Volkswagen Ag Unsp/Adr

facing Osnabrück. The NOZ newspaper today reported that you are in advanced talks with Rafael or Dynamit Nobel, which is part of Rafael, about the production facilities in Osnabrück and the plant. And the newspaper says there's already a letter of intent which was signed. Can you confirm that? Can you tell any details what's planned there? Yes, thank you.

We have announced that we want to come to a feasible production footprint of 9 million cars. That's what we have sold per average during the last five years. Our ambition in terms of sales is higher, but we think to be on the safe side and improving our break-even situation, that would be the feasible one. And talking about Osnabrück, As I mentioned already, our talks are advanced already. We do not comment on the partners we are dealing with. Overall, I think we feel ourselves as an experienced company in terms of automation with very qualified people, also in the responsibility for the goals of the German government. for the country protection. And this, from our part, is also to provide, to stabilize democratization in Germany. Therefore, I think it's a win-win situation at the end to adapt plant capacities and, on the other side, support the goals of the German government and European governments in terms of NATO.

Okay, I hope this answers the question. Next line would be Lazar Bakovic from Handelsblatt. Lazar, please.

The line is yours. Thank you, André. You mentioned your plan cost during the investor call and repeated it here. Your goal is to reach 3,000 euros in Europe. You are conducting reviews at your German plans. Can you tell us where you stand in the first quarter of 2026? whether you met your cost target there at your key plans. That would be the first question. And the second would also be on Chinese vehicles and Chinese VW models, which could possibly build in Europe. I mean, technically, they are based on a different platform, on the CSP. So will this platform be localized for Europe? Can you comment on that?

Mr. Pagovic, we have a clear goal that we want to achieve. We make progress in the chairman plans by 20%, which is significant last year. But we have still a long way to go to be cost competitive. And obviously, we have to pull all the levers, productivity. And this is also why we discussed the topic of capacity. The Chinese are coming to Europe, building also factories, which are highly efficient, and we cannot compete with underutilized plants. So improving the utilization is a key lever to make our German plants competitive. And this is why we continue to work also on improving the utilization.

In terms of Chinese platforms, I talked before only about options. And today it's too early to decide if we want to localize a Chinese platform in Germany. But our priority would be, first of all, if we would do it, to take one of our own platforms first. because this year we are ramping up the CMP platform and the ramp up for the CSP is planned for 2027 in China and this work has to be done first and then we could think about options in Europe and on the other side also to check which products could be the right ones. We are getting right now the feedback and response from the market our first new products in China and there are many more to come and then at the end we will decide depending on the success we have in China which model would fit in Europe especially in segments where we are not present with our current portfolio in Europe and so step step by step but it's true too early and we haven't kicked off the process and we haven't taken a decision

A quick or short follow-up because it wasn't a question. So the first quarter of 2026, you did meet your cost targets in the plans or not? Or can you not comment on that?

We are on track to improve. We have still a target gap last year and we make progress. But it's too early to give you an indication for 2026.

But being very, very clear, the progress we are doing, and I'm personally from production, we have never seen a progress what we have seen last year. Over 20% is massive. And we haven't seen this 10 or 20 years before. There was more or less, in terms of production cost, a compensation of inflation with our productivity work. And this 20% is also compared to the competition in massive progress, being very clear on this. And we are continuing on this path, and we know how to do it.

Thank you, Oliver. OK, very well. Thanks, Nazar. So I can see Bloomberg is next in line. Monika, good to have you on the call. Can you please take the mic?

Good morning.

Can you hear me all right?

Very good. Yeah, very good. Wonderful. Thanks so much. I guess I would just expand on some of the questions surrounding Chinese partnerships and how those could potentially be leveraged in European plans. Mr. Bluma, have you discussed the possibility of Chinese partnerships with labor leaders? And I'm wondering how they have reacted to this option. How far along would these talks be? And I guess on the labor side, Are there certain red lines or concrete conditions of such a partnership? And then my second question would focus mostly on what's happening in the Middle East. I know the fallout so far has been limited, specifically when it comes to deliveries in the region. But we know that the conflict has raised energy and shipping costs in the short term. GM was already saying that it's being higher cross across across the board from aluminium and steel Okay, did you finish your question Hello can can you hear me I Think she has disconnected

So maybe wait a couple of seconds and then we maybe start answering the part that we got Can we get a signal if you're able to to hear us I think you have Monica.

I think you would have to reconnect Yeah, then

I think we take the next call and then give her a chance to, when she's back on the call, to get an answer. So the next one would be Sebastian Ash from Financial Times. Sebastian, please.

Hi there. I hope you can hear me. I actually would have liked to have fallen on from Monica's questions, but I mean, I would ask the same thing when it comes to the Middle East, when it comes to potential for rising material costs in particular. I mean, what have you seen in the first quarter? And how do you expect that to develop over the course of the year? I mean, is there any potential that we can see this have an impact on the price of vehicles at the end? And then I think the other element that I would touch on in terms of plant utilization and talks with Chinese companies or producing your own Chinese vehicles in European factories is that we heard again in the investor call that you're a supporter of um local content rules the the industrial accelerator act how would um how would that work together with uh chinese production in your factories do you see that as complementary um or is there any friction between those two positions thank you yeah may i start and monica also touched this

question and i hope she's connected again to be very clear today we haven't got a concrete plan to share capacities with a chinese partner and there are no activities yeah we are talking about only options and these options are with clear priorities and the first priority would be to think about a own Volkswagen product. We have designed, engineered, and we are producing in China to make a localization here in Europe. But first of all, we have to ramp up the new product in China. And if you have mentioned, the huge momentum we are bringing now to the market has to be executed. And for this year and the next year, We have a lot of work to bring all this to life. We are talking about 20 new models this year and overall 30 new models by the end of 2027. And so step by step and being very clear on this, no activities right now to partner in Europe in terms of capacities. We will do it for the next steps. In terms of when we have decided where we want to reduce capacities, then we are thinking about the options we do have. And there, defense could be a part, but also own product from China. But step, step after step. But the positive way of thinking is that now we as a global player have the opportunities to benefit what we are doing in China in terms of innovation, in terms of processes, And at the end, also in terms of products, we could have the opportunity not only for the global south, which is our first priority from China to Asia Pacific, Middle East, India, South America, and Africa. And Europe is maybe a step for the upcoming years, but not decided.

Yeah, and since it's a lot of interest there, I will give a little bit more details on Middle East. First and foremost, direct effect on our cost, for example, shipping and transport, it's about 20 to 30 million burden a month. This is what we currently see due to the higher cost of fuel. On raw material costs and others, we have quite some good hatching in 2026, so there we expect a lower burden, but obviously, hatching, it doesn't last forever, so we expect there some rising costs. We don't see so far second-round effects, but obviously, we cannot rule out that some of the materials we buy, some of our materials, our suppliers buy plastics, chemicals, others become more expensive. In terms of demand, we have about 50,000 to 100,000 sales in the region. Obviously, there's a risk. It's less than 1%, but it's nevertheless important for premium brands. And demand overall, as I said, we cannot rule out there's a headwind. The overall market in the first three months is down about 4% total market, mainly due to China. And we cannot rule out that the outlook of the year will worsen if the conflict and the closure of the Hormuz stays. And this is what we prepare for on the cost side. We have to prepare for these kind of disruptions and make Volkswagen more robust.

Thank you very much. I can see, Monika, you're back on the call. I believe your first question has been answered about Chinese partnerships. The second one we didn't get, unfortunately, brought up. You want to start with the second one?

No, I think it's been tackled already by my colleague. I just wanted to raise my hand to say I'm back and I appreciate you waiting and then answering the question.

No problem. Good. Then I would say next one could be Christian Muesgens from FAZ. Christian, can you hear us?

Yeah, hello.

Please go ahead. Entschuldigung, dafür meine Fragen wurden beantwortet. Ich hätte mich sonst gemeldet. Vielen Dank. Ah, okay, okay, okay, because I saw you on the list. Good. Okay, that's fine. That's a good sign if we answered all the questions already. It seems to be right. Then the next in line would be Lutz Meyer from Capital.

Hello. Hello. Hello. Go ahead, please. Thank you for taking my question. I'm referring to something Anu Antlitz mentioned earlier in the analyst's call. He said that you are calculated with the burden of 400 to 500 millions for CO2 costs in Europe, and you have to calculate against the margin delusion of the model. So first of all, I'd like to know the 400 to 500 million is that per year in this three-year period, which is running currently. And the second is maybe you can elaborate a bit how you calculate the trade-off. So to which amount of BV models you have to sell to lower this potential burden? And how are you dealing actually with, and maybe also to what extent still the BV margins are below the ICE margins? Because I know this mentioned, they are pretty much higher now, but it's still not the same level if I got it right. Thank you very much.

Yeah, to be a little bit more precise on that, we expect a miss of the CO2 targets also on the three-year period, 25, 26, 27. One reason is we expect really a very positive feedback and ramp-up of the ID2 family. And then later on, ID1, also a very promising car, but they come late, 26 and 27. So we expect a miss of 300 to 400 to 500 million CO2 costs per year. So basically almost 1.5 billion over the three-year period. And so the obvious question for you is why don't you just sell more electric cars? we must really expect the fact that we have to sell more electric cars than the natural demand in Europe is. So we have to help these cars with prices that put us into a situation that the margin is much lower than in combustion engine cars. So we make a trade-off between money we lose due to the CO2 fine and money we lose due to the margin loss of the BBs. This is our responsibility and this is currently where we stand. So the obvious solution is improve the margin of the BEVs. This is what we heavily work on. The first generation, like the ID.3, they have really a very weak margin. Next generation, we call it MEP Plus, has a much better margin, contribution margin. They get an LFP battery. The great cars were introduced so far. Just yesterday, we saw the ID. Polo. And if you compare, for example, the ID cross, ID2 cross, with the T cross, which is a combustion engine car, the margin is much, much closer, 70% to 80% already, but still not on the same level. We expect a margin, the fully comparable margin, only with our future platform SSP. This is why we concentrate on developing that until the time when this platform arrives, we have to make sound trade-offs between BEV volumes and CO2 fines.

Okay, I can see one more question. Rachel, you're waiting as well. Rachel from Thomson Reuters.

Yes, good morning. Good morning. You said improving utilization is a key lever, Mr. Antlis. I wanted to ask what this means for the Zwickau plant. Are you planning similar defense partnerships there, like in Osnabrück, or can you share any other plans for Zwickau? And then I wanted to ask if you can give any specifics on streamlining the product platform. So are there any models that you have that will be discontinued, any brands that will be affected in particular, or synergies, any detail there, if you can, please.

Rachel, Oliver speaking, and let me start with defense. First of all, we want to close the solution for the Osnabrück plant, and this will give us a bit of feeling How does it work up to now? It's very constructive and with a positive perspective what we could do there. And at the end, we know about the need of the defense industry. And they are being very clear, Volkswagen won't go at the end for weapons. That's clear. We are providing our experience. of serial production, automation, and so on, which is very useful for the defense industry. And our knowledge is more on military transport or safety systems. Then for the next step, and there in Zwickau, we have made decisions for the upcoming years With our agreement we closed at the end of 24 and so we are going for recycling in Zwickau. We have done a reduction of the capacity technically and the same for other German plants and then we will enter into the next steps in terms of solution finding. No decisions taken but defense is interesting and we will have the first experience there. In terms of products, we have the clear intention to reduce the number of our products worldwide, double-digit percentage, and also to reduce the options by reducing complexity and also reducing our capital investment on this and making our structures cleaner and also providing for our customers a clearer profile with our products. We have already started this process, and the products which will come to the market right now, for example, the Polo or the Cupra Raval, have already benefited from these activities, and we will continue to do so. Today, we won't announce any concrete thinkings. We have concepts already, and then step by step, we will announce where we want to go. But the clear goal overall is complexity reduction, cost reduction, investment reduction, and being more focused. And at the end, having more and better product customer sites for the different regions of the world.

Okay, thank you all for your excellent questions. I think this concludes the Q&A session, and we are now also at the end of our call. If anything was left unanswered, as Rolf also mentioned during the investors and analysts call, please contact us in Rolf's book here, drop us a note, call us. And I can only wish you all a pleasant week and stay safe and looking forward to your next time. Thanks.

This concludes our conference call for today. Thank you for participating. You may now disconnect.