Q1 2026 Volkswagen AG Earnings Call

April 30, 2026

Operator: Good morning, and thank you for standing by. Welcome to the Volkswagen Group Q1 2026 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. We will first take questions from investors and analysts after a short break, followed by a separate Q&A session for the members of the media. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pietro Zollino, Head of Corporate Communications. Please go ahead.

Operator: Good morning, and thank you for standing by. Welcome to the Volkswagen Group Q1 2026 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. We will first take questions from investors and analysts after a short break, followed by a separate Q&A session for the members of the media. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pietro Zollino, Head of Corporate Communications. Please go ahead.

Speaker #1: Good morning and thank you for standing by. Welcome to the Volkswagen Group Q1 2026 results conference call. At this time, all participants are in a listen-only mode.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. We will first take questions from investors and analysts, after a short break, followed by a separate Q&A session for the members of the media.

Speaker #1: To ask a question during the session, you will need to press *1, 1 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker #1: To withdraw your question, please press *1, 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pietro Zollino, Head of Corporate Communications.

Speaker #1: Please go ahead.

Speaker #2: Good morning, everyone, and a warm welcome to our first quarter 2026 results call of Volkswagen Group. Thanks for dialing in. This is, as usual, a joint call for both the media as well as investors and analysts, moderated by Rolf Woller, our Head of Treasury and Investor Relations, and myself, Pietro Zollino, Head of Corporate Communications, with us today are Oliver Blume, our CEO of the Volkswagen Group, and Arno Antlitz, CFO and COO of Volkswagen Group.

Pietro Zollino: Good morning, everyone, and a warm welcome to our Q1 2026 Results Call of Volkswagen Group. Thanks for dialing in. This is, as usual, a joint call for both the media as well as investors and analysts, moderated by Rolf Woller, our Head of Treasury and Investor Relations, and myself, Pietro Zollino, Head of Corporate Communications. With us today are Oliver Blume, our CEO of the Volkswagen Group, and Arno Antlitz, CFO and COO of Volkswagen Group. You should have received the press release, the interim financial report, and all other related materials, which were published already this morning. If you do not have them, you can find all documents on our group website. In case of any issue, give us a call or drop us an email.

Pietro Zollino: Good morning, everyone, and a warm welcome to our Q1 2026 Results Call of Volkswagen Group. Thanks for dialing in. This is, as usual, a joint call for both the media as well as investors and analysts, moderated by Rolf Woller, our Head of Treasury and Investor Relations, and myself, Pietro Zollino, Head of Corporate Communications. With us today are Oliver Blume, our Chief Executive Officer of the Volkswagen Group, and Arno Antlitz, Chief Financial Officer and Chief Operating Officer of Volkswagen Group. You should have received the press release, the interim financial report, and all other related materials, which were published already this morning. If you do not have them, you can find all documents on our group website. In case of any issue, give us a call or drop us an email.

Speaker #2: You should have received the press release, the interim financial report, and all other related materials which were published already this morning. If you do not have them, you can find all documents on our group website.

Speaker #2: In case of any issue, give us a call or drop us an email. Now let me hand over to Rolf, who will give you a brief run-through of the next essay, one and a half hours.

Pietro Zollino: Now let me hand over to Rolf, who will give you a brief run-through of the next, let's say, one and a half hours. Thank you.

Speaker #2: Thank you.

Speaker #3: Thank you, Pietro. Good morning to everyone. From a very sunny day in Wolfsburg, thank you for joining us today. Let's have a look at our agenda.

Rolf Woller: Thank you, Pietro. Good morning to everyone from a very sunny day in Wolfsburg, and thank you for joining us today. Let's have a look at our agenda. Oli will start with the financial highlights of Q1 and will then present our transformation plan towards the Volkswagen Group target picture 2030. Arno will go on with the key developments of Q1. After that, we will take a closer look at the financial results and the full year outlook 2026. Following the presentation, we will first host a Q&A session with Oli and Arno for the investor and analyst community, moderated by myself. After the session, we will have a short break before we continue with the media Q&A, which will then be hosted by Pietro.

Speaker #3: Ollie will start with the financial highlights of the first quarter. And we'll then present our transformation plan towards the Volkswagen Group target picture 2030.

Speaker #3: Arno will go on with the key developments of the first quarter. And after that, we will take a closer look at the financial results and the full year outlook 2026.

Speaker #3: Following the presentation, we will first host the Q&A session with Ollie and Arno for the investor and analyst community, moderated by myself. After the session, we will have a short break before we continue with the media Q&A, which will then be hosted by Pietro.

Speaker #3: Since today's call includes forward-looking statements, the safe-harbor language and other cautionary statements on the slide will govern today's presentation. I encourage you to read the disclaimer carefully, as all forward-looking statements are qualified by this language.

Rolf Woller: Since today's call includes forward-looking statements, the safe harbor language and other cautionary statements on this slide will govern today's presentation. 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 to you. With that, I hand it over to Oli. Oli, please go ahead.

Speaker #3: In the interest of time, I will not read it to you. And with that, I hand it over to Ollie. Ollie, please go ahead.

Speaker #4: Thank you, Rolf. Thank you, Pietro. Good morning, ladies and gentlemen, and also a warm welcome. Let me start with the highlights year to date. Our model momentum in Europe continues.

Oliver Blume: Thank you, Rolf. Thank you, Pietro. Good morning, ladies and gentlemen. Also, a warm welcome. Let me start with a highlight. Year to date, our model momentum in Europe continues. Importantly, the first two of a series of new vehicles of the electric urban car family have been launched to the market, the Cupra UrbanRebel and yesterday, the ID.Polo, and books are now open for customer orders. In China, we are switching to delivery mode with our In China, for China strategy. The Beijing Auto Show marked an impressive start of our model offensive with locally developed NEVs geared to Chinese customers' taste and highly competitive in terms of technologies and costs. In the US, Volkswagen Chattanooga assembly plant will shift to higher volume models, such as the second generation of the Atlas, which will be in the showrooms from fall.

Speaker #4: Importantly, the first two of a series of new vehicles of the electric urban car family have been launched to the market: the Cupra Raval and, yesterday, the ID.

Speaker #4: Polo and books are now open for customer orders. In China, we are switching to delivery mode with our In China for China strategy. The Beijing Auto Show marked an impressive start of our model offensive with locally developed NEVs geared to Chinese customers' taste and highly competitive in terms of technology and costs.

Speaker #4: In the US, Volkswagen's Shetanduga assembly plant will shift to higher volume models such as the second-generation of the Atlas, which will be in the showrooms from fall.

Speaker #4: While the electrical ID.4 still is available in the US, we decided to end local production on the ID.4 from April 2026. The Rivian Volkswagen technology joint venture successfully completed winter testing of the first vehicles equipped with the newly developed software defined vehicle architecture.

Oliver Blume: While the electrical ID.4 still is available in the US, we decided to end local production on the ID.4 from April 2026. The Rivian Volkswagen technology joint venture successfully completed winter testing of the first vehicles equipped with a newly developed software-defined vehicle architecture. Lastly, we continued the implementation of our active portfolio management. Traton reduced the holding in Sinotruk, recording a cash inflow of EUR 0.2 billion in the first Q1. A second step followed in April in the magnitude of EUR 400 million. In addition, Porsche has closed an agreement to sell its stake in Bugatti Rimac Group. Closing of the transaction is contingent on regulatory approvals. Looking at the financial highlights. Deliveries to customers were down 4% in Q1, mainly due to the declines in US and China. Nevertheless, we kept our global market share stable.

Speaker #4: Lastly, we continued the implementation of our active portfolio management. Traton reduced the holding in Sinotruck, recording a cash inflow of €0.2 billion in the first quarter; a second step followed in April in the magnitude of €400 million.

Speaker #4: In addition, Porsche has closed an agreement to sell its stake in Bugatti Rimac Group, closing off the transaction is contingent on regulatory approvals. Looking at the financial highlights, deliveries to customers were down 4% in quarter one, mainly due to the declines in US and China.

Speaker #4: Nevertheless, we kept our global market share stable. Our order book situation in Europe remains very encouraging. It shows that our new vehicles are resonating well with customers.

Oliver Blume: Our order book situation in Europe remains very encouraging. It shows that our new vehicles are resonating well with customers. Revenues in Q1 were down 2%, in line with the unit sales decline, excluding China joint venture volumes. Automotive net cash flow was strong at around EUR 2 billion. This shows that the working capital measures implemented last year by Arno and the teams are delivering lasting results. Net liquidity was almost on par with year-end 2025, despite the redemption of EUR 1.75 billion hybrid bond in February. Group operating profit stood at EUR 2.5 billion against the backdrop of increased geopolitical tension and declining vehicle markets, as well as, again, significant special effects. The achieved return on sales of 3.3% is a solid result.

Speaker #4: Revenues in the first quarter were down 2% in line with the unit sales decline excluding China joint venture volumes. Automotive net cash flow was strong at around 2 billion euros.

Speaker #4: This shows that the working capital measures implemented last year by Arno and the teams are delivering lasting results. Net liquidity was almost on par with year-end 2025.

Speaker #4: Despite the redemption of 1.75 billion euros hybrid bond in February. Group operating profit stood at 2.5 billion euros, against the backdrop of increased geopolitical tension and declining vehicle markets, as well as again significant special effects that achieved return on sales of 3.3% is a solid result.

Speaker #4: But we must also be clear. Our current business model and the changed environment is not generating sufficient returns. Even before special effects, our margin is at 4.3% only.

Oliver Blume: We must also be clear, our current business model in the changed environment is not generating sufficient returns. Even before special effects, our margin is at 4.3% only. US tariffs are not included in the special effects. This is clearly too low to finance future investments, pay attractive dividends, and strengthen our financial position at the same time. We must and will continue to reduce complexity, focus investments on what wins customers, and continue execution across the group while navigating industrial transformation, geopolitical uncertainty, and stagnant revenue prospects in our industry, especially in Europe. The need for action was clearly recognized in 2023. A comprehensive realignment was therefore kicked off and communicated in June 2023 in a capital markets day. Since then, a comprehensive action plan has been put into implementation across the key success factors, products, regions, software, and cost programs.

Speaker #4: US tariffs are not included in the special effects. This is clearly too low to finance future investments, pay attractive dividends, and strengthen our financial position at the same time.

Speaker #4: We must and will continue to reduce complexity, focus investments on what wins customers, and continue execution across the Group while navigating industrial transformation, geopolitical uncertainty, and stagnant revenue prospects in our industry, especially in Europe.

Speaker #4: The need for action was clearly recognized in 2023. A comprehensive realignment was therefore kicked off and communicated in June of that year in a Capital Markets Day.

Speaker #4: Since then, a comprehensive action plan has been put into implementation across the key success factors. Products, regions, software, and cost programs. We have already made great progress.

Oliver Blume: We have already made great progress. These achievements helped offset significant earnings headwinds and enabled us to regain the competitive flexibility and freedom to act that we need. At the same time, from 2025 onward, headwinds intensified further, driven by geopolitics, tariffs, and accelerated competition, particularly in China and Europe, against a backdrop of generally high uncertainty. This environment makes it clear that we need to step up our transformation plan. The progress we have made in recent years gives us momentum and the confidence to take the next steps now. This is why the executive board agreed on a substantial step-up and acceleration of our transformation plan. The result is the Volkswagen Group Target Picture 2030. It focuses on distinct levels. The most relevant are laid out on the chart. Reducing complexity in products, technology, and modular platforms while putting our customers at center stage.

Speaker #4: These achievements helped offset significant earnings headwinds and enabled us to regain the competitive flexibility and freedom to act that we need. At the same time, from 2025 onward, headwinds intensified further, driven by geopolitics, tariffs, and accelerated competition, particularly in China and Europe, against a backdrop of generally high uncertainty.

Speaker #4: This environment makes it clear that we need to step up our transformation plan. The progress we have made in recent years gives us momentum and the confidence to take the next steps now.

Speaker #4: This is why the executive board agreed on a substantial step up and acceleration of our transformation plan. The result is the Volkswagen Group target picture 2030.

Speaker #4: It focuses on distinct levers. The most relevant are laid out on the chart. Reducing complexity, and products, technology, and modular platforms while putting our customers at center stage.

Speaker #4: Aligning our production footprint to market realities. Exploiting gross priorities in the regions streamlining the portfolio. And improving execution through operational excellence, leadership, and lean government.

Oliver Blume: Aligning our production footprint to market realities. Exploiting growth priorities in the regions. Streamlining the portfolio and improving execution through operational excellence, leadership and lean government. First, product portfolio. We must reduce complexity and consequently drive synergies across the group. We will achieve this by significantly cutting the number of models from current about 150 and reducing the number of variants. We will focus on these projects that make a tangible difference for our customers. Second, technology roadmap. We will streamline our technology, technological toolbox and implement a much more focused approach with a targeted number of modular platforms, electric electronic architectures, ADAS stacks and infotainment systems. Our tech stacks, RBT and SEER for the Western and Eastern Hemisphere, serve as a blueprint. Third, production network. We must adapt our production network to market realities.

Speaker #4: First, product portfolio. We must reduce complexity and consequently drive synergies across the Group. We will achieve this by significantly cutting the number of models from the current approximately 150 and reducing the number of variants.

Speaker #4: We will focus on these projects that make it tangible difference for our customers. Second, technology roadmap. We will streamline our technology technological toolbox and implement a much more focused approach with a targeted number of modular platforms electric electronic architectures, Ada stacks, and infotainment systems.

Speaker #4: Our tech stacks are VT and CR for the Western and Eastern Hemisphere, serve as a blueprint. Third, production network. We must adapt our production network to market realities.

Speaker #4: Based on a low or no growth environment, this requires realigning our global technical capacity to approximately 9 million units per year, consistently focus on customer demand in each region.

Oliver Blume: Based on a low or no growth environment, this requires realigning our global technical capacity to approximately 9 million units per year. Consistently focus on customer demand in each region. This will lower our break-even point to a level that gives us the necessary flexibility in such a dynamic environment. Fourth, regional growth. We must foster regional growth opportunities. We steer centrally, drive the business in the regions with more independence and decision-making power. North America and the Global South offer significant growth opportunities for Volkswagen Group. Fifth, operational excellence. We already bundled cross-functional responsibilities for development, procurement, production, sales, and quality at CEO level. This will allow us to increase the speed in decision-making, exploit synergies across the group, improve efficiency and quality while keeping entrepreneurship and at brand level. Sixth, portfolio management.

Speaker #4: This will lower our break-even point to a level that gives us the necessary flexibility in such a dynamic environment. Fourth, regional growth. We must foster regional growth opportunities.

Speaker #4: We steer centrally but drive the business in the regions with more independence and decision-making power. North America and the Global South offer significant growth opportunities for Volkswagen Group.

Speaker #4: Fifth, operational excellence. We already bundled cross-functional responsibilities for development, procurement, production, sales, and quality at CEO level. This will allow us to increase the speed in decision-making exploit synergies across the group, improve efficiency and quality, while keeping entrepreneurship and brand level.

Speaker #4: Sixth, portfolio management. Our ambition must be to significantly streamline our portfolio, consistently aligned with the principle of the best owner approach. Arno will provide an update of our progress year to date.

Oliver Blume: Our ambition must be to significantly streamline our portfolio, consistently aligned with the principles of the best owner approach. Arno will provide an update of our progress year to date. Seventh, leadership and culture. We will foster an even stronger performance culture. The changes we have implemented since the Capital Markets Day in June 2023 demonstrate. Fewer hierarchy levels and effective lean management structures with clear responsibility and targeted integrated incentive system are two key drive to change. We will build on this. Eighth, group governance. Clear decision-making structures, streamlined processes, and greater accountability at all levels will make our company more effective and help us remain competitive in the long term. Today marks the start of our journey to bring the Volkswagen Group 2030 Target Vision to reality.

Speaker #4: Seventh, leadership and culture. We will foster an even stronger performance culture. The changes we have implemented since the capital markets day in June 2023 demonstrate.

Speaker #4: Fewer hierarchy levels and effective lean management structures with clear responsibility and a targeted, integrated incentive system. Our two key drives to change—we will build on this.

Speaker #4: And eighth, group governance. Clear decision-making structures streamline processes, and greater accountability at all levels will make our company more effective and help us remain competitive in the long term.

Speaker #4: Today marks the start of our journey to bring the Volkswagen Group target picture 2030 to reality. The good news is, thanks to all efforts implemented already since 2023, we have a very solid basis to start from.

Oliver Blume: The good news is, thanks to all efforts implemented already since 2023, we have a very solid basis to start from. We have all the talent we need. We get strong support from our stakeholders. We have it in our own hands, the team has the skills, will and the spirit to excel. The strong progress achieved with our performance programs to date makes us confident that we can now take into the next level. We will drive this step in transformation decisively and will deliver on our margin and cash ambitions in 2030 by implementing our transformation plan. As you have seen, it's from us since June 2023, we will take you with on that journey through clear priorities, measurable milestones and regular updates on our progress.

Speaker #4: We have all the talent we need, we get strong support from our stakeholders, we have it in our own hands, and the team has the skills, will, and spirit to excel.

Speaker #4: The strong progress achieved with our performance programs to date makes us confident that we can now take into the next level. We will drive this step in transformation decisively and will deliver on our margin and cash ambitions in 2030 by implementing our transformation plan.

Speaker #4: And as you have seen, it's from us since June 2023, we will take you with on on that journey on that journey. Through clear priorities, measurable milestones, and regular updates, on our progress.

Speaker #4: With that, I would like to hand over to Arno.

Oliver Blume: With that, I would like to hand over to Arno.

Speaker #1: Yeah, thank you, Oliver. And welcome also from my side. In 2026, geopolitical tensions have risen and the competitive environment intensified even further. Against this backdrop, we made further progress.

Arno Antlitz: Yeah. Thank you, Oliver. Welcome also from my side. In 2026, geopolitical tensions have risen and the competitive environment intensified even further. Against this backdrop, we made further progress. Order intake in Europe and the order book improved. Our cars are resonating well with our customers. Implementation of our China for China strategy continues with full speed. We reduced group-wide overhead costs by almost EUR 1 billion in a quarter. We achieved a net cash flow of EUR 2 billion, which is quite substantial for a Q1, taking into account that we had to refill the product pipelines. Despite this progress, our operating margin, even before special effects, centered 4.3%, only reflecting the current challenges of the industry and the weak spots of our current business model.

Speaker #1: Order intake in Europe and the order book improved. Our cars are resonating well with our customers, implementation of our China for China strategy continues with full speed.

Speaker #1: We reduced group-wide overhead costs by almost $1 billion in a quarter and we achieved a net cash flow of $2 billion euro, which is quite substantial for a first quarter taking into account that we had to refill the product pipelines.

Speaker #1: Despite this progress, the operating margin even before special effects, stood at 4.3%, only reflecting the current challenges of the industry and the big spots of our current business model.

Speaker #1: Ladies and gentlemen, we bring attractive new vehicles to our customers, making technological progress and consistently delivering on our cost programs. Nevertheless, our financial figures make clear that these efforts are not yet sufficient to generate an adequate return and ensure a robust path into the future.

Arno Antlitz: Ladies and gentlemen, we bring attractive new vehicles to our customers, making technological progress and consistently delivering on our cost programs. Nevertheless, our financial figures make clear that these efforts are not yet sufficient to generate an adequate return and ensure a robust path into the future. Since we launched Volkswagen Zukunft program 1.5 years ago, the operating environment has deteriorated significantly. US tariffs have been introduced and are weighing on our earnings by EUR 4 billion annually. Pricing and competitive pressure in China has intensified further, particularly for our premium brands, Audi and Porsche. Chinese competitors are increasingly exporting this pressure to Europe. In addition, geopolitical tensions such as the conflict in the Middle East are worsening the global economic outlook. Against this backdrop, incremental cost measures will not be enough. We must fundamentally reshape our business model through structural and lasting improvements.

Speaker #1: Since we launched the Volkswagen Zukunft program one and a half years ago, the operating environment has deteriorated significantly. US tariffs have been introduced and are weighing on our earnings by $4 billion annually. Pricing and competitive pressure in China has intensified further, particularly for our premium brands Audi and Porsche.

Speaker #1: And Chinese competitors are increasingly exporting this pressure to Europe. In addition, geopolitical tensions such as the conflict in the Middle East are worsening the global economic outlook.

Speaker #1: Against this backdrop, incremental cost measures will not be enough. We must fundamentally reshape our business model through structural, lasting improvements. This includes a step up in cost competitiveness of our products, reduced overhead costs, improved efficiency in our plants, and higher speed—both technologically-wise and in terms of decision-making.

Arno Antlitz: This includes a step-up in cost competitiveness of our products, reduced overhead costs, improve efficiency in our plants, and higher speed, both technologically wise and in terms of decision-making. Achieving this is not possible within our current setup. To create the conditions for long-term success, we must drastically reduce complexity in terms of size, our product portfolio, number of platforms and technology stacks we run, in terms of the number of entities and layers, and the way we steer the group. We need to put the customer at the center and structurally strengthen the core of our business. These are the priorities we will execute over the coming months. Let's now turn to the operational and financial developments of the quarter, starting with deliveries to customers.

Speaker #1: Achieving this is not possible within our current setup. To create the conditions for long-term success, we must drastically reduce complexity in terms of size or product portfolio, number of platforms, and technology stacks we run in terms of the number of entities and layers, and the way we steer the group.

Speaker #1: We need to put the customer at the center and structurally strengthen the core of our business. These are the priorities we will execute over the coming months.

Speaker #1: Let's now turn to the operational and financial developments of the quarter, starting with deliveries to customers. In the first three months of the year, deliveries to customers amounted to 2.05 million vehicles, some 4% below the prior-year period.

Arno Antlitz: In Q1, deliveries to customers amounted to 2.05 million vehicles, some 4% below the prior year period. Deliveries differed by region. North America declined by 13%, mainly due to US tariffs, which became effective in April 2025. In China, deliveries to customers declined by 15%, slightly less than the overall weak market. Declines in both China and North America could be partially offset by increases in South America and Europe. South America recorded growth of 7%. In Europe, our strong momentum continued in Q1, with deliveries up 5% year-on-year. The order situation in Europe continues to be strong, thanks to the enhanced model lineup and further product momentum.

Speaker #1: Deliveries differed by region. North America declined by 13%, mainly due to US tariffs, which became effective in April 2025. In China, deliveries to customers declined by 15%, slightly less than the overall weak market.

Speaker #1: Declines in both China and North America could be partially offset by increases in South America and Europe. South America recorded growth of 7%, and in Europe, our strong momentum continued in the first quarter with deliveries up 5% year on year.

Speaker #1: The order situation in Europe continues to be strong thanks to the enhanced model lineup and further product momentum. In the first three months of the year, order intake increased by 3% to $1.1 million vehicles, driven by increases across all brands.

Arno Antlitz: In the first 3 months of the year, order intake increased by 3% to 1.1 million vehicles, driven by increases across all brands. As a result, the total order book in Europe grew by 15% compared to year-end 2025 to about 1.1 million vehicles. This corresponds to an order reach of more than 3 months. Global deliveries of battery electric vehicles were down 8% year to date to 200,000 units on lower demand in China and the US. Our BEV shares stood at 10%, some 40 basis points below the prior year level. BEV deliveries in Europe saw robust demand and increased by 12%. The corresponding BEV share expanded year on year to 18.1%.

Speaker #1: And as a result, the total order book in Europe grew by 15% compared to year-end 2025 to about $1.1 million vehicles. It corresponds to an order reach of more than three months.

Speaker #1: Global deliveries of battery electric vehicles were down 8% year to date, to 200,000 units, on lower demand in China and the US. Our BEV share stood at 10%, some 40 basis points below the prior year level.

Speaker #1: BEV deliveries in Europe saw robust demand and increased by 12%. The corresponding BEV share expanded year on year to 18.1%. Škoda Elroq continued to ramp up extremely successfully, with around 30,000 vehicles delivered in the first quarter, underlining strong customer demand in the fast-growing compact battery electric vehicle segment.

Arno Antlitz: Škoda Elroq continued to ramp up extremely successfully with around 30,000 vehicles delivered in Q1, underlining strong customer demand in the fast-growing compact battery electric vehicle segment. With that, let's move on to the financial and the operating performance of the Volkswagen Group in Q1. Vehicle sales came in at 2 million units, down 7% year on year or by 2% excluding the China JVs. Group sales revenue declined by 2% to EUR 75.7 billion. The lower vehicle sales were partially compensated by strong growth in the financial services business. Operating result came in 14% lower year on year at EUR 2.5 billion, corresponding to a margin of 3.3%. Our continued product offensive across all brands as well as stringent cost work continue to pay off in our earnings.

Speaker #1: With that, let's move on to the financial and the operating performance of the Volkswagen Group in the first quarter. Vehicle sales came in at $2 million units, down 7% year on year, or by 2% excluding the China JVs.

Speaker #1: Group sales revenue declined by 2% to $75.7 billion euro, the lower vehicle sales were partially compensated by strong growth in the financial services business.

Speaker #1: Operating result came in 14% lower year on year, at $2.5 billion euro, corresponding to a margin of 3.3%. Our continued product offensive across all brands, as well as stringent cost, were continuing to pay off in our earnings.

Speaker #1: The results decline is mainly due to special effects amounting to $800 million, or about 100 basis points margin, specifically at brand Volkswagen and at Traton.

Arno Antlitz: The result declines mainly due to special effects amounting to EUR 800 million or about 100 basis points margin, specifically at brand Volkswagen and at Traton. EUR 0.5 billion have been booked related to the announced end of the production of the ID.4 in Chattanooga. Around EUR 0.3 billion were incurred by restructuring measures at Traton as well as to a smaller extent, Brand Group Core. In addition, Traton booked an impairment related to the stop of an individual battery project. Including the effects, the Q1 operating margin would have amounted to 4.3%, corresponding to the lower half of our full year outlook range. Cash flow in the Automotive Division came in rather strong and totaled EUR 2 billion in Q1 2026 compared to EUR -800 million in the prior year quarter.

Speaker #1: 0.5 billion euro have been booked related to the announced end of the production of the ID.4 in Chattanooga, around 0.3 billion euro were incurred by restructuring measures at Traton, as well as to a smaller content to a smaller extent, brand Group Core.

Speaker #1: In addition, Traton booked an impairment related to the stop of an individual battery project. Excluding the effects, the Q1 operating margin would have amounted to 4.3%, corresponding to the lower half of our full-year outlook range.

Speaker #1: Net cash flow in the amount of the division came in rather strong and totaled €2 billion in Q1 2026, compared to minus €800 million in the prior year quarter.

Speaker #1: Gross cash flow improved by 2.2 billion year on year, mainly due to the operating performance before special items and about $1.1 billion lower tax payments in the quarter.

Arno Antlitz: Gross cash flow improved by EUR 2.2 billion year-on-year, mainly due to the operating performance before special items and about EUR 1.1 billion lower tax payments in the quarter. Investments in CapEx and R&D were largely unchanged, and in the absence of further M&A, we recorded a cash inflow of EUR 0.2 billion related to the sale of a stake in Sinotruk by Traton. Working capital movements at EUR -0.9 billion were a slight headwind in Q1, but on a similar level as in Q1 last year. This development clearly confirms the sustainability of working capital measures implemented in particularly in H2 of last year. Automotive net liquidity came in at EUR 34.2 billion at the end of March, almost on par with the year-end 2025 number and on a solid level.

Speaker #1: Investments in CapEx and R&D were largely unchanged, and in the absence of further M&A, we recorded a cash inflow of 0.2 billion euro related to the sale of a stake in Sinotruck by Traton.

Speaker #1: Working capital movements at minus €0.9 billion were a slight headwind in the first quarter, but on a similar level as in Q1 last year.

Speaker #1: This development clearly confirms the sustainability of working capital measures implemented in particularly in the second half of last year. Automotive net liquidity came in at $34.2 billion euro at the end of March, almost on par with the year-end 2025 number, and on a solid level.

Speaker #1: Net cash flow of $2 billion more than compensated for the net liquidity outflow from the redemption of a hybrid bond with a nominal value of €1.75 billion.

Arno Antlitz: Net cash flow of EUR 2 billion more than compensated for the net liquidity outflow from the redemption of a hybrid bond with a nominal value of EUR 1.75 billion. Moving on to the performance of the divisions. Passenger Cars recorded an operating result of EUR 0.3 billion in the 3 months of 2026, 43% above prior year period. The margin amounted to 4.1%, up by 1.3 percentage points. Commercial Vehicles saw a decline to EUR 40 million, corresponding to an operating margin of only 0.4% to a vast majority driven by special effects. The Financial Services Division came in almost on par with last year's level, with an operating result of EUR 1 billion. Coming to the EBIT bridge, volume price mix had a slightly negative impact of EUR 0.2 billion.

Speaker #1: Moving on to the performance of the division's passenger cars recorded an operating result of 0.3 billion in the first three months of 2026, 43% above prior year period.

Speaker #1: The margin amounted to 4.1%, up by 1%.3 percentage points. Commercial vehicles saw a decline to 40 million, corresponding to an operating margin of only 0.4%, to a vast majority driven by special effects.

Speaker #1: The Financial Services division came in almost on par with last year's level, with an operating result of €1.0 billion. Coming to the EBIT bridge, volume-price mix had a slightly negative impact of €0.2 billion; positive pricing partially compensated for negative mix effects.

Arno Antlitz: Positive pricing partially compensated for negative mix effects. Same trade movement posted tailwind of EUR 0.4 billion. Borrow costs were largely flat year-on-year. Last but not least, fixed costs and others had a positive effect of EUR 0.8 billion, with overhead cost reduction being the biggest contributor. This is also visible when taking a more detailed look at the overhead cost development. In the first 3 months of the year, overhead costs in the Automotive Division have been reduced by EUR 0.9 billion. Accordingly, the overhead cost ratio improved by 70 basis points, which is quite significant. This overhead cost reduction was largely driven by the consequent implementation of restructuring measures. In the first 3 months of 2026, Volkswagen AG reduced the number of active employees, both in the indirect and direct area at its German sites by another round 1,000.

Speaker #1: Exchange rate movements posted tailwind of 0.4 billion, broader costs were largely flat year on year, and last but not least, fixed costs and others had a positive effect of 0.8 billion, with overhead costs reduction being the biggest contributor.

Speaker #1: This is also visible when taking a more detailed look at the overhead cost development in the first three months of the year. Overhead costs in the automotive division have been reduced by 0.9 billion euro.

Speaker #1: According to overhead cost ratio improved by 70 basis points, which is quite significant. This overhead cost reduction was largely driven by the consequent implementation of restructuring measures.

Speaker #1: In the first three months of 2026, Volkswagen AG reduced the number of active employees, both in the indirect and direct areas at its German sites, by around another 1,000.

Speaker #1: Overall, since the end of 2023, headcount was reduced by approximately 15,000. In addition, Audi, Porsche, and Cariad are pushing ahead with their respective programs.

Arno Antlitz: Overall, since the end of 2023, headcount was reduced by approximately 15,000. In addition, Audi, Porsche, and CARIAD are pushing ahead with their respective programs. As a result, headcount in Germany on group level have been reduced by a total of 3,000 in the first three months or 18,000 in a bit more than 2 years' time. Group-wide restructuring resulted in a reduction of 29,000 headcount since 2023. Let's now turn to the development of the brand groups, platforms, and the financial services business. Within the passenger car segment, Brand Group Core recorded sales revenue almost on par with last year's Q1. Operating result came in at EUR 0.5 billion, EUR 1.5 billion, 38% higher than in the prior year period, despite the significant effect related to the end of the ID.4 production in the U.S.

Speaker #1: As a result, headcount in Germany on Group level has been reduced by a total of 3,000 in the first three months, or 18,000 in a bit more than two years' time.

Speaker #1: And group-wide restructuring resulted in a reduction of 29,000 headcount since 2023. Let's now turn to the development of the brand business. Within the passenger car segment, brand Group Core recorded sales revenue almost on par with last year's Q1.

Speaker #1: Operating result came in at 0.5 billion euro, 1.5 billion euro, 38% higher than in the prior year period. Despite the significant effect related to the end of the ID.4 production in the US of 0.5 billion euro, the margin stands at 4.4%, and I will provide some more detail on brand Group Core in a minute.

Arno Antlitz: of EUR 0.5 billion. The margin stands at 4.4%, and I will provide some more detail on Brand Group Core in a minute. Brand Group Progressive saw sales decline by 6%, while sales revenue were flat. EBIT increased by 10% to EUR 0.6 billion compared to a prior year quarter that has been impacted by costs related to U.S. emissions regulation and restructuring charges. Porsche Automotive Business delivered an operating result of EUR 0.5 billion, corresponding to a margin of 7%. This was driven by a significant improvement in mix from higher volumes of 911, offsetting volume headwinds in China and the U.S. Let's have a look at the brands of the Brand Group Core. The operating result was largely driven by Škoda and the component business.

Speaker #1: Brand Group Progressive saw sales decline by 6%, while sales revenue were flat. EBIT increased by 10% to 0.6 billion euro, compared to a prior year quarter that has been impacted by costs related to US emissions regulation and restructuring charges.

Speaker #1: Porsche Automotive business delivered an operating result of 0.5 billion, corresponding to a margin of 7%. This was driven by a significant improvement in mix from higher volumes of 911, offsetting volume headwinds in China and the US.

Speaker #1: Let's have a look at the brands of the brand Group Core. The operative result was largely driven by Škoda and the component business. Volkswagen passenger cars recorded a decline in profitability by 20 basis points to 0.4%, mainly due to the costs related to the ID.4 production stop in the US, as well as significant headwinds from US tariffs.

Arno Antlitz: Volkswagen passenger cars recorded a decline in profitability by 20 basis points to 0.4%, mainly due to the costs related to the ID.4 production stop in the U.S., as well as significant headwinds from U.S. tariffs. Škoda continued their impressive earnings trajectory and improved operating margin by 80 basis points to a remarkable value of 8.3%. Excluding the non-operational effect, the financial performance of Volkswagen brand and Brand Group Core are decent. Before effects of EUR 0.5 billion from the ID.4 production stop at Chattanooga, Volkswagen reported a margin of 3.3%. This is slightly below the margin target of 4% that the brand has set itself for the full year 2026. A reminder that we must continue to rigorously implement the measures agreed at the Volkswagen Zukunft agreement and intensify speed and magnitude of the restructuring programs.

Speaker #1: Škoda continued their impressive earnings trajectory and improved operating margin by 80 basis points to a remarkable value of 8.3%. Excluding the non-operational effect, the financial performance of the Volkswagen brand and Brand Group Core are decent.

Speaker #1: Before the effects of the €0.5 billion from the ID.4 production stop at Chattanooga, Volkswagen reported a margin of 3.3%. This is slightly below the margin target of 4% that the brand has set itself for the full year 2026.

Speaker #1: And a reminder that we must continue to rigorously implement the measures agreed under Volkswagen Zukunft, agreement, and intensify speed and magnitude of the restructuring programs.

Speaker #1: Backed by increasing volumes, Carriot recorded sales revenue of 0.4 billion, up 64% year on year. Operating loss was reduced to minus 0.4 billion euro, benefiting from the implementation of restructuring measures and higher volumes.

Arno Antlitz: Backed by increasing volumes, CARIAD recorded sales revenue of EUR 0.4 billion, up 64% year-on-year. Operating loss was reduced to EUR -0.4 billion, benefiting from the implementation of restructuring measures and higher volumes. PowerCo kept operating results at a stable level despite the ongoing ramp-up of cell production at the Salzgitter plant and intensifying construction works at the Valencia and St. Thomas plant. Traton recorded a slow start to the year, driven by lower unit sales, in particular in South America and North America. Sales in Europe were up, and order trends in the region remain promising. Mainly as a result of lower volume, sales revenue declined by 5% to EUR 9.8 billion. Operating result came in at EUR 40 million, significantly below the prior year quarter.

Speaker #1: PowerCo kept operating results on stable level despite the ongoing ramp-up of cell production at the Salzgitter plant and intensifying construction works at the Valencian St.

Speaker #1: Thomas Plant: Traton recorded a slow start to the year, driven by lower unit sales, in particular in South America and North America. Sales in Europe were up, and order trends in the region remain promising. Mainly as a result of lower volumes, sales revenue declined by 5% to €9.8 billion. Operating result came in at €40 million, significantly below the prior-year quarter.

Speaker #1: Lower volumes, US tariff costs, foreign currency effects, and special effects—mainly related to the adjustment to the electric mobility projects, the sale of the Springfield site, and the EU truck case—negatively impacted results.

Arno Antlitz: Lower volumes, US tariff costs, foreign currency effects, and special effects mainly related to the adjustment to the electric mobility projects, the sale of Springfield site, and the EU truck case negatively impacted results. Our financial services business delivered a solid performance in the period under review, supported by improved contract volume, specifically in Europe. The credit loss ratio continues to be on a solid level. Operating result at EUR 1 billion was almost on par with the prior year level. Investment spend for CapEx and R&D in the automotive division was slightly lower in the quarter by EUR 0.2 billion to EUR 7.5 billion in the first three months of the year. The invest ratio stood at 11.3%, largely unchanged year over year. We remain fully committed to sustainably reducing investment spend in the years to come.

Speaker #1: Our financial services business delivered a solid performance in the period, with revenue supported by improved contract volume, specifically in Europe. The credit loss ratio continues to be at a solid level.

Speaker #1: Operating result at 1 billion euro was almost on par with the prior year level. Investment spend for CapEx and R&D in the automotive division was slightly lower in the quarter by 0.2 billion euro to 7.5 billion in the first three months of the year.

Speaker #1: The invest ratio stood at 11.3%, largely unchanged year over year. We remain fully committed to sustainably reducing investment spend in the years to come.

Speaker #1: Moving on to the performance of our China joint ventures, in an overall weak market and continued high competitive pressure, specifically in premium unit sales were 90% lower year on year, at 0.5 million vehicles, at the same time Volkswagen Group China is launching its unprecedented model offensive, which is burdening results now, and we expect contributions from Q3 onwards.

Arno Antlitz: Moving on to the performance of our China joint ventures. In an overall weak market and continued high competitive pressure, specifically in premium, unit sales were 90% lower year-on-year at 0.5 million vehicles. At the same time, Volkswagen Group China is launching its unprecedented model offensive, which is burdening results now, and we expect contributions from Q3 onwards. As a result, and as expected, the proportionate operating result of our joint ventures in China came in at EUR 83 million in Q1 2026. We confirm the bandwidth for proportionate operative result for the full year and continue to expect an operational and financial turnaround in fiscal year 2027. This brings me to the full-year outlook, which we confirm today. Continue to expect the operating return on sales in a bandwidth between 4% and 5.5%.

Speaker #1: As a result, and as expected, the proportion of operating result of our joint ventures in China came in at €83 million in the first quarter of 2026.

Speaker #1: We confirm the bandwidth for proportional operative result for the full year and continue to expect an operational and financial turnaround in fiscal year 2027.

Speaker #1: This brings me to the full year outlook, which we confirmed today. Continue to expect the operating return on sales in a bandwidth between 4 and 5.5%, building on the strong start to the year.

Arno Antlitz: Building on the strong start to the year, we continue to expect automotive net cash flow to the range between EUR 3 billion and EUR 6 billion. Ladies and gentlemen, six strategic fields will determine the success of our strategy. The ramp-up of electric vehicles, software, China and North America, robust operating margins in a low-growth environment, capital efficiency and cash conversion, and a lean governance, and reduced complexity. For most of these action fields, we have developed comprehensive plans that now must be implemented consistently and with strict discipline. At the same time, the economic environment has changed significantly. Since the launch of the Volkswagen Zukunft Program, which was designed to achieve a sustainable margin for Volkswagen brand, the world has changed dramatically. In this environment, it's not enough to just incrementally increase cost measures.

Speaker #1: We continue to expect automotive net cash flow to the range between 3 and 6 billion. Ladies and gentlemen, six strategic fields will determine the success of our strategy: the ramp-up of electric vehicles, software, China and North America, robust operating margins in a low-growth environment, capital efficiency, and cash conversion, and the lean governance and reduced complexity.

Speaker #1: For most of this action field, we have developed comprehensive plans that now must be implemented consistently and with strict discipline. At the same time, the economic environment has changed significantly.

Speaker #1: Since the launch of the Volkswagen Zukunft program, which has was designed to achieve a sustainable margin for Volkswagen brand, the world has changed dramatically.

Speaker #1: In this environment, it's not enough to just incrementally increase cost measures. We need to fundamentally change our business model. We have a step-up of structural and lasting improvements.

Arno Antlitz: We need to fundamentally change our business model with a step-up of structural and lasting improvement in terms of cost competitiveness of our products, in terms of overhead cost reduction and efficiency improvements in our plants, and in terms of speed. To be able to achieve this, we must significantly reduce complexity of our business model. These are the priorities we will address with determination over the coming months. Thank you very much, and with that, I hand back to Rolf.

Speaker #1: In terms of cost competitiveness of our products, in terms of overhead cost reduction, and efficiency improvements in our plants, and in terms of speed.

Speaker #1: To be able to achieve this, we must significantly reduce the complexity of our business model. These are the priorities we will address with determination over the coming months.

Speaker #1: Thank you very much, and with that, I hand back to Rolf.

Speaker #2: Thank you, Oli. Thank you, Arno, for the concise presentation. Before we move to the Q&A, let me give you some instructions. You should be dialed in to the conference call in order to raise a question.

Rolf Woller: Thank you, Oli. Thank you, Arno, for the concise presentation. Before we move to the Q&A, let me give you some instructions. You should be dialed in into the conference call in order to raise a question. It will not work if you're dialed in via webcast. If you want to raise a question, you must press star one, and after that, another one. To withdraw the question, you do the same procedure. Let me briefly highlight the next events where you can follow us. We will continue on 10 June with our ESG conference. There will be the annual shareholders meeting on 18 June, then the H1 call on 24 July.

Speaker #2: It will not work if you're dialed in via webcast. If you want to raise a question, you must press star one, and after that, another one.

Speaker #2: And to withdraw the question, you do the same procedure. Let me briefly highlight the next events where you can follow us. We will continue on June 10th with our ESG conference.

Speaker #2: There will be the annual shareholders meeting on June 18th, and then the H1 call on July 24th. And with that, I would like to move on to the Q&A session.

Rolf Woller: With that, I would like to move on to the Q&A session and see here the first question coming from Tim Rokossa from Deutsche Bank. Tim, please go ahead with your question.

Speaker #2: And see here, the first question coming from Tim Rokasa from Deutsche Bank. Tim, please go ahead with your question.

Speaker #3: The target program—very interesting to see. That's much needed with the Chinese OEMs coming to Europe, tariffs, etc., and it's also good to learn about it here first and not through the media.

Tim Rokossa: Target program. Very interesting to see that. Much needed with the Chinese OEM coming to Europe, tariff CTC, and it is also good to learn about here first and not the media. Now, obviously, we want to know what all of this will cost you. We want to know what it brings you, and I suspect you are not yet ready to say that. Let me ask in a different way. Do you expect a material net EBIT improvement from this program, from the levels that you are at right now? Or it is just barely enough to counter the headwinds that we are seeing in the market. Given it says, again, reduce the number of variants, and I have heard this many, many times over the 18 years I cover you guys now from VW, can you give examples for how much you see on that side being possible?

Speaker #3: Now, obviously, we want to know what all of this will cost you. We want to know what it brings you. And I suspect you're not yet ready to say that.

Speaker #3: So, let me ask in a different way. Do you expect the material net EBIT improvement from this program, from the levels that you are at right now, or is it just nearly enough to counter the headwinds that we're seeing in the market?

Speaker #3: And given it says again, reduced the number of variants, and I've heard this many, many times over the 18 years I cover you guys now from VW, can you give examples for how much you see on that side being possible?

Speaker #3: And on the capacity side, is it fair to assume that most of this comes out of Europe? And secondly, Arno, for you, just thinking about seasonality of cash and earnings here, free cash flow is obviously quite strong.

Tim Rokossa: On the capacity side, is it fair to assume that most of this comes out of Europe? Secondly, Arno, for you, just thinking about seasonality of cash and earnings here. Free cash flow is obviously quite strong. It's helped by taxes, but also the underlying number is quite strong. Two questions. Should we expect normal seasonality in Q2 from what you can tell right now, i.e., that it should be stronger underlying on earnings and help the cash than Q1? Since you didn't upgrade your free cash flow target now, is that just a sign of what's going on in the world with all the uncertainty, or is there any cash outs that you already foresee today that prevent you from actually printing possibly a higher than previously guided for figure? Thank you.

Speaker #3: It's helped by taxes, but also the underlying number is quite strong. So, two questions: should we expect normal seasonality in Q2 from what you can tell right now—i.e., that it should be stronger underlying on earnings, and perhaps the cash in Q1?

Speaker #3: And since you didn’t upgrade your free cash flow target, now, is that just a sign of what’s going on in the world with all the uncertainty, or is there any cash-outs that you already foresee today that prevent you from actually printing possibly a higher than previously guided-for figure?

Speaker #3: Thank you.

Speaker #4: Yeah, Tim, good morning. And let me start with your first question in terms of improvement, in terms of EBIT. As Arno mentioned, we will keep our expectation yet to year on a profit margin between 4 and 5.5%.

Oliver Blume: Yeah, Tim, good morning. Let me start with your first question in terms of improvement in terms of EBIT. As Arno mentioned, we will keep our expectation year to year on a profit margin between 4% and 5.5%. With this, we expect a net EBIT improvement. All this despite all the headwinds we have faced geopolitically, the regulations, the market, and the expenditures and transformation. This we are able because of all the work we have done during the last years. Year to year, we will expect a better EBIT. In terms of models, variants, and capacities.

Speaker #4: And with this, we expect a net EBIT improvement. And all this despite all the headwinds. We are faced, geopolitically, the regulations, the market, and the expenditures and transformation.

Speaker #4: And we are able because of all the work we have done during the last years. And so, year to year, we expect a better EBIT.

Speaker #4: Then, in terms of models, variants, and then capacities. We, with the program we have launched, we want to reduce our models and variants with a double-digit percentage.

Oliver Blume: With the program we have launched, we want to reduce our models and variants with a double digits percentage and also the options. There the idea is more to bundle offers and making it easier at the end also for our customers and more and more transparent to order a car. In terms of capacities, we come from an invested production footprint from over 12 million units. We already reduced 1 million in China in several plants and some also linked to component plants. 1 million in Europe. There, for example, we closed Brussels, Russia, Dresden now turning to a technology and innovation campus.

Speaker #4: And also, the options. The idea is more to bundle offers, and so making it easier at the end also for our customers, and more and more transparent to order a car.

Speaker #4: In terms of capacities, we come from an invested production footprint from over 12 million units. We already reduced 1 million in China. In several plants, and also linked to component plants.

Speaker #4: Then 1 million in Europe. There, for example, we closed Brussels–Russia–Dresden, now turning to a technology and innovation campus. Then Osnabrück is on the way.

Oliver Blume: Osnabrück is on the way and in Volkswagen and Audi, we adapted technological capacity, so 1 plus 1. We are on 10 million, we think that 9 million will be reasonable. Percentage of the last 5 years has been on this level. Last week, we announced another 500,000 in China. We are aiming now for reducing capacity in Germany, Europe, with another 500,000 to come to 9 million. We will bring down our cost level to this 9 million and aiming for more profitability.

Speaker #4: And Volkswagen and Audi, we adapted technological capacities. So 1 plus 1. So we are on 10 million. And we think that 9 million will be reasonable.

Speaker #4: Percentage of the last five years has been on this level. So last week, we announced another 500,000 in China. And we are aiming now for reducing capacity in Germany, Europe, with another 500,000 to come to 9, 9 million.

Speaker #4: And we will bring down our cost level to this €9.9 million, and aiming for more profitability.

Speaker #2: Yeah, Tim, thanks for the question. And I would like to add on to what Oliver just said. All these measures he mentioned—look, Oliver laid out, or we laid out, our strategic margin target of 8 to 10% some months ago.

Arno Antlitz: Yeah, Tim, thanks for your question. I would like to add on what Oliver just said, no, all these measures he mentioned. Look, we Oliver laid out or we laid out our strategic margin target of 8% to 10% some month ago. Obviously, this transformation program we just laid out is the way in steps to achieve this margin target at the end of this decade. We now fill the gaps from where we currently trade, of where to our current margin target is, what the headwinds are, and still be able to come up to the 8% to 10%.

Speaker #2: And now obviously, this transformation program we just lay out is the way in steps to achieve this market margin target at the end of this decade.

Speaker #2: And we now fill the gaps. From where we currently trade, which our current margin target is what the headwinds are and still be able to come up to the 8 to 10%.

Speaker #2: And in terms of cash flow, yeah, we are quite pleased with the strong cash flow in Q1, given the seasonality of our business, normally in Q1.

Arno Antlitz: In terms of cash flow, we are quite pleased with the strong cash flow in Q1, given the seasonality of our business normally in Q1, we fill up the order bank. To be very transparent, now it's about EUR 1 billion coming from the operative business before special effects. EUR 1 billion, slightly less coming from tax payment versus last year. Last but not least, we were very disciplined on M&A, which is another EUR 1 billion. We have to take into account that there's a slight seasonality. As you know, we were successful in the winter test, where we make good progress in our JV with Rivian.

Speaker #2: We filled up the order bank. But to be very transparent, it's about €1 billion coming from the operative business before special effects, a little less than €1 billion coming from tax—versus tax payment versus last year.

Speaker #2: And last but not least, we were very disciplined on M&A, which is another $1 billion. And so we have to take into account that there's a slight seasonality.

Speaker #2: As you know, we were successful in the winter test where we make good progress in our JV with Rivian. But as you also know, subject to the successful winter test, we will invest in another billion in about a billion in Rivian, which will see an outflow in the second quarter.

Arno Antlitz: As you also know, subsequent to the successful winter test, we will invest in about EUR 1 billion in Rivian, which will see an outflow in Q2. All in all, we are really confident, and we said that last year on the conference call for last year, that the working capital measures are really well in place. The whole company is focused on cash flow. You know, like for years and years, we focused on EBIT. Now we really see a cultural change in the company. People are fighting for cash flow and net liquidity, for better working capital.

Speaker #2: All in all, we are really confident. And we said that last year, on the conference calls for last year, that the working capital measures are really well in place.

Speaker #2: The whole company is focused on cash flow. You know, we were like for years and years, we focused on EBIT. Now we really see a cultural change in the company.

Speaker #2: People are fighting for cash flow and net liquidity for better working capital. So this is really now implemented in everybody's minds, and gives us a confidence that we will achieve the $3 to $6 billion this year.

Arno Antlitz: This is really now implemented in everybody's minds and gives us a confidence that we will achieve the EUR 3 to 6 billion this year. Obviously, it's much too early to change the guidance, but the building blocks are clear. Stringent cost work, I would like to remember your overhead cost reduction of almost EUR 1 billion in one quarter, which is significant. Much more disciplined M&A, and disciplined R&D and CapEx combined, should by far compensate for potential headwinds we see from the market.

Speaker #2: Obviously, it's much too early to change the guidance. But the building blocks are clear. Stringent cost work—I would like to remember your overhead cost reduction of almost $1 billion in one quarter.

Speaker #2: Which is significant. Much more disciplined M&A. And disciplined R&D and CapEx x combined. Should by far compensate for potential headwinds we see from the market.

Speaker #3: Thank you very much.

Rolf Woller: Thank you very much.

Tim Rokossa: Thank you very much.

Speaker #2: Thank you, Tim. And we will continue with Patrick Hummel from UBS. Patrick, please go ahead.

Rolf Woller: Thank you, Tim. We will continue with Patrick Hummel from UBS. Patrick, please go ahead.

Speaker #4: Thank you, Rolf. Good morning, everybody. I would just like to follow up, Ollie, please, regarding your comments about the cost and capacity alignment. I think the point Tim brought up was also about whether you can get ahead of the wave, so to say, or you remain reactive to safeguard margins rather than driving a margin recovery.

Patrick Hummel: Thank you, Rolf Woller. Good morning, everybody. I would just like to follow up, Oliver Blume, please, regarding your comments about the cost and capacity alignment. I think the point Tim Rokossa brought up was also about, you know, whether you can get ahead of the wave, so to say, or you remain reactive to safeguard margins rather than, you know, driving a margin recovery. Can I ask a bit more precisely what kind of timeline we have to expect here for the exercise to cut the capacity by another 1 million? I guess the focus here is on that half million that's yet to come in Europe.

Speaker #4: So, can I ask a bit more precisely what kind of timeline we have to expect here for the exercise to cut the capacity by another million? I guess the focus here is on that half million.

Speaker #4: That's yet to come in Europe. Are we talking about the next one to two years, so that we will already see a significant positive bottom line impact in 2027 or 2028?

Patrick Hummel: Are we talking about the next 1 to 2 years so that we will already see a significant positive bottom line impact in 2027, 2028? Or is it really back-end loaded towards the end of the decade? My second question, Arno, goes to you. I'd just like to get a quick update on the sensitivities to the Middle East situation. We're now 2 months into that crisis, and so far it seems the demand impact is very limited. Can you just remind us for the coming quarters, what your biggest potential pain points would be? Is it just a softening of Globestar?

Speaker #4: Or is it really back and loaded towards the end of the decade? And my second question, Arno, goes to you. I'd just like to get a quick update on the sensitivities to the Middle East situation.

Speaker #4: We're now two months into that crisis, and so far, it seems the demand impact is very limited. Can you just remind us, for the coming quarters, what your biggest potential pain points would be?

Speaker #4: Is it just the softening of global SAR? Is it maybe an acceleration of the commodity inflation in the second half, as we've heard from some of your competitors?

Patrick Hummel: Is it, you know, maybe an acceleration of the commodity inflation in H2, as we've heard from some of your competitors, just to get a better feel, about the risks related to the Middle East situation? Thank you.

Speaker #4: Just to get a better feel about the risks related to the Middle East situation. Thank you.

Speaker #3: Yeah, Patrick. In terms of cost reduction, as you know, the implemented programs we are running are providing already results. For example, the overhead reduction Arno mentioned.

Oliver Blume: Yeah, Patrick, in terms of cost reduction, as you know, the implemented programs we are running, are providing already results. For example, the overhead reduction Arno mentioned. On the other side, what we will strengthen right now is we call it operational excellence, is even more cost work in terms of engineering, purchasing, production, sales, and then quality, for example. This is a program which has already started. We'll provide results already this year and even more in the period up to 2030. The other part, adapting capacities in China, the 1.5 are already done.

Speaker #3: On the other side, what we will strengthen right now is we call it operational excellence. It's even more cost work in terms of engineering, purchasing, production, sales, and then quality for example.

Speaker #3: This is a program with us already started. We'll provide results already this year. And even more, in the period up to 2030. The other part, adapting capacities, in China, the 1.5 are already done.

Oliver Blume: In Germany, we announced the 1 million, which is on a good way. We will complete up to 2028. For example, the adaptation we have done already in Audi, in Neckarsulm, and in Ingolstadt, and the adaptations we are doing at Volkswagen. A further 500,000 will be in the program by 2030. Now, that depends a bit what we have in the production lines right now, what opportunities we have to switch. Most importantly is the reduction of our plant costs. You know, that's the main target. Last year, we were able to reduce our plant costs of over 20%, and that's ongoing and even more.

Speaker #3: In Germany, we announced the 1 million, which is on a good way. We will complete up to 2028. For example, the adaption we have done already in Audi in Neckarsulm and in Ingolstadt, and the adaptions we are doing at Volkswagen.

Speaker #3: And a further 500,000 will be in the program by 2030. Now, that depends a bit on what we do have in the production lines right now.

Speaker #3: What opportunities we have to switch. But most importantly is the reduction of our plant costs. That's the main target. And last year, we were able to reduce our plant cost of over 20%.

Speaker #3: And that's ongoing. And even more. And there's no argument about not being able to work on the same cost level as competitors in Europe. And there, especially, our plants in Eastern and Western Europe are helping.

Oliver Blume: There's no argument not being able working on the same cost level like competitors in Europe. There, especially our plants in Eastern and Western Europe are helping.

Speaker #2: Yeah, Patrick, I would like to give you some flavor, perhaps a little bit more on the details. On fuel and on other costs, we expect $20 to $30 million a month for transportation.

Arno Antlitz: Yeah, Patrick, I would like to give you some flavor, perhaps a little bit more on the details on fuel and on other costs. We expect EUR 20 to 30 million a month for transportation. We have planned about 50,000 to 100,000 cars in the region, which is less than 1% of our volume, but which now try to find alternative ways to deliver the cars to the customers, specifically for the premium brands. I think Porsche found good ways there. On the raw material side, we are hedged most of it. Of course, you never hedge 100%, but we have some good hedgings.

Speaker #2: We have planned about 50,000 to 100,000 cars in the region, which is less than 1% of our volume. But we are now trying to find alternative ways to deliver the cars to customers, specifically for the premium brands.

Speaker #2: I think Porsche found good ways there. On the raw material side, we are hedged—most of it. Of course, you never hedge 100%. But we have some good news also on the order intake; I just said that the order intake is also slightly increased.

Arno Antlitz: Also on the order intake, I just said that the order intake is also slightly increased. What we cannot rule out second-round effects, both in terms of global demand and on material costs. Of course, this is a risk. We cannot rule out that, but this is another motivation to increase our efforts on the cost side on the cash flow side to compensate for that. This is where we stand currently.

Speaker #2: So, while we cannot rule out second-round effects—both in terms of global demand and on material costs—of course, this is a risk.

Speaker #2: And we cannot rule out that. But this is another motivation to increase our efforts on the cost side and on the cash flow side to compensate for that.

Speaker #2: So this is where we stand currently.

Speaker #4: Thank you both.

Patrick Hummel: Thank you both.

Speaker #3: Thank you, Patrick. And we will continue now with Mike Tindall from HSBC. Mike, please go ahead.

Rolf Woller: Thank you, Patrick. We will continue now with, Michael Tyndall from HSBC. Mike, please go ahead.

Michael Tyndall: Hello. Not sure if you can hear me. Still showing muted.

Speaker #5: Hello. Not sure if you can hear me. Still showing muted.

Arno Antlitz: We can.

Rolf Woller: We can.

Speaker #2: We can.

Speaker #5: You can hear me? Excellent.

Michael Tyndall: You can hear me? Excellent.

Arno Antlitz: Yes. Loud and clear.

Speaker #2: Yes.

Michael Tyndall: Michael Tyndall from HSBC. Just a couple of questions, if I can. I'm trying to get my head around the 9 million of capacity, which is broadly where we are in current sales, but we've got growth in North America and the Global South, and if I'm not wrong, growth in China. Is there an implication here that potentially Europe gets smaller from a volumes perspective, or am I just trying to jiggle the numbers around too much. The other question is, your components business did a 9% margin in Q1. I mean, compared to other suppliers, that's a very rich margin. I know that, you know, one part feeds into the other, but where are you in terms of benchmarking what you're paying the components business versus third parties? Is there scope there to actually squeeze more cost out of that?

Speaker #3: Mike from HSBC. Just a couple of questions, if I can. I'm trying to get my head around the 9 million of capacity, which is broadly where we are in current sales.

Speaker #3: But we've got growth in North America and the Global South. And, if I'm not wrong, growth in China. Is there an implication here that, potentially, Europe gets smaller from a volumes perspective?

Speaker #3: Or am I just trying to jiggle the numbers around too much? And then the other question is, your Components business did a 9% margin in Q1.

Speaker #3: I mean, compared to other suppliers, that's a very rich margin. And I know that one part feeds into the other. But where are you in terms of benchmarking what you're paying the components business versus third parties?

Speaker #3: Is there scope there to actually squeeze more cost out of that? Curious to know why that margin is so high when Brand Group Core is potentially lower than it should really be?

Michael Tyndall: Curious to know why that margin is so high when Brand Group Core is potentially lower than it should really be. Thanks.

Speaker #3: Thanks. Yeah, Mike, let me start with your first question, and then I'll hand over to Tarano for the component question. To make it very clear, the 9 million capacity is what we have seen on average during the last five years.

Oliver Blume: Yeah, Mike, let me start with your first question, then I hand over to Arno Antlitz with a component question. To make it very clear, the 9 million capacity is what we have seen in average during the last 5 years. Our product planning is ambitious, also our sales planning is ambitious. What we are doing here is on the one hand side to adapt our cost structure for 9 million cars in terms of a risk scenario. What could happen if. On the other side, we are working on a more ambitious sales planning. This leads us to bring down our break-even situation and making our financial situation more and more robust. Now, that's behind this planning.

Speaker #3: Our product planning is ambitious. And also our sales planning is ambitious. But what we are doing here is, on the one hand side, to adapt our cost structure for 9 million cars in terms of a risk scenario.

Speaker #3: What could happen if? And on the other side, we are working on a more ambitious sales planning. And this leads us to bring down our break-even situation.

Speaker #3: And making our financial situation more robust—that's behind this planning. And when, at the end, all the new products, and they're very confident because of the feedback we are getting right now for all the new products coming to the market right now, we would be better—that we'll be in a positive effect in terms of our margin situation and EBIT at the end.

Oliver Blume: When at the end, all the new products and we are very confident because of the feedback we are getting right now for all the new products coming to the market right now. We would be better. That will be a positive effect in terms of our margin situation and EBIT at the end.

Speaker #2: Yeah, Mike. And the second question. First and foremost, the component business—the majority of the component business—is also part of Volkswagen AG.

Arno Antlitz: Yeah, Mike, to your second question, first and foremost, the majority of the component business is also part of the Volkswagen AG. Just to remind you, in the Volkswagen AG, we have the component business in Kassel, which is doing gearboxes, Salzgitter engine plants and Braunschweig, steering and extra components. All the cost efforts we see so far. For example, I said since 2023, 15,000 reductions in the Volkswagen AG is always also happening in the component business. Because they have three big plants there. Also, the improvement in overhead costs.

Speaker #2: Just to remind you, in Volkswagen AG, we have the component business in Kassel, which is doing gearboxes; Salzgitter engine plants; and Braunschweig steering and axle components.

Speaker #2: And so all the cost efforts we see so far for example, I said since 2023, 15,000 reductions in the Volkswagen AG is always also happening in the component business.

Speaker #2: Because they have three big plants there. Also, the improvement in the overhead costs. And what you can see now here is we haven't basically changed the pricing logic between the Brand Group and the brands and the component business.

Arno Antlitz: What you can see now here is we haven't basically changed the pricing logic between the brand groups, the brands, and the component business. We kept basically the logic of the prices stable. What you see now is the basically we measure the improvement of the Volkswagen turnaround of the Volkswagen Zukunft project in that it's working in the component. Nevertheless, we need more contributions also from our component business. The competition is coming to Europe and our component business, for example, is also producing electric engines, producing batteries for the material. We need also to significantly step up the improvements there in order to be competitive for our cars versus competition.

Speaker #2: And we kept, basically, the logic of the prices stable. And what you see now is, basically, we measure the improvement of the Volkswagen turnaround, of the Volkswagen Zukunft project, that it's working in the component business.

Speaker #2: Nevertheless, we need more contributions also from our component business. The competition is coming to Europe. And our component business, for example, is also producing electric engines, producing batteries for the material.

Speaker #2: And we need also to significantly step up the improvements there in order to be competitive for our cars versus competition.

Speaker #5: Okay. That sounds great. Thank you.

Michael Tyndall: Okay. That sounds great. Thank you.

Speaker #2: Thank you, Mike. We will continue with Tom Narayan from RBC. Tom, please go ahead.

Rolf Woller: Thank you, Mike. We will continue with Tom Narayan from RBC. Tom, please go ahead.

Speaker #6: Hi. Thanks, Tom Narayan, an, RBC. The first one, Arno on the 26 guidance. I noticed there wasn't any booking for the benefit on the IEPA the Supreme Court ruling in the US.

Tom Narayan: Hi. Thanks, Tom Narayan, RBC. The first one, Arno, on the 2026 guidance, I noticed there wasn't any booking for the benefit on the EPA, the Supreme Court ruling in the US. Other competitors have booked pretty large benefits there in Q1. I was just curious why you guys didn't book that. I know you have a lot of hedging, but the other OEMs are noticing pretty big H2 headwinds. Is it that you're not expecting those H2 headwinds? That's the first question, the guidance. Oli, on the Chinese partnerships, is there any potential for the US? I know it's a politically maybe sensitive topic, but what do you see out of as that, as a possibility of the Chinese relationships in the US? Thanks.

Speaker #6: Other competitors have booked pretty large benefits there in Q1. I was just curious why you guys didn't book that. And then, I know you have a lot of hedging, but the other OEMs are noticing pretty big H2 headwinds.

Speaker #6: Is it that you’re not expecting those H2 headwinds? That’s the first question on the guidance. And then, Ollie, on the Chinese partnerships— is there any potential for the US?

Speaker #6: I know it's a politically maybe sensitive topic. But what do you see out of that as a possibility of the Chinese relationships in the US?

Speaker #6: Thanks.

Arno Antlitz: Tom, I start with the second question in terms of I assume you're referring to the EBIT bridge, right?

Speaker #3: Tom, I start with the second question in terms of I assume you're referring to the EBIT bridge, right? That it's basically positive. Yeah, that's a little bit counterintuitive.

Tom Narayan: Yeah.

Tom Narayan: That it's basically positive. Yeah. That's a little bit counterintuitive. It shows that we have some very good hedgings there in place. If you I would say, it's also versus last year, no? It was the EBIT bridge is the effect versus last year. Last year, I think it was negative Q1 by -EUR 300 something, also -EUR 400. It's basically a reversal of some of the effects. We don't expect the positive effect throughout the year to stay here. I mean, we have to face realities, no? The major currencies are weak. We have a lot of exports in dollar regions and others.

Arno Antlitz: That it's basically positive. Yeah. That's a little bit counterintuitive. It shows that we have some very good hedgings there in place. If you I would say, it's also versus last year, no? It was the EBIT bridge is the effect versus last year. Last year, I think it was negative Q1 by -EUR 300 something, also -EUR 400. It's basically a reversal of some of the effects. We don't expect the positive effect throughout the year to stay here. I mean, we have to face realities, no? The major currencies are weak. We have a lot of exports in dollar regions and others.

Speaker #3: It shows that we have some very good hedging there in place. But if you, I would say, and it's also versus last year. It was the EBIT bridge, is the effect versus last year.

Speaker #3: And last year, I think it was negative in the first quarter by minus 300-something, also minus 400. So it's basically a reversal of some of the effects.

Speaker #3: But we don't expect that the positive effect throughout the year to stay here. I mean, we have to face realities. Major currencies are weak.

Speaker #3: We have a lot of exports in the dollar region and others. Since we are hedged, we don't expect a significant headwind in that topic. In terms of EBIT bridge.

Arno Antlitz: Since we are hedged, we don't expect a significant headwind in that topic, in terms of EBIT bridge but for the operative business.

Speaker #3: But for the operative business, it's obviously a headwind. And as you know, hedges don't last forever, and the next hedges will be more expensive.

Arno Antlitz: It's obviously a headwind. As you know, hedges don't last forever, and the next hedges will be more expensive. Yes, it's a headwind. It's, I would say, a temporary effect positive, but it shouldn't turn significant negative throughout the year. In terms of EPA, nothing is booked in Q1 results. It's too early to say to what extent we will book a benefit in the remainder of the year. We will come back to you with or to all of you with that topic potentially in Q2.

Speaker #3: So yes, it's a headwind. I would say a temporary effect, positive, but it shouldn't turn significantly negative throughout the year. And in terms of EAPA, nothing is booked in Q1 results.

Speaker #3: It's too early to say to what extent we will book a benefit in the remainder of the year. We will come back to you—or to all of you—with that topic, potentially in Q2.

Oliver Blume: Coming to your second question in terms of Chinese partnerships. First of all, Volkswagen Group is there in a very positive situation as a global automotive player, having a strong footprint in China, but also in the Western world, where we can benefit from innovation speed and then processes. We decided to go for two ecosystems. One is China, also with our partnership there, for example, with XPeng and then Horizon Robotics. We can see already the first results with our first software architecture, the SEER we presented at the end of last year, and the first cars are entering into the market right now. This is a blueprint in terms of architecture also for our Rivian joint venture.

Speaker #2: Tom, coming to your second question in terms of Chinese partnerships. First of all, Volkswagen Group, it's there in a very positive situation as a global automotive player, having a strong footprint in China.

Speaker #2: But also in the Western world, where we can benefit from innovation speed and then processes. We decided to go for two ecosystems. One is China.

Speaker #2: Also with our partnership there. For example, with Chao Peng and then Horizon Robotics. We can see already the first results. With our first 7L architecture.

Speaker #2: They see here we presented at the end of last year. And the first cars are entering into the market right now. And this is a blueprint.

Speaker #2: In terms of architecture, also for our Rivian joint venture. In the Western world, we have a distance of around one and a half years.

Oliver Blume: In the Western world, we are have a distance of around one and a half year, comparing with our Chinese activities. This brings us in the situation to have a clear comparison in terms of speed and content, what we have achieved in China. We are very happy about the progress I mentioned with our Rivian joint venture. Coming back to the two ecosystems, what we are doing in China right now, will help us also for the whole Southern Hemisphere. We can localize our local platforms from China, the China Main Platform, bringing this to a global main platform, for example, for South America.

Speaker #2: Comparing with our Chinese activities—and this brings us into the situation to have a clear comparison in terms of speed and content—what we have achieved in China.

Speaker #2: But we are very happy about the progress. I mentioned with our Rivian joint venture. Coming back to the two ecosystems—what we are doing in China right now will help us also for the whole Southern Hemisphere.

Speaker #2: We can localize our local platforms from China—the China main platform—bringing this to a global main platform. For example, for South America. And we have huge export opportunities now from China.

Oliver Blume: We have huge export opportunities now from China, being on a competitive technological level, but also cost competitive with the Chinese competitors. This helps us to enter Southeast Asia, for example, Middle East, India, but at the end, also Africa. In the Western Hemisphere, this footprint from China helps us to speed up and build the right offer for the western world, where we are restricted because of regulations to use Chinese software. Therefore, we have made a clear differentiation in between the two worlds. Now we have the flexibility and having the right product for the right region to fulfill the customer expectations, but also the right cost structure.

Speaker #2: Being on the competitive technological level, but also cost competitive with the Chinese competitors. And this helps us to enter Southeast Asia, for example, and the Middle East.

Speaker #2: India, but at the end, also Africa, and in the Western Hemisphere. This footprint from China helps us to speed up and build the right offer for the Western world.

Speaker #2: Where we are restricted because of regulations to use Chinese software. And therefore we have made a clear differentiation in between the two worlds. But now we have the flexibility and having the right products for the right region to fulfill the customer expectations.

Speaker #2: But also the right cost structure.

Tom Narayan: Understood. Thank you.

Speaker #6: Understood. Thank you.

Speaker #2: Thank you, Tom. And we move on to the next question which comes from José Azumendi from JP Morgan. José, please go ahead.

Rolf Woller: Thank you, Tom. We move on to the next question, which comes from Jose Asumendi from J.P. Morgan. Jose, please go ahead.

Speaker #3: Thank you all. Good morning, Ollie and Arno. A couple of questions. Ollie, can you speak a bit about your tech stack that you have in China?

José Asumendi: Thank you, Rolf. Morning, Oli and Arno. A couple of questions. Oli, can you speak a bit about your tech stack that you have in China? Thank you very much for the capital markets day you recently did. I'd like to understand a bit better which parts of that tech stack and know-how that you're building in China you can actually bring back to Europe, or maybe which suppliers you think you can even co-collaborate closer in Europe to improve the cost competitiveness and bring that tech stack into European businesses. Clearly, the products you're launching in China are some of them clearly superior to what you're offering in Europe.

Speaker #3: Thank you very much for the capital markets that you recently did. I'd like to understand a bit better which parts of that tech stack and know-how that you're building in China you can actually bring back to Europe.

Speaker #3: Or maybe, which suppliers you think you're going to collaborate more closely with in Europe to improve cost competitiveness and bring that tech stack into the European businesses.

Speaker #3: Clearly, the approach you're launching in China are some of them clearly superior to what you're offering in Europe. Also interested, please, in hearing if you will be open to open up your production sites your capacity in Europe to your partners ACIC or FAW.

José Asumendi: Also interested, please, in hearing if you will be open to open up your production sites, your capacity in Europe to your partners, SAIC or FAW. Second question, Arno, can you talk a bit about the margin progression on your Brand Group Progressive? Do you think there's a chance to see a sequential margin improvement in Q2 versus Q1 in the light of the improved earnings in Q1? Thank you.

Speaker #3: ACIC or FAW. And second question, Arno, can you talk a bit about the margin progression on your progressive brand? Do you think there's a chance to see a sequential margin improvement in Q2 versus Q1 in the light of the improved earnings in the first quarter?

Speaker #3: Thank you.

Oliver Blume: Jose, on the one hand side, we can benefit from the innovation speed and from China, which we can transfer also the process knowledge, but especially the cost work we have done. What we presented last week was a cost reduction of 40% to 50%, depending on the platform. All these measures, and that's a great opportunity, we can implement right now on our Western platforms, which has already been kicked off. On the other side, all activities we are doing there also with our component business, Arno talked before, and suppliers in terms of hardware. We can benefit in terms of sourcing because knowing the right partners there and the best solutions, that's an opportunity.

Speaker #2: José, on the one hand side, we can benefit from the innovation speed. And from China. Which we can transfer also the process knowledge. But especially the cost work we have done what we presented last week was a cost reduction of 40 to 50 percent depending on the platform.

Speaker #2: these measures. And that's a great opportunity. We can implement right now on our Western platforms. Which is already has already been kicked off. And on the other side, all activities we are doing there also with our component business.

Speaker #2: Arno talked before. And suppliers in terms of hardware. We can benefit in terms of sourcing because knowing the right partners there. And the best solutions.

Speaker #2: That's an opportunity. And software we will be more restrictive. Because developing our own software for the Western world. But innovations and speed and processes helps a lot.

Oliver Blume: In software, we will be more restrictive, because developing our own software for the Western world, but innovations and speed and processes, helps a lot. Overall, having been in China last week, the media feedback was great. We got the by far biggest media feedback and to reach of all companies, including the Chinese companies there in China. That has shown the great response and how well our products are received in the market. In terms of capacities, we always look for intelligent solutions. As you have seen, in terms of Dresden or, we are now in good negotiations for Osnabrück, for example, with defense companies. That's one approach.

Speaker #2: Overall, and having been in China last week, the media feedback was great. We got by far the biggest media feedback and reach of all companies.

Speaker #2: Including the Chinese companies there in China, and that has shown the great response and how well our products are received in the market. In terms of capacities, we always look for intelligent solutions.

Speaker #2: As you have seen, in terms of Dresden, or we are now in good negotiations for Osnabrück, for example, with defense companies. That's one approach.

Speaker #2: And the other approach, we also will check if there are opportunities for our Chinese cars in Europe, or for opening this for partnering maybe with our partners.

Oliver Blume: The other approach, we also will check if there are opportunities for our Chinese cars in Europe, or for opening this for partnering maybe with our partners we do have in China. We haven't taken a decision. The solution field is flexible. This is always a clever solution to reduce capacities in terms of changing this to a different owner, like defense company or sharing capacities with other business opportunities. The second option at the end, and that's the worst one and most costly one, is to close a plant. We will go on this topic very openly.

Speaker #2: We do have in China we haven't taken a decision. But the solution field is flexible. And this is always a clever solution to reduce capacities in terms of changing this to a different owner.

Speaker #2: Like defense company or sharing capacities with other business opportunities. And the second option at the end and that's the worst one and most costly one is to close a plant.

Speaker #2: But we will go on this topic very, very openly.

Speaker #3: Yeah, José, in terms of margin, we expect and we need to step up in margin. Our guidance is four to five and a half percent.

Arno Antlitz: Yeah, Jose, in terms of margin, we expect and we need a step up in margin. Our guidance is 4% to 5.5%. We currently reported at 3.3%, and we wanna achieve a reported margin within that guideline. We have also some promising results. Look at brand Volkswagen. Yes, they are more closer to zero currently, but if you take into account the write-off for the ID.4 in US, they are at 3.5% currently running. We have a typical seasonality in our business at Q3 and, sorry, Q2 and specifically Q4 are normally stronger than Q1. It's also a good chance for Audi. Audi now have a refreshed portfolio.

Speaker #3: We are currently reported at 3.3, and we want to achieve a reported margin within that guideline. And we also have some promising results. Look at Brand Volkswagen.

Speaker #3: Yes, they are more closer to zero currently. But if you take into account the write-off for the ID.4 in the US, they are at 3.5 percent currently running.

Speaker #3: And we have a typical seasonality in our business that Q3 and sorry, Q2 and specifically Q4 are normally stronger than the first quarter. And it's also a good chance for Ollie Ollie have a refresh portfolio they are currently trading at 4.2.

Arno Antlitz: They are currently trading at 4.2. They expect 6 to 8 with a lot of product momentum coming, specifically S and RS models, which are really doing very well in order intake. Last but not least, we really drive forward the restructuring methods throughout the whole group. You saw the fixed cost improvement Q1 EUR 1 billion, obviously we want to continue that. That should give also more tailwind. After a little bit cautious, now we will ramp up the BEVs in H2 of the year, which are margin dilutive. Yes, there might be some economic headwinds from the conflict in the Middle East.

Speaker #3: They expect six to eight with a lot of product momentum coming specifically as an RS models which are really doing very well in order intake.

Speaker #3: And last but not least, we really drive forward the restructuring methods throughout the whole Group. You saw the fixed cost improvement—first quarter, €1 billion—and obviously we want to continue that.

Speaker #3: The chips should us give also more tailwind. We have to a little bit cautious. We will ramp up the BVs in the second half of the year which are margin dilutive.

Speaker #3: And yes, there might be some economic headwinds from the conflict in the Middle East. But all in all, taking this into account, we still are fully underway to achieve our guidance of four to 5.5 percent.

Arno Antlitz: All in all, taking this into account, we still are fully underway to achieve our guidance of 4% to 5.5% and confirm the guidance.

Speaker #3: And confirm the guidance.

Speaker #2: Super. Thank you.

José Asumendi: Super. Thank you.

Speaker #3: Thank you, José. And we will continue with Horst Schneider from Bank of America. Horst, please go ahead.

Rolf Woller: Thank you, Jose. We will continue with Horst Schneider from Bank of America. Horst, please go ahead.

Horst Schneider: Yes. Thank you. Good morning, team. Good morning, Oli. Good morning, Arno. The first question that I have that relates to the impact on consumer demand coming from the high oil price. Since you are the largest, one of the largest car makers of the world, clearly the market share monster in Europe, I think you can maybe best answer this question. It's not just about Q1 average, it's more about latest trends that you have seen since the oil price spiked. What shift do you see in terms of demand shift from ICE to BEV, downtrading in segments, differences as premium versus mass, and also between diesel and gasoline? That's question block number 1.

Speaker #4: Yes, thank you. And good morning, team. Good morning, Ollie. Good morning, Arno. The first question that I have relates to the impact on consumer demand coming from the high oil price.

Speaker #4: Since you are the largest one of the largest carmakers of the world, clearly the market share monster in Europe, I think you can maybe best answer this question.

Speaker #4: And it's not just about Q1 average. It's more about the latest trends that you have seen since the oil price spiked. So what shift do you see in terms of demand shift from ICE to BEV?

Speaker #4: Down trading in segments? Differences is premium versus mass? And also between diesel and gasoline. So that's question block number one. The number two is a little bit following up to that what also José has asked on if you are prepared to share plans with Chinese OEMs.

Horst Schneider: The number two is a little bit following up to that, what also Jose has asked on if you are prepared to share plans with Chinese OEMs. This seems to become kind of industry trend. We heard that also Stellantis wants to do that. Seems that several car makers are thinking about that. I just want to get then your view on the European outlook more in general. Isn't that a bad sign for Europe? Because in a way, the industry is opening up the market to the Chinese competition, opening up to a wolf in sheep's clothing, potentially. Is the outlook from here that Europe can just get worse, the competition is heating up, and that the incumbents lose more market share? Thank you.

Speaker #4: This seems to become kind of industry trends. So we heard that also Stellantis wants to do that. So seems that several carmakers are thinking about that.

Speaker #4: And I just want to get, then, your view on the European outlook more in general. Isn't that a bad sign for Europe? Because, in the way, the industry is opening up—the market to the Chinese competition—opening up to evolve in cheap, closing potentially.

Speaker #4: So, is the outlook from here that Europe can just get worse? That competition is heating up and that the incumbents lose more market share?

Speaker #4: Thank you.

Speaker #2: Yeah, Horst. I’ll start with where we were just like two days ago—a discussion. What is your department called?

Arno Antlitz: Yeah, Horst, I start with, we had just like two days ago, a discussion. Rolf, what is your department called Volkswagen-

Oliver Blume: The economics.

Rolf Woller: The economics.

Speaker #3: The economics.

Arno Antlitz: ... economics, team.

Speaker #2: The economic team showed us all the risks, and they did some really great scenarios on how long the conflict lasts. What has been fuel prices in different scenarios?

Oliver Blume: Economics department, yeah.

Arno Antlitz: They showed us all the risks, and they did some really great scenarios on how long the conflict lasts, what has been fuel prices in different scenarios. Yes, there might be a headwind coming up in terms of overall market demand. You ask, and then put another say we'll include that in their total market guidance. What we currently see within us, we don't see these effects right now. We have a strong order book. Yes, March was a little bit weaker, but still strong. What we specifically saw, January, February, saw a little bit more pressure on the residual values of the BEVs and that turned in March, which is really positive.

Speaker #2: And yes, there might be a headwind coming up in terms of overall market demand. But if you ask, and then Stanford and others, they will include that in their total market guidance.

Speaker #2: But what we currently see within us, we don't see these effects right now. We have strong order book. Yes, the March was a little bit weaker.

Speaker #2: But still strong. And what we specifically saw, January–February saw a little bit more pressure on the residual values of the BVs. And that turned in March, which is really positive.

Arno Antlitz: In total, we see more, I would say demand for BEVs or interest in BEVs. Let me put it that way. Although ICE and BEV order intake both increased. Yeah, this is where we currently stand. Of course, we cannot rule out that there are headwinds. We prepare for them on the cost side. We are cautious on capacity, what Oliver said. We don't wanna end up with, being like on the inventory side, above ideal stock. We carefully monitor that, we don't see major effects so far in Europe, on-

Speaker #2: And in total, we see more— I would say—demand for BVs, or interest in BVs, let me put it that way. Although ICE and BV order intake both increased.

Speaker #2: Yeah, this is where we currently stand. Of course, we cannot rule out that there are headwinds. We prepare for them on the cost side.

Speaker #2: We are cautious on capacity. What Oliver said, we—and we don't want to end up with being, like, on the inventory side above ideal stock.

Speaker #2: We carefully monitor that. But we don't see major effect so far in Europe, Horst.

Horst Schneider: Mm-hmm. Arno, just quick follow-up. When you talk about rising BEV demand, I wonder if that is in the end then positive or negative for Volkswagen. You potentially save rebates that you don't have to provide anymore, but you also lose profitable ICE cars. What's the net equation? Is that positive or negative if that demand is increasing?

Speaker #4: Arno, just a quick follow-up. When you talk about rising BEV demand, I wonder if that is in the end then positive or negative for Volkswagen.

Speaker #4: You potentially save rebates that you don't have to provide anymore. But you also lose profitable ice cars. So what's the net equation? Is that positive or negative if bath demand is increasing?

Speaker #2: No, this is a great question. Currently, we are on the balance. That means we have a margin dilution on the BV side. But we still expect full year to book four to five hundred million.

Arno Antlitz: This is a great question. Currently, we are on the balance. That means, we have a margin dilution on the BEV side, but we still expect full year to book EUR 400 to 500 million on burden because we don't achieve our CO2 targets. More demand means more margin dilution. On the other hand, less burden on the CO2 regulation. Net-net, if we were to significantly increase our BEV share, that would be a margin dilution going forward, which is what we always said. Structurally, we must decide, we must distinguish between three, I would say, technology platforms. One is the MEB platform. For example, in our volume brand, we run currently ID.3, ID.4.

Speaker #2: On burden, because we don't achieve our CO2 targets. So more demand means more margin dilution. On the other hand, less burden on the CO2 regulation.

Speaker #2: But net-net if we were to significantly increase our bath share, that would be a margin dilution. Going forward, which is what we always said.

Speaker #2: Structurally, we must decide we must distinguish between three, I would say, technology platforms. One is the MEB platform, for example, in our volume. Brand, we run currently ID3, ID4.

Speaker #2: And now, with the arrival of the ID.2 family, comes an MEB Plus, which has an LFP battery—cell to pack. Next generation for electric trains.

Arno Antlitz: Now with the arrival of the ID.2 family comes an MEB+, which has an LFP battery, cell-to-pack, next generation for electric trains. There, the margin dilution effect is still there, but it's smaller. You know, the ID.2 for us is much closer to the T-Roc. This is we have to take into account. But until we implement our next generation SSP platform, the margin dilution effect will continue. Smaller than today, but it will continue.

Speaker #2: So, the margin dilution effect is still there, but it's smaller. The ID.2 Cross is much closer to the T-Roc, and so we have to take that into account. But until we implement our next-generation SSP platform, the margin dilution effect will continue.

Speaker #2: Smaller than today, but it will continue.

Speaker #4: Okay. Thank you.

Horst Schneider: Okay. Thank you.

Speaker #2: And Horst, good morning. Let me come to your second question situation in Europe. We expect tougher competition in the next years, especially from the Chinese.

Arno Antlitz: Thank you.

Oliver Blume: Horst, good morning. Let me come to your second question, situation in Europe. We expect a tougher competition in the next years, especially from the Chinese car manufacturers. We see ourselves well prepared. First of all, we have a great product momentum. Order intake is increasing both on ICE and BEVs. We are by far market leader for both. The new products we kicked off three years ago are now entering into the market. The Polo and there are others, one example, but others also in the BEV segment. Arno mentioned also the product momentum at Audi with S and RS models.

Speaker #2: Car manufacturers. But we see ourselves well prepared. First of all, we have a great product momentum. Order intake is increasing—both on ICE and BEVs.

Speaker #2: We are by far the market leader for both. And the new products we kicked off three years ago are now entering the market. The Polo and the Royal are one example.

Speaker #2: But others also in the bath segment. And Arno mentioned also the product momentum at Audi with S and RS models. So on first, we are counting on our own strengths.

Oliver Blume: First, we are counting on our own strengths, while keeping with our cost initiatives, to have at the end more profit with our products. Second approach is what we will check is what own China products could fit for the European market, especially in segments where we are not present right now. That depends at the end on tariffs, on logistic costs and so on, if we see opportunities there. We are now in a positive situation having own Chinese products, which are very attractive to the customers. Third approach is at the end for capacities to check if we could share capacities with Chinese partners. I am saying this very clear.

Speaker #2: While keeping with our cost initiatives, to have at the end more profit with our products. Second approaches, what we will check is what's owned.

Speaker #2: China products could fit for the European markets, especially in segments where we are not present. Right now. But that depends at the end on tariffs.

Speaker #2: On logistic costs and so on. If we see opportunities there. Because we are now in a positive situation having owned Chinese products. Which are very attractive to the customers.

Speaker #2: And third approaches, at the end for capacities, to check if we could share capacities with Chinese partners. But saying this very clear, first approach is what we are doing right now in Osnabrück.

Oliver Blume: Our first approach is what we are doing right now in Osnabrück, is being in contact with the defense industry. That's also very intelligent to solve overcapacities with this manner. On the other side, to protect or bringing more or equal competitiveness in Europe, we have a clear position in terms of Made in Europe. Companies who make business here in Europe should have an European footprint. Yeah. Therefore, we are in contact also with the European Commission. The Made in Europe initiative, making progress. I think this will bring the market situation and the competition in Europe to a more fair trade situation. Yeah.

Speaker #2: Is being in contact with the defense industry. That's also very intelligent. To solve overcapacities with this manner. On the other side, to protect or bringing more or equal competitiveness in Europe.

Speaker #2: We have a clear position in terms of 'Made in Europe.' Companies who do business here in Europe should have a European footprint. And therefore, we are in contact also with the European Commission.

Speaker #2: The Made in Europe initiatives are making progress. And so I think this will bring the market situation and the competition in Europe to a more fair trade situation.

Speaker #2: And that's also important because we are faced with another region of the world, these restrictions. And this is more a European interest policy. It's not protection.

Oliver Blume: That's also important because we are facing other regions of the world, these restrictions, and this is more a European interest policy. It's not protection, but I think we need it and to so the companies who are investing in Europe can benefit.

Speaker #2: But I think we need it. And to the companies who are investing in Europe, can benefit.

Speaker #4: Okay, great. Also, as a German citizen, I keep my fingers crossed for you—that you master all these challenges. All the best.

Horst Schneider: Okay, great. Also, as a German citizen, I keep the fingers crossed for you that you master all these challenges. All the best.

Speaker #3: Thank you. Horst. And we continue with Michael Ponset from DZ Bank. Michael, please go ahead.

Rolf Woller: Thank you, Horst. We continue with Michael Punzet from DZ Bank. Michael, please go ahead.

Speaker #5: Yes, Michael Ponset. Good morning. I have one question regarding a report of the Handelsblatt from last week. Mentioning that you have to increase your net liquidity.

Michael Punzet: Yes. Michael Punzet. Good morning. I have one question regarding a report of the Handelsblatt from last week, mentioning that you have to increase your net liquidity. So far, you gave us a target of roughly 10% of revenues. Can you give us any indication for the new target and maybe also the topics which you need to increase net liquidity, and if this have any impact on upcoming dividend payments?

Speaker #5: So far, you gave us a target of roughly 10% of revenues. Can you give us any indication for the new target? And maybe also the topics which you need to increase net liquidity.

Speaker #5: And if this has any impact on upcoming dividend payments.

Speaker #2: Yeah, Michael. Look, I will give you a little bit of color. Overall, we want to make sure that in the transformation, we have a really strong balance sheet.

Arno Antlitz: Yeah, Michael. Look, I will give you a little bit of color. Overall, we wanna make sure that in the transformation we have a really strong balance sheet, and rating is really important for us. That. So this is not the only reason, but another reason why we are focused on improving our result, on improving our net cash flow. Net liquidity, we said always at least 10% of revenue. If you look into the industry, others have an even stronger balance sheet. Going forward, it is clear that we want to improve our operative result and the cash conversion rate with more discipline and being more disciplined and then and on R&D, and that's driving also our cash conversion rate.

Speaker #2: And rating is really important for us. And that—so, this is not the only reason. But what—another reason why we are focused on improving our result—on improving our net cash flow.

Speaker #2: So net liquidity, we said always, at least 10% of revenue. But if you look into the industry, others have an even stronger balance sheet.

Speaker #2: And going forward, it is clear that we want to improve our operative result. And the cash conversion rate with more discipline than being more disciplined and then on R&D.

Speaker #2: And that's driving also our cash conversion rate. And so although it's too early to discuss it, but let's assume we achieve that. We are rather confident, very confident that we achieve that.

Arno Antlitz: Although it's too early to discuss it, let's assume we achieve that. We are rather confident, very confident that we achieve that. It's a question, what are potential ways to use that cash flow? One net cash flow is obviously let's strengthen our net liquidity position and our balance sheet. Another possibility is, or means is, let our shareholder participate on a much stronger Volkswagen. Third, we have also hybrid bonds. We look into potentials there. This is why we said 10% of revenue is the minimum we want to keep. With a stronger Volkswagen going forward in uncertain world, we potentially also want to increase that.

Speaker #2: Then it's a question of how—what are potential ways to use that cash flow. And one net cash flow is, obviously, that it strengthens our net liquidity position and our balance sheet.

Speaker #2: Another possibility is or means is let our shareholder participate on a much stronger Volkswagen and third, we have also hybrid bonds. We look into potentials there.

Speaker #2: And this is why we said 10% of revenue is the minimum we want to keep. And with a stronger Volkswagen going forward in an uncertain world, we potentially also want to increase that.

Speaker #5: Okay, thank you. Maybe a short follow-up. You mentioned the sale of Bugatti Rimac. Will this also have no impact on your industrial net cash?

Michael Punzet: Okay. Thank you. Maybe a short follow-up. You mentioned the sale of Bugatti Rimac. Will this have also no impact on your industrial net cash and all this stuff? Will you have a different accounting compared with Porsche?

Speaker #5: And all this stuff? Or will you have a different accounting compared with Porsche?

Speaker #2: No, no. That will also strengthen our balance sheet. Because Porsche is fully consolidated in the group.

Arno Antlitz: No, that will also strengthen our balance sheet because Porsche is fully consolidated in the Group.

Speaker #5: No. I mean, yesterday, Porsche said that the book gain and also the cash inflow from that deal will not have any impact on the automotive division.

Michael Punzet: No, I mean, yesterday, Porsche said that the book gain and also the cash inflow from that deal will not have any impact on the automotive distribution. Is it the same as at your level?

Speaker #5: Is that the same as at your level?

Arno Antlitz: This positive effect on a cash flow at Porsche will be, since we are fully consolidated, also a positive net cash flow on group level.

Speaker #2: This positive effect on the net cash flow at Porsche will be since we are fully consolidated, also positive net cash flow on group level.

Speaker #5: Okay.

Michael Punzet: Okay.

Speaker #3: Thank you, Michael. And we continue with Christian Freines from Goldman Sachs. Christian, please go ahead.

Arno Antlitz: Thank you, Michael. We continue with Christian Frenes from Goldman Sachs. Christian, please go ahead.

Rolf Woller: Thank you, Michael. We continue with Christian Frenes from Goldman Sachs. Christian, please go ahead.

Christian Frenes: Goldman Sachs. Most of my questions have been answered. Just, I have a question on pricing. Your pricing for passenger cars and light commercial vehicles was up in the quarter. Could we look into that a little bit more, specifically within EU pricing, given emerging Chinese OEMs localization efforts? You mentioned, I think, the minimum pricing discussions between the EU and China. How do you expect, you know, pricing to evolve throughout the rest of the year, in this year? What impact do you think the minimum pricing discussions will have on that?

Speaker #6: Goldman Sachs. Most of my questions have been answered. Just I'd have a question on pricing. Your pricing for passenger cars and light commercial vehicles was up in the quarter.

Speaker #6: Could we look into that a little bit more? Specifically within EU pricing. Given emerging Chinese OEMs, localization efforts, and, as you mentioned, I think, the minimum pricing discussions between the EU and China.

Speaker #6: How do you expect pricing to evolve throughout the rest of the year in 2024, in this year? And what impact do you think the minimum pricing discussions will have on that?

Speaker #6: And then secondly, just also sticking with pricing, looking at China, thanks for your capital markets day event. And we just had the Beijing Motor Show where we saw a lot of the impressive product you have coming.

Christian Frenes: Secondly, just also sticking with pricing, looking at China, thanks for your Capital Markets Day event. We just had the Beijing Motor Show, where we saw a lot of the impressive product you have coming, also your strategy and targets. Could you comment a little bit about your expectations for China pricing again for the remainder of the year this year? Thank you.

Speaker #6: And also your strategy and targets. But could you comment a little bit about your expectations for China pricing again for the remainder of the year this year?

Speaker #6: Thank you.

Speaker #2: Yeah. Thanks for the question. Obviously, what we cannot make that public discussions on what prices we plan and what we expect. What we can say and what we prepare for, the competition is clearly increasing.

Arno Antlitz: Yeah. Thanks for the question. Obviously, what we cannot make that public, discussions on what prices we plan and what we expect. What we can say and what we prepare for, the competition is clearly increasing. You know, Chinese competitors are bringing their cars to Europe, and they're also basically exporting the competitive pressure to Europe. What we see in our EBIT bridge, we saw pretty strong movement based on our really good product substance and our portfolio. You saw pricing was even slightly positive in the first quarter with EUR 0.2 billion. Of course, we have to take into account the negative mix basically from the ramp-up of the BEVs.

Speaker #2: Chinese competitors are bringing their cars to Europe, and they're also basically exporting the competitive pressure to Europe. What we see in our EBIT bridge is that we saw pretty strong movement based on our really good product substance.

Speaker #2: And our portfolio you saw pricing was even slightly positive in the first quarter with 0.2 billion. Of course, we have to take into account the negative mix.

Speaker #2: Basically, from the ramp-up of the VVs, in total, we expect more pressure. But this is also why we compensate on the cost side on in order to be prepared.

Arno Antlitz: In total, we expect more pressure, but this is also why we compensate on the cost side in order to be prepared on the cost level. Now we have great products, we have good technology, and we have to have the competitive cost base, and this is what we work on.

Speaker #2: On the cost level. We have great products. We have good technology. And we have to have the committed cost base and this is what we work on.

Speaker #6: Yeah. And maybe to China, we have seen during the last two years an average decline of 15% in pricing, and we don't expect that the pricing level will come back to where it has been years ago.

Oliver Blume: Maybe to China, we have seen during the last two years an average decline of 15% of pricing. We don't expect that the pricing level will come back to where it has been years ago. Margin improvement will come only over tough cost work. This process has already been kicked off. We have shown you a cost improvement of 40% to 50% depending on our platforms in China, and we will continue to do so. The same what we are doing there is our task in Europe to being more competitive in terms of pricing while having the opportunity and improving margin.

Speaker #6: So margin improvement will come only through tough cost work. And this process has already been kicked off. We have shown you a cost improvement of 40 to 50 percent, depending on our platforms in China.

Speaker #6: And we will continue to do so. And the same what we are doing there, is our task in Europe. To being more competitive in terms of pricing, while having the opportunity and improving margin.

Speaker #4: And then maybe as a quick follow-up, not much is being said about your supply chain or Middle East and that's in line with the rest of the industry, I would add.

Christian Frenes: Maybe as a quick follow-up, not much is being said about your supply chain or Middle East, and that's in line with the rest of the industry, I would add. If you-- When would you expect to have more clarity on 2027, regarding these issues? Thank you.

Speaker #4: But if you—when would you expect to have more clarity on 2027 regarding these issues? Thank you.

Speaker #2: Yeah. Today, our supply chain is not affected. And also, in terms of raw materials, for example, we have hatching. What it would mean for 2027 is too early to predict.

Arno Antlitz: Yeah. Today, our supply chain is not affected. Also in terms of raw materials, for example, remember we have hedging. What would it mean for 2027 is too early to predict. Depends on the conflict. We don't know what will happen. For 2026, you can be for sure that we won't be affected in terms of cost.

Speaker #2: Depends on the conflict. And we don't know what will happen. But for 2026, you can be for sure that we won't be affected. In terms of cost.

Speaker #4: Thank you.

Christian Frenes: Thank you.

Speaker #3: Thank you, Christian. That brings us to the next question, which comes from Frank Biller from ABBW. Frank, please go ahead.

Rolf Woller: Thank you, Christian. Brings us to the next question, which comes to from Frank Biller from LBBW. Frank, please go ahead.

Frank Biller: Yes. Hello. Frank Biller from LBBW. Thanks for taking my question. It's about a possible divestment, thinking about Europcar's stake, or a floating of Traton. Are you also thinking of a divesture of maybe Ducati or Lamborghini IPO?

Speaker #7: Yes. Hello, Frank Biller from ABBW. Thanks for taking my question. It's about a possible divestment. Thinking about Avalanche stake or floating of Traton, or are you also thinking of divestiture of maybe Ducati or Lamborghini IPO?

Speaker #2: No, we were very transparent about our plans for Avalanche, and we are pretty confident that this is really a very good process, and it's progressing well.

Arno Antlitz: No. We were very transparent about our plans for Europcar, and we are pretty confident that this is a really very good process, and it's progressing well. In Traton, we always said we don't rule out the next step. We wanna increase the free float. We made the first step. Also Traton made some steps, for example, in terms of Sinotruk. These are the topics we decided on so far. We look at various alternatives for PowerCo. We open our capital structure there. Frank, please have understanding for that. We can only talk about topics like this once we have decided on.

Speaker #2: In Traton's, we always said we don't rule out the next step. We want to increase the fleet float. We made the first step. Also, Traton made some steps for example, in terms of Sinotruck.

Speaker #2: But these are the topics we decided on so far. We look at various alternatives for PowerCo. We open our capital structure there. But Frank, please have understanding for that.

Speaker #2: We can only talk about topics like this once we have decided on.

Speaker #6: But there is a clear intention. It's part of our program for the next steps of transformation. To reorder our investment portfolio, that's very clear.

Oliver Blume: There is a clear intention, and that's part of our program for the next steps of transformation, to re-reorder our investment portfolio. That's very clear to reduce complexity. That's, for example, why we kicked off last year the Bugatti deal at Porsche. That's just one example. Many others, we are working currently, but we won't go into details and speculations in terms of Ducati and Lamborghini. The activities are placed and we have clear priorities what we will take first and then step by step. Overall, reducing complexity is our goal.

Speaker #6: To reduce complexity. And that's, for example, why we kicked off last year the Bugatti deal at Porsche. That's one example. Many others we are working currently.

Speaker #6: But we won't go into details and speculations in terms of Ducati and Lamborghini. But the activities are placed, and we have clear priorities—what we will tackle first.

Speaker #6: And then step by step. But overall, reducing complexity is our goal.

Arno Antlitz: It is a good point. We always talk about Ducati and Lamborghini, these brands. We have 1,500 entities that we have in our books, fully consolidated and not fully consolidated. We need to reduce that complexity. We have so many layers. We have a lot of entities, and we need to reduce that complexity in order to achieve the cost savings that we need to achieve in order to be competitive.

Speaker #4: That is a good point. We always talk about Ducati and Lamborghini, these brands. We have 1,500 entities that we have in our books, fully consolidated.

Speaker #4: And not fully consolidated. And so we need to reduce that complexity. We have so many layers. We have a lot of entities. And we need to reduce that complexity in order to achieve the cost savings.

Speaker #4: That we need to achieve in order to be competitive.

Speaker #7: Yeah. Thank you.

Frank Biller: Yeah. Thank you.

Speaker #3: Thank you, Frank. And we move on to Steven Reitman. Steven, please go ahead.

Rolf Woller: Thank you, Frank. We move on to Steven Wright from.

Rolf Woller: Move on to Steven Wright from Bernstein.

Arno Antlitz: Steven, please go ahead.

Rolf Woller: Steven, please go ahead.

Speaker #8: Yes. Good morning. In the final spot interview, the article last week, there was also talk about reducing factor costs. Which I think was said to be about 4,500 euros at the moment.

Steven Wright: Yes. Good morning. In the Handelsblatt interview article last week, there was also talk about reducing factor costs, which I think was said to be about EUR 4,500 at the moment. You want to reduce that to EUR 3,000 in Europe. Could you comment on what the situation looks when you compare plants across Europe and how that also then compares to the situation in China and in other locations? Just give us some kind of rough feel for that. Thank you.

Steven Reitman: Yes. Good morning. In the Handelsblatt interview article last week, there was also talk about reducing factor costs, which I think was said to be about EUR 4,500 at the moment. You want to reduce that to EUR 3,000 in Europe. Could you comment on what the situation looks when you compare plants across Europe and how that also then compares to the situation in China and in other locations? Just give us some kind of rough feel for that. Thank you.

Speaker #8: And you want to reduce that to 3,000 euros. In Europe, could you comment on what the situation looks when you compare plans across Europe?

Speaker #8: And how does that also then compare to the situation in China? And in other locations? Just give us some kind of rough feel for that.

Speaker #8: Thank you.

Speaker #2: Yeah. First of all, that hasn't been an interview in 100+. But talking about the figures, that's a direction we want to go to. And we are very confident that we have turned to the right direction right now.

Oliver Blume: Yeah. First of all, that hasn't been an interview in Handelsblatt. But talking about the figures, that's a direction we want to go to. Yeah. We are very confident that we have turned to the right direction right now. Now, the first results, having reduced our plant cost in Germany over 20% last year. That's massive. Now, we haven't achieved this over the last 10 or 20 years. This in one year, 20%. That's not the end. Today, we can say that our plants in Eastern and in Western Europe are competitive to all the others are acting in Europe.

Speaker #2: The first results I'm having reduced our planned cost in Germany over 20% last last year. That's massive. We haven't achieved this over the last 10 or 20 years.

Speaker #2: And this in one year. 20%. And that's not the end. Today, we can say that our plans in Eastern and then Western Europe are competitive.

Speaker #2: To all the others, are acting in Europe. And therefore, we decided, for example, to bundle our urban car family in Spain and the ID.1 to come in Portugal.

Oliver Blume: Therefore, we decided, for example, to bundle our urban car family in Spain and the ID.1 to come in Portugal, on a very competitive plant level. In Germany, we still have our work ahead, but also very clear measures to reduce. A plant cost level per car of around EUR 3,000 is a feasible level comparing to the competition. In China, the level of plant cost is even lower. That's clear now because of labor costs and energy and everything around. This you can't compare with Europe now. For us, it's important to compare our situation in the different regions of the world. There we can confirm in Europe already, Western and Eastern on competitive level.

Speaker #2: On a very competitive plant level, in Germany, we still have our work ahead, but also very clear measures to reduce. And so, a planned cost level per car of around €3,000 is a feasible level compared to the competition.

Speaker #2: In China, they level of planned cost is even lower. That's clear. Because of labor cost and energy and everything around. But this you can't compare with Europe.

Speaker #2: And for us, it's important to compare our situation in the different regions of the world. And there, we can confirm in Europe already Western and Eastern on competitive level.

Speaker #2: In Germany, still work to do. On China, completely on a competitive level. And where we have also strong footprint in South America, we are working on a competitive level.

Oliver Blume: In Germany, still, work to do. On China, completely on a competitive level. Where we have also strong footprint in South America, we are working on a competitive level. Yeah. That's what we have to do. The 3,000 which was written there is an average, like a goal to go to.

Speaker #2: And that's what we have to do. And the 3,000, which was written there, is an average, like a goal to go to.

Arno Antlitz: We just got a question, a follow-up question on my remark on the number of entities and layers. I must confirm we are 100% convinced that we are the best owner of Lamborghini. Lamborghini is a integral part of Brand Group Progressive. There's a lot of synergies between the three brands there, and so that's not. Hopefully, you didn't kinda get it wrong. We clearly stick to the current setup in the Brand Group Progressive, including Lamborghini right now.

Speaker #3: Just got a question, a follow-up question on my remark on the number of entities and layers. And I must confirm, we are 100% convinced that we are the best owner of Lamborghini.

Speaker #3: Lamborghini is an integral part of brand group Progressive. There's a lot of synergies between the three brands there. And so let's not hopefully, it didn't get it wrong.

Speaker #3: So we clearly stick to the current setup in the Brand Group Progressive, including Lamborghini, right now.

Speaker #4: Thank you, Arno, for that clarification. We actually have Henning Kosman from Barclays, who is having difficulties asking his question. So he wrote me an email with two questions.

Rolf Woller: Thank you, Arno, for that clarification. There is, we have Henning Cosman from Barclays, actually, who has difficulties with asking the question, so he wrote me an email. Two questions. One is on, I think, Oli, can you update us on US localization? Is there a chance that localization would take Scout into considerations? If we would localize, would that be compensated within the EUR 160 billion investment budget for 2026 to 2030, so in the current planning round? The second question is for Arno, update on Everlance. There are obviously short listed PE names, if you would like to comment on that.

Speaker #4: One is on, I think, Oli, can you update us on US localization? Is there a chance that localization would take Scout into consideration? And if we would localize, would that be compensated within the €160 billion investment budget for 2026 to 2030?

Speaker #4: So in the current planning round. And the second question is for Arno. Update on Avalanche. There are obviously shortlisted PE names. If you would like to comment on that.

Speaker #4: And Capital Allocation from Proceeds of the potential sale of Avalanche if this is still true that this is in line with our current dividend policy.

Rolf Woller: Capital allocation from proceeds of the potential sale of Everlance, if this is still true, that this is in line with our current dividend policy, and if the potential proceeds are included in the cash flow forecast?

Speaker #4: And if the potential proceeds are included in the cash flow forecast.

Speaker #2: Yeah. Let me start with the first question in terms of US localization. With the Scout plant, we have great opportunities. Making good progress. We are in line with our milestones.

Oliver Blume: Yeah. Let me start with the first question in terms of US localization. With the Scout plant, we have great opportunities, making good progress. We are in line with our milestones, and the capacity also provides opportunities for other brands of Volkswagen Group. We are not at the point today to communicate what are the concrete plans. In terms of more capacities in the US, we are still in contact with different states. At the end, this depends in terms also support, we are getting there, and there stick to my position.

Speaker #2: And the capacity also provides opportunities for other brands of Volkswagen Group. But we are not at the point today to communicate what are the concrete plans.

Speaker #2: In terms of more capacities, in the US, we are still in contact with different states. But at the end, this depends in terms also support.

Speaker #2: We are getting there. And there are stick to my position. We can't do both paying high tariffs on the one hand side and on the other side heavily invest in new capacities.

Oliver Blume: We can't do both, paying high tariffs, on the one hand side and on the other side, heavily invest in new capacities. There are some states interested in our investment, but at the end, the balance in between support and investment is important. We plan step by step. First, now ramping up the Scout capacities, maybe using them for other brands of Volkswagen Group and then thinking to the next step. Our goal is clear to improve the local footprint in the US, as having the US as a opportunity market for the future.

Speaker #2: And so, there are some states interested, and in our investment. But at the end, the balance between support and investment is important. And so, we plan step by step—first, now ramping up the Scout capacities.

Speaker #2: Maybe using them for other brands of Volkswagen Group. And then thinking to the next step. But our goal is clear. To improve the local footprint in the US.

Speaker #2: Having the US as a opportunity market for the future.

Arno Antlitz: Regarding Everlance, just to say this is a great company with a strong position in the market, convincing strategy, and in consequence, the interest is very strong. I obviously cannot comment on specific steps of the process. What we said, we wanna sell the majority, and the process is very well underway. The potential process are not included in the cash flow. This is what we always made very clear. Please also have understanding that we decide on a dividend towards the end of the year, taking all the factors into account, and this is then decided on by the group board and management and supervisory board.

Speaker #4: And regarding Avalanche, just to say this is a great company with a strong position in the market. Convincing strategy. And, in consequence, the interest is very strong.

Speaker #4: I obviously cannot comment on specific steps of the process. What we said, we want to sell the majority and the process is very well underway.

Speaker #4: The potential process is not included. In the cash flow, this is what we always made very clear. And this also has the understanding that we decide on a dividend towards the end of the year.

Speaker #4: Taking all the factors into account, this is then decided on by the Group Board, and Management and Supervisory Board, and this is too early to commit on now.

Arno Antlitz: This is too early to commit on now, specificities on the dividend.

Speaker #4: Specificities on the dividend.

Speaker #3: Thank you, Arno. And Henning, I hope this has answered all your questions. Coming to the last best for last, it would be Harald from Citi.

Rolf Woller: Thank you, Arno and Henning. I hope this has answered all your questions. Coming to the last, best for last, it would be Harald from Citi. Harald, please go ahead. Let me bring you up on stage.

Speaker #3: Harald, please go ahead. Let me bring you up on stage. And now we should.

[Analyst] (Citi): Rolf, can you hear me okay?

Harald Hendrikse: Rolf, can you hear me okay?

Speaker #4: Rob, can you hear me OK?

Rolf Woller: Yes. Yes. Now we can hear you.

Speaker #3: Yes. Yes. Now we can.

[Analyst] (Citi): Perfect. Yeah. Slightly difficult question again, and I, you know, I don't like the short-term ones. Interesting conversation in relation to Horst question earlier with regard to IAA. The market's largely ignored that.

Harald Hendrikse: Perfect. Yeah. Slightly difficult question again, and I, you know, I don't like the short-term ones. Interesting conversation in relation to Horst question earlier with regard to IAA. The market's largely ignored that.

Speaker #4: Perfect. Yeah. So slightly difficult question again. And I don't like the short-term ones. But interesting conversation in relation to Horst's question earlier with regard to IAA.

Speaker #4: The market's largely ignored that. And by the way, just wanted to congratulate you on the incredible work you're doing in what is, I think, the most challenging cycle that I have seen in this industry.

[Analyst] (Citi): By the way, just wanted to congratulate you on the incredible work you're doing in what is, I think, the most challenging cycle that I have seen in this industry. As you know, I've been around probably as long as most of you. But with relation to policy and IAA specifically, first question, how do you see the IAA impacting on the potential fleet sales for Chinese OEMs? How restrictive do you think the IAA Made in Europe policy might be? I suspect you're closer to that than we are, and I'd love to understand that better because I think there is some potential there. Secondly, same question, but with relation to other policy, you're seeing some German government now looking to subsidize industrial electricity. You've seen, the EU protecting the steel industry much more carefully.

Harald Hendrikse: By the way, just wanted to congratulate you on the incredible work you're doing in what is, I think, the most challenging cycle that I have seen in this industry. As you know, I've been around probably as long as most of you. But with relation to policy and IAA specifically, first question, how do you see the IAA impacting on the potential fleet sales for Chinese OEMs? How restrictive do you think the IAA Made in Europe policy might be? I suspect you're closer to that than we are, and I'd love to understand that better because I think there is some potential there. Secondly, same question, but with relation to other policy, you're seeing some German government now looking to subsidize industrial electricity. You've seen, the EU protecting the steel industry much more carefully.

Speaker #4: And as you know, I've been around probably as long as most of you. So but with relation to policy and IAA specifically, first question.

Speaker #4: How do you see the IAA impacting the potential fleet sales for Chinese OEMs? How restrictive do you think the IAA 'Made in Europe' policy might be?

Speaker #4: I suspect you're closer to that than we are. And I'd love to understand that better because I think there is some potential here. And then secondly, same question, but with relation to other policy, you're seeing some German government now looking to subsidize industrial electricity.

Speaker #4: You've seen the EU protecting the steel industry much more carefully. To what degree should we hope I always want to hope and I'm always disappointed.

[Analyst] (Citi): To what degree should we hope? You know, I always want to hope, and I'm always disappointed, but to what degree should we hope that the EU or the European governments will actually start to try to finally start to help this industry? Hope you understand where my question's coming from.

Harald Hendrikse: To what degree should we hope? You know, I always want to hope, and I'm always disappointed, but to what degree should we hope that the EU or the European governments will actually start to try to finally start to help this industry? Hope you understand where my question's coming from.

Speaker #4: But to what degree should we hope that the EU, or the European governments, will actually start to try to finally—finally—start to help this industry?

Speaker #4: So hope you understand where my question's coming from.

Speaker #2: Yeah. And in terms of the Made in Europe policy from the European Commission, it hasn't been completely fixed yet. But it is a European interest policy.

Oliver Blume: Yeah. In terms of the Made in Europe policy from the European Commission, it hadn't been already fixed completely, it is a European interest politic which we support. This starts with a European production footprint, but then also to have different levels for components. Yeah. Therefore, this has to be carefully balanced. I also agree that at the end, the different regions could be comparable. What we see in other regions should happen in Europe, then you have a fair competition. Yeah. This has to be worked out.

Speaker #2: Which we support. And this starts with a European production footprint, but then also to have different levels for components. Yeah. And therefore, this has to be carefully balanced.

Speaker #2: And I also agree that, at the end, the different regions could be comparable. What we see in other regions should happen in Europe. And then you have fair competition.

Speaker #2: Yeah. And this has to be worked out. Hardware components, focusing also on battery cells, battery systems. But at the end also in electric electronics, what could be included.

Oliver Blume: Hardware components, focusing also on battery cells, battery systems, but at the end, also in electric electronics, what could be included. We feel ourselves well-prepared in Europe as a European player. We expect, there, fair or better conditions in terms of trade comparing with the competition. Energy is an important point. There, I think, should be important to focus also on the most important industries. For example, the battery industry right now in Germany, for example, is excluded from the energy regulations. That's for me a wrong decision.

Speaker #2: And we feel ourselves well prepared in Europe as a European player. And we expect there fair or better conditions in terms of trade, comparing with the competition.

Speaker #2: Energy is a important point. And there I think it should be important to focus also on the most important industries. For example, the battery industry right now in Germany, for example, is excluded from the energy regulations.

Speaker #2: And that's, for me, a wrong decision. They have to expand the energy regulations also for battery brands, because the battery industry is a crucial one for Germany and Europe.

Oliver Blume: They have to expand the energy regulations also for battery plants because the battery industry is a crucial one for Germany and Europe, and this has to be supported. All right. Battery manufacturing or production is high energy intensive, and therefore, I think they have to adapt the regulations. That's only one example. At the end, energy counts for all, also for the charging infrastructure. That's what we see in other regions of the world or where the energy is on a very low level. The customer is calculating and switching to.

Speaker #2: And this has to be supported. Battery manufacturing or production is high energy intensive. And therefore I think they have to adapt the regulations. That's only one example.

Speaker #2: And at the end, energy counts for all, also for the charging infrastructure. That's what we see in other regions of the world where the energy is on a very low level.

Speaker #2: So the customer is calculating and switching to battery electric vehicles. And there we still have something to do, especially in Germany.

[Analyst] (Citi): Right

Oliver Blume: battery electric vehicles. There we still have something to do, especially in Germany.

Harald Hendrikse: Right

Oliver Blume: battery electric vehicles. There we still have something to do, especially in Germany.

Speaker #4: OK. Thank you.

[Analyst] (Citi): Okay. Thank you.

Harald Hendrikse: Okay. Thank you.

Oliver Blume: Thank you.

Speaker #3: Thank you, Harald. Thank you all actually for a very lively discussion. A lot to ask and a lot to debate. Clearly, you see that Volkswagen is moving ahead.

Rolf Woller: Thank you, Harald. Thank you all actually for a very lively discussion. A lot to ask, a lot to debate. Clearly we see that Volkswagen is moving ahead. This concludes the Q&A session for the investor and analyst call for today. If anything was left unanswered, please contact the IR team here in Wolfsburg. They are really happy that you're keeping them employed. After a short break of about five minutes, we will continue with the media Q&A at about, I would say 10:40, 10:42, something like that. Thank you.

Speaker #3: This concludes the Q&A session for the investor and analyst call for today. If anything was left unanswered, yeah, please contact the R team here in Wolfsburg.

Speaker #3: They're really happy that you're keeping them employed. And after a short break of about five minutes, we will then continue with the media Q&A at about, I would say, 10:40, 10:42, something like that.

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