. But when I look also for your EBIT bridge, Q3, nine months, what we see is that the EVs, they continue to dilute the mix. The EV sales increase. That's good. You hold up versus the new market entrance, et cetera. That's great. But nevertheless, they dilute the mix. For me, it's hard to imagine that this gets any better because the number of best sales need to improve, of course. And then also pricing, it's constantly a little bit negative. So therefore, if I spin this thought further, it means that this burden will not go away. So in that context, Can you remind us again of the cost savings that you expect for 26, 27? Would be good to have this view on a net basis. Can they compensate basically these negative price mix effects which should persist? So therefore, in a nutshell, the question is what I asked also at the IAA already, if 26, maybe even 27, another year of transition, or is the ambition clearly to increase the earnings already next year. That's number one. The number two is on this next period issue where you also probably do not have great visibility. And you say you are covered until next week. Next week is not a long time. So therefore, I just want to get a feeling if any production cut can be avoided or what needs to happen. that the production cut can be avoided. I think it's just up to the politicians that they get this away. So what is happening in the background? Any color would be appreciated. Thank you.

Thanks very much for your question. As always, in the Q3 call, I start answering it with, obviously, I can't give you full guidance for 2026, but I understand where you're coming from. Look, if I want to give a little bit of color, On the exhibit 11, I deliberately decided to give you basically three margins. The one is reported margin, 2.3%. The 5.4% margin is like if you take all out of the one-offs, shows a little bit of our performance and shows also that although all these headwinds, we would have been still in the corridor that we gave you at the beginning of the year. And then we gave you a figure of 4.5%. which is kind of an underlying margin because it includes tariffs, but it excludes the one-offs. And if I were you, I would say, look, this is roughly a normalized performance. It's a little bit improved because there's only two quarters of tariffs in, not three, but let's assume this is basically the run rate of our current business, including tariffs. And this is should be the base for doing the math and the calculation for next year. And from that 4.5, I wouldn't expect too much from global markets. Europe, flat. US, perhaps a little bit under pressure. China, very small growth. I talked about the market share. So it's really on the cost and on the revenue side. And what are headwinds? Yes, we ramp up PVs further. So that will be an additional headwind. the headwind will be a little bit less proportionally because the ID2 family, let's call it, I think we call it new electric urban family, the margins are closer to the combustion engine margins. So they will have an LFP battery, they will be built in Spain, they will have a more integrated electrical engine. So the margin dilution effect continues, but For these cars, it's much lower because they have already 80% of the contribution margin of the combustion engine cars. But still, margin's elusive. I said it's a little bit than we add one quarter of tariffs, but let's not forget product momentum and let's not forget the huge momentum we have on our cost programs. I think you follow us for quite a while. And look, we were able to reduce overhead costs by a billion. despite inflation, and we were able to reduce the workforce by basically 11,000 over the last one and a half years. And that continues. And this will continue next year. So margin losing effects, performance programs, and then some positives and negatives, smaller ones on the P&L.

Can you just tell us a number, how much you want to cut the costs? I mean, that was announced already, but it's hard to keep the overview. Just repeat that maybe again. What do you expect in terms of cost savings for the next two years?

Four billion of the Volkswagen, Volkswagen AG, which includes brand and component business. And if you add all the other programs, Audi 2, Porsche, it's a career, it's then up to six billion. until 2030 2030 all right and until 27 no number has been communicated right no but it's look if you look at the the major effect comes from from the wage sampling the wage um logic that is a billion this year and another 500 million next year continuing so then it's basically the at the end of 26 we are at 1.5 billion which should continue and then and then the The reduction of workforce, as you see, it's rather linear. 5,000, 20, 23, 5,000, 20, 24, sorry, 20, 24, 25. That should continue more or less linear. And the capacity reduction kicks in 20, 28. So this is more like a step down. Okay, that's great.

Just the period would be great if you could answer that as well.

Look, I... Perhaps it doesn't feel like, if you read the press, but I'm really proud of the team this is working on. This team is still by, I don't know whether this is the right word in English, but I would say in German, this team is still by the experience they made during the chip crisis. So we have tremendous visibility between us and our suppliers. We know which semiconductors are going to which part, and there's a great transparency. They also try to find additional sources, obviously. And what we can say, we are safe until the end of next week. But I must also be very honest to you. We look at that topic week by week. We try to stabilize week by week. Now we are safe at the end of next week. And as you said before, the solution should be on the political side because it's not like a technical shortfall or a capacity shortfall. It's really induced by obviously political discussions. And this is where we hope that all the relevant parties sit together and find solutions.

These political discussions, is it Europe or U.S.? It has to be done by the U.S. or by Europe, is your feeling?

I don't want to speculate. I'm not sure whether I have... Okay, all right, that's fine. Thank you so much. What I can say is what we are doing, and I would say the transparency we have now per car, per piece, is way better than we had when we started the chip crisis.

Okay.

That's great, Arno. Thank you. Thank you, Horst. Thank you, Horst. And we move over to Tim. Tim from Deutsche Bank. Please go ahead.

Thank you, Rolf and Arno. Arno, the fight for better free cash flow generation and conversion has kind of been one of your biggest professional fights as a CFO at VW over the last few years. We know that VW only changes under tremendous pressure, usually really for the better. We've seen this multiple times with the restructuring, diesel scandal, and so on and so forth. Do you feel like your colleague understands now a little bit better why you pick up that fight and why you want to drive free cash regeneration now that we see that Porsche is not generating as much anymore and it's also problematic on all sorts of other items? Or do you still feel it's as difficult as it was? And I understand you don't want to give us a number, but if I give you a number and say, hey, Let's say you generate a little bit of free cash flow this year, actually, because there's a lot of capex that you now have to spend in Q4, really. And then you sell Everland. That would be counted as free cash flow as well. We suddenly talk about 5 to 7 billion positive next year and not the 7 billion negative media speculation, right? So what would you say to that? And then secondly, when we think about restructuring and improvements of the business, we see the result already with NBW Brand and Core Group. Is this implied strong result of Audi in Q4 also partly a result of the ongoing restructuring efforts already? Or is that still to come next year as a support? Thank you.

Tim, first and foremost, I think we had the opportunity to meet not the whole board, but we had a presentation on the ER. And I think you realize that we really act as a team. And we find really good answers. I think everybody knows where we stand. And again, look, as I said before, the speculation, the press, you have to see where we stand. We had a planning round. We agreed on a viable planning round. And now all of a sudden there's an additional headwind of 5 billion tariffs, an additional headwind of China. And we are committed to compensate for that as well. And we look at measures. and I said it even in an interview this morning, we had program, brand by brand, and these programs are really focusing not only on EBIT, but also on cash flow. The teams work much closer together in terms of production, sales. If you look at our working capital of our inventories, much stronger than in the past in terms of percentage of sales. But there's a second level, I would say, It's the field we also talk long about, it's group synergies. And this is what I specifically highlighted. Now we have real programs, brand by brand, and the next level where we could compensate and do even better and make more out of the current cash flow and R&D is even more group synergies, both in CapEx and R&D, on software, on combining brands, production to brands. I make one example. id2 family now all the cars from the same platform from different brands should be in future and on one line or even or one factory so this this gives us um the positive i said before tim it's i it's really i cannot give you a free cash flow guidance um today because we are not done so far and that would be not professional if i give you guys although we are not done i i said We have the consensus for next year inside on cash flow. Perhaps we should leave it like that. And we know what we need to deliver as a group in order to be able to pay dividends and interest rates to shareholders. So this is where we stand. This is what we work on. And we are fully committed as a team. And hopefully you have understanding that I cannot be more specific right now. And then Audi, let's not forget Audi restructured already. They closed down the Brussels plant. They agreed on Audi Zukunft and they will reduce the headcount by 7,000. New products are coming and the continuous effect on the closure of the Brussels plant also comes in obviously then in the fourth quarter and next year. So yes, part of the The improved figures in Q4 and going on for next year already is also from the restructuring.

Thank you, Arno. Looking forward to the free cash flow guide early next year.

Thank you, Tim. The next one in line would be Mike Tindall from HSBC. Difficult to ask now an additional question on 2026 and the free cash flow, but Mike, please go ahead.

Thanks, Rolf. Just a couple for me. I guess, given we're talking about cash flow, I'm not going to ask about 26. But I wonder if you've got any thoughts around the dividend. We've seen a lot of one-offs this year. Some of them will be included. Some of them won't. Cash flow effectively on the guide is neutral. Any thoughts you could offer in terms of dividend would be super helpful. And then the second one, on the tariff piece, it feels like we've seen movement on most regions. with the exception of Mexico. And I just wonder if you can talk about what are you seeing and hearing on what might be happening on Mexico? And while I'm at it, there was some discussion about potentially getting credit for investment. You talked about potential Audi factory in the US. Is that conversation ongoing? I just wonder if you could give us a bit more feel for it's 5 billion, but is there a potential downside? opportunity on that tariff number. Thanks.

Yeah, Mike, thanks for your questions. On the dividends, I think I can give you two indications. First and foremost, I said we stick to the 30% payout ratio, at least 30% payout ratio, and what we also communicated that when we laid out our talk, that we won't the non-cash impairment charge of the Porsche Goodwill in the magnitude of 2.7 billion we won't take as a basis when calculating the basis for the dividend for the 2025 which we propose and this is what I can give you on a dividend which would help you to determine a where we could stand on that.

Can I just come back? Just one second on that. I just wonder with the planning round going on and the emphasis on generating free cash flow, how does that conflict potentially with paying money out?

I mean, look, what I said before, it's not conflicting. It's actually the other way around. We have to come up with a planning around that it's robust for the Volkswagen Group going forward. And robust means also being able to pay the dividends we promised to the capital market, to our shareholders. This is where it's at. So it's not conflicting. It's actually the other way around. This is part of the robustness. And we have a net liquidity on more than $30 billion. We are committed on cash flow generation, the cash conversion rate, should go up, so it's not conflicting. It's actually the other way around. It's part of the, when I describe robustness, it's part of the ability to also let our shareholders participate of the success of the Volkswagen Group.

And tariffs, yeah.

Look, the $5 billion, I said up to $5 billion. That's very roughly, and don't cite me, but very roughly, it's about... 4 billion, 4 point something billion we have to pay from the current basis on the regimes we see, between 4 and 4.5 payout, and the rest of the 5 billion is basically, I would say, lost margin due to some measures we took in order to mitigate the effect. So there are two levers to optimize the 5 billion, first and foremost. additional measures like pricing and others, obviously. And on the other hand, there are some talks about, look, from Mexico to the US, you have 27.5%. So there are some ideas, I think, to exclude some of the parts that go from Mexico to the US, which would obviously bring down the up to $5 billion to a smaller number. In terms of the factory, we don't have new information yet. We are still in discussions with the administration in the U.S. We still look into the topic. We calculate. But I cannot share new information on the topic of potential industrialization and localization. Let's call it that way of the Audi brand in the U.S. We don't have new information, which I can share. Thank you very much. Appreciate it. Thank you, Mike. And the next question comes from Sam Perry from Exxon. Please go ahead.

Hi there. Thanks for taking my questions. There's a few media stories in the quarter around issues with the Rivian software rollout and Cariad sort of moving to be a coordinator of these technologies. Can you give any color on exactly what's going on here and whether or not that could result in any one-off charges going into next year? And then with regards to Porsche's change in strategy back to ICE and given the shared platforms with Audi and the 300 million impairment that Audi took, does that have any implications for Audi's future model rollout or investment requirements that you could share? Thanks.

It was difficult to understand. I heard about the Rivian software. So what I can say, the Rivian software which we developed together in the JV for the electric vehicles is on plan. We look into the next milestone, which would be the winter test for the Mool. And it's even the other way around. When you remember back then, we agreed on the software. We set up a certain model range of the first step of cars or the first tranche of cars that will get the software. For example, electrical SUV from Audi, for example, Scout and others. And we even included in the course of the joint venture the ID.1. So the ID.1 will be an additional model that will get the Rivian JV-based software in the MAB. So this doesn't feel like delayed. It's even like we increased basically the speed in terms of we added a different model, which is also a very good news for the ID.1 because it's a very capable and per car cost-effective software. This is where we stand at Derivium.

Thanks. I don't know if my second question was heard, but just on Porsche's changing strategy back to ICE, the implications for Audi.

Look, what I would propose, I think Audi has their call next week, Rolf, on next Monday. Yes, there are some implications, but minor ones in terms of financial impact. I think they had a burden of 200 million. But I would really propose that next week's call is, I think, on Monday and And so here you can discuss in detail the audit product strategy with Jürgen Lillisberger. Thanks. If that's okay for you.

Thank you.

Thanks. And the next question comes from Michael Punzert from GZ Bank. Michael, please go ahead.

Yes, Michael Tunzeff, good morning. I have two questions. First one is, can you explain in a bit more detail what's happened with the other financial result because we saw a huge swing year over year in Q3? And second one is, can you give us any kind of guidance what we should expect on special items or restructuring charges and so on in Q4, please?

Thanks.

Yeah, on the other financial result, there were some

basically new evaluations of, for example, convertibles we have and, for example, other participations, which are positive. And for the fourth quarter, we don't expect major one-offs. The restructuring is going on. There's, I think, a double-digit million up to a small... three-digit million more restructuring to expect from the brand group core, but not major ones. What I would like to remind you in terms of restructuring, just for the understanding, the major effect of restructuring of our program at Volkswagen Zukunft is the so-called early retirement program. And these, the So the accruals for that total retirement program, we do contract by contract and person by person. So that flows in over the course of the year. And just to give you an understanding, it's a magnitude of $400 million a year. This $400 million is factored in our outlook and is factored in the bridge, but the true performance of our program, of our Volkswagen brand and brand group core performance would even be better if you deduct that 400 million per year as well, which we don't do.

Okay, thank you.

Thank you, Michael.

And we have the last question in today's session coming from Henning Kosman from Barclays Henning. Please.

Oh yeah, good morning. Thank you for squeezing me in. I apologize in advance. I need to come back to this free cash flow thing for 2026. I just want to clarify because I think it's important. Appreciate the sort of color that you're striving for consensus. The clarification is just that's excluding any potential asset sales, right? Because that could of course be a big factor. So if you could just confirm that we're talking about underlying free cash flow from the operating business. And then the second question is, please, thanks for reminding us about the 4 billion and 6 billion cost savings through to 2030. Could you just talk about whether that's growth or net of inflation that's happening in the meantime in terms of cost evolution? and also if that's in any way double counting, for example, with the expected Audi earnings recovery, Porsche earnings recovery from a low base, or is that really a number that we should basically stick on top of whatever the underlying result is currently without any netting offsets? Thank you so much.

Yeah, Henning. No, the free cash flow bridge for 2026, is we talk about really operating free cash flow. Bear in mind, we have some also M&A activities planned for 2026, smaller ones. There might be some basically compensation for that, smaller sales of participation. But in that free cash flow guidance, we gave you the color, let's call it color for 2026, And we said before that we look into options, strategic options for our Everland participation. This Everland participation, if it works out and we agree on certain options and execute on them, is not included in the color I just gave you, in that huge magnitude. But I don't rule out that smaller M&A activities in the plus and minus business is then included.

Perfect. That's very clear. Thank you.

Yeah, and the 4 to 6 billion net of inflation, look, you can't put that on top because when Brand Group Corp said last year we try to achieve a target of 6.5% or aim for a target of 6.5% in 2029, of course, the 6 to 4 billion are included in that figure and also the the $2 billion for the rest of the group are included in the EBIT guidance. So you can't put that on top to the guidance. So it's basically this is the effect of the programs I just mentioned. For example, the $4 billion net reduction is basically $1.5 billion of dampening of wage increase and The rest comes from productivity and ramp down of the workforce. So this is basically included in the guidance of the brands.

Great. Thank you very much. Very good.

That was the last one, actually, in our Q&A round. Thanks very much for all the very good discussion, and we are now continuing with a small break. before we continue then with the Q&A of the media colleagues. Thank you very much and talk soon. Thank you. Thank you.

Ladies and gentlemen, please hold the line. The conference will continue shortly. Thank you. Ladies and gentlemen, we will now begin the question and answer session for media. To ask a question, please, as a reminder, press star and one on your telephone.

Yes, hello, everyone. So let's kick off the Q&A. We have a couple of colleagues already lined up. As I can see in the list, Sebastian, Sebastian Esch from FT, you're the first one. Please, go ahead.

Hi, Arno, and thank you for taking my question. I was wondering if you could just run us through those tariff numbers one more time. So it's a 2.1 billion impact in terms of the tariffs paid year to date. What would that be over the full year in 2025? And if I understand, you see that rising to 4 billion next year. How does that fit in within the 5 billion figure? Perhaps you can bring a little clarity there for me. And then my second sort of addition there would be that with other major OEMs, especially those with a bigger manufacturing presence in the United States, then we've seen that the recent adjustments have led to fairly significant reduction in the anticipated tariff burden. How do you evaluate that disparity between Volkswagen and those other OEMs, and how do you think it affects your competitive position in North America?

Thanks for the question. Look, as you said, $2.1 billion for two quarters. So very roughly, if you double that, you are roughly at four, perhaps slightly less. This is what the tariff we pay. And why did I say up to $5 billion? Look, the $5 billion we calculated at the beginning of that tariff journey, and back then we were planning for, let's say, 10% more sales in the U.S., and now we are faced with In North America, now we're safe with 8% less. So, obviously, there's a swing in our sales, partly and mostly due to tariffs, and that swing is due to other measures. We talk specifically from Mexico to the US. From Mexico to the US, for cars, it's 27.5%. And based on that, yeah, tariff situation, Some cars are just not profitable. Of course, we have our customers inside. Of course, we look on the dealers and their business. But on that basis, it's just like we took some measures also on the cars we delivered. And that leads then, what I said, up to $5 billion. And that obviously can't be optimized, but this is where we stand today.

And just the full year 2025, would that be about 2.8 billion on the current run rate? What would that be?

This is a good estimate, up to three, on tariff paid. Yes, I understand.

OK, thanks. As I can see, next in line is Rachel Moore from Reuters. Rachel, can you hear us?

Yes, can you hear me?

Very good.

Morning. I wanted to ask about the Porsche costs because we see that they were a bit less than guided last month at 4.7 billion. Can you say why that was? What helped here? And I also have a question on the recent agreement between the US and China on trade. Do you expect that to fix the rare earths problem in terms of possible supply problems there? Thank you.

Can you repeat the first question, please?

Yes, the first question, sorry, was on Porsche costs. They were lower than guided. What helped there? I think we had 5.1 billion last month and it turned out today there was a 4.7 billion hit from the strategy change.

Yeah, look, when we... When we communicated our talk to the capital market, we had a rough estimation of 3 billion right down in the goodwill of our Porsche participation. But obviously, we had not so much time to do an in-depth discussion and calculation. And in the course of the detailed calculation, we came up with some different assumptions specifically on the interest rate and then the precise number. was then $2.7 billion, but that didn't really change materially. It's just like there were assumptions in the calculations which we had over the course of time to make more precise. This was the difference between the $2.7 and the $3 billion. And between U.S. trade and China, obviously a lot of current trade markets Restrictions are based on the relation between the U.S. and China. And obviously it's very important for us that some of the topics there are solved. Specifically on the Nexpedia, we discussed that before. This is not a physical supply shortage. It's a supply shortage that's based on political decisions and other decisions. And so this is also the way that topic can be solved. And we really look forward to these trade talks. But I don't have more information than you have on specific issues.

On rare earths, you can't speak to that. Any easing in the problems there?

It's really hard to understand your question.

Apologies. The question on rare earths. whether the U.S. and China agreement helps in that regard.

I think it's the same topic, really. We just know what you know out of the news. So I think it's, as Anna mentioned, it's quite too early to give any estimations, assumptions to what's the outcome of it.

Okay, thank you.

You're welcome. So next on the list, Monica Raymond from Bloomberg. Monica, are you on the line?

I am indeed.

Can you hear me all right?

Excellent. Go ahead. Wonderful. Thanks so much. I had two questions. One centering not necessarily only on Nexperia, but also on PowerCo. I'm wondering, Mr. Antlitz, how your view of PowerCo has changed in light of what's happened with Nexperia and all of the geopolitical tussling surrounding rare earths and Chinese controlled supply chains in general. does this put additional pressure on Powerco to ramp up production in Salzgitter in order to maintain or to have a more secure supply of batteries? With China flexing its powers on rare earths and chips, basically I'm wondering how does Volkswagen feel about the security of its supply of batteries? And then my second question would be on the dividend. You said that Volkswagen is going to stick to the minimum 30% payout ratio. I was just wondering, do you see that as sort of being the bottom of the barrel in terms of how low dividends could go? Or do you see that as being one of the levers that would need to be changed to keep Volkswagen's operations sort of in the black or keep Volkswagen's operations looking all right for investors?

Yeah, Monika, thank you for your two questions. First and foremost, The basic view on power core has not changed because there were always several reasons why we embarked on that strategy to invest in our own battery capacity. First and foremost, obviously, that we have it in our own hands. We have the technology on our own hands. Then we introduced the unified cell. which is a huge advantage in the competition. Just to remember that within one cell, we can offer LFP and NMC chemistry, so there's huge flexibility. And last but not least, we always said that we invest in PowerCore also to be kind of independent on the political situations. And this is why we're not only investing in the capacity, but also in upstream and downstream, specifically energy. in upstream initiatives like securing raw materials, lithium and cobalt and other materials. So this was always a part of the strategy and it becomes even more relevant going forward. On the other hand, what we do, and I was very transparent on that, we adapt the ramp-up of power codes to the needs we see in the global market and also with us. So this is why I said before, in the light of the new expectations about the ramp-up of battery, we basically adjust the ramp-up of the power code. We fully stick to the three sides. We have in Salzgitter, in Spain, and in Ontario, Canada. But of course, we have to adapt to market realities. And if the ramp-up of electrification, specifically now in the US, is not as fast as expected, we will react with postponing some of the blocks in the sites, but that has nothing to do with less commitment to the power core, but rather with adapting to market realities. And the dividend, as I said, our dividend policy is a payout ratio of at least 30%, and that's obviously depending on the earnings per share we achieve, but the 30% as a relative measure we have as a policy since years, and we haven't changed that.

Thank you. Okay, now we're moving to our home region here in Lower Saxony. It's the DPA, Frank Johansen. Frank, can you hear us?

Yes, I can hear you. Yes, just a short question to the semiconductor problems and crisis. So could you give us just a short brief summary? How's the situation and how to solve the problem? Because I think that's quite a huge problem. If you say your outlook is supposed that there won't be no shortage, that's quite simply not realistic, I think. So how's the situation and how to solve the problem?

First and foremost, I must reiterate that I'm really proud of the team who dedicated their work, the transparency. We have really much more transparency than we had back in the semiconductor crisis. We also know these are not like very complicated semiconductors. It's more like standard semiconductors. And the shortage was not caused by a earthquake or something like that. It happened just like obviously politically. discussion and this is how it needs also to be solved. I'm really looking forward to that the parties sit together and find solutions for the German and European and basically the worldwide industry. Yeah, how it can be solved, as I said before, first and foremost politically, but we cannot stand still. We have a responsibility. So we try to find alternative sources, get it from alternative sources. We achieved that so far. And we look on the issue day by day and week by week. And what we can say, until the end of next week, we have enough supply. And we continue to try to find alternative sources. And so the truth is, week by week, we work forward. But the good news is, so far, until the end of next week, we can say that we don't lose any cars on that topic.

OK. I think this is as much as we can say, honestly, at the moment. Next on the list would be Christina Ammann. Christina, are you on the line?

I hope you can hear me.

Excellent.

Fantastic. I have one question on the Audi plant. Are you still optimistic to take a position this year or do you think this will drag into next year? Second question on the overall investment. You said that in the current planning round, it's 165 billion. That's going to go down. Do you have any target you can give for the next planning round? Where's your goal? Where do you expect investments to go? And the third question would be on divestments. There's the Trayton stake where you have said in the past that you want to reduce. There has been a sale, but is there more to come? Second question on Everlance, which is going on sale and there's been reports lately. Do you have any timeframe or any details on that? And the third would be power coal, which was going to be investment ready this year. Do you have any information on where's that going? Is there any investment of any outside investor to come or will that be something for even later? Thanks.

Yeah, on the investment side, I said we have the 165 now for the next five years inside. And we even prepare for less because I said if we decided on a potential plant for Audi, then we will compensate that in 165 billion. And so that shows we will work down the 165 over time. because if we decided on the Audi plant, then that means that we will compensate that. So we prepared already for the lower figure, and we also gave a guidance of 10% R&D CapEx combined for 2027, which is also significantly lower than today, where we stand at 12% to 13% in terms of sales. Divestments? We were very transparent about that. There are some chances. We look at PowerCore, and we look into potential options for Avalanche, but it's too early to give you specific more information. We don't have more information on that. As soon as we make progress or decide on specific steps, we will inform you. But I hope you understand that it's too early. to give you specificities. What I can reiterate is we are committed on that path. We started that path back in Hockenheim in our communication, and we make progress on that. The progress is also shown by the first small step on trading, which we achieved at the beginning of the year. Okay, so active portfolio management.

The last one was the Audi plant. Do you still expect a decision this year?

Yeah, Oliver was very transparent on that. We said we have to decide on the Audi plant this year, and this is still what we are looking for.

Good. So on the list I can see the next one in line would be Lazar Bakovic from Handelsblatt. Lazar, can you hear us?

Yeah, thank you so much.

Very good.

Okay, so it's two topics, but four questions with that. So two questions each. First, you had the right of billions because of your adjustments at Porsche regarding your vehicle plans. Can you in any way rule out that this will be repeated within the next months within other brands and that we will continue to see one-offs? That will be the first question. Second question in this context, you are feeling strong pressure and against this backdrop, are there any considerations to postpone your future platform SSP once again in order to stretch any investments? And then regarding Nixperia and chips, maybe you can put a bit color onto what exactly is missing and how long the stocks will last. Because, yeah, I think there is sometimes a mixture. Sometimes they say it's semiconductors, then it's diets or something else that will be interesting what exactly is missing. And the last question would be, did I get that right, that you do not have any assessment on the deal made between Xi and Trump regarding rare earths? Any comment on this would help.

Thank you.

A lot of questions. Thank you for them. What I said in the call earlier, there might be smaller one-offs here and there, but we don't expect from today's perspective significant one of going forward in the magnitude of what we just communicated. And then in terms of on investments on our future platforms, we are committed to ramp up the so-called SSP. What I said before, we look into potentially even more synergies in the group and that more synergies might mean that we combine even more cars from different brands on certain platforms in the course of the SSP and optimize that. This is specifically what we look at both in terms of software and in terms of hardware. But this is currently what we look at. But it's more like an optimization of using the funds we have in the group and using the huge scale and the potentials we have in the groups more stringent. Let's not forget, we basically invented the platform strategy and that platform strategy was very successfully implemented over years in terms of R&D and now the next phase would be that we combine the cars from the same platforms even more stringent also for production. Look today, Golf is on the same platform like an Audi and other cars like Leon and Octavia, but every brand today produces the Golf by themselves. Volkswagen produces Golf, Audi produces Audi A4, Skoda produces Octavia, and the next, I would say, wave of platform strategy is producing them on the same line in the same factors, which will benefit us and has no impact in terms of the customer. Customer value is even higher in terms of differentiation in front of the customers, but we save synergies in combining these cars. Another example is, for example, the ID2 family. It's combined in Spain, although there are three brands involved. So these are the things we look at. In terms of chips, I think it's more than 2,000 small different brands chips, let's call them chips, so I cannot really go through them piece by piece. It's really very small, very cheap semis, not the difficult ones, and so it makes it also difficult to find alternative solutions because we are not talking about three or five or seven different units, more like thousands. And again, the assessment of the talks between Mr. Trump and Mr. Xi, I don't have any additional information on top of what you potentially have. So I kind of comment on what we can expect there. Thank you, Arno.

So at least from the outlet, we move away from Germany to the New York Times. Melissa, are you on the call?

Yes, I'm here.

Can you hear me? Yes, excellent. Very good.

Fantastic. Great. Thanks so much. My first question would be, during the IAA, Ali Bluma spoke very clearly about cutting a deal with the Trump administration, not avoiding tariffs, but given VW's big investment in the states, that there would be some way to carve something out. He said that was expected in the coming weeks. I'm just looking for some guidance on where that is at and what kind of timeline you're looking at. And coming back to Nexperia, what would be the results if you do not find supplies, say, for a week? What goes down first or where would you have to halt production? Thanks.

Yeah. I think I'll start with the second question first because I really, let's not speculate. What I can say, we secure the production day by day and week by week. We are now safe until the end of next week and the teams continue to work and I don't want to really speculate where and when. For the time being, it's good news that we are safe for another week and this is how we work through that topic, find alternative solutions and find alternative suppliers of semis together with our first year suppliers. And I'm very pleased with the performance of the teams and the processes and the cooperation we see in the whole value chain. Yeah, in terms of US deal, I think we have no new information on that topic. We are absolutely committed to the gas. It's one of the biggest and most profitable markets. And more localization would be one measure to increase our footprint there. But I kindly ask for your understanding that I cannot share more detail today.

Thank you. Okay, so at least outlet-wise of the Wall Street Journal, we stay in the US, Stephen, even if you're not based there. Go ahead, please.

Can you hear me?

Yes, very good, loud and clear.

Great, thank you. Okay, well, you've covered a lot of the points here, and I know you can't say any more on the potential Audi factory, but can you talk to me about the other options you have for reducing this $5 billion? tariff bill and where are you at with price increases for example and what about making more parts that you use in mexico usmca compliant um just if you could talk to me about the other levers you might be able to pull in order to reduce that tariff bill that would be great and just second question um on china um it sounds like most people seem to be of the view that things aren't

the price competition isn't getting any easier there are you still optimistic that you can turn the business around in the way that you've laid out in in your in your previous guidance thank you yeah in terms of measures you you already i think you mentioned the the most important ones first and foremost is um more localization bigger footprint in the us we operate a factory there let's not forget that we work on the ramp up of scout which is a very promising project. It's a project that's localized in South Carolina. It's in the middle of the most important American segment to pick up the rugged SUVs. So we invest in the Scout. You talked about pricing. You talked about increasing the localization of parts in the U.S. This is exactly what we look at. And what we work on to optimize the situation. And second, China, it's a very challenging pricing environment, although we see some, I would say, stabilization of the situation, but it's still very challenging in terms of pricing. What makes us confident in our strategy is that we bring a lot of great new cars now on new platforms. Based on the new China main platform, we both... significantly reduced the cost base, first and foremost. And second, the product substance increases with new software features. We bring LFP batteries. We bring in-car infotainment, state-of-the-art. And we are convinced that even in the current challenging pricing environment, we are much better off in terms of competitiveness with the new cars we bring in both our joint ventures FAV and SAIC and also at Anhui and the cars were presented in Shanghai also Audi and I would say the best news in that challenging pricing one was that we bring very attractive cars on a very good cost base to compete.

Can I just say on price increases I appreciate your working on that but So Porsche has made clear that it's increasing prices. What about the other brands? Do you see potential to increase prices to cover the tariff costs, or are you more cautious on the other brands? What's the overall picture?

Yeah, but look, for certain reasons, I cannot talk publicly about planned price increase. This is very clear. What I can say, it's a principle, a major lever, and we look into that. This is what I can say.

Okay, thank you.

Yes, I want to talk a lot about products that I think Thoroughbred Car Magazine fits perfectly in here. I can see AutoCar.

Will, are you on the line? I think he can't hear us.

Can you hear me? Oh, now I can hear you, yes. Go ahead. Thank you.

Good morning to the UK. Good morning. Hello, Arnold. I wonder if you're able to shed light Any light for me on the talks between Porsche and Matti Rimac about selling Porsche's stake in Bugatti Rimac and what it could mean for the wider Volkswagen group, please?

Unfortunately, I don't want to disappoint you, but unfortunately, I must say I cannot comment on the speculation. Sorry for that.

I expected that answer. That's absolutely fine. Thank you.

Okay. Thanks.

Okay, I think that brings us to the end of this Q&A. Thank you for participating. Thank you for your excellent questions. Yeah, I can only wish you have a great day and stay safe and talk to you soon. Bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.