Volkswagen Ag Unsp/Adr

Good morning, everyone. A warm welcome to the half-year 2026 results call of Volkswagen Group. This is a joint call for both the media as well as investors and analysts, moderated by Ralf Woller, our head of Group Treasury and AR, and myself, Sebastian Rudolph. With us today are Oliver Blume, our CEO of Volkswagen Group, and Arno Antlitz, our CFO and COO of Volkswagen Group. A few remarks before we start. You should have received the press release, the interim financial report and all other related materials which were published this morning. If you do not have them yet, you can find all documents on our website or just drop us an email. Now, let me hand over to Ralf, the floor is yours. Thank you, Sebastian.

Good morning to everyone on the call. Thank you for joining us today. Let's have a look at our agenda. Oliver will start with the key developments of the first half year and Arno will then take you through the half year financial results and the full year outlook for 2026. And I will hand it back to Olli, who will guide you through the current status of the Group Target Picture 2030. Following their presentations, we will first host a Q&A session for the investor and analyst community, which will be hosted by myself. And after this session and a short break, we will continue with the media Q&A moderated by Sebastian. Since our call will include forward-looking statements, the safe harbor language and other cautionary statements on the slide you should currently see on the screen will govern today's presentation. As usual, I encourage you 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.

Thank you Ralf and good morning and also a warm welcome to everyone on this call. Let me start by providing you with an overview of key developments of the first half year. We are operating, as you know, in a more than challenging environment. Major markets face weak consumer confidence Subdued demand and intense competition. In China, the market declined by 20% in half year one, further increasing excess capacity. Everything in spite of over 500 new models arrived in half year one in the market. As a result, Chinese OEMs have sharply increased exports, adding pressure in Europe. US tariffs create a significant burden and restrict international trade. In our home market, regulatory requirements and high energy costs add further pressure. This affects not only Volkswagen, but the European auto industry as a whole. We at Volkswagen are acting early on and decisively. Before I take you through our group target picture 2030, let me start where we stand after the first six months of 2026. In the environment described, group deliveries came in 6% lower at 4.1 million vehicles. But underlying demand for Volkswagen is stronger than the headline figures suggest. Europe remained positive with the deliveries up 3%. In our home market, we thus retained the clear number one position. North America returned to growth with volumes increasing 8% despite continued BEP weakness and supported by the new models. South America also delivered solid growth of 9%. In China, deliveries declined 37% in Q2 and 26% in H1, reflecting very weak consumer sentiment, the end of subsidies and the ongoing model transition. In light of a weak NAV market in Q1, we started the year as number one in China. After six months in 2026, we continue to be strongly positioned in the top three. Excluding our China JVs, deliveries increased 2% year-on-year the first six months and by 3% in the second quarter standalone. Our renewed SUV portfolio is creating momentum across key markets. In North America, Tiguan and Atlas supported growth, while T-Cross and Audi Q3 continued to drive volumes in Europe. Even in China, Initial customer response to locally developed models such as Audi E7X and Volkswagen ID.ERA 9X is encouraging, strengthening our confidence in the China in China for China strategy. We are not standing still. The ID.CROSS is complementing the electric urban car family in Europe. The vehicle was just introduced to the market. Order intake remains strong and increased 4% year on year to 2.1 million vehicles in half year one. As a result, the order book grew to around 1.1 million vehicles at the end of June, providing visibility of more than three months of sales. We are especially encouraged by the strong momentum in our BEV order book, which increased by 57% year on year to 330,000 vehicles. BEVs now account for 31% of the European order book, up from 22% at year end 2025. A major contributor is our new electric urban car family. For the first time, Volkswagen Group has a comprehensive and highly competitive offering in the entry-level BEV segment, opening up a large customer group that we were previously unable to address effectively. The Volkswagen ID Polo, Skoda Epic and Cupra Voile have already generated more than 70,000 orders within weeks of launch, even before entry-level variants become available. Together with the recently launched ID Cross, this provides a strong foundation for future BEV growth and market share gains in Europe. This shows how our platform strategy is working. One platform shared by three brands across four models. Unique cars and highly differentiated, yet about 80% shared parts. Produced together in two factories in Spain, overall realizing synergies of more than 600 million euros. Importantly, this will also put us in a better position to reduce the remaining gap to the CO2 targets in Europe. And in such demanding environments Volkswagen Group held up also financially. The group generated stable sales revenue of €158 billion. Operating profits amounted to €5.9 billion, corresponding to a 3.8% margin. Excluding restructuring costs and the ID4-related write-off in the US, the margin reached 4.3%. The consistent implementation of our performance programs is increasingly visible in our results. of the past years, these measures have enabled us to weather substantial market-related headwinds with a cumulative headwind in a double-digit billion-euro range to date. At the same time, cash generation remains strong with 3.2 billion automotive net cash flow in half year one, up 4.5 billion euro year over year. Net industrial liquidity amounted to 32.7 billion. This is providing us with a solid base to stay successful in the market environment and to decisively push ahead with our group target picture. Looking at the results of our passenger car business, the operating profit increased from 4.4 billion to 4.8 billion in half year one. Brand Group Core Volkswagen brands stayed firmly on the path of improved efficiency while simultaneously advancing the largest product campaign in its history. The Brand Group Core margin, excluding special effects, improved to 5.9% in half year 1, 2026. Brand Group Progressive increased results with improved performance in Europe, overweighting the headwinds in China and the US. In half year two, the operating margin is expected to accelerate to six to eight percent. Brand Group Progressive should benefit from product launches such as the new Q7, Q9 and RS5 models, as well as continued cost work. At Porsche, we undertook a comprehensive restructuring and repositioning in 2025, including a sharper focus on our core business and expanded cost program. As forecast, the restructuring measures are beginning to gain traction with operating profit increasing to more than 1 billion Euro in the first half year 2026. On reported basis, results were up by 45% to a corresponding margin of 8%. With that, I hand over to Arno for a more detailed presentation of our financial results.

Thank you, Oliver, and good morning everyone. Ladies and gentlemen, the market environment has remained challenging in recent months and pressure has intensified. The ongoing conflict in the Middle East continues to create volatility. In China, the overall market is down by 20%. Chinese competitors not only export their vehicles to Europe, but they also export competitive pressure. In this environment, we continue to manage the situation with discipline by consistently advancing the implementation of our strategic initiatives. We continue ramping up our attractive new vehicle portfolio, both electric and combustion engine models. We continue to reduce investment spending and overhead costs while workforce reduction is progressing as planned. Automotive net cash flow was strong. at 3.2 billion in the first half of the year, 4.5 billion above the first six months of 2025. And the announced sale of 51% of Everland with expected proceeds of around 7.4 billion Euro is further evidence of our active portfolio management. But despite this progress, our operating margin is still not at the sustainable level at 3.8% after six months or 4.3% before special effects. Results clearly reflect the environment we are operating in and the challenges of our business model and an overly high cost structure. The 4% margin shows that the cost reductions currently agreed under the existing programs are not sufficient in today's economic and competitive environment. In short, the half-year results are another wake-up call for action. We must accelerate and broaden our efforts to lower our cost base structurally, generate adequate returns, and safeguard the delivery on our financial ambitions. This requires structural and sustainable improvements across the group, improving vehicle cost structures without compromising product substance, reducing overhead costs, increasing plant efficiency, and accelerating technology development and decision making. The prerequisites are clear. We need substantially lower complexity and faster execution across our product base and technology platforms, our portfolio of participation and our leadership and decision-making structures. These are the areas addressed by the Group Target Picture 2030 Oliver will present later. What matters now is swift and disciplined and consistent implementation. With that, let us dive straight into the operating and financial performance of the first half of the year. Vehicle sales totaled 4 million units in the first six months, 8% below the prior year level or 1% higher, excluding the China joint ventures. Group sales revenue remained broadly stable on €158 billion as growth in financial services offset lower revenue in passenger cars. The operating result came in to 5.9 billion Euro, 12% below H1 2025, corresponding to a margin of 3.8%, in Q2 alone the margins stood at 4.2%. H1 results were burdened by special effects of around 0.9 billion Euro, equivalent to approximately 50 basis points of margin. Excluding these effects, operating profit reached 6.9 billion, and the operating margin was 4.3% slightly below the midpoint of our full year outlook range. Profit before tax declined by 26% to 4.8 billion Euro in the first half of 2026 and this was driven by the lower operating result and a negative swing in our other financial result mainly due to valuation effects and impairments on participations and shareholdings. Profit after tax decreased to 3.1 billion Euro. Automotive net cash flow increased to a solid 3.2 billion Euro compared with an outflow of 1.4 billion in the prior year period. Excluding M&A, clean net cash flow increased to 3.7 billion Euro and cash out for M&A amounted to 0.4 billion Euro. This includes 0.9 billion for the investment in Rivian, partially offset by 0.5 billion cash inflow from Trayton's disposal of a stake in Sinotrack. This development underlines our continued M&A discipline. Automotive net liquidity at the end of June came in at 1.8 billion, came in at 32.7 billion Euro, Net cash flow of €3.2 billion more than offset dividends to shareholders and hybrid bonds, interest payments totaling €3.1 billion. Overall automotive net liquidity remained very solid at €32.7 billion at the end of June. Moving on to the performance of the divisions in the first six months of 2026. Passenger cars recorded an operating profit of 4.8 billion Euro, some 8% up on H1 2025 and corresponding to a margin of 4.1%. Commercial vehicles were impacted by costs related to restructuring and alignment measures booked in the first quarter. Supported by a stronger Q2, the operating result came in 24% lower year-on-year at 0.9 billion Euro. Financial services delivered a robust performance with 0.9 billion operating profit, roughly on par with prior year period. Looking at the profit bridge of the passenger car business area, volume and other had a negative impact of minus 0.7 billion compared with the same period last year. Price mix had a negative impact of around minus 1.6 billion Euro. This was mainly due to higher incentive levels for electric vehicles and an unfavorable regional and product mix. Product costs were slightly down by € 0.3 billion due to higher raw material costs and increased memory chips and logistics prices. Fixed costs and others had a positive effect of € 2 billion supported by improved overhead costs and significantly lower restructuring compared to last year. Fixed costs continued to be supported by further improvements of automotive overhead costs. Overhead costs were reduced by 0.7 billion Euro supported by strict cost discipline across the organization. The overhead cost ratio improved by 20 basis points. The development of overhead costs was supported by the continued reduction of workforce, which is progressing according to plan and is delivering 10 liberal results across the group. Under the current agreement, we decided in 2024 to reduce headcount at Volkswagen AG by 35,000 including Audi, Porsche and Carriot, we are planning to reduce headcount by 50,000 in the German entities by 2030. The reduction refers to the manufacturing as well as the administrative part of our business in Germany. So far, roughly 21,000 employees have already left the company in Germany, for the most part in the context of early retirement schemes. But despite all the progress made so far, SG&A costs remain a major structural gap versus automotive peers, and this gap amounts to roughly 30%. It's largely driven by the complexity of the group structure across all levels, creating a clear cost disadvantage. And sustainably closing this gap is essential to strengthen our financial robustness. Under the group target picture 2030, we aim to reduce overhead costs globally by around 11 billion euro. Consistent execution would bring the overhead cost ratio in the automotive division down to around 12% by 2030 from roughly 16% today. That 4 percentage point improvement would translate directly into a 4 percentage point margin uplift. Since personnel costs account roughly 60% of total overhead costs, closing the gap to competition would imply a further workforce reduction of around 50,000 employees in addition to the current program mostly in the administrative areas of the Group worldwide. Turning to the development of the Brand Group, the platforms as well as the financial services. Brand Group Core delivered a performance on last year's level in the first six months of 2026. Vehicle sales and sales revenue were up by 3% and 1% respectively. Operating results came in broadly stable at 3.6 billion Euro and a margin of 4.9%. Branco Progressive reported a market decline in sales by 8% and sales revenue by 10% reflecting weaker volumes in China and the US. Nevertheless, operating results came in broadly stable compared to prior year period at 1.1 billion Euro. This corresponds to a margin of 3.8% up by 50 basis points. Results in H1 2025 had been impacted by restructuring charges and higher costs related to US tariffs, which posed a smaller headwind to results in the first half of 2026. Despite a pronounced decline in vehicle sales, Porsche automotive business delivered strongly improved financial results. Operating profit came in 45% higher year on year at 1.2 billion Euro, corresponding to a margin of 8%. Porsche will report half-year results on July 29th. Let's have a closer look at the brands in the Brand Group Core. Volkswagen recorded an operating margin of 2.4%, broadly on par with the prior year level. If adjusting for non-recurring effects, operating margins stood at 3.8%. Skoda continues to show impressively what can be achieved in a highly competitive environment based on strong products and a competitive cost base. The operating margin of 8.5% in the first six months of 2026 gives us confidence that we are on the right track. Carrier sales revenue increased by 44% to €0.8 billion backed by increased volume of the 1.1 and 1.2 software stacks. Operating results improved by €0.3 billion to minus €0.9 billion. Powercore kept the operating results broadly stable despite the ongoing production ramp-up at the Salzgitter plant and continued construction works at the Valencia and St. Thomas sites. After a slow start to the year, industrial operations of Trayton caught up in the second quarter. Overall sales revenue in H1 was slightly down on lower unit sales and operating results came in at €0.9 billion 4% below the prior year level. Operating margins stood at 4.5%. Lower volumes, costs related to US tariffs and special effects negatively impacted the results. The financial services business delivered a robust performance. Contract volumes increased by around 3% in the first half of the year. At the same time, residual value risks slightly increased. The credit loss ratio was broadly stable on a solid level and operating profit at 0.9 billion euro was slightly down compared to the prior year period. Investments in CAPEX and R&D in the automotive division were further reduced by €1.5 billion to €14.8 billion in the first half of the year. This corresponds to an investment ratio of 10.6%, 80 basis points below the level recorded in H1 2025. Going forward, we will focus our resources more consistently on the areas that matter most for the future competitiveness and Value Creation. At the same time, we will lose complexity in our product portfolio and variance, leverage group synergies more systematically, and apply an asset-light approach where appropriate, aiming for an investment ratio of around 9% in 2030. China's automotive market has come under increasingly strong pressure since the beginning of the year, factors including changes in subsidy and tax policies, rising fuel prices, and ongoing price competition have impacted consumer confidence. In this week's market environment, our unit sales were 31% lower year-on-year at 0.9 million vehicles. At the same time, Volkswagen Group China continues its model offensive under the In-China-For-China strategy. To counter these pressures, Volkswagen Group China intensified its cost work and was able to compensate for parts of the pressure. As a result, the proportionate operating profit of our joint ventures activities in China amounted to 184 million in the first half of 2026. Before moving on to the outlook, let me briefly comment on the agreed sales of 51% in Everland. The agreement with Bain Capital is a result of a highly competitive and transparent bidding process based on clearly defined criteria. The winning bid prevailed in a compelling combination of ambitious growth, committed future investment in Everland and an attractive valuation. The transaction is expected to generate proceeds of around 7.4 billion Euro for the Volkswagen Group. Beyond the financial benefits, this step further sharpens our focus on the automotive core business and supports a more efficient allocation of capital. This brings me to the financial outlook for the full year 2026. Against the backdrop of developments in the first half year, we now expect sales revenue to be up minus 3% below the previous year. At the same time, we continue to expect operating return on sales in the range between 4 and 5.5%. And building on the strong cash flow in the first half year, we continue to expect automotive net cash flow to range between 3 and 6 billion and net liquidity in a bandwidth of 32 to 34 billion euro. Ladies and gentlemen, since the launch of Volkswagen Zukunft Programme, the world has changed fundamentally. In this environment, it's not enough to just incrementally step up cost measures. We need a fundamental change in our business model with a pronounced step up of structural and lasting improvement in terms of cost competitiveness of our products. In terms of overhead cost reduction and efficiency improvement in our plant and in terms of speed. And to achieve this we must significantly reduce the complexity of our business or better of this company. Did be convinced if we are able to simplify our business we will become more agile in adapting to the world around us. These are the priorities we will address with determination over the coming months to achieve our Long-term targets for 2030, a group operating margin of 8 to 10 percent, automotive cash conversion of above 60 percent, an overhead cost ratio of 12 percent, and an investment ratio of around 9 percent. Together, these targets form a comprehensive framework to lead the Volkswagen Group towards a successful future. With that, I hand back to Oliver.

Thank you very much, Arno. Three years ago, we set out an ambitious transformation agenda. Until today, we have demonstrated tangible progress across all key pillars of our strategy. In short, progress delivered, major operational targets achieved, promises kept in products, software and technologies in the regions and with our performance programs. But reality is that the automotive industry is faced with fundamental challenges. Geopolitics, trade barriers, regulatory pressure, adverse demand trends, technological disruption, unprecedented competitive intensity. These factors are reshaping our industry across all major regions. And they are not cyclical, they are increasingly structural. The measures that were adequate in the past are no longer allowing us to achieve our goals. Therefore, the Group Target Picture 2030 represents the next phase of our transformation. This is not just a cost reduction program. It is a comprehensive plan with a holistic approach to make Volkswagen faster, more resilient, more competitive, and even more Innovative. The program compromises 12 fields of action clustered into three main areas, technology, performance, group steering. Let me highlight some of the initiatives that we have decided and started to implement. Covering key vehicle segments with fewer models, thereby creating significant added value for our customers. That is what we want to achieve. To that end, we will streamline our model lineup by up to 50%. This allows us to consolidate our development and production resources, to focus our expenditure on even higher level innovation, equipment, and quality of our cars, to reduce segment overlaps and substitution, by doing so reduce complexity and cost, and ultimately increase the volume and profit per model. Every remaining model shall lead its segment in driving and technology experience. At the same time we have looked through all parts and supplies and found that we could reduce the number of available equipment options by up to 75% without compromising product substance. Implementation has already started Depending on the component, complexity will be reduced by up to 90% for example in seats, variants, windscreens and similar parts. Customer will continue to have a meaningful choice. We are cutting what is not ordered and we scaled what customer demands. A key element of our technology strategy is the consolidation of platforms, electric-electronic architectures and software stacks into two regional technology ecosystems, one for the Western Hemisphere and one for the Eastern Hemisphere. This allows us to tailor solutions to local customer requirements while reducing complexity, eliminating duplicate development and improving investment efficiency. At the same time, we maintain our ambition of technology leadership by focusing resources on scalable technologies and selective strategy partnerships such as Rivian and Corizem. And we are fully on track in all these activities. The goal is not to create more technology ecosystems, but fewer and stronger ones. The objective is simple, maximize synergies globally by localizing where it creates customer value. In the West, We build on Rivian partnership in the RVT tech joint venture in the East on China electric-electronic architecture and Corizon ecosystem. We therefore intend to make full use of our presence to fill market gaps, for example, serving the Global South from our China hub. As the only international player, we are able to act like a Chinese OEM in terms of technology and cost base going global from China. By further streamlining our technical capacities, we are aligning our production network to the changed market environment. Our cost base will be aligned to a production volume of 9 million units per year. Prior to the COVID pandemic, the company was invested for production capacity of approximately 12 million vehicles per year during the past year we have already made significant progress with a reduction of 2 million units we are currently discussing a further reduction of technical capacities by more than 500 000 vehicles in each china and europe our target is to lower the break-even point to a production level of less and 8 million units. Operational excellence is about tackling the structural costs and complexity embedded across the group. We are focusing on six key levels, R&D, procurement, production, quality, sales, and overhead. Through greater standardization, increased scale effects, simpler processes, and higher productivity, we aim to reduce structural costs while improving speed and competitiveness. Sometimes the simple things have the greatest impact. Simplifying technical specifications and purchasing processes, consequentially use AI to support the development process or in product testing. Implement use of shared services across a group and eliminate consequently dual work within the organization. and we need to consequently look for growth opportunities in parallel. First in regions, for example in North America, India and the Global South are tomorrow's growth engines for us. Second, market instruments. Fleet business, used cars, after sales and insurance business offer growth opportunities we want to further exploit for Volkswagen. And third, technologies. We are moving decisively into future-oriented fields, including circular economy, SOCs, energy storage, or robotics. This is how we are turning our engineering strengths into entirely new sources of value creation and competitiveness. With consistent implementation across all action fields of our group target picture, We are safeguarding achievement of our 2030 ambition and operating return on sales of 8-10% by 2030. Over the past months, the program has been developed and detailed. The setup is in place, objectives are defined, initial measures have been established. In the months ahead, measures will be further specified across all 12 initiatives with implementation already started in parallel. The entire process is supported by close tracking at group and brand level, complemented by regular reporting to the board. You will have noticed that while the announced initiatives are already far-reaching, not all potential fields of action are finally agreed. We are in constructive dialogue and plan to obtain outstanding approvals as fast as possible. Let me conclude the presentation with three main messages. First, the underlying demand picture is stronger than headline deliveries suggest as we continue our model offensive. Excluding China, vehicle deliveries increased by 2%, Our enhanced model lineup is resonating well with customers. The European order book rose to more than 1 million vehicles with particular strengths in battery electric vehicles. And the strong early momentum of the electric urban car family and customer response to our newly launched China models like ID Era 9X or E7X from Audi are encouraging. Second. Despite a highly challenging environment, particularly in China, the group held well with regards to financial performance in the first half year. We continue to act from a position of strength with a very solid net liquidity position and strong net cash generation. And we confirm the full year outlook for operating margin, net cash flow and net liquidity. We have launched a truly unparalleled, far-reaching corporate program, our group target picture 2030. And we have got our foot on the gas pedal. We are aligning our products, technologies, and structures to succeed in the new market realities. We are reducing complexity, accelerating execution, improving competitiveness, and allocating capital more selectively. And we are sizing and growth opportunities in key future fields. In short, while market conditions remain extremely tough, we act early on and we see encouraging progress in the areas that matter most. This gives us conviction to successfully master the next phase of Volkswagen's transformation. With that, I hand back to Ralf.

Thank you, Olli. Thank you, Arno. This we conclude the prepared remarks and let us now move to the Q&A session. If you want to ask a question, please press star followed by one, one. Looking here at the queue, I have the first question coming from Tim Rokosa from Deutsche Bank. Tim, please go ahead.

Yeah, thank you very much. So first of all, Olli, Arno, Rolf, I think I speak for the capital markets in general when I say that we appreciate that you, against all of this pressure, start the 2030 program despite having just shortly launched the other one. It would be nice if it wasn't needed, but in this world it clearly is. To my questions. The first one is the discussions in the press often focus on plant closures when we discuss about the 2030 plan. I agree that a plant closure would obviously be a pretty powerful message, but at the same time I don't think It's feasible to assume that that would be possible pre-2030, and we're discussing about a 2030 plan here. So could you just confirm that plant clorers are not needed to achieve the 2030 targets that you also just spoke about? And secondly, not easy with you guys given all of the complexity, but I think drilling it down to the key issues, one of the key issues for the group is Audi right now. I had the question again this morning from a lot of investors. If Audi with this model initiative isn't working, will it ever? And what do you say to people when you think about this? When should we get our hopes up again for Audi? Thank you.

Tim, thanks for your remarks and your questions. First of all, I think we have built during the last three years a foundation for everything to come. And now we are in a more stable situation in terms of product technology also in regions and especially the performance programs which helps us to compensate the major part of the headwinds we are faced. And now we are entering in the next phase of our transformation with our target picture 2030. We have the need because of the risk scenario and we are acting early. And to be very clear, this is not only a cost reduction program, it's a comprehensive program which touches all fields of our company. It's the deepest and the most innovative program we have ever implemented in the history of Volkswagen Group. And so for us, it's very motivating that we have already started with a lot of fields. One part, of course, is to adapting furthermore our capacities. And we were able to reduce already during the last two years, to reduce two million of capacities with around seven plant closures we have done. And now we have a work to do of over 500,000 in China and also in Europe. And on the one hand side, in our existing plants, especially in Germany, we have models in production and we need these models. And so it's not realistic to talk about plant closures up to the end of this decade. On the one hand side, on the other side, to close a plant is also the last solution. First we will focus on competitiveness and this in a European context and there we have opportunities and when I talk about intelligent solutions we also can consider for example for a different industrial usage or opportunities also more in the future to pick some of our Volkswagen group products from China to bring them in plants in Europe. But step by step, first focuses on competitiveness. And at the end, the last option would be to close a plant. We have done this during the last two years in some cases. And this is always the consideration we have to take. Coming to Audi, the response from the market is very positive on the new product. Thank you Tim.

And we have the next question coming from Horst Schneider from Bank of America. Horst, please go ahead.

Yes, thank you. Good morning. I hope you can hear me. The first question that I have relates to the guidance for this year. So you kept the operating margin guidance unchanged and that implies that H2 needs to be stronger than H1. So maybe a question for Arno. Arno, maybe you can explain us what is getting better exactly in H2. It does not seem to be volume. So it should be maybe price mix or it should be other sliner costs. So maybe you can provide more details on that. Then maybe for Olli, since you say you aim to reduce complexity of the group, do I get it right that this means also that you want to accelerate disposals? So maybe you can provide here more details also on the timeline how quick they're going to come and if they come what you want to do then with the liquidity that you increase by that. And the last one of course on restructuring I know it's for you difficult to talk about that because in the end you need the approval maybe also from the Works Council and they probably also listen to this call but maybe you can at least tell us What's the ambition on the timeline? So by when can you basically, you think you can make an agreement? Or does it require in the end, if it comes from bad to worse, an AGM and that could basically extend the agreement to, I don't know, maybe even H127?

Thank you. I take the first question. Yeah, obviously, it applies a better second half of the year. But there are some factors that gives us tailwind. First and foremost, obviously Audi. We expect a strong improvement in margin in the second half based on the product momentum, both in terms of model mix. They just launched their RS models and S models, which are really well received by the customers with good margins. And last but not least, they will launch a new Q7 and then at the end of the year also a Q9, It's some of the market, so this should give momentum at Audi. And second, cost program. You saw the reduction on headcount we achieved so far. I think we send at 21,000. We expect at least to end up with reduction of 25,000, 26,000 at the end of the year. So this should give also continuous tailwind. And last but not least, I take the third question as well. From today's perspective, we don't expect major restructuring in the second half of the year so far. And we had quite some restructuring in the first half. For example, discontinuing of the ID4 in the US. And so these are the effects. Based on that, we We're confident that we achieve a margin in the corridor.

But in the end, Arno, you expect Q3 is always weak. You expect now a very strong Q4, right?

Yeah, exactly. As you know us very well, Q3 is typically the quarter when we have the summer holidays in major German plants. So yes, as last year and also as already we expect a strong Q4. Okay, thank you.

And Horst, Olli speaking, coming to your second and third question. First of all, complexity. We were working on reducing complexity in terms of products, technologies, but also investment portfolio, as we have done in the last weeks, which was avalanche, which was a very positive result. and all of this. And then we have further opportunities, as you know. First of all, safeguarding our liquidity position and having their stability, but also safeguarding an attractive dividend on the one hand side. And further on, it depends a bit on the steps we will do with our investment portfolio. We will consider how we will deal with other liquidity options, but it's too early to predict. First of all, work has to be done and then having the stability and offering opportunities also for our investors. And when you look to our cash flow situation, first half of this year, already 4.5 billion Euro better than last year. That shows a stable situation. Also after the strong cash flow, We have shown last year and so we keep on working on safeguarding on our stable situation on cash flow liquidity and then step by step to decide. Restructuring is a major part of our program. It's not part of being to agreed of the supervisory board and That is already in an execution and in all cost positions. To the main, deeper, deeper restructuring, there we are executing the agreement we have done in 24 already. It's a 50,000 reduction of headcount where 37,000 We have a great contract by our employees. It's well received. We are well on track. And in terms of the adaption of our production capacity, we are making good progress. Already 2 million per year we have already reduced. And there you can see the speed. Only in two years what we have done in the past wouldn't have been thinkable to come to this direction. And now we are entering in the next period of transformation. I think we will come to a conclusion agreement during this year. We started two weeks ago with the first overall presentation in the supervisory board and it's clear that there are some points to be discussed in terms of plant utilization, What competitiveness means for our plants, especially in a European context and also for the overhead costs. There we have set a clear benchmark where we want to go and now we are working this out with all our brands, our organizations and regions. What is possible in terms of headcount adaption and on the other side, in terms of labor costs. And at the end, the product in between both of them will be the adaption of our costs. So summing up, the major part of our target picture is already in execution, especially in terms of all the technologies, products, and costs. And the part of the restructuring has to be discussed furthermore, especially with the worker union. and our supervisory board, and then we will take decisions during this year.

Okay, that's great. Thanks, Olli. Good luck.

Thank you, Horst. And we are moving on in the queue to Jose Azumendi from JP Morgan. Jose, please go ahead.

Thank you, Rolf. A couple of questions, please. Olli, can you talk a little bit about The business model in China, I mean, it's been a difficult first half of the year, but obviously you've done a lot of work with Ralf there to take down capacity, launch new vehicles, launch new products. Are you seeing signals of stabilization in the business model in China? Is this not a vote of confidence also when you're discussing with the unions that you're able to restore to the business and stabilize the business model in China? And this will have also, you know, as you bring these best practices into Europe, or some of them at least, It will also help to improve the business in Europe. If you could talk about this, please. Then second, Arno, when we think about the different cost measures, what do you think is the biggest sort of cost bucket where you see a big difference in terms of the competitiveness? I think you mentioned several of them, but the biggest one for you stands out. And when you think about the restructuring cash outflow we should be expecting over the next years, can you give us any signals, any guidance, or maybe talk about liquidity and the sale of Everlands, how that is going to be helping to Let me start with your first question. The environment in China is clear.

First half of this year, the market overall went down of more than 20%. We have over 150 competitors in the market. and there have been over 500 new model launches in the first of the half year. And that shows the tension in terms of competitiveness in the market. In spite of this, we started in first quarter as market leader and second quarter or half year under top three. And this underlines the strong position of Volkswagen Group in China. We have done a huge restructuring during the last three years with our In China for China business with the engineering center, the biggest one outside of Germany. We have brought to life our new electric electronic architecture and all the new products to start now on the market. Our intention is to launch over 30 models up to the end of next year and the first market response is very positive. But this opens us other opportunities. I'm often asked, is it worth to invest in China? And my client says, yes. It's on the one hand side China. It brings us on this technology level and this cost level. We can see also our Chinese competition. But on the other side, it opens us the same opportunities Chinese competitors are executing right now in other regions of the world. And for us, especially export opportunities to the Southern Hemisphere in Southeast Asia, Australia, India, South America and Africa, but also in Europe, where we are not present in some segments with products from Europe. We could consider to bring our own products from China to Europe. And now this shows that we are the only international player who is in conditions to use all these global opportunities. What we have done in China, our strength and core business in Europe, and on the other side, our corporations and businesses we are doing in the US. And combining this, this is a unique offer to the markets for the future.

Thanks for the question. If I look at our business, the biggest advantage is clearly reducing overhead costs. So far, and if you look at our business, and Oliver mentioned it, we are rather complex in front of the customer with a lot of model, a lot of offers, but we are also very complex internally, a lot of layers, a lot of entities. And this weighs on our costs and also makes us slow in decision making. So I'm deeply convinced in simplifying our business, this is one of the The biggest advantages and chances we have as a Volkswagen Group become more leaner and more agile in adapting to the world around us. And also in terms of cost, we did an in-depth benchmark versus competition about SG&A and applied that to our overhead costs. And as you know, they are roughly 45 billion today. And if we close the gap to competition, this is a chance of Arno Antlitz, Gernot Dollner, Rolf Woller, Thomas Schmall-Reichsgraf von und zu Westerholt is the magnitude we see there. But don't get me wrong. We need to improve our other costs as well. We need to improve our material costs without sacrificing product substance, as Oliver mentioned. And we also need to improve the efficiency and productivity in the plants. The competition is coming to Europe. Chinese competitions are building plants in southern and eastern Europe. It's hard to compete with underutilized plants. So it's a comprehensive program that addresses all the levels of cost in the company. But clearly the biggest advantage is reducing complexity and overhead cost. And in terms of restructuring, it's obviously too early to give specific numbers. We need to wait until we have detailed decisions and then come up with detailed figures on that, but it's very clear. We look on a company with net liquidity on more than 30 billion, 33 to 34 billion, and the proceeds of evidence will give us further positive effects on on that topic. So we have a very solid balance sheet still, and we increased that robustness with a good cash flow first quarter, more than 3 billion, and we kept our outlook. So this is a company that will clearly be able to manage also the restructuring, the potential restructuring measures.

Thank you.

Thank you, Jose. And we are moving on to Patrick Hummel from UVS.

Patrick, please go ahead. Thank you, Rolf. Good morning, Arno. My first question to you, Arno, regarding the 50,000 headcount reduction or at least target picture that you painted. In the first wave, you've been using early retirement, which was, let's say, relatively straightforward and relatively low cost. This time, it seems to get more expensive, so I understand you can't give us any details, but is it fair to say that at least a significant share of the Everlands proceeds will be required for that restructuring? And you said, Olli, before, actually, that you expect a deal with the unions to be reached by the end of this year, but, Arno, you said no restructuring You currently foresee for the second half. That sounds a little bit like contradicting. Should we expect that incremental restructuring to be booked this year or not? And what would be the impact if I put it all together on the dividend? Is it fair to assume a flattish dividend trend? Is that what you're targeting? Could we see a cut in dividend? Any call you can give on that. And the second one, just on the implementation of that restructuring, you know, the Chinese are gaining share in Europe at the speed of light. It feels every two to three months they're gaining one percentage point of market share in Europe. So if the implementation of what you're trying to do here is skewed towards the back end of the decade, it might not even be fast enough. So what can you actually do to get those headcount related savings sooner rather than later? And Olli, do you actually expect any support on the political front? It feels all very half-hearted so far on the Industrial Accelerator Act. It's not really banning Chinese cars from entering Europe. The plug-in hybrid tariffs, that's under discussion. Are these instruments that you think will change this market share shift trend, or is it just fair to say for as long as China as a market is weak, these Chinese companies will push as much as they can into Europe?

Patrick, I take the first question and then I hand over to Oliver. First and foremost on the topic of restructuring. Yes, we embarked on a first strategy. We agreed on 2024 with the restructuring of 50,000 headcount, mainly in Germany, in the indirect and direct areas, so administrative and manufacturing part of our business. And we use for the most of the time early retirement schemes. and they're there in place but let's not forget they weighed on our margins and our result with four to five hundred million a year so far already it's just not seen in the bridge because we spent every year roughly half a billion so if you take out this destruction fees our operative business is even stronger so the second wave is as I explained is a benchmark on a worldwide basis and so the second wave of up to 50,000 is mostly in the administrative side and on a worldwide basis. And it's really, Patrick, it's too early. First, we have to identify where we want to reduce. On the other hand, there are also other potential. We are not looking for job reductions per se. We are looking for a much better cost base and the structural reduction of our cost base to be more competitive. So there might be also elements in the labor costs that will help us there. And so this is where we stand. And let me be very precise. What I have to say is in the 4% to 5.5% margin guidance and outlook, obviously in this guidance is no restructuring incurred. So if we had to decide on restructuring in the second half, this is clear that that comes on top.

Patrick, coming to the second part of your question, how could the politics be supportive? Let me go to three approaches. First of all, we have to do our homework. We have done it already in terms of products. They are competitive. They are attractive for our customers. Our order intakes show this in spite of the competition we are faced right now. Deliveries also in Europe. What we have done furthermore is cost work, reducing more and more our costs and bringing us there in a better positioning, earning more money with our products. But that's our homework. Second, we will benefit from our China opportunities. You can see us also as a China player and we can do the same like the Chinese do. and having the same opportunities, being competitive in terms of products, technologies and also costs, also for exports. Then the third aspect in terms of politics. We need a level playing field, not more, not less. And in some areas it's already working. The regulations on BEV is working. There we are competitive also in terms of pricing. Where it's still not working are the plucking hybrids, for example. And what has to be done is the made in Europe. And I think this will adapt the market. And I hope during the next month, the European politic, with the support of the German politics, will bring the European automotive market to a level playing field, which today does not exist. At the end, With our homework we are doing right now and benefiting from the China business, I think we have the opportunities in Germany. But the politics have to accelerate the upcoming decisions in terms of plugging hybrids, for example, and made in Europe strategy.

And maybe a quick word on the implementation timeline of this upcoming program. Is that like a savings target that will only hit by 2030? Is there a chance that we could hit that already in 2028, let's say?

Well, not only 2028. I expect that the politics will react this year. We have no time to lose. And that's a clear expectation from an industry leader. The level playing field has to be built in Europe. That should be a European industry interest. to do so. And then from 27 on, we will benefit from the current product portfolio and everything to come already, and then step by step also with our Chinese opportunities. We are well prepared for everything to come, but the politics has to do with the work which we talked about.

Thank you very much. Thank you, Patrick. And we are moving on in the queue to Mike Tindall from HSBC. Mike, please go ahead.

Yes. Morning, gentlemen. Thanks for taking my question. I've got a few if I can. Can we just talk a little bit about China as an export base? I think that story is changing because back in 24, it was China for China. In April, it was China to the global south. But we're now talking about China into Europe. Am I reading that right and when will we see this tangibly happening? So that's question number one. The second question is just around, I know that when you were initially looking at plans for Osnabrück, you were looking for alternative uses. I'm curious whether or not some of the people that approached you at that time said Osnabrück doesn't fit, but we like Hanover, we like Emden. The potential for finding alternative uses for some of those German plants. And then the last one, a very quick one, just in terms of disposals. I just wonder if you can talk at all about Trayton. Trayton clearly having a pretty good run at this point in time. And I know you've sort of said before that you would like to reduce your stake. I wonder if you could just give us sort of an update on that. Thanks very much.

Yeah, Mike. Correct that we started in China for China, then three years ago still with different market conditions. But the advantage now is that we brought ourselves in the same competitive situations where many Chinese competitors are. So Volkswagen Group in China is a China player. And so with the changed market conditions that the market is going down, the margins are under pressure, this opens up for us the same what Chinese OEM are doing in terms of export. And furthermore, it opens up opportunities we have never had in the past because of our cost structure and not having the right product for the southern hemisphere, but also for Europe. We can benefit in terms of our complete products we have there in China, but also in terms of technologies. Thinking about autonomous driving, this could be an option and maybe also for our existing combustion engine product portfolio. So we have many, many opportunities now also benefiting from engineering. from parts we are producing there in China with our own organizations, processes we can adapt. That's many, many advantages. Talking about the timeline, we are implementing right now our experiences from China to Europe in terms of products. It needs a bit of time. We need to ramp up the current product portfolio in China. And I think it would be realistic in 2028 with complete products, technologies maybe, but we have to do it step by step by step. We already launched the first models in the last months in China. Many attractive products on our own platform, the CSP platform, are entering the market in China in 2027. But this offers opportunities up to, I would think realistically, from 28. Talking about Osnabrück, there we are in very advanced negotiations with defense industry. That's not a secret, but we can't deep dive any further more there. It's confidential, but we expect a decision during this year. Talking about other plans, first of all, as I said before, is European competitiveness. That's a headline. Then second step is do we have usage with other products and then also use it in an industrial context. And therefore also we will check each plant where we have need for action, what opportunities we would have. And every plant has got different conditions and so we have to develop a specific plan And that's what we are kicking off right now. We have done, I think, very hard and deep work during the last two years to reduce capacities to 2 million cars a year. That is not a small part of capacity reduction. And also the 50,000 of headcount reduction we are doing, which is well on track. and now we are entering in the next phase which has to be done to be more competitive as we are today.

Jan, in terms of trading in our target picture, it's clearly what we continue to say in the past. We want to stay a responsible shareholder with 75% plus one share and we are on the way to that and we are aware of the current Thank you very much. Thank you. And we are moving on and Stephen is the next one, Stephen Reitman.

from Bernstein, please go ahead.

Yes, thank you. I have a question about China again. You made roughly about 200 million euros or so in the first half of the year and your guidance for the full year is basically 200 to 600 million, so basically from flat to 400 million euros. I just want to look at how you're judging your progress so far. You talk about the new models you've launched with Anhi, the Unix models and such like, and the models from Audi. How would you judge how successful they are? What kind of volume numbers are you looking at? Because obviously the figures we're seeing when we look on a monthly basis of registration is still very low, and there's also quite a lot of volatility, where sometimes they appear to have Initially one month which is quite good and then kind of like tailing off I think again and we've seen that with the Audi model the S5 but also you know now we're seeing other ones picking up a bit but where would what would you be your criteria for success given the fact that the volume seems to be very low relative to some of the launches that are or the models that we're seeing from the Chinese brands and secondly more a philosophical question about the expectation for change within the Volkswagen group It seems to me that probably one of the most successful periods of change in terms of cost reduction and reorientation of the company happened in the 1990s. But that really occurred when the company basically went into loss, and it seemed that really you'd reached the end of the road, and that caused a situation maybe where you could actually make deep changes. At the moment, your numbers, you say, are not satisfactory, and I think that most people would agree with that, but still you're generating reasonable free cash flow. Your guidance is still quite positive as well. Do you feel there's sufficient urgency that's fully appreciated by all the parties that they need to make the sacrifices that you're seeking? Thank you.

Maybe I can start with our model launches in China. Maybe Arno can add some aspects in terms of the financials. and then I would like to talk about if there is sufficient urgency what we are planning right now about the China models. What we can say is that the first response we are getting, first of all media tests, the Audi E5 was voted as the car of the year in China, is very positive. In concrete, talking about the Era 9X, we have over 10,000 deliveries right now since the launch. That's very positive. And also the Unix 07 with around 6,000 and we see Very positive opportunity with the Unix 08, which is a product which starts with around 200,000 renminbi and offering already our new electric electronic architecture. And the response on the Audi E7X is also positive. We delivered over 4000 units. in June and we are ranked among the top three in the range of 300,000 renminbi level. So you can see in between the competition, which is by far very, very strong, we are very well positioned and many more to come. Expecting now our first Arno Antlitz, Gernot Dollner, Thomas Schmall-Reichsgraf von und zu Westerholt Arno Antlitz, Gernot Dollner, Thomas Schmall-Reichsgraf von und zu Westerholt

The guidance for this year is 200 to 600 million proportion of the result and going forward it will heavily depend on our plan to catch up market share in the electric segment. We are still a clear market leader in combustion engine and we bring, as Oliver said, 20 new models this year, very attractive both in terms of features but also in terms of cost and technology to the market and next year again 20 new models and based off that the team wants to achieve towards 2030 a share between 10% and 12%. And based on that, we gave our outlook some months ago that we want to achieve 1.6 to 2 billion proportion of operative result in 2030. And this is the way we need to go.

I'm coming, Steven, to the second part of your question. Is there sufficient urgency recognized by all the stakeholders? You brought the comparison to the 90s, where Volkswagen Group was in the losses, and you can't compare the situation of today with the 90s. That's correct. When you look on the one hand side to the profit margins, our long-term average profit margin since the 90s was exactly on 4%. This year, our expectation is to be better than the average profit margin we have seen since 1990 up to today. But on the other side, this is not a guarantee. and the environment has never been as heavy as we are faced today. As I said before, we are able to compensate a double digit billion euro year by year by our cost work we have implemented already during the last three years. And that's heavy work to do this. Without this, we would have been in a completely different situation right now. But when we look to the future, we have more and more risks coming. You know the pressure in China and the more than 150 competitors and or are coming to the market with a low cost positioning. And we have to face this position. And this means that we have to reduce even furthermore, if we want or not, our cost position. and all stakeholders and I can confirm this because we have done also in a belief audit are aware that we are in this risk scenario not only Volkswagen Group the whole industry but we are reacting now yeah that's maybe the difference comparing to others we are after the first period of transformation looking back to the last three years and now we are entering already in the next phase and then we have now to negotiate all the cornerstones of our plan of the target picture 2030 and I can confirm the major part of the program is already in execution and the second step of the restructuring has to be done, that's clear, but the urgency is recognized by all stakeholders.

Thank you. Thank you, Steven. And we have to hurry up a little bit given the timeline. We have two remaining questions in the queue. And the first one comes from Christian Freines from Goldman Sachs. Christian, please go ahead.

I'll try to keep it brief. First of all, in terms of China stabilization, it sounds like That question's already been answered. It's 2028, you expect stabilization. I'm wondering, as we think about Audi specifically, which you also referenced earlier, and the second half, and also 2027, should we expect stabilization in Audi within China when you think about operating profitability to happen before 2028 already? And how do we think about that for the second half, for example? In Audi, obviously, the implication is for margin improvement in the second half. Overall, I'm just wondering what role Audi China plays within that. That's my first question.

Christian, only one comment to China. When I talk about 2028, I talk more about to benefit from the Chinese developments in other regions of the world. And it will start for some regions in the southern hemisphere already in 2027, but in 2028 I think we will be in full swing with all the product launches. We will have a hat, especially in this year and next year. That's what I mean talking about 2028. It's not a stabilization. I think the stabilization starts right now with all the new products to come while we are still stable in terms of our combustion engine business as market leader with over 22% of market share. And maybe, Arno, you can elaborate a bit on the Audi situation and the margin in the second half and maybe talking about the residual values.

I think we addressed Audi already. The tailwind basically from the product momentum. As we said, Audi is ramping up the Q7, Q9 brand new and then also the model launches on the S and RS models bring headwind. This should really help Audi for the second half of the year. Obviously, Audi also embarked on a strategy to significantly reduce costs, specifically overhead costs, which should also be part of the much longer second half of the year. And also, overall, Audi and specifically a part of the group, what we haven't talked about so far, the successful ramp-up of BEVs, weight on our margin so far, but it's also A chance in terms of CO2 fines from today's perspective over the three year period, there might be also a financial chance in the second half of the year that we need not to book any provisions for CO2 fines in Europe anymore. So these are the major effects.

Okay, thank you. And then my second question is on restructuring. Broadly speaking, you have, I think you mentioned the 8 million capacity goal longer term. Could you elaborate, you know, if you export from the global south, the China model, you know, just thinking maybe for example Latin America, should we, is this implying then that you would close capacity presumably in China and because you have capacity obviously in Latin America or how do we think about that? And also on the topic of closing factories, obviously you've had a supervisory board meeting. Is this topic over now or should there be more to come? And maybe a third point here, we've seen also a different model that Stellantis has talked about with basically partnering up with Chinese OEMs to share capacity. Is this also an option for you or is this not really a strategy.

Thanks. Yeah, giving you some figures. We will adapt our cost structure around 9 million cars that we think will be realistic in the next years, especially looking to 2020, 2030. Also with our opportunities we have in the southern hemisphere I talked about. The intention is to bring down our break-even situation and lower than 8 million, to have a margin there and a robustness. At the 9 million cost structure, under 8 million the break-even situation. In terms of adapting capacities, we have still the need, coming from over 12 million a year, and we want to bring it down to 9 million. We are already working on 10 million. We were able to reduce 2 million during the last two years. We have closed around seven factories already. And looking ahead, that's what I said before. We will adapt capacities, but we also think in improving competitiveness of our plants. and also thinking about a different use in an industry context. And then the last part of your question was if we are considering something like Stellantis, we are in different conditions. We have the opportunities of our own business. We have built in China and we don't need to think about other competitors to bring them in our plants. We have our own products there in China. And when there are opportunities and on the other side also the need for a plant, we could do it. And that's a major difference to all the other international players that we are a Chinese, like all the other Chinese OEMs, a China player. And this we could use for export on the one hand side, but also for plant utilization in Europe.

Great, thank you very much. Christian, one remark in all transparency. Knowing that Audi has their own conference call next week and we don't want to take too much information here or give too much information on Audi there, we want to leave it to Jürgen Littesberger, but you should expect that Audi takes down their guidance from six to eight percent to five to seven percent, which is still Thank you for clarifying.

In light of the time, I'm super sorry, Daniel and Philipp, I see you still in the queue, but we have to make a cut here on the analyst side and will, without doing a break, directly hand over to the media question session. Thank you for your understanding. And Daniel and Philipp, please reach out to our team and we will make sure that all your questions will get answered.

Okay, thanks Ralf and we go right away in the media call. As we have some English speaking colleagues, we stick to English. I'm happy to get your questions and the first goes to Christina from Reuters. You could also speak in German though, but vice versa. Guten Morgen.

Guten Morgen, good morning. Thanks for the first question. I was wondering on your elaboration, Oliver Blume, on Chinese cars for German plants. I understand the first step would be to import the cars, the second could be to produce them here. What does that mean for your development operations in Europe? And on the margin outlook, I'm a little bit wondering, because the margin was so bad or the income was worse in the first half of the year, what is driving your optimism for the second half? What should really uplift the margin towards the end of the year? And do you have a first visibility towards next year?

May I start with your first question in terms of China products? Of course. What I explained in the analyst call is that we are now in a very great situation as an international player. benefiting from our Chinese achievements, having products like Chinese competitors in terms of technology and cost, which brings us in a situation to the exports. First of all, to the southern hemisphere, where already Chinese OEMs are winning market shares, and this brings us in the same situation. In Europe, we would bring and Woodbring. Only products and segments which are not invested with European products. And so these exports won't inflate or won't have an impact on our European development. Completely different cars and there isn't a single segment and you are right, we would do the step First export, then checking how's the response in the market. And we have already a good feeling what works, looking to the Chinese competitors. But we will carefully plan in which segments we will enter. And then this might open also the opportunity to build one or two products there in European plants. And to elaborate more the margin situation, Arno, I would like to hand over to you.

Thank you very much for this question, Christina. As I said, first and foremost, every business starts with the products. We see some products momentum at Audi. Also on the whole group, we talked about a very successful new urban electric car family, which I will elaborate on in a minute. The product momentum at Audi should drive margins there. and see improved margins in the second half of the year. As I said before, the updated margin guidance would be 5% to 7%, which is significantly stronger than in the first half of the year. Cost work, we will continue our cost work specifically on overhead costs, also on productivity in the plants, and hopefully we see even first effects on the transformation program. in 2026 already. As Oliver said, we don't wait. We started working already. And so there are two technical effects. Let me call them technical effects. One effect is we had a structuring burden of about a billion in the first half of the year, which we, from today's perspective, don't foresee. And last but not least, we also booked CO2 provisions for not meeting The CO2 guidance, but with the very encouraging order intake of the new urban electric car family. We have already 70,000 orders on hand. Our renewed outlook for the three-year period, it seems that we do not need to book this restructuring, this CO2 provisions in the second half of the year, or even can we see some of the reversals. In all fairness, as you know, the margin delusion effect of the electric cars ramping up will also be a headwind. But at least we see a compensation on the relief on the CO2 burdens.

And adding three examples of the restructuring work we have implemented already during the last years. On the one hand side, you can see the progress in terms of overhead costs. You can see the progress of the restructuring we have done in Brand Group Core not only on the products but also on the results and especially at Porsche where we have done the huge restructuring last year and there you can see already the results. We have promised already last year on a profit margin level on 8% half year one and in terms of operating Profit of 45% better than last year. And there you can mention already all the effects we have implemented last year or in the other years before for the other aspects. There are some arguments which will pay off now step by step.

The next question goes to the Financial Times. Sebastian Nash, please.

Good morning, Oliver and Arno. I hope you can hear me. I just had a couple of questions. The first one was about Chinese competition. I think you both mentioned the idea that Chinese manufacturers were exporting competitive pressures increasingly to Europe. I'm wondering whether you can elaborate on that point a little bit. How are you seeing that at this point in time and how do you expect that to affect your and your business in future is it going to be through prices or will it be harder to kind of sustain the same market share going forwards and yeah then secondly I wanted to ask a question about US tariffs in your forecast you say it's based on the current tariff situation in international markets I mean overnight we've had what seems like Potentially significant change. I'm wondering whether that was factored into the forecast and then whether you have any thoughts on, yes, what the most recent announcements, what effect they could have on Volkswagen. Thank you.

Sebastian, may I start with your first question and then I hand over to Arno to elaborate a bit on tariffs. Chinese competition in Europe. Yeah, and it's heavy. It's heavier than we expected some years before. The market share already is over 8% of Chinese OEMs in Europe. And in some segments like the plug-in hybrids, which are not protected with tariffs right now, which has to be done but hasn't been done in the past, there the market shares already over 30%. And so first of all, there has to be built a level playing field. That is a task for the European Union to establish quickly. And then the Chinese competitors are there because they have the pressure in their home market in China and export is the only opportunity to be successful. And therefore, We think even if we would have a level playing field in Europe, we have faced this strong competition there. So that's a need for us to enter now in the second period of our transformation plan to reduce even more our costs. Beside of this, and that is the positive aspect, is that our products are so attractive. We are by far market leader. for combustion engines. We are by far market leader for the electric cars. We have the strong order intake for our urban car family with over 70,000 orders only in the first weeks. We have products, although we are the strongest positioned player in the BEV model. For example, the Skoda Aeroq is number two top BEV model in Europe. and now with the promising new models to come, we have opportunities. On the one hand side, level playing field, politics costs our homework and then to continue with our strong momentum we need and then I think we could face a Chinese competition but they are there and that's the biggest risk for the whole European automotive industry right now. And then I hand over to Arno for the

Yeah, Sebastian, on the tariff side, as we communicated several times, so the tariff situation is really one of the factors besides the competition in China for premium OEMs and also the competitive pressure in Europe. Oliver elaborated on that we have to step up our restructuring efforts in order to stay competitive. And we still continue to calculate with a burden of four to five billion. on a yearly basis, and that burden consists of basically the tariffs we pay. But let's not forget, we also have a significant impact on the volume. First and foremost, we had to take out some of the entry-level models from Mexico that we export from Mexico to US, like Cheddar or Towers, which are not profitable anymore, and also from Europe. We had to increase prices to at least partially offset the tariff. Look, we are in an industry with 4-5% margin and we talk about 50% tariffs from Europe, so we increased prices and so we have also lower exports from Europe to the US, which also in turn puts pressure on plant utilization and the volumes in Europe. From today's perspective, we expect this burden to continue and this is why it's so important that we make progress on the On the restructuring program we just discussed both in terms of cost and in terms of capacity utilization and efficiency in our plants.

Now we go to the FAZ, Christian Miskens.

Two questions, if I may. The first would be on the Porsche agreement. on the cost reduction that we saw this week. There was an agreement regarding the cost-cutting program. Even as talks will continue until Monday, it seems like they reached an agreement and there has been lots of talk about this agreement being difficult for VW because it entails, I don't know, significant concessions for the labor representatives in Stuttgart. And the question is to Oliver Blume, Do you foresee any impact on VW and on the negotiations that you are having in Wolfsburg with the cost-cutting program for the Volkswagen concern? And maybe is it an option for you to extend an employment guarantee to Audi and VW as well? I don't know, I'm just speculating. Could you elaborate a little bit on the Porsche effect? And the second would be just, could you give some examples of which models, concrete models you want to cut out of the portfolio in the group? Are there any A or A0 models from Ziad or Cupra that you are cutting? Can you give some specific examples?

May I start with the Porsche situation? First of all, what is important from our group view is that we have agreed the profit margins we want to achieve in each brand and brand group in 2030. This is our guideline. And at the end, the situation of each brand is a bit specific. In terms of restructuring, the major restructuring at Porsche we have done last year. And in terms of overhead adaption, Porsche is doing a two-step approach. The first step we have implemented already last year and now they are entering in the second step. This is work in progress. They have presented this in the supervisory board this week. But there's still work to do, so I can't go into any details. But from the group view, it's important at the end to achieve the margin corridor, which leads at the end to the margin we have as a target for the group published in between 8% and 10% profit margin in 2030. Talking about products, concrete products. First of all to say what we want to do. We want to focus our expenditures on clear focused products to improve innovations, to improve technologies, to improve equipment and to improve quality for the single product. Then to achieve higher volume with a more focused product and with this at the end to achieve a higher profit margin per product. Yeah, that's the intention there and we know from today that we have substitutions in some segments in between the brands. We have a high number of derivatives and there we will cut at first with the derivatives and then we will come to a number of products which still will be by far higher than what we see at the competition but for us it will be a major reduction of up to 50% of our product but where we will start are the derivatives and there we have the plan up to 2035. It's a longer progress because we have our current portfolio currently in production and in the market and then step by step We will clean it up and reduce complexity. And there it's too early to predict. We have clear ideas where we want to tackle, where we have substitution in between the brands. But today I want to address some concrete products. But at the end, the customer spend will benefit. We will benefit in terms of profit margin. And at the end, also the investors will benefit from higher profit margins.

Then we go to the Handelsblatt and Lazar Bakovic, please.

Thank you so much for taking my question. I have two questions, first to Oliver Blume and the second one to Arno Antlitz. Oliver, following up on the question of Christiane Mueskens, could you imagine extending employment guarantees at Volkswagen AG or would that be incompatible with your group restructuring plans? That would be interesting to know, not only in the light of Porsche, but if you could just imagine doing so. And the second question would be to Arno. It's a question on the proceeds from the Avalanche transaction. How should investors think about the use of those funds? Should they primarily expect a stronger automotive cash flow or will be a significant portion of that needed for finance restructuring measures such as, I don't know, programs for abfindungsprogramme, I would say, and transformation costs. That would be also interesting to know the share of how you use the money from the Avalanche transaction.

Let me start with your first question. It's too early to talk about employment guarantee. We know the situation we are faced with a huge risk scenario, especially in Europe, being faced with the Chinese competitors. And so we will do it step by step. Two weeks ago, we have been for the first time in the supervisory board to present the overall transformation plan and with our group target picture 2030. There are some points to elaborate and to discuss furthermore and one of these points are the adaption of overhead and there we are deep diving now into brands in our Subsidiaries but also in the regions and at the end it will be a combination in terms of overhead adaption and labor costs and at the end we have to talk about how to deal and what you have seen in 24 already where we came to a very positive agreement at the end which we are executing right now making good progress And so we will enter in the next phase of transformation, having done all the analysis and then to talk about the conditions. And there it's too early to talk about employment guarantee.

Sure.

And Arno, maybe you can pick the second part of the question.

Yeah. In principle, although I have to say it's too early to talk about restructuring, potential restructuring we have to book because we have to decide on the measures first. But in terms of situation of the group, I mentioned before we have a net liquidity on hand of 32 billion, which is a solid balance sheet and the process from Everland will further increase this net liquidity. Obviously, depending on when we close the deal, currently we have so-called signing and the proceeds we get when we close the deal. and then we really need to decide on restructuring measures but we also look at minimizing restructuring measures for obvious reasons because it's also money that is outflowing and so we try to optimize that as well but what we can say from today's perspective there will be restructuring efforts and measures incurred and we can find We can finance this destruction, which is also a strong message to the market.

Thank you. Thank you.

The next question goes to Bloomberg and William, please.

Hi. Good morning, everyone. I just had a question on asset disposals. There's a line in your statement after the supervisory board meeting about focusing on automobiles. Does that mean that Ducati is up for sale and when might you start a sales process for that company which is hugely successful in motorsport and would be an attractive asset for many people? Thank you.

Okay, we do not enter right now in the details of the plan. We haven't An overall agreement to our restructuring plan. What we are checking, of course, is our investment portfolio, as we talked about right now about Everland. And also, we always think about how we will develop our brands. Do we need an investor or something like this? But right now, we do not enter in any details because we haven't done right now and external information on this. Internally, we are doing information frequently for our management, for our employees, but also for our labor representatives. But in details, we are still not in conditions. Two weeks ago, we started our first overall presentation and then step by step Up to the moment when we have an overall agreement, we will do an external communication of the whole group target picture 2030. Thank you.

Then we have Christoph Kapolczynski from the Welt, please.

Hello. Regarding politics, you didn't mention the phasing out of ICEs, the plan of the European Union. You just said that you're optimistic that there will be no fines in the years to come. Isn't it that high on your mind anymore that there needs to be a change in this regulation concerning phasing out ICEs by 2030? Thank you.

On the one hand side, we are well prepared with our product portfolio, which I already mentioned in terms of deliveries. We can see this year and also the order intakes, which are very promising, which brings us to a situation to being able to manage the current CO2 regulations. But looking further to 2030, I think there's still need for reaction. and there we are aiming for a more flexible averaging what they implemented in between 25 and 27 if not the whole industry would be affected and we have to achieve at the end a regulation which is linked to the real market development also We are very successful right now. We have a best market share of around 20% or a bit more than 20% in Europe, but by far not what is now in the regulations in 2030. And this has to be worked out. Now we have some brands which are on a higher level, like Porsche, for example, who's very successful in terms of electrification, which is higher than 30% and when you add the plug-in hybrids it's over 50% in Europe already but this is linked to the successful Porsche electrification strategy but overall in average we are still only on a level of around 20% and we are by far market leader and therefore when you are market leader you should expect that you have no problem with CO2 and with the current regulations in 2030 We have still problems and so we need the averaging which has to be done by the European Union.

Christoph, I would like to confirm what Oliver just said. When I was referring to the CO2 topic, as Oliver said, it's 25 to 27 this period. The significant step down in 2030 and beyond will put burden on our balance sheet because from today's perspective we need to sell More electric cars than the customers will accept or would like to buy naturally. So this would be still a burden and we need to discuss this 2030 step as Oliver mentioned.

We have time for three more questions starting with Paulina Wilminghausen from Süddeutsche Zeitung.

Yes, thank you. Mr. Blume, first, regarding the group target picture, you have just said that you expect to see significant progress on this by the end of the year. Could you elaborate on that? And isn't that an overly optimistic assumption given the resistance you are facing?

Yeah, we elaborated a complete group target picture during the last month with our management board and with very clear positions clear answers what has to be done in Volkswagen Group now you know about the foundation we have led during the last years which brought us in a stable situation and our financial figures show in terms especially comparing with the competition that we are still in a stable situation but this is not a guarantee for the future In the overall environment. And then once again, this is not a Volkswagen crisis. It is an industry crisis we are faced because of China. The market went down and the Chinese competitors in Europe, the shrink market in Europe, the tariffs, the regulations we talked about, and that's the industry crisis. And Volkswagen It's doing quite well in this industry, but only because we laid the foundation during the last years. And now, working from this foundation, we are entering the next period of transformation, our target picture 2030. And we are already executing the major part of the program. We do not need any agreement from our supervisory board. especially in terms of what we are doing in products, in technologies, what we are doing in engineering costs, what we are doing in material costs, sales costs and so on. There are many fields we are already working, but there are some points which have to be agreed in the supervisory board and that's my expectation that we will come to a conclusion during next year as soon as possible. What we do not have is time and we want to accelerate also these open topics but the major part is already in a ramping up period and you can see our activities already in our expectation for the end of this year that we announced that our results will be over last year and this is a result of our efforts we implemented during the last years.

The second last question goes to Wall Street Journal and Stefan Wilmot, please.

Hi there, thank you for taking the question. Firstly, I wanted to ask about the 8 to 10% margin target. Where does this come from, given that it's a number that Volkswagen hasn't achieved in decades? Is it the result of your benchmarking exercise? It seems more in line with targets that you get from premium players, whereas Volkswagen is 75% or so volume, more mass market brands. So just if you could talk through how you think about that target, which is obviously underpinning a lot of what's going on at the moment. And the second question was, in terms of your China product push, the results so far, I think you said 6,000 or so sales so far for the Unix 7. Typically, the Chinese brands, they're reporting sort of 10,000 plus sales in their first sales month. When they do these launches, there's a huge emphasis on the initial sales push. We haven't really seen that at Volkswagen and Huawei. Can you just talk through how you're seeing those initial results? Are you targeting a more gradual ramp up than your Chinese peers would normally do? Can you just speak to the slightly low figures that we're seeing from Volkswagen after the initial push? Thank you.

Steven, I take the first question on the margin target. Technically, yes, I could say it's derived from benchmarks where typically other OEMs in this industry want to be at the end of the decade. But more importantly, if you look at ourselves, we need a robust level of earnings and a robust level of productivity in this uncertain environment. If you shoot only for 4% and something goes wrong or there's tariffs included here or there's some decisions there, you're under pressure. And we want to achieve and we are motivated and committed to achieve a margin a target of 8 to 10% in order to be much more robust, to be able to invest also in innovation in the future. And it's also possible. We talk not only about a program that reduces costs or reduce some of the models, it's a fundamental change of our business where we invest in technology, we streamline the model range, but we take out significant level of of complexity and out of our company. And we want to streamline our company both in terms of cost but also in terms of speed of decision making. So it's derived from competitive benchmarks. It's necessary in order to be robust, to move robustly into the future. And it's achievable if we implement our transformation program Consequently and with speed.

Coming to the sales figures in China, you always have to look at the market and the competition. Starting with the era, the era I talked about that we have delivered already over 10,000 units and the era is number one in the market of extended range full-size SUVs. Number one, are the figures as high as we used to see them years ago in China? No, but that's about that we have over 150 competitors there in the market. And for us, the orientation is to be on the top of the market. And second example is the Audi E7X, which is above the top three in the market. And when you look to the Unix 07, that's correct that we have delivered orders placed because we entered in the market by the end of May of 6,000 units. It's successful, but there we have the situation we have still only a smaller number of dealerships and dealer network and we have to expand this to come to higher numbers But it was a very positive start also to compare with the competition. And there always to differentiate in between the situation we have seen with low competition in the last decades in China and now with a very high competition. And there we have to be successful. That's one part. And the other part then benefiting from these models also for other regions of the world. This is now the new China thinking. Well, we have unique opportunities as an international player having a big footprint in China.

Then we take the last one for today as an overtime question, Lutz, from Capitae. Hey, can you hear me? Good morning.

And thank you for taking my question. Two questions, in fact. First, you were talking a lot about China. But I still don't fully get where your confidence comes from. So is it still the perspective to get back to 1.5 billion of profit in the forthcoming years? And will that only come from this export perspective you cited? You also mentioned the competition and the situation in the Chinese market overall. I heard He Xiaoping last week and also he was speaking about the market as being brutal. So is that realistic to compare yourself with a Chinese player as the Chinese players are saying themselves? that they are in a difficult situation in the moment. So can you come back to this perspective of 1.5 billion to 2 billion profits from China in the coming years? And the second question, you also made the comparison to the situation in the 90s of the Volkswagen Group then and said It's not comparable at all, because on the one hand, you're better off now in terms of profitability, and in the other hand, the market conditions are worse than they were. But nevertheless, can you learn something from how the situation was solved back then? Thank you.

Professor Mayer, I'll take the first question. When I said the targets or the vision we just communicated some weeks ago in China, they obviously depend on the successful ramp up of our new energy vehicles, which some of them we mentioned already, like the AERA, others they have to still like being ramped up throughout this year and next year. We bring in total 20 new models this year and next year. obviously it depends on the recovery of the overall market and then our potential market share we want to achieve at the end of the decade of 10 to 12 percent because then we obviously want to keep our market share in the combustion engine but the combustion engine market will go down and with these 20 new models this year and 20 new models next year in the new energy vehicle segment We want to regain share to 10 to 12 percent and this then all factors into the roughly one and a half to two billion and obviously depending on overall situation and obviously depending on the overall market but this is basically factored in in in this plan so the the key element is the successful ramp up of our in China for China developed new energy vehicles with them with good Very good product substance and a much better cost base which should give us then these contributions towards the end of 2030.

And coming to your second part of the question, always you can learn from the past and what our colleagues have done in the 90s was a great, great work. The conditions were different, but they focused on cost reductions. For example, material cost reductions initiated with Sen. Lopez and Mr. Piech focused on the right products and the main deficit had been on products and costs. On the other side, there was a regular competition in the market, not as tough as today. And you have been in growing markets in this period. The situation today is different. The business is more complex. Technologies are more complex. Our group is much bigger than it used to be in the 90s. And we are in an environment where we, on the one hand side, have a lot of financial headwinds, double-digit billion euros. We have to compensate what we are doing already. If we wouldn't have these headwinds, we would have been in a completely different situation right now. We have a very tough competition. Only from China, over 150 new companies entering into the market, what we can mention already in Europe also. Then we have the trade barriers, we have the regulation and so on. But we have to face them. And what we have done in the last years, we built a foundation for Volkswagen Group with all the restructurings we have done. We brought ourselves now in a strong position in terms of products, technologies and also the software strategy will help us in the future. We have the battery business. We need to manage the transformation. And then we can link also to some achievements from the 90s, especially when I look to the material cost. There's a huge need for us to improve. And there, for example, we can pick some aspects they have done in the 90s. But you can't compare the situation because the environment is completely different, more complex, and even more and more challenging.

And with this I say thank you to Oliver Blume and Arno Antlitz for all the answers and all the information. Also to my colleague Rolf and we're at the end of this call. I wish you a good day, a good weekend and see you soon. Bye bye.