Q3 2025 Bayerische Motoren Werke AG Earnings Call - Q&A

November 5, 2025

Speaker #1: So, ladies and gentlemen, welcome back to our quarterly earnings call. Oliver Zipse and Walter Mertl are also back in the room with me.

Operator: Ladies and gentlemen, welcome back to our Quarterly Earnings Call. Oliver Zipse and Walter Mertl are also back in the room with me. The line will be open shortly for your questions. The operator will first give you some technical instructions.

Speaker #1: The line will be open shortly for your questions. The operator will first give you some technical instructions.

Speaker #2: Ladies and gentlemen , we will now begin our Q&A session . If you have a question , we ask that you please use the raise hand function at the bottom of your zoom screen .

Max: Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. If you have dialed in, please press star nine to enter the queue. Once your name has been announced, you can ask your question. If you want to withdraw your question, please lower your hand using the raise hand function in the Zoom app or via telephone, press star nine. Thank you. Please stay tuned for our first question. Our first question is from Jose Asumendi, from J.P. Morgan. Please unmute your line and ask your question.

Operator: Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. If you have dialed in, please press star nine to enter the queue. Once your name has been announced, you can ask your question. If you want to withdraw your question, please lower your hand using the raise hand function in the Zoom app or via telephone, press star nine. Thank you. Please stay tuned for our first question. Our first question is from Jose Asumendi, from J.P. Morgan. Please unmute your line and ask your question.

Speaker #2: Or if you have dialed in , please press star nine to enter the queue . Once your name has been announced , you can ask your question if you want to withdraw your question , please lower your hand using the raise hand function in the zoom app or via telephone .

Speaker #2: Press star nine. Thank you, and please stay tuned for our first question. Our first question is from Jose Mendy from JP.

Speaker #2: Please unmute your line and ask your question .

Speaker #3: Thank you Max . Good morning Oliver and Walter . I wanted to ask just a few questions please . And then maybe revolve around China and obviously too early to give 26 guidance .

Jose Asumendi: Thank you, Max. Good morning, Oliver and Walter. I wanted to ask just a few questions, please, and they mainly revolve around China and obviously too early to give 2026 guidance. I was wondering, with the upcoming product launches that you have, and particularly Neue Klasse, do you think you can stabilize the business model and deliveries in China sequentially or even deliver higher sales growth in 2026 versus 2025? Second, can you give us an update, please, where you stand on dealer restructuring in China? How far in the process are you in terms of reducing the number of dealerships and consolidating the dealer network? Thank you very much.

José Asumendi: Thank you, Max. Good morning, Oliver and Walter. I wanted to ask just a few questions, please, and they mainly revolve around China and obviously too early to give 2026 guidance. I was wondering, with the upcoming product launches that you have, and particularly Neue Klasse, do you think you can stabilize the business model and deliveries in China sequentially or even deliver higher sales growth in 2026 versus 2025? Second, can you give us an update, please, where you stand on dealer restructuring in China? How far in the process are you in terms of reducing the number of dealerships and consolidating the dealer network? Thank you very much.

Speaker #3: But I was wondering , with the upcoming product launches that you have , and particularly your cluster , do you think you can stabilize the business model and deliveries in China sequentially , or even deliver higher sales growth in 26 versus 25 ?

Speaker #3: Second , can you give us an update , please ? What you stand on dealer restructuring in China . How far in the process are you in terms of reducing the number of dealerships and consolidating the dealer network ?

Speaker #3: Thank you very much .

Speaker #1: Thank you . Jose . We start about China with Oliver and then Walter Oliver . Good morning Jose . This is Oliver speaking .

Operator: Thank you, Jose. We start about China with Oliver and then Walter. Oliver.

[Company Representative] (BMW): Thank you, Jose. We start about China with Oliver and then Walter. Oliver.

Oliver Zipse: Good morning, Jose. This is Oliver speaking. Regarding China, I think what we see in China is a continued intense competition that has been influencing our sales volume also in 2025. Now we I think since September, we're kind of stabilizing on the current volume. It's about 50,000 units per month that is stabilizing. Also, prices are stabilizing, we see continued intense competition, of course, there. I think Walter will talk in a minute about the dealer restructuring. Overall, I think this, the Neue Klasse will stabilize the business there. It will not come to the market early the year. It will be rather at the end of the year. We will see next year about the volume of 2025.

Speaker #1: Regarding China, I think what we see in China is a continued intense competition, and that has been influencing our sales volume.

Speaker #1: Also in 2025 . But now we we I think since since September , we kind of stabilizing on the , on the , on the current volume .

Speaker #1: It's about 50,000 units per month . That is stabilizing . Also prices are stabilizing . But we see continued intense competition . Of course there I think Walter will will talk in a minute about the dealer restructuring .

Speaker #1: But overall I think the the NOAA cluster will will stabilize the business . There . It will not come to the market early the year .

Speaker #1: It will be rather at the end of the year . So we will see next year about about the volume of 2025 . But looking at the product portfolio , we have there from from mini over all segments of BMW .

Oliver Zipse: Looking at the product portfolio we have there from MINI over all segments of BMW and then Rolls-Royce, I think that will give us some form of resilience. Of course, the Neue Klasse, we will have a car there which is adapted to the Chinese needs. It's a longer version. There's a lot of Chinese for China content in there. I think we're ready to give good responses to a continued dynamic market but we will not see rapid growth in China next year. No, not in 2026 and 2027, we will have to see there. What is important that we're entering into targeted collaboration with Chinese partners, and I mentioned a couple of them.

Speaker #1: And then Rolls-Royce , I think that will give us some form of , of of , of resilience . And of course the NOAA cluster .

Speaker #1: We will have a car there , which is adapted to Chinese needs . It's a longer version there . There's a lot of Chinese for China content in there .

Speaker #1: So I think we are we're ready to to , to to give good responses to continued dynamic market . And but we we will not see rapid growth in China next year .

Speaker #1: No not not in 2026 and 2027 . We will have to see there what is important that we are entering into targeted collaboration with Chinese partners .

Speaker #1: And I mentioned a couple of them . It's Alibaba , it's deep sea integration . It's who are we ? It's Tencent . It's momenta .

Oliver Zipse: It's Alibaba, it's DeepSeek integration, it's Huawei, it's Tencent, it's Momenta. What we see there that you will see specifically on the digital side, a lot more cooperation with our Chinese partners in China. Thank you.

Speaker #1: So what we see there that you will see . Specifically on the on the digital side a lot more . With with with our Chinese partners in China .

Speaker #1: Thank you . Thank you . Oliver Walter . Hello , Jose .

Operator: Thank you, Oliver. Walter.

[Company Representative] (BMW): Thank you, Oliver. Walter.

Walter Mertl: Hello, Jose. As we mentioned, we stabilize on this roughly 50,000 units a month in China. The dealer restructuring network is part of it because we have to stabilize that one first, and we are well on track. We are more than halfway through. We will finish this restructuring by mid next year. With every dealer restructured, we come in a more stable phase on the dealer profitability side, which is supporting us straight away our sales performance in the market. We have even established new locations with the dealers. We closed some of those. We switched some from sales and service to service only in order to maintain even our service set up and footprint.

Speaker #4: Yeah . As we mentioned , we stabilized on this roughly 50,000 units a month in China . And the dealer restructuring network is part of it because we have to stabilize that one first .

Speaker #4: And we are well on track . We are more than halfway through . We will finish this restructuring by mid next year . And with every dealer restructured , we come in a more stable face on the dealer profitability side , which is supporting and straight away our sales performance in the market .

Speaker #4: We have even established new locations with dealers. We closed some of those. We switched some from sales and service to service only in order to maintain our service setup and footprint.

Speaker #4: So, I think we are doing everything in order to stabilize China. And like Oliver mentioned, we wouldn't expect growth next year.

Walter Mertl: I think we are doing everything in order to stabilize China. Like Oliver mentioned, we wouldn't expect growth next year. Then the rest is coming with the Neue Klasse from 27 onwards. We shall see that one about the market dynamics.

Speaker #4: And then the rest is coming down with the from 27 onwards . And we shall see that one about the market dynamics .

Speaker #1: Thank you very much, Jose, for your question. Next question, please.

Operator: Thank you very much, Jose, for your question. Next question please.

[Company Representative] (BMW): Thank you very much, Jose, for your question. Next question please.

Speaker #2: Thank you . Our next question is from Patrick Hummel from UBS . Please unmute your line and ask your question .

Max: Thank you. Our next question is from Patrick Hummel from UBS. Please unmute your line and ask your question.

Operator: Thank you. Our next question is from Patrick Hummel from UBS. Please unmute your line and ask your question.

Speaker #5: Yeah . Hi . Everybody . I hope you can hear me . It's Patrick from UBS . Perfect .

Patrick Hummel: Yeah. Hi. Hi, everybody. I hope you can hear me. It's Patrick from UBS.

Operator: Perfect, Patrick.

[Company Representative] (BMW): Perfect, Patrick.

Speaker #1: Patrick .

Speaker #5: Thank you . A couple of questions . First of all , Oliver , I think you ended up with your prepared remarks saying you're looking into the future with optimism .

Patrick Hummel: Thank you. A couple of questions. First of all, Oliver, I think you ended up with your prepared remarks saying you're looking into the future with optimism. I'd like to pick up on that in terms of what that means for next year. You know, we currently have a run rate in the auto EBIT margin in the second half of, let's say, around 5%. I guess Q4 maybe even a little bit below. If you think qualitatively about the key puts and takes going into next year. I appreciate today's not guidance day. Can you just elaborate a little bit where that optimism comes from and whether that's also optimism as far as the EBIT margin expansion year-over-year is concerned?

Speaker #5: And I'd like to to pick up on that in terms of what that means for next year . You know , we we currently have a run rate in the Ebit margin in the second half of , let's say , around 5% .

Speaker #5: I guess Q4 , maybe even a little bit below if we think qualitatively about the key puts and takes going into next year , I appreciate today's not guidance day , but can you just elaborate a little bit where that optimism .

Speaker #5: Comes from and whether that's also optimism as far as the EBIT margin expansion year over year is concerned, because I think we do have some headwinds year over year.

Patrick Hummel: I think we do have some headwinds year-over-year. Obviously, China had weakened during this year. We have some further tariffs headwinds, I would assume. We have some FX headwinds. Just to better understand where that optimism comes from. Thank you. The second question is more capital allocation-related one. Your free cash flow guide for the year is now more than EUR 2.5 billion because of that almost EUR 1 billion of, you know, delayed refund of the overpaid tariff. I'm just wondering how that affects your thinking about future share buyback activity. Are you just going to smoothen and sort of allocate the EUR 1 billion that's missing this year to this year so that you can still continue your share buyback with EUR 1 billion plus next year?

Speaker #5: Obviously, China has weakened during this year. We have some further tariff headwinds. I would assume we have some FX headwinds.

Speaker #5: So just to better understand where that optimism comes from , thank you . And the second question is more capital allocation related . One , your free cash flow guide for the year is now more than €2.5 billion .

Speaker #5: Because of that , almost 1 billion of , you know , delayed refund of of the overpaid tariff . I'm just wondering how that affects your thinking about future share buyback activity .

Speaker #5: Are you just going to smoothen and sort of allocate the 1 billion that's missing this year to this year so that you can still continue your share buyback with a billion plus next year ?

Speaker #5: How do you think about that? You know, the timing difference we have because of the overpaid tariff this year in the context of share buybacks in the future.

Patrick Hummel: How do you think about that, you know, timing difference we have because of the overpaid tariff this year in the context of share buyback in the future? Thank you.

Speaker #5: Thank you .

Speaker #1: Good . Yes we understand . Thank you Patrick . We start with Oliver Patrick . Good morning . I would like to start philosophically a little bit Karl Popper once said optimism is an entrepreneurial duty .

Operator: Good. Yes, we understand. Thank you, Patrick. We start with Oliver.

[Company Representative] (BMW): Good. Yes, we understand. Thank you, Patrick. We start with Oliver.

Oliver Zipse: Patrick, good morning. I would like to start philosophically a little bit. Karl Popper once said, Optimism is an entrepreneurial duty. Just imagine you are not optimistic about the future of your company. What would that mean? I leave the answer of that question to you. For BMW now, that optimism is not naive optimism. It's the result of a year-long strategy process which gives us a lot of resilience. First of all, there's of course, the Neue Klasse, where we have all technology clusters on benchmark level, and the investment for that is mainly already behind us. That is what we have already done. Now we talk about the rollout of many new cars based on these technology clusters.

Speaker #1: Just imagine you are not optimistic about the future of your company . What would that mean ? I leave I leave that question .

Speaker #1: The answer of that question to you . But for BMW , now that optimism is not naive . Optimism . It's it's the result of a of a year long strategy process which gives us a lot of resilience .

Speaker #1: First of all, there is, of course, the energy cluster where we have all technology clusters on a benchmark level, and the investment for that is mainly already behind us.

Speaker #1: So that is what we have already done . And now we talk about the rollout of many new cars based on these technology clusters .

Speaker #1: If we wouldn't be optimistic after these high investments , which are already behind us , we we would have done something completely wrong .

Oliver Zipse: If we wouldn't be optimistic after these high investments, which are already behind us, we would have done something completely wrong. Of course, on the cost side, we are continuously improving. We are below the 2024 levels already now, substantially. We take advantage of application of AI in all processes, becoming more efficient at the same time, having efficiency as a core element of our entrepreneurial duty on top of technological competence. That gives us all optimism. Don't forget, let's look at 2025. Europe was growing by more than 8%, United States by more than 9%, the rest of the world by more than 10%. If you only look at crises or more difficult markets like China or supply chain issues, then this is not the whole story.

Speaker #1: Then , of course , on the cost side , we are continuously improving . We are below the 2024 levels already . Now substantially so we take advantage of application of AI in all processes , becoming more efficient at the same time .

Speaker #1: Having having efficiency as a core element of our entrepreneurial duty on top of technological competence . So that gives us all optimism and don't forget , let's look at 2025 .

Speaker #1: Europe was growing by more than 8%. The United States by more than 9%. The rest of the world by more than 10%.

Speaker #1: And if you only look at crises or more difficult markets like China or supply chain issues, then this is not the whole story.

Speaker #1: You know , the whole story is we we have a global footprint . We have a technology neutral approach . We have a premium multi-brand strategy across all relevant customer segments .

Oliver Zipse: You know, the whole story is we have a global footprint, we have a technology-neutral approach, we have a premium multi-brand strategy across all relevant customer segments, and we play the global market, which is growing by the way. Also all forecasts for the next five years, and you can read whatever source you want. There is a growing worldwide market on individual mobility. That is where we think we are resilient for the future, and that gives us, of course, also some realistic optimism into the future.

Speaker #1: And we play the global market , which is growing , by the way . Also , all forecasts for the next five years .

Speaker #1: And you can read what whatever source you you want , there is a growing worldwide market on individual mobility , and that is where we think we are resilient for the future .

Speaker #1: And that gives us, of course, also some realistic optimism for the future.

Speaker #4: Yes, Patrick, I can understand your arguments. And of course, China's second half of the year was different from the first half of the year.

Walter Mertl: Yeah, Patrick. I can understand your arguments. Of course, China's second half year was different than in the first half year, but we are still running and doing efficiencies against it. There will be a first half year impact and straight away. Of course, I can understand this one. The same as with FX, it's also the impact on the second half year. Translation is different in the second half year than in the first half year. You know that all across the companies. On the other side, tariff will be different as well in the first half year compared with the first half year of last year. Efficiencies, we just elaborated today, that we also did a good work on that on all cost categories, having positive impacts between 2025 and 2024.

Speaker #4: But we are still running and doing efficiencies against it. There will be the first half-year impact and straight away, of course, I can understand this one.

Speaker #4: The same is true for FX. It's also the impact in the second half of the year. Translation is different in the second half of the year than in the first half of the year.

Speaker #4: You know that all across the companies on the other side , tariff will be different as well . In the first half year compared with the first half year of last year .

Speaker #4: And efficiencies , we just elaborated today that we also did a good work on that . On all cost categories , having positive impacts between 25 and 24 .

Speaker #4: So, year to date, I even mentioned today around €2 billion in cost efficiencies across all cost elements. Not just some fixed costs, but across everything: material costs, logistics costs, and fixed costs of any kind.

Walter Mertl: Year to date, I even mentioned today, around EUR 2 billion cost efficiencies across all cost elements, not just some fixed costs, but across everything, material costs, logistic costs, fixed costs in any kind. These ones are also running positively on the other side. With respect to your free cash flow, of course, I can understand the discussions and your points. With respect to CapEx and depreciation, this will be, of course, directionally positive. You know, as we just stated, our CapEx is down. Depreciation will grow next year. That's the start of the production of our new Neue Klasse. Of course, depreciation is kicking in. On the other side, don't forget the efficiencies. That will be also then, of course, positively for the free cash flow, not to forget your mentioned refund of tariffs next year.

Speaker #4: So these ones are also running positively on the other side . And with respect to your free cash flow , of course I can understand the discussions and and your points with respect to CapEx and depreciation .

Speaker #4: This will be , of course , directionally positive as we just stated , our CapEx is there , depreciation will grow next year with the start of the production of our new cluster .

Speaker #4: Of course, it's kicking in on the other side. Don't forget the efficiencies that will be achieved as well. Then, of course, there will be positive implications for free cash flow.

Speaker #4: Not to forget , you mentioned refund of tariffs next year , but this is a time gap between Ebit and cash . And of course there are sometimes an effect positively as you just have provisions for .

Walter Mertl: This is a time gap between EBIT and cash. Of course, there's sometimes an effect positively as you just have provisions for the bond stage, as we see on the warranty side, unless there's a cash out. Pretty simple, that is okay. On the other side, with regards to capital allocation, of course, we can't mention anything with respect to the capital allocation at this stage. We will provide you, of course, this annual conference and update. More importantly, I think we stress that we have a strong balance sheet, and this gives us the ability to honor our capital allocation commitments in this dynamic year 25.

Speaker #4: But on stage , as we see on the warranty side , on us , there is a cash out . So that is that is okay .

Speaker #4: But on the other side, with regards to capital allocation, of course, we can't mention anything with respect to the capital allocation at this stage.

Speaker #4: So we will provide you , of course , with the annual conference and update . But more importantly , I think we stress that we have a strong balance sheet and this gives us the ability to honor our capital allocation commitments in this dynamic .

Speaker #4: Year 25. And I think we are underpinned by that. We said for this year, 25 free cash flow automotive is not a cap, but we took this cap away and we stressed in the ad hoc as well as in the speech today that we still stick to the 30% to 40% dividend rule.

Walter Mertl: I think we underpinned that we said for this year 2025, free cash flow automobile is not a cap, but we took this cap away and we stressed in the ad hoc as well as in the speech today that we still stick to the 30% to 40% dividend rule we have. Even we are not having a policy, but we stick to our own rules. Thank you, Patrick.

Speaker #4: We have . Even we are not having a policy , of we stick to our own rules . Thank you . Patrick .

Speaker #1: Thank you Patrick .

Oliver Zipse: Thank you, Patrick. Next question, please.

[Company Representative] (BMW): Thank you, Patrick. Next question, please.

Speaker #4: Next question please .

Speaker #2: Thank you . Our next question is from Tim Ricossa from Deutsche Bank . If you could unmute your line and ask your question , please .

Max: Thank you. Our next question is from Tim Rokossa from Deutsche Bank. If you could unmute your line and ask your question, please.

Operator: Thank you. Our next question is from Tim Rokossa from Deutsche Bank. If you could unmute your line and ask your question, please.

Speaker #6: Yeah , thank you very much . Hey , Max , Oliver and Walter , I'd like to follow up very quickly to that .

Tim Rokossa: Yeah. Thank you very much, Max, Oliver, and Walter. I'd like to follow up very quickly to that, Walter. If I take the EUR 2.7 billion or so starting point this year, you have the US tariff repayments, you have less IBS cash out, you have CapEx down. We are in the vicinity of something like EUR 4 to 5 billion for next year, just knowing the building blocks that we know today. Maybe there's something you want to say on that. To my two questions, please. On China, I think what was most surprising with the latest profit warning is actually how profitable you are still in China. Much about that validated optimism, Oliver. I fully agree with that. You have to be optimistic on that market.

Speaker #6: Walter . So if I take the 2.7 billion or so starting point this year , you have the US tariff repayments , you have less IBS cash out , you have CapEx down .

Speaker #6: We are in the vicinity of something like $4 to $5 billion for next year. Just knowing the building blocks that we know today, maybe there's something you want to say on that.

Speaker #6: And then to my two questions, please. On China, I think what was most surprising with the latest profit warning is actually how profitable you are still in China.

Speaker #6: So , so much about that validated optimism . Oliver , I fully agree with that . You have to be optimistic on that market .

Speaker #6: Some would say that your assumption about a flat 26 market is now again too optimistic. How can you give us some reassurance that we don't stand here and post the summer break?

Tim Rokossa: Some would say that your assumption about a flat 2026 market is now again too optimistic. How can you give us some reassurance that we don't stand here and post the summer break 2026 and have the same revelation that we had over the last 2 years, i.e., you still being too optimistic, assuming a flat market, when in reality it was probably trending down? Is there anything you change with respect to your quarterly assessments, monthly assessments, anything else, adjusting capacity and so on and so forth? Thirdly, probably to you, Oliver, as well, or maybe Walter, we all talk about the German OEMs all the time. Every newspaper seems to sell better saying BMW has a problem, Mercedes-Benz has a problem, Volkswagen is terrible, and so on and so forth. In reality, you guys have very globally diversified business models.

Speaker #6: 26 and have the same revelation that we had over the last two years , i.e. you still being too optimistic , assuming a flat market when in reality it was probably trending down .

Speaker #6: Is there anything you change with respect to your quarterly assessments ? Monthly assessments ? Anything else ? Adjusting capacity and so on and so forth , and thirdly , probably to you , Oliver as well .

Speaker #6: Or maybe Walter , we all talk about the German OEMs all the time . Every newspaper seems to sell better , saying BMW has a problem has a problem .

Speaker #6: VW is terrible , and so on and so forth , when in reality you guys have very globally diversified business models . You make money from all sorts of things , and the real issues on the supplier side in Europe and Germany , arguably , that also means more support from you guys for these suppliers .

Tim Rokossa: You make money from all sorts of things. The real issue is on the supplier side in Europe and Germany, arguably. That also means more support from you guys for these suppliers. Is that something that we should preemptively put in our models every year now? Is that something that you see, Oliver, in your discussions with politicians, is actually understood how urgent the situation there is, or is this just being totally ignored and everyone just focuses on the OEMs? Thank you.

Speaker #6: Is that something that we should preemptively put in our models every year now ? Is there something that you see Oliver , in your discussions with politicians is actually understood how urgent the situation there is ?

Speaker #6: Or is this just being totally ignored and everyone just focuses on the OEMs ? Thank you .

Speaker #1: Thank you very much, Tim, for your question. I think we start with the first and the second one with Walter.

[Company Representative] (Bayerische Motoren Werke AG): Thank you very much, Tim, for your question. I think we start with the first and the second one with Walter, and then about the German OEMs, the answer will come from Oliver. Walter, please.

[Company Representative] (BMW): Thank you very much, Tim, for your question. I think we start with the first and the second one with Walter, and then about the German OEMs, the answer will come from Oliver. Walter, please.

Speaker #1: And then about the German OEMs . The answer will come from from Oliver . Please .

Speaker #4: Hello , Tim . Yeah , I can see all the points which I try to elaborate with Patrick's answers . On the free cash flow statement .

Walter Mertl: Hello, Tim. Yeah, I can see all the points, which I try to elaborate with Patrick's answers on the figures for statement. Yep. Of course, I can't give you any numbers. That is not the time to do so. The topics, of course, I think I elaborated already answering Patrick's question. With respect to China and profitability, thing and optimism, well, we do our homework. We differentiate our tasks and measures on the production side, but also on the sales side. I think we stressed it already today. We mentioned on the production side that we are utilizing our capacity, flexible in all aspects. I can just underpin that costs metric is a total different one in China than outside China. I mentioned that's also permanent.

Speaker #4: Yep . Of course I can't give you any numbers . That is not the time to do so . But the topics , of course , I think I elaborated already answering Patrick's question with respect to China and profitability thing , and optimism .

Speaker #4: While we do our homework, we differentiate our tasks and measures on the production side, but also on the sales side. And I think we stressed that already today.

Speaker #4: We mentioned under the production side that we are utilizing our capacity flexibility, flexible in all aspects. I can just underpin that cost.

Speaker #4: Patrick is a totally different one in China than in China. I mentioned that also permanent and on the sales side, we are just in the middle of the consolidation.

Walter Mertl: On the sales side, we are just in the middle of the consolidation, the restructuring and resizing the things. As I mentioned, we closed some locations, we opened even new locations. We downgraded some fully-fledged dealerships to service only in order to cover the customer support fields. We are doing all that stuff, and we are more than halfway through already now, and we will finish it by mid-year 2026. With every dealership set up freshly and restructured, we will contribute to the profitability of dealers and hence also to make it more attractive to sell fantastic BMW Group cars. With that respect, I think we are still on a good track.

Speaker #4: The restructuring and resizing the things . As I mentioned , we closed some locations . We opened new location , we downgraded some fully fledged dealerships to service only in order to cover the customer support fields .

Speaker #4: So we're doing all that stuff and we are more than halfway through already . Now . And we will finish it by mid-year 26 .

Speaker #4: And with every dealership set up freshly and restructured, we will contribute to the profitability of dealers and, hence, also make it more attractive to sell fantastic BMW Group costs.

Speaker #4: So, with that respect, I think we are still on a good track. You do know that we have been performing well in the first half of the year, and at the Capital Market Day, we had the discussion about oops. What impact is it all about with this commission segment changed?

Walter Mertl: You do know that we have been performing well in the first half year. At the capital market day, we had the discussion about groups, which impact is it all about, which commission segment changed. We shall see that even we have to consider some subsidies which are differently now since October than in previous quarters, coming from provinces and cities, and that will also, come into effect one way or the other. We are observing the whole markets, and we cope with the dynamics with all instruments we have. I think that should underpin our optimism. Thank you.

Speaker #4: But we shall see that even we have to consider some subsidies, which are different now since October than in previous quarters, coming from provinces and cities.

Speaker #4: And that will also come into effect . One way or the other . So we are observing the whole market and we cope with the dynamics with all instruments .

Speaker #4: We have... and I think that should underpin our optimism. Thank you.

Speaker #1: Thank you Walter .

[Company Representative] (Bayerische Motoren Werke AG): Thank you, Walter. Oliver.

[Company Representative] (BMW): Thank you, Walter. Oliver.

Speaker #4: Oliver .

Oliver Zipse: Tim, I think the industry, I don't like, as you know, the word crisis, but we are on the crossroads of something. The crossroads means that the rules for competitiveness, for OEMs as for suppliers alike, are very similar. First rule is you have to have a global approach to be able to profit from technological advance, from global supply chains, and also from global markets. I'm adamant that this is one of the secrets of the future of suppliers and OEMs. The second is that you have to have some form of technology-neutral capability. That means you have to be able to manage complexity, to stay efficient despite the complexities, efficient in all your processes. That means you have to be very close to your markets, which are super diverse.

Speaker #1: Tim , I think I think the , the the industry and I don't like , as you know , the word crises , but we are on the crossroads of something and the crossroads means that the rules for competitiveness , for OEMs .

Speaker #1: As for suppliers alike , are very similar . First rule is you have to have a global approach to to be able to profit from technological advance from global supply chains and also from global markets .

Speaker #1: I'm adamant that this is one of the secrets of the future of suppliers and OEMs. The second is that you have to have some form of technology-neutral capability.

Speaker #1: That means you have to be able to manage complexity to stay in despite the complexities . Efficient in all your processes . And that means you have to be very close to your markets , which are super diverse .

Speaker #1: There is no there is no one size fits all in market demand . So technology neutral means you have to embrace complexity and at the same time stay efficiently .

Oliver Zipse: There is no one-size-fits-all in market demand. Technology-neutral means you have to embrace complexity and at the same time stay efficiently. The third one is, and that is very much linked to the global approach, you have to be on the verge of technological and innovation development. A lot of technology, they are not born inside Germany or inside Europe, they're born in a global context. Look at batteries, look at AI applications, look at digital capabilities like assistant or autonomous driving. If you don't have a global approach to have connectivity into these technologies, you might run into competitive problems, you know.

Speaker #1: And the third one is and that is very much linked to the global approach , you have to be on the verge of technological and innovation development .

Speaker #1: And a lot of technology . They are not born inside Germany or inside Europe . They're born in a global context . Look at batteries , look at AI applications , look at digital capabilities like assistant or autonomous driving .

Speaker #1: And if you are don't have a global approach to to have connectivity into these technologies , you might run into competitiveness problems . You know , and that to to to see that and discover that resilience means that you have to stay globally connected despite the fact that you might have disruptions in your global supply chain and you have to read it .

Oliver Zipse: That to see that and discover that resilience means that you have to stay globally connected despite the fact that you might have disruptions in your global supply chain. You have to read it correctly. If you think you've become resilient to cut your global supply chains, I think you're on the wrong path.

Speaker #1: Correctly . If you think you become resilient to cut your global supply chains , you're I think you're on the wrong path . Thank you very much , Tim .

[Company Representative] (Bayerische Motoren Werke AG): Thank you very much, Tim. Now we come to the next question. Yes.

[Company Representative] (BMW): Thank you very much, Tim. Now we come to the next question. Yes.

Speaker #4: And now we .

Speaker #1: Come to the next question. Yes.

Speaker #2: Thank you . Our next question is for Steven Reitman from Bernstein . If you'd like to unmute your line and ask your question , please .

Walter Mertl: Thank you. Our next question is for Daniel Roeska from Bernstein. If you'd like to unmute your line and ask your question, please.

Operator: Thank you. Our next question is for Daniel Roeska from Bernstein. If you'd like to unmute your line and ask your question, please.

Speaker #1: Yes .

Daniel Roeska: Yes. Good morning. My question is also about China. You mentioned that obviously the cost base you have in China is very, very different from what you have in Europe, and I guess even in your German plants and even in Hungary, I guess. What I was thinking, what that means implications for pricing in China of your new products. We've seen your German neighbor, Mercedes-Benz, price their CLA based on their new electric platform at a very aggressive level, at yuan 59,000 renminbi. Very much like with the Tesla Model 3 long range.

Speaker #7: Good morning. My question is also about China. You've mentioned that, obviously, the cost base you have in China is very, very different from what you have in Europe.

Speaker #7: I guess even in Hungary , in your German plants and even in Hungary , I guess what I was thinking , what that means in implications for pricing in China of your new products , we've seen your German Mercedes price there .

Speaker #7: CLA, based on their new electric platform, is priced at a very aggressive level of ¥259,000. This is very much like-for-like with the Tesla Model 3 Long Range.

Speaker #7: Obviously it's not a vehicle that directly correlates to the IX three or the i3 , but it's maybe it's a signal that the realization that one has to price at these kind of levels , which are quite different from where we've seen historically , the German autos price their cars .

Daniel Roeska: Obviously, it's not a vehicle that directly correlates to the iX3 or the i3, but it's maybe it's a signal that the realization that one has to price at these kind of levels, which are quite different from where we've seen historically the German autos price their cars. Do you have any kind of observations on that without necessarily revealing what your pricing strategy is in absolute detail is going to be? Thank you.

Speaker #7: Do you have any kind of observations on that without necessarily revealing what your pricing strategy in absolute detail is going to be? Thank you.

Speaker #1: Thank you very much . Steven . Walter .

Operator: Thank you very much, Stephen. Walter.

[Company Representative] (BMW): Thank you very much, Stephen. Walter.

Speaker #4: Hello , Steven . Well , we always have to differentiate the price and the volume , not just per se , but also which price we are talking about .

Walter Mertl: Hello, Stephen. Well, we always have to differentiate the price and the volume, not just per se, but also which price we are talking about. We have MSRPs and we have transaction prices of the market. The transaction prices are usually with the dealers because they're independent, and we have our net sales revenue, ultimately, how we are selling our cars and products to the dealers. With respect to the transaction price deterioration since 2023, especially since 2024 Q2, we have given here and there more support to them in order to adjust the profitability. That's crystal clear. The whole transaction prices collapsed, in fact, in 2024 for the whole industry, everyone across all segments, whether we have high-pay or low-pay cars, but still the dominant growth in the market comes from cars up to 150,000 RMB.

Speaker #4: We have MSRP and we have transaction prices of the market and the transaction prices are usually with dealers because there independent . And we have our net sales revenue .

Speaker #4: Ultimately how we are selling our cars and products to the dealers . And with respect to the transaction price deterioration since 23 , especially since 24 Q2 , we have given here and there are more support to them in order to adjust the profitability .

Speaker #4: That's crystal clear and the whole transaction price collapsed . In fact , in 24 , for the whole industry , everyone across all segments , whether we have high or low pay costs , but still the dominant growth in the market comes from cars up 250,000 RMB .

Speaker #4: That is the dominant growth year on year . Now , with respect to our competitors pricing , of course , we are having a look on which transaction price levels our cars are priced transaction price wise currently .

Walter Mertl: That is the dominant growth year-over-year. Now, with respect to our competitors' pricing, of course, we are having a look on which transaction price levels our cars are priced transactional price-wise currently. We have our understanding how we utilize this one for us, how we set our MSRP or recommended price. You can see that also if you compare the predecessor of the current X3 in China and the successor, the current X3. You see transaction price is slightly elevated, but not much. I think based on that one, we consider all the dynamics, even our competitors trying to utilize whatever best we learn from all of that, and we set the prices properly.

Speaker #4: And we have our understanding how we utilize this one for us , how we set our MSRP or recommended price . And you can see that also if you compare the predecessor of the current X3 in China and the successor , the current X3 .

Speaker #4: So you see transaction prices slightly elevated , but not much . And I think based on that one , we consider all the dynamics , even our competitors trying to utilize whatever best we learn from all of that .

Speaker #4: And we set the prices properly and parallel . Of course , with respect to our profitability , we are working very hard on all the cost levers with respect to material costs , but also with respect to production costs .

Walter Mertl: In parallel, of course, with respect to our profitability, we are working very hard on all the cost levers with respect to material costs, but also with respect to production costs. Don't forget, we fully consolidate our joint venture, BBA, whilst other competitors don't have these fully consolidated effects like we do. We have a different revenue base, we have different costs in our balance sheet and P&L. We can't compare straight away the P&L effects between us consolidating fully our joint venture partner in China and others just having them like they have shares in other companies and getting the other financial results. That is, of course, also to be considered. Thank you, Stephen.

Speaker #4: And don't forget, we fully consolidate our joint venture, Eva, while other competitors don't have these fully consolidated effects like we do.

Speaker #4: So we have a different revenue base , we have different costs in our balance sheet and PNL . So we can't compare straight away .

Speaker #4: The PNL effects between us consolidating fully our joint venture partner in China and others just having them like a they have shares in other companies and getting that as financial result .

Speaker #4: That is of course also to be considered . Thank you Steven . Thank you Steven .

Operator: Thank you, Stephen. Next question, please.

[Company Representative] (BMW): Thank you, Stephen. Next question, please.

Speaker #1: Next question please .

Speaker #2: Thank you . Our next question is from Philipp from Jefferies . Please unmute your line and ask your question . Please .

Max: Thank you. Our next question is from Philippe Houchois from Jefferies. Please unmute your line and ask your question, please.

Operator: Thank you. Our next question is from Philippe Houchois from Jefferies. Please unmute your line and ask your question, please.

Speaker #1: Yes .

Philippe Houchois: Yes, good morning. Thank you very much. I've got two questions, if possible, and I'll take your point, Oliver, about optimism and looking into 2026. I look at all the changes we've seen on tariffs, and more recently, we've had no new proclamation from Trump on the 3.75. We're gonna get tariff from the US into the EU to zero. The CO2 pullback in the US is a mixed opportunity for you, I assume. I'm just wondering, is there a reason why, if we look at Western world, US, Europe, if there should be any incremental negative in 2026 versus 2025, or if those changes kind of balance out into a more optimistic outlook?

Speaker #8: Good morning . Thank you very much . I've got two questions if possible , and I'll take your point . Oliver , about optimism and looking into 2026 , I look at all the changes we've seen on tariff and more recently we've had no new proclamation from Trump on the 3.75 .

Speaker #8: We're going to get tariffs from the U.S. into the EU to zero. The CO2 pullback in the U.S. is a missed opportunity for you.

Speaker #8: I assume . And I'm just wondering , is there a reason why if we look at Western world , US , Europe , if there should be any incremental negative in 2026 versus 25 , or if those changes kind of balance out into a more optimistic outlook , and then my second question , then that'll be a pessimist .

Philippe Houchois: My second question, then I'll be a pessimist, and it seems like the 10 December is when we're gonna hear from the EU about adapting their strategy. I look at this industry and everybody has a different view, a different agenda on CO2, on local content, et cetera, rather than a unified approach that might give the industry a bit more weight in discussing with Brussels. I'm just wondering, do you think that on the 10th we get a changed auto policy and then everyone will have to adapt, or there will be a little bit of everything for everyone?

Speaker #8: And it seems like the 10th of December is when we're going to hear from the EU about , you know , adapting their , their , their strategy .

Speaker #8: I look at this industry and everybody has a different view , a different agenda on CO2 , on on local content , etc. and rather than a unified approach that might give the industry a bit more weight in discussing with with Brussels .

Speaker #8: So, I'm just wondering, do you think that on the 10th we will get a changed auto policy and then everybody will have to adapt, or will there be a little bit of everything for everyone?

Philippe Houchois: Do we have no piecemeal approach, you'll be happy and, or do we have a view that will favor, you know, you or the French or the Germans, the usual divide in the industry? Thank you very much.

Speaker #8: So, do we have a piecemeal approach? You'll be happy, and/or do we have a view that will favor you, or the French, or the Germans?

Speaker #8: The usual divide in the industry . Thank you very much .

Speaker #1: Thank you very much , Philipp Oliver . Philipp . Good morning . Thank you for your question on the on the tariff side , I would like to underline what what we have said before .

Operator: Thank you very much, Philip. Oliver.

[Company Representative] (BMW): Thank you very much, Philip. Oliver.

Walter Mertl: Philippe, good morning. Thank you for your question. On the tariff side, I would like to underline what we have said before. If you have a global business model, that is kind of a natural hedge you have. Take the example of BMW. Just for the sake of the argument, just assume that we're importing and exporting into the United States and into Europe about the same amount of cars. From Germany into United States and from Spartanburg into Europe. Just for the sake of the argument, if that would be, and that is about the case, it's the equal value of cars. Of course, before we paid the sum of 12.5%, 10% into Europe and 2.5% into the United States.

Oliver Zipse: Philippe, good morning. Thank you for your question. On the tariff side, I would like to underline what we have said before. If you have a global business model, that is kind of a natural hedge you have. Take the example of BMW. Just for the sake of the argument, just assume that we're importing and exporting into the United States and into Europe about the same amount of cars. From Germany into United States and from Spartanburg into Europe. Just for the sake of the argument, if that would be, and that is about the case, it's the equal value of cars. Of course, before we paid the sum of 12.5%, 10% into Europe and 2.5% into the United States.

Speaker #1: If you have a global business model that is kind of a natural hedge, you can take the example of BMW just for the sake of the argument.

Speaker #1: Just assume that we're importing and exporting into the United States and into Europe about the same amount of cars . So from Germany into United States and from Spartanburg into Europe , just for the sake of the argument , if that would be and and that is about the case , it's the equal value of cars .

Speaker #1: Then , of course , before we paid the sum of 12.5% , 10% into Europe and 2.5% into the United States . Now , after the conclusion of the deal with the United States , with 15% .

Walter Mertl: Now, after the conclusion of the deal with the United States, it'll be 15%. It's an increase of 12.5% to 15%. This does not destroy any business model. This effect that it almost doesn't change, despite the fact that locally we have different taxes, means that the global business model kind of protects you against these changes.

Oliver Zipse: Now, after the conclusion of the deal with the United States, it'll be 15%. It's an increase of 12.5% to 15%. This does not destroy any business model. This effect that it almost doesn't change, despite the fact that locally we have different taxes, means that the global business model kind of protects you against these changes.

Speaker #1: So it's an increase of 12.5 to 15% . This does not destroy any business model . And this effect that it almost doesn't change , despite the fact that locally we have different taxes means that the global business model kind of protects you against these changes .

Speaker #1: And specifically and that is even more true when , when when both markets grow , as I said before , Europe grows by by more than 8% in the first nine months .

Oliver Zipse: That is even more true when both markets grow. As I said before, Europe grows by more than 8% in the first 9 months, and the United States grew by more than 8, 9% in the first 9 months. It's kind of even a stabilizing element. I think what is even more important that a global business model, an international corporation, is at the core of everything industry must do, and they must do everything to get also political support for global trade and to tell what the guiding principles of this trade is. We have to reduce trade barriers instead of increasing them.

Speaker #1: And the United States by more than 9% in the first nine months . So it's kind of even a stabilizing element . But I think what is even more important that a global business model , an international cooperation , is at the core of everything industry must do , and they must do everything to get also , political support for global trade and to to to tell what the guiding principles of this trade is .

Speaker #1: And we have to reduce trade barriers instead of increasing them . And if you if you look , for example , at what we see in the semiconductor industry , at the core of it is not an industrial problem .

Oliver Zipse: If you look, for example, at what we see in the semiconductor industry, at the core of it is not an industrial problem. It's the inability to talk to each other on a eye height level, you know. That is why we said we have to reduce trade barriers, not increase them. I come to your second question. What we really fight for is a new regime in the CO2 regime for 2030 and 2035, away from tailpipe only all the way to life cycle assessment. That we take all CO2 effects we see in our industry into account, and that we are confident that we also achieve currently the 2025.

Speaker #1: It's the inability to talk to each other on a , on an high level , you know , and that is why we said we have to reduce trade barriers , not not increase them .

Speaker #1: I come to you to to your second question , what we what we really fight for is a new regime in the in the CO2 regime for 20 , 30 and 2035 away from tailpipe .

Speaker #1: Only all the way to to a life cycle assessment that we take all CO2 effects we see in our industry into account , and that we we are confident that we also achieve currently , the 2025 .

Speaker #1: And I can also tell you that 26 and 27 will not be different; we will achieve our targets, despite the fact that they are more strict now in 2025.

Oliver Zipse: I can also tell you 26 and 27 will not be different, that we will achieve our targets, despite the fact that they are more strict now in 2025. I think technological neutrality is very crucial. I think a piecemeal approach is exactly the wrong way. As long as you stay tailpipe-only, it doesn't help you if you allow some e-fuels in it and also allow plug-in hybrids. That is not enough. That is not enough to give an industrial valid proposal for CO2 reduction, which keeps the industry in its size, but doesn't shrink markets. I think is very important. All we achieved so far gives us credibility in our position, and we think we have to get away from tailpipe-only measurements.

Speaker #1: And I think technology , technological neutrality is very crucial . And I think a piecemeal approach is exactly the wrong way . As long as you stay tailpipe only , it doesn't help you if you allow some e-fuels in it and also allow plug in hybrids .

Speaker #1: That is not enough . That is not enough to give an industrial valid proposal for CO2 reduction , which keeps the industry in its size , which doesn't shrink markets .

Speaker #1: I think it's very important and all we achieved so far gives us credibility in our position , and we think we have to get away from tailpipe only measurements .

Speaker #1: This is the most important request we have from from policymakers . Thank you . Thank you very much , Philip . Now we know Oliver is responsible for optimism .

Oliver Zipse: This is the most important request we have from policymakers. Thank you.

Operator: Thank you very much, Philippe. We know Oliver is responsible for optimism. Thank you. Next question, please.

[Company Representative] (BMW): Thank you very much, Philippe. We know Oliver is responsible for optimism. Thank you. Next question, please.

Speaker #1: Thank you. Next question, please.

Speaker #2: Thank you . Our next question is from Horst Schneider from Bank of America . Please unmute your line and ask your question .

Operator: Thank you. Our next question is from Horst Schneider from Bank of America. Please unmute your line and ask your question.

Horst Schneider: Yes, thank you. I hope you can hear me. On this optimism just.

Speaker #8: Yes .

Speaker #6: Thank you . And I hope you can hear me on this optimism . Just I remember to one of the BMW meetings , it was I think it was ten years ago .

Operator: Yes.

[Company Representative] (BMW): Yes.

Horst Schneider: To one of the BMW meetings, I think it was 10 years ago. There was a joke made, what does a German who sees light at the end of the tunnel? He extends the tunnel. That is not my question, and I think you have got a clearly different stance, Oliver. My questions are more related to Europe, a region where you perform strong, which is a good region for you at the moment. Maybe you can talk a little bit about the order trends and price trends that you are seeing. The background of my question is that we see at the moment that one of your peers is running this significant model on defensive and of course, tries to take market share. That's also what the company targets suggest of this peer.

Speaker #6: There was a joke made: What does a German do when he sees light at the end of the tunnel? He extends the tunnel.

Speaker #6: But that is that is not my question . And I think you have got a really a different stance , Oliver . My , my questions are more related to Europe , a region where you perform strong , which is a good reason for you at the moment .

Speaker #6: Maybe you can talk a little bit about the other trends and price trends that you are seeing. The background of my question is that we see at the moment that one of your peers is running this significant model launch offensive.

Speaker #6: And of course, it tries to take market share. That's also what the company targets suggest about this peer. So, I want to know if there's any impact that you see in the market from that, which could hurt you.

Horst Schneider: I want to know if there's any impact that you see in the market from that which could hurt you. The second question also related to that is, you said that iX3 got off to a very good start in terms of orders. Do you see some cannibalization that people switch, let's say, from the iX1 to the iX3? In general, do you see that competitors also react to your very competitive pricing, that you have set the pricing that you can afford because of the Neue Klasse concept? Do you feel also in that context that maybe in 2026, there's very strong competition in the European EV market just because every peer tries to sell the model at the same time? Thank you.

Speaker #6: And then the second question, also related to that, is you said that I got off to a very good start in terms of orders.

Speaker #6: Do you see some cannibalization that people switch , let's say , from the ix1 to the ix3 in general ? Do you see that competitors also react to your very competitive pricing that you have said , the pricing that you can afford because of the new cluster concept , but do you feel also in that context that maybe in 2026 there's very strong competition in the European EV market , just because every peer tries to sell the model at the same time ?

Speaker #6: Thank you .

Speaker #1: Thank you very much , Horst Oliver . Horst , it's it's not new in the last ten years that there's competition and everyone tries to to fetch market share from the other competitors .

Operator: Thank you very much, Horst. Oliver.

[Company Representative] (BMW): Thank you very much, Horst. Oliver.

Oliver Zipse: Horst, it's not new in the last 10 years that there's competition and everyone tries to fetch market share from the other competitors. This is, I mean, this is the essence of this industry for many, many years. As I said, in Europe, we grow in Europe together with BMW and MINI faster than the market. We are one of the peers who are taking market share. By the way, I don't have any problem if the iX3 cannibalizes the iX1. It's okay. You know, it's completely okay if, I mean, it's a more expensive product, if that's happening, it's fine. The iX1 is currently completely sold out. It's produced in our Regensburg plant. The Regensburg plant operates absolute on its limits on a 6-day week, 3 shifts per day.

Speaker #1: This is I mean , this is the essence of this industry from , from for many , many , many years . And as I said in Europe , we grow in Europe together with BMW and manifested in the market .

Speaker #1: So so we are one of the peers who are taking market share . And by the way , I don't have any problem if the ex , the ix3 cannibalizes the ix1 , it's okay .

Speaker #1: You know , it's it's completely okay . I mean , it's a more expensive product . And if that's happening it's fine . And the X1 is currently completely sold out .

Speaker #1: It's produced in our Regensburg plant . The rings , birch plants , operates absolutely on its limits . On a six day a week , three shifts per day .

Speaker #1: It's completely sold out . So . So I wouldn't have any problem with that kind of cannibalization . When a , when a higher value product cannibalize the lower value product .

Oliver Zipse: It's completely sold out. I wouldn't have any problem with that kind of cannibalization when a higher value product cannibalize the lower value product. That's okay with me. Of course, there's a very strong competition in the EU market, EV market. We know exactly the point where we stay in the market and where we leave the competition. We know exactly the point where we do that. Of course, you can adjust your prices, but you must know in what kind of business model you're working on. If you look at our results, especially on the group side, I think we do that in that competitive market quite well, and at the end of the day, we still have a very, very solid business model, you know.

Speaker #1: That's okay with me . And of course , there's a very strong competition in the EU market . EV market . We know exactly the point where we stay in the market and where , when , when we leave the competition , we know exactly the point where we where we do that .

Speaker #1: And of course you can you can adjust your prices , but you must know what in what kind of business model are working on .

Speaker #1: And if you look at our results , especially on the group side , I think we do that in that in that competitive market quite well .

Speaker #1: And at the end of the day , we still have a very , very solid business model . You know , and and I think with our full line up of combustion engines , plug in hybrids , BEVs and diesels , we we are perfectly set up for the European market .

Oliver Zipse: I think with our full lineup of combustion engines, plug-in hybrids, BEVs, and diesels, we are perfectly set up for the European market also for 2026.

Speaker #1: Also for 2026 .

Speaker #6: And that means that you expect the an increase of sales , especially on EV's . Clearly in 2026 . Also in Europe , you made the statement on China .

Walter Mertl: That means that you expect an increase of sales, especially on EVs, clearly in 2026 also in Europe. You made the statement on China, but for Europe, clearly you should aim for an increase and higher than the market growth, right?

Speaker #6: But for Europe, clearly you should aim for an increase and higher than the market growth, right?

Speaker #1: You hear me silent because we are not at the time of the year to make any prognosis.

Oliver Zipse: You hear me silent because we are not at the time of the year to make any prognosis.

Speaker #6: Yeah , that's fair .

Walter Mertl: Yeah, that's fair.

Horst Schneider: Yeah, that's fair.

Speaker #1: But I remain optimistic . Yes , yes , yes . Overall , yes I do remain optimistic . Okay .

Oliver Zipse: I remain optimistic. Yes. Yes.

Walter Mertl: Mm-hmm.

Oliver Zipse: Yes. Overall.

Walter Mertl: Okay.

Horst Schneider: Okay.

Oliver Zipse: Yes, I do remain optimistic.

Walter Mertl: Okay. Thank you. Best of luck, of course. Thank you.

Horst Schneider: Okay. Thank you. Best of luck, of course. Thank you.

Speaker #6: Thank you, and best of luck. Of course, thank you.

Speaker #1: So optimism is the word of the day . Yes . Thank you very much , Horst . And now next question please .

Oliver Zipse: Optimism is the word of the day. Yes. Thank you very much, Horst. Now our next question, please.

[Company Representative] (BMW): Optimism is the word of the day. Yes. Thank you very much, Horst. Now our next question, please.

Speaker #2: Thank you. Our next question is from Anthony Dick from Adobe. If you'd like to unmute your line by pressing star six to ask your question, please.

Operator: Thank you. Our next question is Anthony Dix from ODDO BHF. If you'd like to unmute your line by pressing star six to ask your question, please.

Speaker #9: Yes . Hello . Thanks for taking the question . My question was around the costs . So firstly , regarding the comment you made about costs being lower in Q4 , I was just wondering if that should affect the usual seasonality we usually see with Q4 being a week or quarter from a margin perspective , and then so we've seen , you know , some important labor force reduction programs at your peers , especially in Germany .

Anthony Dix: Yes. Hello. Thanks for taking the question. My question was around the costs. Firstly, regarding the comment you made about costs being low in Q4, I was just wondering if that should affect the usual seasonality we usually see with Q4 being a weaker quarter from a margin perspective. We've seen, you know, some important labor force reduction programs at your peers, especially in Germany. I know this is not really usually the BMW way, but I was just wondering if you were also considering such measures in light of the circumstances. Just more generally, also, you know, could you elaborate a little bit into in terms of what you're doing on the cost side of things, and how that will carry through 2026. Thank you.

Anthony Dick: Yes. Hello. Thanks for taking the question. My question was around the costs. Firstly, regarding the comment you made about costs being low in Q4, I was just wondering if that should affect the usual seasonality we usually see with Q4 being a weaker quarter from a margin perspective. We've seen, you know, some important labor force reduction programs at your peers, especially in Germany. I know this is not really usually the BMW way, but I was just wondering if you were also considering such measures in light of the circumstances. Just more generally, also, you know, could you elaborate a little bit into in terms of what you're doing on the cost side of things, and how that will carry through 2026. Thank you.

Speaker #9: So I know this is not really the usually the BMW way , but I was just wondering if you were also considering such measures in light of the the circumstances and just more generally , also , you know , could you elaborate a little bit into in terms of what you're doing on the cost side of things and how that will carry through 2026 ?

Speaker #9: Thank you .

Speaker #1: Good . Thank you very much , Anthony . We start with Walter about . the costs in Q4 .

Oliver Zipse: Good. Thank you very much, Anthony. We start with Walter about the costs in Q4.

[Company Representative] (BMW): Good. Thank you very much, Anthony. We start with Walter about the costs in Q4.

Walter Mertl: Hello, Anthony. It's about the costs. I didn't mention anything about Q4, so of course not. I elaborated on in the quarter and year-to-date, and optimistically, as this is the time for, we cut our costs in the quarter, year-on-year by more or less EUR 1 billion. Year-to-date, I mentioned more or less EUR 2 billion. Year-on-year, Q4 will be also lower. That is the lower aspect year-on-year. In the Q4, there is the usual seasonality that the highest fixed costs we have in the Q4, but not year-on-year, that is still the lower aspect. I hope that makes it more clear. Seasonality is still there. The labor force reduction, I thought we explicitly mentioned that.

Speaker #4: Anthony, it's about the costs. I didn't mention anything about Q4, so of course not. But I elaborated on it in the quarter and year to date.

Speaker #4: And optimistically, as this is the time for us to cut our costs in the quarter, year on year, by more or less €1 billion, and year to date, I mentioned more or less €2 billion.

Speaker #4: So year on year , Q4 will be also lower . That is the lower aspect . Year on year . But in the quarter four , there is the usual seasonality that the highest fixed costs we have in the quarter for , but not year on year .

Speaker #4: That is still the lower aspect . I hope that makes it more clear . So seasonality is still there . The labor force reduction , I thought we explicitly mentioned that .

Speaker #4: So we have this impact that we reduce . It in total . But I have to stress again , we utilize the flexibility also in China where we have fixed term contracts in our joint venture .

Walter Mertl: We have this impact that we reduce it in total, but I have to stress again, we utilize the flexibility also in China, where we have fixed-term contracts in our joint venture. Once they expired, they haven't been renewed. That brought it down to a slightly below previous year. If you have a look outside China, we would still guide this previous year's level. We are just utilizing the flexibility all over the place. As we had to adjust with our prediction, the Chinese numbers, that's automatically the consequence. With respect to costs, I'm happy to repeat myself 1,000 times. We just utilize our costs and organize that they are coming down, whether we speak about material costs, CapEx, or any of these fixed costs, but we have no program.

Speaker #4: And once they expired , they haven't been renewed . And that brought it down to a slightly previous year . If you have a look outside China , we would still guide this previous year's level , but we are just utilizing the flexibility all over the place .

Speaker #4: And as we had to adjust with our prediction . The Chinese numbers , that's automatically at the consequence . And with respect to costs , I'm happy to repeat myself 1000 times .

Speaker #4: We just utilize our costs and organize that . They are coming down . But if we speak about material costs , CapEx or any of these fixed costs , but we have no program , we have no cost program like other ones mentioning at one stage I mentioned even should you need a program , eventually you need external help .

Walter Mertl: We have no cost program like other ones mentioning. At one stage, I mentioned even should you need a program, eventually you need external help. We are not utilizing external help because we just do our homeworks on all cost elements. Thank you.

Speaker #4: And we are not utilizing external help because we just do our homework on all cost elements. Thank you.

Speaker #1: Thank you .

Oliver Zipse: Thank you very much, Anthony. Next question, please.

[Company Representative] (BMW): Thank you very much, Anthony. Next question, please.

Speaker #4: Very much, Anthony. Next question, please.

Speaker #2: Thank you . Our next question is from Stuart Pearson Analytics .

Operator: Thank you. Our next question is from Stuart Pearson, Exane BNP Paribas.

Speaker #10: Yeah. Good morning. Thank you for taking my question. I just have a couple of questions left. I mean, I’m just noticing your, I guess, silence or reluctance to answer Horst on the mix in Europe next year.

Stuart Pearson: Yeah, good morning. Thank you for taking my questions. Just a couple left. I mean, just noticing your, I guess silence or reluctance to answer Horst on the xEV mix in Europe next year. I just wonder, given your, I mean, you're not just on track to meet your CO2 targets this year, you actually might beat them a little bit. You don't really need to increase xEV mix the next couple of years. You're already around 40% year to date in Europe, market's around 30%. I wonder, you know, is that really a goal to keep pushing that mix higher, or could we see you rather take the benefit of fresh EV product via pricing and margin?

Speaker #10: I just wonder, given your, I mean, not just on track to meet your CO2 targets this year, you actually might beat them a little bit.

Speaker #10: So you don't really need to increase CV mix the next couple of years . You're already around 40% year to date in Europe , markets around 30 .

Speaker #10: So I wonder , you know , is that really a goal to keep pushing that that mix higher ? Or could we see rather take the benefit of fresh EV product via pricing and margin ?

Speaker #10: And conversely, if you were to increase your mix and hence improve your CO2 significantly in the next couple of years, could we see you think about selling your services in a pool to another car maker and monetizing it that way?

Stuart Pearson: Conversely, if you were to increase your xEV mix and hence improve your CO2 significantly in the next couple of years, could we even see you think about selling your services in a pool to another car maker and monetizing it that way? Just a question on xEV in Europe. The second one's also xEV, but over in the US, where xEVs were around 25% of your Q3 sales. I wonder if you can share what proportion of those were benefiting from the subsidy via the leasing loophole that's now being removed and how you see the US market post Mercedes-Benz was talking about US still being a growth market.

Speaker #10: So just a question on XV in Europe. And the second one is also XV. But over in the U.S., where XVs are around 25% of your Q3 sales, I wonder if you can share what proportion of those are benefiting from the subsidy via the leasing loophole that's now being removed?

Speaker #10: And how do you see the U.S. market post that? Mercedes was talking about us still being a growth market. Obviously, it was tough in October with the overhang, but a hangover.

Stuart Pearson: Obviously, it was tough in October on the overhang or hangover, but I just wonder how you expect to see that in the coming months and into next year. Thank you.

Speaker #10: But I just wonder how you expect to see that in the coming months and into next year. Thank you.

Speaker #1: Okay. Thank you very much, Stuart. We start.

Operator: Okay, thank you very much, Stuart. We start about the xEV in Europe with Oliver and then the US with Walter. Oliver.

[Company Representative] (BMW): Okay, thank you very much, Stuart. We start about the xEV in Europe with Oliver and then the US with Walter. Oliver.

Speaker #4: About the XIV in .

Speaker #1: Europe with Oliver and then the . US with Walter Oliver . Stuart , we have this very strange regulation in in Europe that you only have a stepping function every five years .

Oliver Zipse: Stuart, we have this very strange regulation in Europe that you only have a stepping function every five years. Between 2025 and 2029, the targets remain the same. Our mix in 2025, where we increased the BEV sales by more than 10%, almost automatically it gives us the leeway to reach the CO2 targets. Now with the new product line of also the Neue Klasse, the ramp-up of MINI and so, we will almost automatically reach our targets in 2026 because the target stays the same as in 2025. By the way, that's also part of our proposal to the European Union to do a continuous improvement process that the CO2 targets are adapted every year and not only every five years.

Speaker #1: So between 2025 and 2029 , the targets remain the same . So our our mix in 2025 where we where we increased the Bev sales by more than 10% , almost automatically .

Speaker #1: It gives us the leeway to reach the CO2 targets . And now with the new product lineup , also , the NOAA cluster , the ramp up of mini .

Speaker #1: And so we will almost automatically reach our targets in 2026 because the target stays the same as in 2025 . And by the way , that's also part of our proposal to the European Union to , to to do and continuous improvement process that the CO2 targets are adapted every year .

Speaker #1: And not only every five years . So we are kind of quite relaxed about the 2026 targets on the left side . Will it increase the market will show .

Oliver Zipse: We are kind of quite relaxed about the 2026 targets on the BEV side. Will it increase? The market will show, Stuart. I don't make any prognosis on the BEV market in 2026. We follow the markets, we look for market share and if that is with EVs, we follow it. It's very simple.

Speaker #1: Stuart , I don't make any prognosis on the market in 2026 . We follow the markets . We look for market share and if that is with the we follow it .

Speaker #1: It's very simple . Thank you Oliver Walter .

Operator: Thank you, Oliver. Walter.

[Company Representative] (BMW): Thank you, Oliver. Walter.

Speaker #4: Stuart , with respect to the yes we have a lower EV share than we utilize in Europe . And we all understand why .

Walter Mertl: Stuart, with respect to the US, we have a lower EV share than we utilize in Europe, and we all understand why. We're still running on roughly 14%. The other way around in Europe, xEV. With respect to the benefit of the support, up to end of September, we utilized the IRA aspect in all relevant numbers. With this respect, we see also, if you have a look for Autodata, for example, that even incentives came down. Don't forget, Autodata includes the IRA impact like a tax credit support, despite the fact the government paid for in the past, up to end of September. Our share was always higher than traditional competitors of us. It automatically, you see incentives are coming down even month-over-month or quarter-over-quarter. You can see that in Autodata.

Speaker #4: But we're still running on roughly 14% one four . So the other way around ten Europe HCV with respect to the benefits of to support up to end of September , we utilize the other aspect in all relevant numbers .

Speaker #4: And with this respect , we see also if you have a look for auto data , for example , that even incentives came down .

Speaker #4: Don't forget auto data includes the IRA impact like a tactical support . Despite the fact the government paid for in the past up to end of September and our share was always higher than traditional competitors of us .

Speaker #4: So it automatically you see , incentives are coming down , even once a month or quarter on quarter . You can see that in all the data and with respect to the coming months .

Walter Mertl: Well, with respect to the coming months, we saw that in the month October, the whole BEV market was a bit lower than previous months, especially September, where the run-off was more or less coming in. We shall see. I guess it's too early to speak about trends or whatever that will be seen in November and December, but we are still selling good EVs in the US. Thank you.

Speaker #4: Well , we saw that in the months October , the whole market was a bit lower than previous months , especially September , where the run on off was more or less coming in .

Speaker #4: And then we shall see . I guess it's too early to speak about trends or whatever that will be seen in November and December , but we are still selling good EVs in the US .

Speaker #4: Thank you .

Speaker #1: Thank you very much . So we come to our last question .

Operator: Thank you very much. We come to our last question.

[Company Representative] (BMW): Thank you very much. We come to our last question.

Speaker #2: Thank you . Our last question is from Michael Tindall from HSBC . If you'd like to unmute your line and ask your question , please .

Operator: Thank you. Our last question is from Michael Tyndall from HSBC. If you'd like to unmute your line and ask your question, please.

Speaker #6: Morning .

Michael Tyndall: Morning, gentlemen. Mike from HSBC. Just a couple, if I can. Walter, can you help me with a little bit of maths here? If I look at your EBIT walk, the other bucket was EUR 1.2 billion. I think you said tariff was in there, that's roughly EUR 500 million. We've got other at EUR 1.7 billion. If I'm not wrong, IBS cost about EUR 800 million last year, we've got the reversal of that. There were some other issues in 2023, again, if I'm not wrong, on airbags and such. How much was warranty of that EUR 1.7 billion? 'Cause I'm trying to understand when I think about Q4, how much of that continues on into Q4.

Mike Tyndall: Morning, gentlemen. Mike from HSBC. Just a couple, if I can. Walter, can you help me with a little bit of maths here? If I look at your EBIT walk, the other bucket was EUR 1.2 billion. I think you said tariff was in there, that's roughly EUR 500 million. We've got other at EUR 1.7 billion. If I'm not wrong, IBS cost about EUR 800 million last year, we've got the reversal of that. There were some other issues in 2023, again, if I'm not wrong, on airbags and such. How much was warranty of that EUR 1.7 billion? 'Cause I'm trying to understand when I think about Q4, how much of that continues on into Q4.

Speaker #11: Gentlemen . Mike from HSBC . Just a couple if I can . Walter , can you help me with a little bit of maths here ?

Speaker #11: So if I look at your Ebit walk the other bucket was 1.2 billion . I think you said that tariff was in there .

Speaker #11: So that's roughly 500 million . So we've got other 1.7 billion . Now if I'm not wrong , IBS cost about 800 million last year .

Speaker #11: So we've got a reversal of that . And there were some other issues in 2023 . Again , if I'm not wrong on airbags and such , how much was warranty of that 1.7 billion ?

Speaker #11: Because I'm trying to understand when I think about Q4 , how much of that continues on into Q4 . And then the second question for Oliver , you very kindly done a lot of work explaining newer classes to all of us .

Michael Tyndall: The second question for Oliver, you've very kindly done a lot of work explaining Neue Klasse to all of us, and I just wonder, how does that translate to consumer awareness? Very strong orders for the iX3. Are customers aware of what a big change this is, or are they buying it because they like the way it looks, the way it drives? I guess the answer is all of those things, but I'm curious to know how you can actually raise consumer awareness about this big change that you're making. Thanks.

Mike Tyndall: The second question for Oliver, you've very kindly done a lot of work explaining Neue Klasse to all of us, and I just wonder, how does that translate to consumer awareness? Very strong orders for the iX3. Are customers aware of what a big change this is, or are they buying it because they like the way it looks, the way it drives? I guess the answer is all of those things, but I'm curious to know how you can actually raise consumer awareness about this big change that you're making. Thanks.

Speaker #11: And I just wonder , how does that translate to consumer awareness ? Very strong orders for the for the . Ix3 a customer's aware of what a big change this is .

Speaker #11: Or are they buying it because they like the way it looks , the way it drives ? I guess the answer is all of those things .

Speaker #11: But I'm curious to know how you can actually raise consumer awareness about this big change that you're making . Thanks .

Speaker #1: Good . Thank you very much , Walter .

Operator: Good. Thank you very much. Walter.

[Company Representative] (BMW): Good. Thank you very much. Walter.

Speaker #4: Hello , Michael . Well , I hoped that my speech was quite clear , but again , happy to speak about it was not about 23 .

Walter Mertl: Hello, Michael. Well, I hoped that my speech was quite clear, but again, happy to speak about it. It was not about 23, it was about 24, first of all. In 24, in Q3, we had a high three-digit EUR million provision for the warranty cases. A high three-digit EUR million. Now with respect to this one and three-quarter EBIT hit year-over-year based on additional tariffs, that is a mid-digit level. That altogether, that's when I mentioned on the one hand and on the other side, that is still positive. The majority of our improvements were then running on material costs and manufacturing costs and direct costs like logistic, for example. All together in the quarter, that all came in. That was this EUR 1.2 billion bucket. Thank you.

Speaker #4: It was about 24 . First of all . And in 24 , in the quarter three , we had a high three digit million provision for the warranty cases .

Speaker #4: A high three digit million . And with respect to this , one and three quarter Ebit hit year on year based on additional tariffs .

Speaker #4: That is a mid digit level . So that all together , that's when I mentioned on the one hand and on the other side , that is still positive .

Speaker #4: But the majority of our improvements were then running on material costs and manufacturing costs . And direct costs like logistics , for example .

Speaker #4: So all together in the quarter , that all came in , that was this 1.2 billion bucket . Thank you .

Speaker #1: Michael , concerning the noise , I think during the IAA in Munich , we created a huge media awareness of the car . What it is , how it looks , how it's used , what the innovative features are in it .

Oliver Zipse: Michael, concerning the Neue Klasse. I think during the IAA here in Munich, we created a huge media awareness of the car, what it is, how it looks, how it's used, what the innovative features are in it. On top of that, in the coming days, journalists and other key opinion leaders will experience and test the serious vehicle. I think the core of the car is how it drives. Whoever drove the car said, Well, I've never experienced anything like how it drives, how synergetic the assistant functions of the car interact with the driver and the physical properties of the car. I think that is new, and of course we're gonna pinpoint it. At the end of the day, people buy on design, you know.

Speaker #1: And on top of that , in the coming days , journalists and other key opinion leaders will experience and test the serious vehicle .

Speaker #1: And I think the core of the car is how it drives . And we whoever drove the car said , well , I've never experienced anything like how it drives , how synergetic the assistant functions of the car interact with the driver and and the and the physical properties of the car .

Speaker #1: I think that is new . And of course , we're going to pinpoint it . And at the end of the people buy on design , you know , and , and we think with the new design language we created for BMW , we hit it right on spot that people love what they see .

Oliver Zipse: We think with the new design language we created for BMW, we hit it right on spot that people love what they see. It's a new, sleek, very modern language we have here, and that will attract more customers.

Speaker #1: It's a it's a new , sleek , very modern language . We have here . And that will attract more customers . Thank you Oliver .

[Company Representative] (Bayerische Motoren Werke AG): Thank you, Oliver. Ladies and gentlemen, now we have reached the end of the telephone conference. Thank you for your optimism to us and for your questions. All the best to you. Bye-bye and service from Munich.

[Company Representative] (BMW): Thank you, Oliver. Ladies and gentlemen, now we have reached the end of the telephone conference. Thank you for your optimism to us and for your questions. All the best to you. Bye-bye and service from Munich.

Speaker #1: Ladies and gentlemen . Now we have reached the end of the telephone conference . Thank you for your optimism to .

Speaker #4: Us .

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