Q2 2026 Mercedes-Benz Group AG Earnings Call

July 28, 2026

Operator: Welcome to the Mercedes-Benz Conference Call. At the request of our customers, this conference call will be recorded. A replay of the call will be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. The short introduction will be followed directly by a Q&A session. If you are connected online and listening via the web interface, please click the telephone handset button and then the raise hand icon. This will allow you to ask your question verbally as well. If you have joined by telephone and would like to ask a question, please dial star nine key pound on your telephone keypad. You will hear the announcement your question has been received. If you would like to withdraw your question, please dial star three key pound. You will hear the announcement your question has been withdrawn. Once you hear the announcement, you may now speak.

Operator: Welcome to the Conference Call of Mercedes-Benz. At the request of our customers, this conference call will be recorded. A replay of the call will be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website. The short introduction will be followed directly by a Q&A session. If you are connected online and listening via the web interface, please click the telephone handset button and then the raise hand icon. This will allow you to ask your question verbally as well. If you have joined by telephone and would like to ask a question, please dial star nine key pound on your telephone keypad. You will hear the announcement your question has been received. If you would like to withdraw your question, please dial star three key pound. You will hear the announcement your question has been withdrawn.

Speaker #1: This call of Mercedes-Benz is at the request of our customers. This conference call will be recorded. A replay of the call will be available as an on-demand audio webcast in the Investor Relations section of the Mercedes-Benz website.

Speaker #1: The short introduction will be followed directly by a Q&A session. If you are connected online and listening via the web interface, please click the telephone handset button and then the raised-hand icon.

Speaker #1: This will allow you to ask your question verbally as well. If you have joined by telephone and would like to ask a question, please dial star 9, then the pound key, on your telephone keypad.

Speaker #1: You will hear the announcement: "Your question has been received." If you would like to withdraw your question, please dial star, 3, then pound. You will hear the announcement: "Your question has been withdrawn."

Speaker #1: Once you hear the announcement, you may now speak. You can ask your question. After your question has been answered, your line will be muted again.

Operator: Once you hear the announcement, you may now speak. You can ask your question. After your question has been answered, your line will be muted again. You will be called upon by the moderator. Please bear with us for a moment while we register your questions. I would like to remind you that this teleconference is governed by the safe harbor wording included in our published results documents. Please note that our presentation contains forward-looking statements, which reflect management's current views with respect to future events. Such statements are subject to various risks and uncertainties.

Operator: You can ask your question. After your question has been answered, your line will be muted again. You will be called upon by the moderator. Please bear with us for a moment while we register your questions. I would like to remind you that this teleconference is governed by the safe harbor wording included in our published results documents. Please note that our presentation contains forward-looking statements, which reflect management's current views with respect to future events. Such statements are subject to various risks and uncertainties. If any of the assumptions underlying these statements prove to be incorrect, actual results may differ materially from those expressed or implied. Forward-looking statements speak only to the date on which they are made. With that, I would now like to hand over to Steffen Scheun, Head of Mercedes-Benz Investor Relations, Digital and Communications. Thank you very much.

Speaker #1: You will be called upon by the moderator. Please bear with us for a moment while we register your questions. I would like to remind you that this teleconference is governed by the Safe Harbor wording included in our published results documents.

Speaker #1: Please note that our presentation contains forward-looking statements, which reflect management's current views with respect to future events. Such statements are subject to various risks and uncertainties.

Speaker #1: If any of the assumptions underlying these statements prove to be incorrect, actual results may differ materially from those expressed or implied. Forward-looking statements speak only as of the date on which they are made.

Operator: If any of the assumptions underlying these statements prove to be incorrect, actual results may differ materially from those expressed or implied. Forward-looking statements speak only to the date on which they are made. With that, I would now like to hand over to Steffen Scheun, Head of Mercedes-Benz Investor Relations, Digital and Communications. Thank you very much.

Speaker #1: With that, I would now like to hand over to Christina Schenk, Head of Mercedes-Benz Investor Relations, Digital and Communications. Thank you very much.

Speaker #2: Good morning, ladies and gentlemen. This is Christina speaking. On behalf of Mercedes-Benz, I would like to welcome you, both on the telephone and online, to our Q2 results conference call.

Steffen Scheun: Good morning, ladies and gentlemen. This is Steffen speaking. On behalf of Mercedes-Benz, I would like to welcome you both on the telephone and online to our Q2 results conference call. I'm very pleased to have with me today Ola Källenius, our CEO, and Harald Wilhelm, our CFO. To allow more time for your questions, Ola will give a brief introduction, and Harald will walk you through our financials. We will then move directly into our Q&A session. The corresponding presentation is available on the Mercedes-Benz Investor Relations website and can also be accessed via the webcast in the web interface. With that, I will now hand over to Ola.

Christina Schenck: Good morning, ladies and gentlemen. This is Steffen speaking. On behalf of Mercedes-Benz, I would like to welcome you both on the telephone and online to our Q2 results conference call. I'm very pleased to have with me today Ola Källenius, our CEO, and Harald Wilhelm, our CFO. To allow more time for your questions, Ola will give a brief introduction, and Harald will walk you through our financials. We will then move directly into our Q&A session. The corresponding presentation is available on the Mercedes-Benz Investor Relations website and can also be accessed via the webcast in the web interface. With that, I will now hand over to Ola.

Speaker #2: I'm very pleased to have with me today Ola Källenius, our CEO, and Harald Wilhelm, our CFO. To allow more time for your questions, Ola will give a brief introduction and Harald will walk you through our financials.

Speaker #2: We will then move directly into our Q&A session. The corresponding presentation is available on the Mercedes-Benz Investor Relations website and can also be accessed via the webcast in the web interface.

Speaker #2: And with that, I will now hand over to Ola.

Speaker #3: Thank you, Christina, and good morning, everybody. Welcome. We delivered solid results in the second quarter, in spite of a dynamic business environment—from macro and geopolitical headwinds to softer consumer sentiment and intense competition in China.

Ola Källenius: Thank you, Steffen. Good morning, everybody. Welcome. We delivered solid results in Q2 in spite of a dynamic business environment, from macro and geopolitical headwinds to softer consumer sentiment and intense competition in China. You can see this reflected in the financial results. Nevertheless, we remained on track in H1 of the year. I think all in all, we have shown the ability to adapt, execute, and succeed as a team. We will definitely carry this mindset into H2 of the year. Let's have a quick look at what happened in Q2. Our product and technology launch program is gaining momentum. The latest premieres that we have shown to the world was the AMG GT four-door coupe, as well as the GLS Maybach.

Speaker #3: You can see this reflected in the financial results. Nevertheless, we remained on track in the first half of the year. And I think, all in all, we have shown the ability to adapt, to execute, and to succeed as a team.

Speaker #3: We will definitely carry this mindset into the second half of the year. Let's have a quick look at what happened in Q2. Our product and technology launch program is gaining momentum.

Speaker #3: The latest premieres that we have shown to the world were the AMG GT four-door coupe as well as the GLS Maybach. We have started the sales of the C-Class battery electric vehicle, the GLE, the GLS, the one-of-a-kind VLE, and also that AMG GT has now also started sales.

Ola Källenius: We have started the sales of the C-Class battery electric vehicle, the GLE, the GLS, the one of a kind VLE, and also that AMG GT has now also started sales. If we look at the feedback and response so far, very positive, not only from product media experts, dealers, but primarily in the community and amongst Mercedes fans. If you read test results from comparison tests on products, most of those in the established product media are won by Mercedes'. We want to seize also next to our automotive business, some opportunities in the defense sector. If you look at the technology that is underpinning this launch offensive, I want to highlight three things. To start with on the powertrain side, we have now started the production of the new axial flux motor that really redefines BEV performance.

Speaker #3: And if we look at the feedback and response so far, it's been very positive—not only from product media, experts, and dealers, but primarily in the community and among Mercedes fans.

Speaker #3: And if you read test results from comparison tests on products, most of those in the established product media are won by Mercedes. And we want to seize, also next to our automotive business, some opportunities in the defense sector.

Speaker #3: If you look at the technology that is underpinning this launch offensive, I want to highlight three things. To start with, on the powertrain side, we have now started the production of the new axial flux motor that really redefines BEV performance.

Speaker #3: It is a USP that no other manufacturer in the world possesses. We're also the ones that ventured out, developing a brand new, from the ground up, high-tech, electrified V8—EU7-ready—that will take that technology to the next level.

Ola Källenius: It is a USP that no other manufacturer in the world possesses. We're also the ones that ventured out developing a, from the ground up, brand new V8, high-tech electrified V8, Euro 7-ready, that will take that technology to the next level. On the powertrain side, we're well-positioned for both BEV growth and maintain our strong position on ICE. MB.OS is coming to fruition. The beauty of MB.OS, it is a platform. We can roll it out in all our vehicles, not just on the BEV side. I think that's what people expect. I believe that the new S-Class that we have also just brought into the market is the first fully software-defined vehicle on the high-tech ICE side. MB.OS will be in every single Mercedes going forward. One highlight of that MB.OS is ADAS. We already last year introduced our AI-based point-to-point assisted driving in China.

Speaker #3: So on the powertrain side, we're well positioned for both BEV growth and to maintain our strong position on ICE. MB.OS is coming to fruition.

Speaker #3: The beauty of MBOS is that it is a platform. We can roll it out in all our vehicles, not just on the BEV side. I think that's what people expect.

Speaker #3: But I believe that the new S-Class that we have also just brought into the market is the first fully software-defined vehicle on the high-tech ICE side.

Speaker #3: So MBOS will be in every single Mercedes going forward. One highlight of that MBOS is ADAS. We already, last year, introduced our AI-based point-to-point assisted driving in China.

Speaker #3: We then continued with the US and are rolling out step by step in the US. And we believe that by the end of this year, or beginning of next year, we can bring this point-to-point technology also within the new European legislation.

Ola Källenius: We then continued with the US and are rolling out step by step in the US. We believe that by the end of this year, beginning of next year, we can bring this point-to-point technology also within the new European legislation. Here, in terms of a global play on ADAS, we are at the forefront of what's happening on the technological side. If we switch to the industrial side, at the same time, we're strengthening our resilience and our competitiveness. We have launched a global productivity initiative with a special focus on Germany. We want to significantly speed up processes, streamline structures, and improve the competitive cost position. One good example of that is the opening of our expanded plant in Kecskemét in Hungary, which we did only a couple of weeks ago, doubling the capacity of that plant.

Speaker #3: So here, in terms of a global play on ADAS, we are at the forefront of what's happening on the technological side. If we switch to the industrial side, at the same time, we're strengthening our resilience and our competitiveness.

Speaker #3: We have launched a global productivity initiative, with a special focus on Germany. We want to significantly speed up processes, streamline structures, and improve our competitive cost position.

Speaker #3: One good example of that is the opening of our expanded plant in Kecskemét in Hungary, which we did only a couple of weeks ago.

Speaker #3: Doubling the capacity of that plant allows us to shift products to this attractive site: the new electric C-Class, the new electric GLC, and also the upcoming compact G. It is our goal to make the production network more resilient, efficient, and competitive.

Ola Källenius: That allows us to ship products to this attractive site, new electric C-Class, new electric GLC, and also the upcoming compact G. It is our goal to make the production network more resilient, efficient, and competitive. Moving over to the numbers. For the group, revenue slightly below last year at EUR 32 billion, an EBIT as booked, and Harald will get into the financials in more detail here in a minute, at EUR 1.5 billion, which is 22% above last year. I want to highlight that in spite of the dynamic, challenging environment that I described, we generated EUR 1.1 billion in free cash flow, which is a combination of the operating activities as well as M&A. In spite of giving shareholders EUR 5 billion in return as a combination of dividend and share buybacks, the net industrial liquidity is still sitting at a healthy EUR 30 billion.

Speaker #3: Moving over to the numbers: for the Group, revenue was slightly below last year at €32 billion, and EBIT as booked. Harold will get into the financials in more detail here in a minute.

Speaker #3: At €1.5 billion, which is 22% above last year, I want to highlight that in spite of the dynamic, challenging environment that I described, we generated €1.1 billion in free cash flow.

Speaker #3: This is a combination of the operating activities as well as M&A. And in spite of giving shareholders €5 billion in return as a combination of dividend and share buybacks, the net industrial liquidity is still sitting at a healthy €30 billion.

Speaker #3: If we drill down a little bit on the sales side, I think it's a tale of two worlds. On the one hand, we saw the Chinese market as a whole drop by about 20%.

Ola Källenius: If we drill down a little bit on the sales side, I think it's a tale of two worlds. On the one hand, we saw the Chinese market as a whole drop by about 20%, which is, of course, a significant reset in the world's biggest market. This affected us. In China, we had a significant reduction of our sales in the period. We could, in the H1, in all markets without China, increase our sales by 2%, which certainly wasn't a given considering the business environment. In relative terms, I think we're doing well there. You can see a clear sign here in these numbers of the second generation battery electric vehicles, which were up 51%, driven by Europe, up 87%.

Speaker #3: Which is, of course, a significant reset in the world's biggest market. This affected us. So, in China, we had a significant reduction of our sales in the period.

Speaker #3: But we could, in the first half of the year, in all markets without China, increase our sales by 2%. Which certainly wasn't a given considering the business environment.

Speaker #3: And in relative terms, I think we're doing well there. You can see a clear sign here in these numbers of the second-generation battery electric vehicles.

Speaker #3: Which were up 51%, driven by Europe up 87%. We have an extremely strong order intake, particularly in Europe, on this side, and are looking forward to ramping those BEVs in the second half of the year.

Ola Källenius: We have an extremely strong order intake, particularly in Europe, on this side, and are looking forward to ramping those BEVs in the H2. With that, I'm going to hand over to Harald, who will dig deeper into the financials. Over to you, Harald.

Speaker #3: And with that, I'm going to hand over to Harold, who will go deeper into the financials. Over to you, Harold.

Speaker #2: Thank you. And hello, everybody. So let's continue now with the car financials. As I explained to sales already before, the revenue developed slightly better than the sales.

Harald Wilhelm: Thank you, Ola. Hello, everybody. Let's continue now with the CAR financials. Ola explained the sales already before. The revenue developed slightly better than the sales. That was supported by growth outside China. On the ASP, we see a lower-than-prior year quarter. That's driven by net pricing and unfavorable FX. Return on sales adjusted at 4%, and we'll go into that in more detail on the next page. On the EBIT bridge. In the Q2, CARS delivered an adjusted EBIT of around EUR 900 million and an adjusted return on sales of 4% within our full year guidance range of 3% to 5%. Globally, the volume effect was fairly neutral, and the main headwinds within the top-line bucket were the following. In order of magnitude, net pricing, higher cost for product life cycle measures, lower part supplies to our joint venture in China.

Speaker #2: That was supported by growth outside China. On the ASP, we see a lower result than in the prior-year quarter. That's driven by net pricing and unfavorable effects.

Speaker #2: Return on sales adjusted at 4%, and we will go into that in more detail on the next page. On the EBIT bridge, in the second quarter, Cars delivered an adjusted EBIT of around €900 million.

Speaker #2: And an adjusted return on sales of 4%, within our full-year guidance range of 3% to 5%. Globally, the volume effect was fairly neutral.

Speaker #2: And the main headwinds within the top line bucket were the following: in order of magnitude—net pricing; higher cost for product lifecycle measures; and lower parts supplies to our joint venture in China.

Speaker #2: So basically, you can see that the majority of the items are related to the development in China in the second quarter. On the other side, you can see on the chart very well, the industrial performance was clearly positive.

Harald Wilhelm: Basically, you can see that the majority of the items are related to the development in China in the Q2. On the other side, you can see on the chart very well, the industrial performance was clearly positive as we continue to see operational efficiencies in purchasing and manufacturing, while raw mats were fairly neutral. The selling expenses reflect effects from the rollout of our direct sales model in Korea, as well as campaigns in line with our ongoing product launches. The R&D contributed positively following our funding peak in 2025. The other bucket includes a risk provision related to shareholder commitments and a lower BBAC at equity result. On the sizable adjustments on the page here, they mainly reflect valuation adjustments related to our investments in China in line with the market development we could observe in the Q2.

Speaker #2: As we continue to see operational efficiencies in purchasing and manufacturing, while raw mats were fairly neutral, the selling expenses reflect effects from the rollout of our direct sales model in Korea.

Speaker #2: As well as campaigns in line with our ongoing product launches. The R&D contributed positively following our funding peak in 2025. The other bucket includes the risk provision related to shareholder commitments.

Speaker #2: And a lower BBAC at-equity result. And on the sizable adjustments on the page here, they mainly reflect valuation adjustments related to our investments in China, in line with the market developments we could observe in the second quarter.

Speaker #2: The remainder of the adjustment refers to the update on legal restructuring and M&A transactions. Looking at the cash flow, following a strong Q1, Cars achieved an adjusted CFBIT of half a billion.

Harald Wilhelm: The remainder of the adjustment refers to the update on legal restructuring and M&A transactions. Looking at the cash flow. Following a strong Q1, CARS achieved an adjusted EBIT of a half a billion. Networking capital was a headwind. That was a result of heavier inventory as we are equipping our sales network with recently launched products such as the S-Class. It is basically the structure within the inventory which went up. On the other side, paying payables benefited from the production ramp-up of the new products. Investments and depreciations are rather balanced. On the other bucket, you can see that besides the BBAC dividend, the other bucket includes the reversal of the BBAC at equity result and the valuation adjustments I just mentioned before, as well as cash outs for bonus payment.

Speaker #2: Net working capital was a headwind. That was a result of heavier inventory, as we're equipping our sales network with recently launched products such as the S-Class.

Speaker #2: So it's basically the structure within the inventory which went up. On the other side, payables benefited from the production ramp-up of the new products.

Speaker #2: Investments and depreciations are rather balanced. And then, in the other bucket, you can see that, besides the BBAC dividend, the other bucket includes the reversal of the BBAC at-equity result.

Speaker #2: And the valuation adjustments mentioned before, as well as cash outs for bonus payments. Looking on the van side, sales developed rather stable at around 94,000 units.

Harald Wilhelm: Looking on the van side, sales developed rather stable at around 94,000 units. The overall market environment remained competitive and volatile in Q2, with continued softer consumer demand for midsize vans in China. These headwinds were largely offset by strong sales development across our core regions, with a healthy growth in Europe and a strong momentum in North America, particularly the US. xEVs remained a key growth factor, up 46% year-on-year, lifting the global xEV share to 11%. Revenue are slightly up at EUR four and a half billion. EBIT adjusted stands at around EUR 450 million. We go into that as well in the bridge, next page. On the cash flow side, we see the adjusted cash flow develop in line with our expectation and continues to reflect our planned investments into the new van architecture.

Speaker #2: The overall market environment remained competitive and volatile in Q2, with continued softer consumer demand for midsize vans in China. These headwinds were largely offset by strong sales development across our core regions.

Speaker #2: We saw healthy growth in Europe, and strong momentum in North America, particularly in the U.S. Events remained a key growth factor, up 46% year-on-year.

Speaker #2: Lifting the global XCV share to 11%. Revenues are slightly up at $4.5 billion. Adjusted EBIT stands at around $450 million. We will go into that as well on the bridge on the next page.

Speaker #2: On the cash flow side, we see the adjusted cash flow developed in line with our expectation, and this continues to reflect our planned investments into the new van architecture.

Harald Wilhelm: As anticipated, investments are expected to peak this year, strategically preparing the business well for the future. With this, we are currently executing the largest product investment program in the history of our vans business. A key milestone in that respect was the start of series production of the all-new electric VLE in Vitoria in June. The VLE is now available for order in selected markets and marks the beginning of a new generation of vans. Looking ahead, we will further expand the lineup with the VLS and the VLS Maybach, along a broad range of private and commercial derivatives built on this highly flexible architecture. Coming to the EBIT bridge for vans. The EBIT adjusted at EUR 450 million. Once again, a benchmark double-digit return sales of 10.2%. Let me guide you briefly through the buckets.

Speaker #2: As anticipated, investments are expected to peak this year, strategically preparing the business for the future. With this, we are currently executing the largest product investment program in the history of our vans business.

Speaker #2: A key milestone in that respect was the start of serious production of the all-new electric VLE in Victoria in June. The VLE is now available for order in selected markets and marks the beginning of a new generation of vans.

Speaker #2: Looking ahead, we will further expand the lineup with the VLS and the VLS Maybach, along with a broad range of private and commercial derivatives built on this highly flexible architecture.

Speaker #2: Now, coming to the EBIT bridge for Vans. So, the EBIT adjusted was €450 million—once again, a benchmark double-digit return on sales of 10.2%.

Speaker #2: Let me guide you briefly through the buckets. So, the volume structure and pricing is a function of higher ex-China sales and the positive contribution from aftersales.

Harald Wilhelm: The volume structure pricing is a function of higher ex China sales, the positive contribution from after sales, as well as positive effects from the leasing portfolio. That was partially offset by a lighter product mix, driven by the end of life cycle sales for Citan and T-Class, as well as strong eSprinter sales in the lower V-Class volumes. In the bucket, we also have a softer net pricing. On the industrial performance, we can see ramp-up cost for the new van architecture and product-related measures. Positive effects come from R&D, driven by further efficiencies and optimized spending for existing model range. Looking at financial services. First, I would like to say the new setup with one integrated customer unit on the sales side has been in place since the beginning of the year and is proving to work really well.

Speaker #2: As well as the leasing portfolio. That was partially offset by a lighter product mix, driven by the end-of-life-cycle sales for Citan and T-Class, as well as strong eSprinter sales and lower V-Class volumes.

Speaker #2: In the bucket, we also have a softer net pricing. On the industrial performance, we can see ramp-up costs for the new van architecture and product-related measures.

Speaker #2: Positive effects come from R&D driven by further efficiencies and optimized spending, while existing model range. Looking at Financial Services, first I would like to say the new setup with one integrated customer unit on the sales side has been in place since the beginning of the year.

Speaker #2: And it is proving to work really well. As a result, we saw new business flat year-on-year, as a higher penetration rate offset lower car sales.

Harald Wilhelm: As a result, we saw new business flat year-on-year as a higher penetration rate offset lower car sales. The portfolio remained rather stable. Profit-wise, MBFS delivered a strong result with adjusted EBIT increasing 70% to close to EUR 500 million and adjusted return sales of 15.3%. This was driven by a continued positive development in the portfolio margin, lower cost of credit risk supported by a stronger portfolio quality, and further efficiency gains from the integrated setup and our personal cost program. If we look now on the group side, let's bring the divisional results and the group together in terms of the group EBIT. Cars, vans, financial services, I explained already before. What's inside the recon? That's positively driven by the Daimler Truck at equity gains, and positive effects from the first disposals, which we did in Q2.

Speaker #2: The portfolio remained rather stable. Profit-wise, MBFS delivered a strong result, with adjusted EBIT increasing 70% to close to €500 million and an adjusted return on sales of 15.3%.

Speaker #2: This was driven by a continued positive development in the portfolio margin. Lower cost of credit risks, supported by a stronger portfolio quality, and further efficiency gains from the integrated setup and our personnel cost program.

Speaker #2: If we look now on the group side, let's bring the divisional results and the group together. In terms of the group EBIT—so, cars, vans, financial services—I explained already before.

Speaker #2: So, what's inside the recon that's positively driven by the Daimler Truck at equity gains, and positive effects from the first disposals which we did in Q2.

Speaker #2: This results in a solid EBIT adjusted of €2.3 billion. And then we had some major adjustments in the second quarter. I mentioned already the valuation adjustments related to our China investments.

Harald Wilhelm: This results in a solid EBIT adjusted of EUR 2.3 billion. Then we had some major adjustments in the Q2. I mentioned already the valuation adjustments related to our China investments. On top of that, we had further adjustments for some restructuring charges associated with our personal cost reduction program, as well as legal proceedings. As well, on the M&A side, we had some adjustments mainly related to the sale of our own operations in Germany and Athlon following its reclassification as asset held for sale. That makes the group EBIT at EUR 1.5 billion reported. Looking on the cash flow, cars and vans were explained already before. Income taxes at EUR 170 million. Interest contributions EUR 350. The other recon is positive, and that mainly reflects the first monetization of Daimler Truck stake, contributing EUR 417 million, as well as the Daimler Truck divvy of EUR 338 after tax.

Speaker #2: On top of that, we had further adjustments for some restructuring charges associated with our personnel cost reduction program, as well as legal proceedings. Also, on the M&A side, we had some adjustments, mainly related to the sale of our own operations in Germany.

Speaker #2: And Adlon, following its reclassification as asset held for sale. That makes the group EBIT €1.5 billion reported. Looking at the cash flow, cars and vans were explained already before.

Speaker #2: Income taxes at €170 million. Interest contributions €350 million. So the other recon is positive, and that mainly reflects the first monetization of the Daimler Truck stake, contributing €417 million, as well as the Daimler Truck divvy of €338 million after tax.

Speaker #2: And with that, we have free cash flow at a solid €1.1 billion in that quarter. Looking at the balance sheet overall, I mean, solid cash generation in the first half of €3 billion.

Harald Wilhelm: And with that, we have a free cash flow at a solid EUR 1.1 billion in that quarter. Looking at the balance sheet. Overall, solid cash generation in the H1 of EUR 3 billion. Following the AGM in April, we paid the divvy of EUR 3.3 billion. In June, we completed the share buyback with approximately EUR 1.7 in H1, there was EUR 1.3 in the Q2. And with that, the total cash return to shareholders sits at EUR 5 billion for H1. And even after that, the NIL is healthy at EUR 30 billion. Now looking forward, we start with the divisional guidances for 2026. Please refer to the disclaimer regarding forward-looking statements at the end of this presentation in relation to the outlook. The conflict in the Middle East continues to add uncertainty to an already highly uncertain global economic and automotive market environment.

Speaker #2: Following the AGM in April, we paid the dividend of €3.3 billion. In June, we completed the share buyback with approximately €1.7 billion in H1, of which €1.3 billion was in the second quarter. With that, the total cash return to shareholders sits at €5 billion for H1.

Speaker #2: And even after that, the NIL is healthy at $30 billion. Now, looking forward, we started with a divisional guidance for 2026. Please refer to the disclaimer regarding forward-looking statements at the end of this presentation.

Speaker #2: In relation to the outlook, the conflict in the Middle East continues to add uncertainty to an already highly uncertain global economic and automotive market environment.

Speaker #2: With respect to potential impacts on material, raw material and energy prices, inflation, and market demand, the outlook could fully re-escalate in the second half of the year.

Harald Wilhelm: With respect to potential impacts on material, raw material, and energy prices, inflation, and market demand, the outlook assumes that the conflict will not fully re-escalate in the H2 of the year. Assumptions are based on today's regulatory framework regarding tariffs. Now on the cars outlook. First, on the sales guidance for 2026, we retain our constructive view with targeted growth ex China. Our product launch program is progressing well with most of the order intake realized in Europe so far. We continue to expect further momentum as production of our new model ramp-ups in additional markets are launched. While we took a cautious view on China at the beginning of the year, market conditions have proved more challenging than expected. Despite the year-on-year growth ex China in the H1, total sales declined by 7%, including China.

Speaker #2: Assumptions are based on today's regulatory framework regarding tariffs. Now, on the car outlook, first, on the sales guidance for 2026, we retain our constructive view.

Speaker #2: With targeted growth, ex-China. Our product launch program is progressing well, with most of the order intake realized in Europe so far. We continue to expect further momentum as production of our new model ramps up and additional markets are launched.

Speaker #2: While we took a cautious view on China at the beginning of the year, market conditions have proved more challenging than expected. Despite the year-on-year growth ex-China in the first half, total sales declined by 7%, including China.

Speaker #2: As a result, we are lowering our sales guidance and now expect full-year 2026 sales to be slightly below 2025 levels. Reflecting the strong momentum of our BEF portfolio, we are raising our full-year XEV share guidance to 23% to 25%.

Harald Wilhelm: As a result, we are lowering our sales guidance and now expect full year 2026 sales to be slightly below 2025 levels. Reflecting the strong momentum of our BEV portfolio, we are raising our full year xEV share guidance to 23% to 25%. On the profitability side, in H1, cars achieved an adjusted return on sales of 4%. For H2, we continue to expect further benefits. Tailwinds are coming from product momentum, lower product-related expenses. On the downside, in terms of headwinds, we expect cost increases such as energy and freight, increasing cost pressures from raw materials, and cost seasonality such as fixed cost capitalization and higher depreciation following the numerous product launches. In addition, the higher than previously expected mean BEV share pays some toll, but that's included in what I said above, as well as some normalization of the tariff in H2 versus H1.

Speaker #2: On the profitability side, in H1, Cars achieved an adjusted return on sales of 4%. For H2, we continue to expect further benefits, so tailwinds coming from product momentum.

Speaker #2: Lower product-related expenses. On the downside, in terms of headwinds, we expect cost increases, such as energy and freight, as well as increasing cost pressures from raw materials.

Speaker #2: And cost seasonality, such as fixed cost capitalization and higher depreciation following the numerous product launches. In addition, the higher-than-previously-expected mean BEF share pays some toll, but that's included in what I said mean above.

Speaker #2: As well as some normalization of the tariff in H2 versus H1. With this, we confirm our full-year adjusted return on sales guidance of 3% to 5%.

Harald Wilhelm: With this, we confirm our full-year adjusted return on sales guidance of 3% to 5% while expecting to be in the lower half of the range for the full year. PPE, R&D, and CCR remain unchanged. On the vans division. Sales guidance is unchanged. As usual, we see a stronger H2 versus H1. xEV share unchanged. In terms of profitability, in H1, vans achieved a healthy 10.1% double-digit return on sales adjusted at the upper end of the guidance range. For H2, we see the following effects compared to H1. Positive effects from higher volume and a better mix. Higher costs, however, due to the ramp-up of the new VLE and factories, and also headwinds from the raw materials. With this, we see H2 below H1. For the full year, we continue to see the return on sales adjusted between 8% to 10%.

Speaker #2: While expecting to be in the lower half of the range for the full year, PPE, R&D, and CCR remain unchanged. Now, on the Vans division, sales guidance is unchanged.

Speaker #2: As usual, we see a stronger H2 versus H1. XEV share unchanged. In terms of profitability, in H1, Vans achieved a healthy 10.1% double-digit return on sales, adjusted.

Speaker #2: At the upper end of the guidance range for H2, we see the following effects compared to H1: positive effects from higher volume and a better mix.

Speaker #2: Higher costs, however, due to the ramp-up of the new VLE and factories, and also headwinds from raw materials. With this, we see H1 below H2, below H1.

Speaker #2: For the full year, we continue to see the return on sales adjusted between 8% to 10%. No change to PPE, R&D, and CCR. On the financial services side, we had an adjusted return on equity of 14.4% in H1.

Harald Wilhelm: No change to PPE, R&D, and CCR. On the financial services side, we had an adjusted return on equity of 14.4% in H1, mainly driven by a higher portfolio margin. We see some headwinds in H2, mainly through the volatile geo and macro environment, reflecting in a potentially higher cost of credit risk. Based on the strong H1, we are, however, raising our full year guidance now to 12% to 14%. With that, I turn to the group guidance. That obviously follows the same premises as the segment guidance. Following the adjustments on the divisional guidance, we now see revenue slightly below previous year due to softer sales developments at cars. We continue to see group EBIT significantly above the previous year. Looking at the cash flow side, we confirm the free cash flow in industrial guidance and continue to see the full year slightly below prior year.

Speaker #2: Mainly driven by a higher portfolio margin. We see some headwinds in H2, mainly due to the volatile geo and macro environment, which is reflected in a potentially higher cost of credit risk.

Speaker #2: Based on the strong H1, we are, however, raising our full-year guidance now to 12% to 14%. And with that, I turn to the Group guidance.

Speaker #2: That obviously follows the same premises as the segment guidance. Following the adjustments on the divisional guidance, we now see revenue slightly below the previous year.

Speaker #2: Due to softer sales developments at Cars, we continue to see Group EBIT significantly above the previous year. Looking at the cash flow side, we confirm the free cash flow in Industrial guidance.

Speaker #2: And we continue to see the full year slightly below the prior year. Let me give you a bit more color on that. This includes, for the H1, cash flow of €3 billion after restructuring cash out of €1.1 billion.

Harald Wilhelm: Let me give you a bit more color on that. This includes for the H1 cash flow of EUR 3 billion after restructuring cash outs of EUR 1.1 billion. The outlook includes for the H2, the sum M&A next to the organic cash flow. Let me give a bit more color on the M&A side. In July, we materialized already another EUR 600 million from divestments of Daimler Truck shares. In the guidance, we do not include any further potential truck disposals. In addition, however, we intend to close the Athlon transaction in H2, which is technically not included in the free cash flow industrial, but will have a positive impact on net cash and on the basis of capital allocation.

Speaker #2: And the outlook includes, for the second half, some M&A activity in addition to organic cash flow. Let me give a bit more color on the M&A side.

Speaker #2: In July, we already materialized another €600 million from divestments of Daimler Truck shares. In the guidance, we do not include any further potential truck disposals.

Speaker #2: In addition, however, we intend to close the Atlan transaction in H2, which is technically not included in the free cash flow industrial, but will have a positive impact on net cash and on the basis of capital allocation.

Speaker #2: And on the back of that cash generation, which has been achieved in H1 and which is expected in H2, we continue our share buyback activity of up to €1 billion, to be completed prior to the AGM 2027.

Harald Wilhelm: On the back of that cash generation, which has been achieved in H1 and which is expected in H2, we continue our share buyback activity of up to EUR 1 billion to be completed prior to the AGM 2027. With this, I hand back to you, Ola.

Speaker #2: And with this, I hand back to you, Ola.

Speaker #1: Thank you, Harold. As you can see, we're navigating through a challenging business environment with discipline and a clear plan. We will retain our realistic view of the challenges and opportunities ahead.

Ola Källenius: Thank you, Harald. As you can see, we're navigating through a challenging business environment with discipline and a clear plan. We will retain our realistic view of the challenges and opportunities ahead, and we will maintain this approach. At the same time, we're preparing for a successful future. Our focus is on two priorities, our product and tech plan and our performance. We believe that strong product is the best answer in any market environment, and that's why we continue to build on our strong momentum. Next up is the premiere of the new GLA tomorrow. In the fall, we will unveil our electric AMG SUV. Our focus is on ensuring smooth ramp-ups and successful market introductions worldwide. For example, our S-Class, the GLE, and GLS will be available worldwide by the end of this year.

Speaker #1: And we will maintain this approach. At the same time, we're preparing for a successful future. Our focus is on two priorities: our product and tech plan, and our performance.

Speaker #1: We believe that a strong product is the best answer in any market environment, and that's why we continue to build on our strong momentum. Next up is the premiere of the new GLA tomorrow.

Speaker #1: And in the fall, we will unveil our electric AMG SUV. Our focus is on ensuring smooth ramp-ups and successful market introductions worldwide, for example.

Speaker #1: Our S-Class, the GLE, and GLS will be available worldwide by the end of this year. All the new products will carry the next generation of Mercedes technology.

Ola Källenius: All the new products will carry the next generation of Mercedes technology. There's much more to come, please stay tuned. We remain confident in the strength of our product pipeline. The full impact will unfold beyond 2026. We want to capitalize on this great potential. At the same time, we're fully committed to optimizing our productivity, resilience, and competitiveness. We have taken important steps over the past years with tangible effects. Now we're launching a productivity initiative, particularly for Germany. We must continue to work flat out to reduce costs so that we can remain competitive on the prices of our products. Our plans for our global footprints are equally ambitious. In Europe, we will continue to ramp up our Kecskemét plant. In China, we're taking on competition with tailored models and deeper localization.

Speaker #1: And there's much more to come, so please stay tuned. We remain confident in the strength of our product pipeline. The full impact will unfold beyond 2026, and we want to capitalize on this great potential.

Speaker #1: At the same time, we're fully committed to optimizing our productivity, resilience, and competitiveness. We have taken important steps over the past years, with tangible effects.

Speaker #1: Now we're launching a productivity initiative, particularly for Germany. We must continue to work flat out to reduce costs so that we can remain competitive on the prices of our products.

Speaker #1: Our plans for a global footprint are equally ambitious. In Europe, we will continue to ramp up our cash commit plan. In China, we're taking on competition with tailored models and deeper localization.

Speaker #1: And in the US, over time, we're expanding local production and strengthening partnerships. Our direction is clear: outstanding products, strong performance, and disciplined execution. The Mercedes team is fully committed to keeping the pace high.

Ola Källenius: In the US, over time, we're expanding local production and strengthening partnerships. Our direction is clear. Outstanding products, strong performance, and disciplined execution. The Mercedes team is fully committed to keeping the pace high. Thank you.

Speaker #1: Thank you.

Speaker #3: Thank you, Ola. Ladies and gentlemen, we will now move on to our Q&A session. Before asking your question, please also state your name and the organization you represent.

Steffen Scheun: Thank you, Ola. Ladies and gentlemen, we will now move on to our Q&A session. Before asking your question, please also state your name and the organization you represent. A few practical points as usual, please ask your question in English, and for reasons of fairness, please limit yourselves to a maximum of two questions. Before we begin, the operator will now briefly explain the procedure once again.

Christina Schenck: Thank you, Ola. Ladies and gentlemen, we will now move on to our Q&A session. Before asking your question, please also state your name and the organization you represent. A few practical points as usual, please ask your question in English, and for reasons of fairness, please limit yourselves to a maximum of two questions. Before we begin, the operator will now briefly explain the procedure once again.

Speaker #3: A few practical points, as usual: please ask your questions in English, and for reasons of fairness, please limit yourselves to a maximum of two questions.

Speaker #3: Before we begin, the operator will now briefly explain the procedure once again.

Speaker #4: If you are connected online and listening via the web interface, please click the telephone handset button and then the raised hand icon. This will allow you to ask your question verbally as well.

Operator: If you are connected online and listening via the web interface, please click the telephone handset button and then the raise hand icon. This will allow you to ask your question verbally as well. If you have joined by telephone and would like to ask a question, please dial star nine key pound on your telephone keypad. You will hear the announcement your question has been received. If you would like to withdraw your question, please dial star three key pound. You will hear the announcement your question has been withdrawn. Once you hear the announcement, "You may now speak," you can ask your question. After your question has been answered, your line will be muted again. You will be called upon by the moderator.

Speaker #4: If you have joined by telephone and would like to ask a question, please dial star nine, then pound, on your telephone keypad. You will hear the announcement, "Your question has been received."

Speaker #4: If you would like to withdraw your question, please dial *3#. You will hear the announcement, "Your question has been withdrawn." Once you hear the announcement, you may now speak.

Speaker #4: You can ask your question. After your question has been answered, your line will be muted again. You will be called upon by the moderator.

Speaker #3: Thank you. We will start the Q&A, and our first question goes to Philippe Rochois from Jefferies.

Steffen Scheun: Thank you. We will start the Q&A. Our first question goes to Philippe Houchois from Jefferies.

Christina Schenck: Thank you. We will start the Q&A. Our first question goes to Philippe Houchois from Jefferies.

Philippe Houchois: Hi. Good morning. Thank you very much for taking the question. If I ask two, possible. The first one, you've taken a charge on the China evaluation. Is the cost done, or is the actual measure of downsizing or reducing capacity, et cetera, already done in the China operations? This is my first question. The second one, maybe more strategically, you're clearly rebalancing your footprint more globally. What's missing in North America is more content. At one point, does it make sense to actually localize engines in North America to try to be USMCA compliant, or is that too much of a restructuring or change in the organization of the group? Thank you.

Speaker #5: For taking the question. Hi, good morning. Thank you very much for taking the question. If I ask two possible. The first one, you've taken the charge on the China valuation does it mean there's is the cost done or is the measures the actual measure of downsizing or reducing capacity, et cetera, already done in the China operations in my first question?

Speaker #5: And the second one, maybe more strategically: You're clearly rebalancing your footprints more globally. What's missing in North America is more content. At what point does it make sense to actually localize engines in North America to try to be USMCA compliant?

Speaker #5: Or is that too much of a restructuring, or a change in the organization of the group? Thank you.

Speaker #1: Thanks, Philippe. Maybe I take the first one on the charges related to the China ventures. Well, I mean, that these charges, I mean, are a function of obviously, I mean, impairment testing, I mean, we have to do at each and every quarter.

Ola Källenius: Thanks, Philippe. Maybe I take the first one on the charges related to the China ventures. Well, these charges are a function of, obviously, impairment testing. We have to do it each and every quarter. Basically, that takes into account all elements within the scope of the various joint ventures which we have, which is obviously market development, cost development. It includes, basically in forward-looking perspective, and given the market dynamics which we could see on the basis of the scope of the joint venture and the existing terms, these adjustments had to be recorded. It indicates a lower profit contribution of these joint ventures in the future compared to the assumptions and the visibility and the perspectives that we had on these ventures so far.

Speaker #1: Basically, that takes place within the scope of the various joint ventures which we have, which is obviously market development, cost development. So it includes, I mean, basically a forward-looking perspective.

Speaker #1: And given the market dynamics, which we could see on the basis of the scope of the joint venture and the existing terms, these adjustments had to be recorded.

Speaker #1: So it indicates a lower profit contribution of these joint ventures in the future, compared to the assumptions and the visibility and the perspectives that we had on these ventures so far.

Speaker #1: With regard to localization in the United States, the option of localizing engines as well in the United States is not something that we have decided at this point.

Ola Källenius: With regard to localization in the United States, the option of localizing engines as well in the United States is not something that we have decided at this point. It's certainly something that we will look at when we also see how USMCA rules develop. You always have to weigh, of course, the scale effects of the investments that you have already made, versus the benefits of going local on any one component, and that goes for engines as well. No decision made at this time, and we will see how things unfold.

Speaker #1: It's certainly something that we will look at when we also see how USMCA rules develop. You always have to weigh, of course, the scale effects of the investments that you have already made versus the benefits of going local on any one component.

Speaker #1: And that goes for engines as well. So, no decision has been made at this time, and we will see how things unfold.

Speaker #3: Thanks, Philippe. I'll move on to the next question, and this one goes to Tim Rocosa from Deutsche Bank.

Steffen Scheun: Thanks, Philippe. I'll move on to the next question. This one goes to Tim Rokossa from Deutsche Bank.

Christina Schenck: Thanks, Philippe. I'll move on to the next question. This one goes to Tim Rokossa from Deutsche Bank.

Speaker #5: Yeah, thank you very much, Christina. Hi Ola. Thank you very much, Christina. Hi Ola and Harald. I have two questions as well. The first one also goes to the China impairment in the market.

Tim Rokossa: Thank you very much, Christina. Hi, Ola and Harald. I have two questions as well. The first one also goes to the China impairment in the market. This is perhaps to both of you, actually. I gather from your previous answer, Harald, that you probably don't want to give us much more details, but I try anyway. Is this really a reset for the strategic ambition in the Chinese market, or is this just something that, with this market development, it's pretty clear that it didn't go in line with your expectations, that was just something that you just had to do at this point, and doesn't really strategically change anything? Is there any way that this can become cash relevant, Harald? It's an equity, so I assume not, but just to ask for that for the group, obviously, in the statements.

Speaker #5: This is perhaps a question for both of you, actually. I gather from your previous answer, Harold, that you probably don't want to give us much more detail, but I'll try anyway.

Speaker #5: Is this really like a reset for the strategic ambition in the Chinese market, or is this just something that, I mean, with this market development, it's pretty clear that it didn't go in line with your expectations?

Speaker #5: That was just something that you had to do at this point and doesn't really strategically change anything. And is there any way that this can become cash-relevant, Harold?

Speaker #5: It's that equity, so I assume not, but just to ask that for the group, obviously in the statements. And Ola, related to that, your current view on China?

Tim Rokossa: Ola, related to that, your current view on China, will this come back? Are there more drastic actions needed? What are you discussing with Ola Källenius, who you just recently sent there basically with this very difficult task? Second question on the DTG placement and cash return. Great to see that you continue to cash return. I think that's very much appreciated. Harald, do you intend to do this through what we've seen so far, i.e., smaller sales, actually pretty big sales, as you just said in July, through the market, no big ABBs, rather opportunistically at any given point in time? Should we see the EUR 1 billion as a maximum, or is this just a commitment to your continuation, which once again is very much appreciated. Thank you.

Speaker #5: Will this come back? Are more drastic actions needed? What are you discussing with Ollie Turner, whom you just recently sent there, basically with this very difficult task?

Speaker #5: Second question on the DTG placement and cash return. Great to see that you continue the cash return. I think that's very much appreciated. Harold, do you intend to do this through what we've seen so far, i.e., smaller sales and the actually pretty big sales, as you just said, in July, through the market—no big ABBs—rather opportunistically at any given point in time?

Speaker #5: And should we see the $1 billion as a maximum, or is this just a commitment to your continuation? Which, once again, is very much appreciated.

Speaker #5: Thank you.

Harald Wilhelm: Tim, thanks. Maybe I take the DT first and then we come back to the China-related questions. On the DT stake, yeah, I think, we had a pretty good run by dribbling in Q2, in actually April and June to be a bit more precise, and most recently in July. Even if you didn't see the 1 transaction from an ABB, that is a sizable amount of a EUR 1 billion investment materialized. I would say at this juncture, given also the favorable evolution on the DT side, which you could see recently, assuming that is going to hold for later in the year, I think I would not exclude the distinct possibility that we would continue. Definitely reserve all options in terms of how we're going to do that. I mean, is that via dribbling or via ABB?

Speaker #1: Tim, thanks. Maybe I take, I mean, the DT first and then we come back to the China related questions. So on the DT stake, yeah, I think we had a pretty, pretty good run by dribbling, I mean, in quarter two.

Speaker #1: In, actually, April and June, to be a bit more precise, and most recently, I mean, in July. And so even if you didn't see the one chunk transaction from an ABB, that is a sizable amount of a $1 billion investment materialized.

Speaker #1: So I would say at this juncture, given also the favorable evolution on the DT side—which you could see recently—assuming that is going to hold for later in the year, I think I would not exclude the distinct possibility that we would continue, but definitely reserve all options in terms of how we're going to do that.

Speaker #1: I mean, is that wire dribbling, or why is it ABB? Market conditions will tell, such as also the competitive environment when it comes to discounting.

Harald Wilhelm: Market conditions will tell, such as also competitive environment when it comes to discounting. You see, we take benefit of the full tool set. Maybe I respond shortly on the more technical side of the China situation and, Ola, you want to take the more strategic side of things. I think definitely these adjustments are not a function of change of strategy. They are just a function of the commercial environment, as I just pointed out before, which we have to recognize, and taking into account all elements, and that is a non-cash charge. That is very clear. I cannot exclude saying that obviously it also demonstrates that there is a lower profit contribution expected from these ventures in China compared to the assumptions we took before.

Speaker #1: So you see, we take benefit of the full toolset. Maybe I can respond briefly on the more technical side of the China situation, and Ola, I mean, maybe you want to take the more strategic side of things.

Speaker #1: I think, definitely, these adjustments are not a function of a change of strategy. They are just a function of the commercial environment, as I just pointed out before, which we have to recognize.

Speaker #1: And taking into account all elements—and that is a non-cash charge—I mean, that is very clear. But I cannot exclude, by saying that, obviously it also demonstrates that there is a lower profit contribution expected from these ventures in China compared to the assumptions we took before.

Speaker #1: I would also like to emphasize, however, that these adjustments are not representative of the entire profit pool we have in China. And over to you for the strategic dimension.

Harald Wilhelm: I would also like to emphasize, however, that these adjustments are not representative of the entire profit pool we are having in China. Over to you for the strategic dimension.

Ola Källenius: Tim, we remain strategically fully committed to China. Everybody can see the intensity of the competition there at the moment, as well as the domestic market development. It is and remains the biggest car market in the world. It is an ecosystem that you need to be in. China is not just a game in China for China. China is also going into the world. If you want to be a global player, you got to be in that space. How do you do it? Tech products, localization, partnerships, of course, adjusting your cost structures to the market environment and what's going on there, and making sure that you find those places in the market to compete that are most beneficial to you. We're committed to all of those. We have strengthened our partnerships in China, especially on the tech side.

Speaker #2: Tim, we remain strategically fully committed to China. Everybody can see the intensity of the competition there at the moment, as well as the domestic market development.

Speaker #2: But it is and remains the biggest car market in the world. It is an ecosystem that you need to be in. And China is not just a game in China for China.

Speaker #2: China is also going into the world. So if you want to be a global player, you've got to be in that space. How do you do it?

Speaker #2: Tech products, localization, partnerships, of course adjusting your cost structures to the market environment and what's going on there, and making sure that you find those places in the market to compete that are most beneficial to you.

Speaker #2: And we're committed to all of those. We are strengthening our partnerships in China, especially on the tech side. We work very well together with our joint venture partner, and we make decisions together on how to tackle this.

Ola Källenius: We work very well together with our joint venture partner and make decisions together on how to tackle this. We have also strengthened our R&D footprint in China, which works hand in hand with mission control over here in Germany. You got to take the long view on China, not just focus on today or tomorrow. Maybe it's also the day after tomorrow that you have to have in mind. We have the strength and resilience as a company to see through this phase. That is why China very much remains one of the strategic pillars of our play. The rest Harald answered.

Speaker #2: And we have also strengthened our R&D footprint in China, which works hand in hand with mission control over here in Germany. So you've got to take the long view on China—not just focus on today or tomorrow; maybe it's also the day after tomorrow that you have to have in mind.

Speaker #2: And we have the strength and resilience as a company to see through this phase. So that is why China very much remains one of the strategic pillars of our play.

Speaker #2: And the rest, Harold answered.

Speaker #3: Thank you, Tim. I will move on to the next question, and that goes to José Azumendi from JP Morgan. Good morning, José.

Steffen Scheun: Thank you, Tim. I will move on to the next question, and that goes to Jose Asumendi from J.P. Morgan. Good morning, Jose.

Christina Schenck: Thank you, Tim. I will move on to the next question, and that goes to Jose Asumendi from J.P. Morgan. Good morning, Jose.

Speaker #4: Good morning, José from JP Morgan. Two questions, please. Ola, can you comment, please, on the task to improve the profitability at the German plants, and which actions are you considering in Germany?

Jose Asumendi: Good morning, Jose from J.P. Morgan. Two questions, please. Ola, can you comment please on the task to improve the profitability at the German plants, and which actions are you considering in Germany? Which ones have you already announced, or you are in discussions, please, with the unions, if you could give us some insights. Then also, how do you plan to leverage the cost efficiency of the plant in Hungary? Then second for Harald, can you comment, Harald, a bit more, with regards to the profitability for Mercedes-Benz cars in the H2, a little bit the seasonality H2 versus the H1, and some of the positives and negatives revolving the profitability in H2. Thank you.

José Asumendi: Good morning, Jose from J.P. Morgan. Two questions, please. Ola, can you comment please on the task to improve the profitability at the German plants, and which actions are you considering in Germany? Which ones have you already announced, or you are in discussions, please, with the unions, if you could give us some insights. Then also, how do you plan to leverage the cost efficiency of the plant in Hungary? Then second for Harald, can you comment, Harald, a bit more, with regards to the profitability for Mercedes-Benz cars in the H2, a little bit the seasonality H2 versus the H1, and some of the positives and negatives revolving the profitability in H2. Thank you.

Speaker #4: Which ones have you already announced, or are you in discussions with the unions? If you could give us some insights. And also, how do you plan to leverage the cost efficiency of the plant in Hungary?

Speaker #4: And then, second, for Harold: Can you comment, Harold, a bit more with regards to the profitability for Mercedes-Benz Cars in the second half? A little bit on the seasonality, second versus the first half, and some of the positives and negatives revolving around the profitability in HU.

Speaker #4: Thank you.

Speaker #2: Yeah, good morning, José. If we look at the expansion in Hungary, what does it allow us to do by weighting more of our overall European volume in a more cost-attractive production setup?

Ola Källenius: Yeah. Good morning, Jose. If we look at the expansion in Hungary, what does it allow us to do by weighting more of our overall European volume in a more cost-attractive production setup? Of course, lowers that weighted average of our production cost for the whole portfolio. This is not something that we have just started now, of course. We have worked in Eastern Europe for many years. Hungary is a prominent example. We have powertrain activities in Romania. As you know, we are in the process right now of converting one of our ICE power plants in Poland to a future production site for our vans. It is a strategic imperative to take the production cost down. We need to use these cost-attractive locations to get that weighted average further down. We cannot leave Germany alone.

Speaker #2: Of course, it lowers the weighted average of our production cost for the whole portfolio. So this is not something that we have just started now.

Speaker #2: Of course, we have worked in Eastern Europe for many years. Hungary is a prominent example. We have powertrain activities in Romania. And, as you know, we're in the process right now of converting one of our ICE power plants in Poland to a future production site for our vans.

Speaker #2: So it is a strategic imperative to take the production cost down. And we need to use these cost-attractive locations to get that weighted average further down.

Speaker #2: But we cannot leave Germany alone. That is why we started an initiative some weeks ago that we called the Productivity Initiative for Germany. It starts with us.

Ola Källenius: That is why we started an initiative some weeks ago that we call Productivity Initiative for Germany, It Starts With Us. We chose that title consciously because we believe that Germany, as an economy, to improve its competitiveness as a whole. We have unbelievable strengths in terms of our ingenuity, innovation power, engineers, and the people working in our factories. If you look at the net working hours vis-a-vis the cost, I think it was one of the politicians that said, The costs are now starting to become higher than we are better. If you are in that position, you absolutely have to tackle your relative cost position. You are not going to turn Germany into Eastern Europe, and certainly not into China. Compared to ourselves, we can make a step forward. This is happening on three levels.

Speaker #2: We chose that title consciously because we believe that Germany, as an economy, needs to improve its competitiveness as a whole. We have unbelievable strengths in terms of our ingenuity, innovation power, and engineers.

Speaker #2: And the people working in our factories. But if you look at the net working hours vis-à-vis the cost, I think it was one of the politicians who said the costs are now starting to become higher than we're better.

Speaker #2: And if you're in that position, you absolutely have to tackle your relative cost position. You're not going to turn Germany into Eastern Europe, and certainly not into China.

Speaker #2: But compared to ourselves, we can make a step forward. This is happening on three levels: what we can do inside Mercedes, that we're doing anyway.

Ola Källenius: What we can do inside Mercedes that we are doing anyway, I commented on it in my presentation. Streamlining processes, doubling down on efficiency measures, looking at every single bit of your operations and making it more both effective and efficient. There is also a general union and political level to this, where we have announced that we think it is time for Germany to rethink some of its positions, whether it is working time or other things. We are in negotiations with the appropriate people on this. The outcome we cannot know at this stage. We are fully committed to pushing hard and making sure that we all in Germany realize that the global competition has become tougher, especially in light of the Chinese and the Chinese going global. We are hopeful, but not certain, that those parties on the other side will pick up on that in the negotiations.

Speaker #2: I commented on it in my presentation: streamlining processes, doubling down on efficiency measures, and looking at every single bit of your operations and making it both more effective and efficient.

Speaker #2: But there is also a general union and political level to this, where we have announced that we think it's time for Germany to rethink some of its positions.

Speaker #2: Whether it's working time or other things, we are in negotiations with the appropriate people on this. The outcome we cannot know at this stage.

Speaker #2: But we're fully committed to pushing hard and making sure that we all in Germany realize that the global competition has become tougher, especially in light of China and the Chinese companies going global.

Speaker #2: And we're hopeful, but not certain, that those parties on the other side will pick up on that in the negotiations. On the H2 profitability, let me give you a bit more color.

Harald Wilhelm: Well, on the H2 profitability, let me give you a bit more color, maybe in detail. Clearly on the volume structure pricing side, we see a tailwind in H2, as a function of the new models coming into the markets. Probably it is more centered on Q4 than Q3, I would say. That is, I think, clearly not only the expectation, but that is supported also by a lot of the market demand, as we can see in the order intake for the new vehicles. That is basically on the tailwind side. In terms of what is on the headwind side, the parts by parts business with all of the elements attached and associated to it, the supply of parts as well as the equity result coming from the JV, that is a headwind in H2 compared to H1.

Speaker #2: Maybe in detail. Clearly, on the volume structure pricing side, we see tailwind in H2 as a function of the new models coming into the markets.

Speaker #2: Or it's more centered on the fourth quarter than the third quarter, I would say. So that is, I think, clearly not only the expectation, but that's also supported by a lot of the market demand.

Speaker #2: As we can see in the order intake for the new vehicles, that is basically on the tailwind side. Then, in terms of what is on the headwind side, it's the parts-by-parts business, with all of the elements attached and associated with it.

Speaker #2: So the supply of parts, as well as the equity result coming from the JV, that is a headwind in the second half compared to H1.

Harald Wilhelm: We further have a bit of normalization of the tariffs, as in the Q1 we had the IEEPA refund included. Number 4 is definitely raw materials, which we see as a headwind in the H2, as well as higher level depreciation following the start of production of numerous new models. We're trying to mitigate that by stepping up the efficiency in the H2, even over and above what we could accomplish in H1, as you could see in the bridge on the Q2, that was not maybe too bad. Clearly, we have the ambition to go the extra mile. With that, we target to bring in an H2, which allows to stay within the guidance corridor of 3 to 5.

Speaker #2: We further have a bit of normalization of the tariffs, as in Q1 we had the AIPA refund included. Number four is definitely raw materials, which we see as a headwind in the second half of the year.

Speaker #2: As well as higher-level depreciation following the start of production of numerous new models. And we're trying to mitigate that by stepping up the efficiency in the second half of the year, even over and above what we could accomplish in H1.

Speaker #2: As you could see in the bridge on the Q2, that was not maybe too bad. But clearly, we have the ambition to go the extra mile.

Speaker #2: And with that, we target to bring in an H2, which allows us to stay within the guidance corridor of three to five. But the H2 is expected to be below H1.

Harald Wilhelm: H2 is expected to be below H1, and that is on the back of which I said, it should be in the lower half on the full year, in terms of ROS adjusted for cars. I hope that helps.

Speaker #2: And that is on the back of what I said. I mean, it should be in the lower half on the full year in terms of ROS, adjusted for cars.

Speaker #2: I hope that helps.

Speaker #4: Super helpful. Thank you.

Jose Asumendi: Super helpful. Thank you.

José Asumendi: Super helpful. Thank you.

Speaker #1: Thanks.

Steffen Scheun: Thank you, Jose. I will move on to the next question, it goes to Christian Frens from Goldman Sachs.

Christina Schenck: Thank you, Jose. I will move on to the next question, it goes to Christian Frens from Goldman Sachs.

Speaker #3: Thank you, José. I will move on to the next question, and it goes to Christian Freinas from Goldman Sachs.

Speaker #5: Yeah, hello everyone. Can you hear me?

Christian Frens: Yeah. Hello, everyone. Can you hear me?

Christian Frenes: Yeah. Hello, everyone. Can you hear me?

Speaker #3: Yes, we can. Yes, we can hear you.

Steffen Scheun: Yes, we can.

Christina Schenck: Yes, we can.

Christian Frens: Great. Thank you.

Christian Frenes: Great. Thank you.

Steffen Scheun: Yes, we can hear you.

Christina Schenck: Yes, we can hear you.

Christian Frens: Thanks for taking my question. Thank you very much. I have two questions. First of all, on the industrial performance in cars, I think you just mentioned that H2 would be bigger than H1. Could you just elaborate on that, where the industrial performance measures are coming from? Second of all, on China, just to clarify and provide some more context. Can you update us on the GLE production shift to China and how that might impact profitability as well as your dealer restructuring efforts? Where are we with that effort right now? Lastly, any thoughts you have on the ASP, average selling price outlook in China? Thank you.

Christian Frenes: Thanks for taking my question. Thank you very much. I have two questions. First of all, on the industrial performance in cars, I think you just mentioned that H2 would be bigger than H1. Could you just elaborate on that, where the industrial performance measures are coming from? Second of all, on China, just to clarify and provide some more context. Can you update us on the GLE production shift to China and how that might impact profitability as well as your dealer restructuring efforts? Where are we with that effort right now? Lastly, any thoughts you have on the ASP, average selling price outlook in China? Thank you.

Speaker #5: Thanks for taking my question. Thank you very much. I have two questions. First of all, on the industrial performance in cars, I think you just mentioned that H2 would be bigger than H1.

Speaker #5: Could you just elaborate on that? Where are the industrial performance metrics coming from? And second of all, on China, just to clarify and provide some more context, can you update us on the GLE production shift to China and how that might impact profitability, as well as your dealer restructuring efforts?

Speaker #5: Where are we with that effort right now? And lastly, any thoughts you have on the ASP—average selling price—outlook in China? Thank you.

Speaker #2: Maybe I'll go on the first one, Christian, in terms of the efficiency in H2. It's not limited to industrial performance; it applies to all buckets, basically.

Harald Wilhelm: Maybe I go on the first one, Christian, in terms of the efficiency in H2. It's not limited to the industrial performance. It applies, I mean, to all buckets basically, on which we want to stretch, I mean, beyond. That is on variable cost, which falls into industrial performance, material cost, production cost, but it also on the fixed cost, which is in the operational areas, but as well on the enterprise side, on the G&A functions. Also some acceleration in terms of invest down in the H2 of the year. It's really, I mean, each and every bucket, on which we're trying to go the extra mile to compensate for some of the headwinds, I mean, I pointed out in terms of energy logistic cost, raw materials and the like.

Speaker #2: On which we want to stretch beyond. That is on variable cost, which falls into industrial performance, material cost, production cost, but it is also on the fixed cost.

Speaker #2: This is in the operational areas, but as well on the enterprise side, on the G&A functions. And also, some acceleration in terms of investor down in the second half of the year.

Speaker #2: So it's really each and every bucket where we're trying to go the extra mile, to compensate for some of the headwinds I pointed out in terms of energy, logistics costs, raw materials, and the like.

Speaker #4: With regard to the GLE, we will start the production of the China-specific GLE in the month of August. We have made adjustments to the product, most prominently.

Ola Källenius: With regard to the GLE, we will start the production of the China specific GLE in the month of August. We have made adjustments to that product, most prominently, increased the wheel base and put even more focus in the rear seat of that vehicle. We'll then start ramping that throughout the fall. That gives us much more ability to react quicker to the market as we're then on the ground, and partially move the cost structure on the parts side to China. It's another benefit. That's certainly one of the segments, not just now, but if I look into the future years, that will be interesting and attractive to us, and it is one of the biggest segments in China.

Speaker #4: Increased the wheelbase and put even more focus on the rear seat of that vehicle. And we'll then start ramping that throughout the fall. So, that gives us much more ability to react quicker to the market as we're then on the ground.

Speaker #4: And partially move the cost structure on the part side to China, so that's another benefit. So that's certainly one of the segments—not just now, but if I look into the future years—that will be interesting and attractive to us.

Speaker #4: And it is one of the biggest segments in China. With regard to ASPs, if you look at the overall market, with the roughly 20% drop that we had, there has been price pressure in China, also in the more premium segments.

Ola Källenius: With regard to ASPs, if you look at the overall market, with the 20% drop roughly that we had, there has been a price pressure in China also in the more premium segments. In the relative competitive set though, Mercedes remains the clear leader in terms of ASP vis-a-vis its peers. It's fair to say that the competitive intensity in that market has never been higher.

Speaker #4: In the relative competitive set, though, Mercedes remains the clear leader in terms of ASP vis-à-vis its peers. But it's fair to say that the competitive intensity in that market has never been higher.

Speaker #5: Thank you.

Christian Frens: Thank you.

Christian Frenes: Thank you.

Speaker #3: Thank you, Christian. I would like to give the next question to Patrick Hummel from UBS.

Steffen Scheun: Thank you, Christian. I would give the next question to Patrick Hummel from UBS.

Christina Schenck: Thank you, Christian. I would give the next question to Patrick Hummel from UBS.

Speaker #6: Yeah, hi. Thank you, Christina. Good morning, all. Good morning, Harald. I have two questions for you, Ola. My first one is in terms of the competitive environment in Europe.

Patrick Hummel: Yeah. Hi. Thank you, Steffen. Good morning, Ola. Good morning, Harald. I would have two questions for you, Ola. My first one, in terms of the competitive environment in Europe, do you see any kind of impact at this point, that the growing presence of the Chinese OEMs in Europe has on your business? Is that for the time being predominantly a mass market phenomenon, or would you say there are segments where you have a certain overlap, that are already seeing additional amount of pricing pressure, especially the last few months? The second question, just on your defense strategic initiative. I mean, in June you announced this partnership with Titan for anti-drone devices using your vehicles, but I think your role in that partnership is very much limited to the supply of the vehicle.

Speaker #6: Do you see any kind of impact at this point that the growing presence of the Chinese OEMs in Europe has on your business? Is that, for the time being, predominantly a mass-market phenomenon, or would you say there are segments where you have a certain overlap that are already seeing additional amounts of pricing pressure, especially in the last few months?

Speaker #6: And the second question, just on your defense strategic initiative. I mean, in June, you announced this partnership with Titan for anti-drone devices, using your vehicles, but I think your role in that partnership is very much limited to the supply of the vehicles.

Speaker #6: So, the wording you're using sounds like it's more strategic—generally, what you want to do in defense. So, if you could just give us an update on how you think about that business.

Patrick Hummel: The wording you're using sounds like it's more strategic, generally, what you want to do in defense. If you could just give us an update how you think about that business. Is it always going to be a sideshow and limited to the vehicles that you do anyways, or are you thinking about growing this business more and also going deeper into the non-vehicle part? Thank you.

Speaker #6: Is it always going to be a sideshow and limited to the vehicles that you do anyway? Or are you thinking about growing this business more and also going deeper into the non-vehicle part?

Speaker #6: Thank you.

Speaker #4: Good morning, Patrick. Starting with the Chinese footprint in Europe—at this stage in the game, the phenomenon is more on the volume market side.

Ola Källenius: Good morning, Patrick. Starting with the Chinese footprint in Europe. At this stage in the game, the phenomenon is more on the volume market side, and more concentrated to specific markets. That is not a reason to sit back and be relaxed, even if you have a very strong position like Mercedes-Benz. I mentioned that in Europe in particular, the new generation electric vehicles are literally flying off the shelf, and the order entry is tremendously strong. We have certainly hit the nerve there, a positive nerve, with some of these vehicles coming along. At the moment, we are strengthening our competitive position in Europe. I think the Chinese ambition to broaden their footprint in Europe has only started. Hence everything else that we're talking about, productivity, offensive in Germany, et cetera.

Speaker #4: And more concentrated to specific markets. But that is not a reason to sit back and be relaxed. Even if you have a very strong position like Mercedes-Benz—I mentioned that in Europe in particular, the new generation electric vehicles are literally flying off the shelf.

Speaker #4: And the order entry is tremendously strong, so we have certainly hit a nerve there—a positive nerve—with some of these vehicles coming along.

Speaker #4: At the moment, we are strengthening our competitive position in Europe. But I think the Chinese ambition to broaden their footprint in Europe has only just started.

Speaker #4: Hence, everything else that we're talking about—productivity offensive in Germany, et cetera, et cetera—now is the time, to use football language, to increase the training units.

Ola Källenius: Now is the time, to use football language, to increase the training units and prepare yourself for future competitions. We're not taking this for granted, but so far, we have seen very limited, if any, impact on our business so far. With regard to defense business, yes. If you run a, I don't know, EUR 130 billion company, at the moment, that defense side, with what we're doing on the G-Class and also transport vehicles on our van side is a niche, and it is small, but it can grow, and we think that it can profitably grow. The first port of call is obvious. You take the technology that you have, and you expand through partnership the use of that technology. That's on the vehicle side. Whether we will venture into adjacent technologies or not has not yet been decided.

Speaker #4: And prepare yourself for future competitions. We're not taking this for granted. But so far, we have seen very limited, if any, impact on our business so far.

Speaker #4: With regard to defense business, yes, if you run a, I don't know, €130 billion company at the moment, that defense side, with what we're doing on the G-Class and also transport vehicles on our van side, is a niche.

Speaker #4: And it is small, but it can grow. And we think that it can profitably grow. The first port of call is obvious. You take the technology that you have and you expand through partnership the use of that technology.

Speaker #4: So that's on the vehicle side. Whether we will venture into adjacent technologies or not has not yet been decided. But what we have said is, where we have industrial capabilities and engineering capabilities, should those be valuable to a partner that is looking for industrial scaling or expansion, we're open for discussions.

Ola Källenius: What we have said is, where we have industrial capabilities, engineering capabilities, should those be valuable to a partner that is looking for industrial scaling expansion, we're open for discussions. We have not put some mind restrictions on where we can go here. There is nothing concrete to announce at this time.

Speaker #4: We have not put any restrictions on where we can go here, but there is nothing concrete to announce at this time.

Speaker #6: Thank you, Ola.

Patrick Hummel: Thank you, Ola.

Speaker #3: Thanks, Patrick. And I will give the next question to Steven Reitman from Bernstein. Good morning.

Steffen Scheun: Thanks, Patrick. I will give the next question to Stephen Reitman from Bernstein. Good morning.

Christina Schenck: Thanks, Patrick. I will give the next question to Stephen Reitman from Bernstein. Good morning.

Speaker #7: Yes, good morning. Steven Reitman from Bernstein. A question again, back on China. You've now launched the GLC Electric in China, and obviously, we have the pricing on that as well.

Stephen Reitman: Yes, good morning. Stephen Reitman from Bernstein. A question again back on China. You have now launched the GLC Electric in China.

Ola Källenius: Yes.

Stephen Reitman: Obviously, we have the pricing on that as well. GLC, obviously, as an ICE vehicle, is one of your most important vehicles. I am watching, so the current generation at peak has been doing 15,000 units a month. Even this year, you have been getting close to 12,000 units a month. Again, which underscores your very strong position in the premium ICE segment. Could you talk about what would you consider to be the ramp of the GLC BEV to develop? What the reactions have been, what you are seeing in terms of generating interest? How are you distinguishing yourself from the crowd? Because obviously, the difficulty, as we know, is there is less support for premium and the premium BEVs among Chinese consumers? Have attitudes changed as well, given the price of the gasoline price, and are you seeing any changes there?

Speaker #7: The GLC, obviously, as an ICE vehicle, is one of your most important vehicles. I mean, I've watched the current generation; that peak has been doing 15,000 units a month.

Speaker #7: And even this year, you've been getting close to 12,000 units a month, again underscoring your very strong position in the premium ICE segment.

Speaker #7: Could you talk about what you would consider to be—how you will consider the ramp of the GLC BEV to develop? What have the reactions been?

Speaker #7: What are you seeing in terms of generating interest? How are you distinguishing yourself from the crowd? Because, obviously, the difficulty—as we know—is that there is less support for premium and premium BEVs among Chinese consumers.

Speaker #7: And has that used to change as well, given the price of gasoline? Are you seeing any changes there? We've obviously seen much greater interest because of BEVs, because of high gasoline prices.

Stephen Reitman: We are obviously seeing much greater interest for BEVs because of high gasoline prices since the conflict started. What you are seeing on the premium space, please?

Speaker #7: Since the conflict started. But what you're seeing on the premium space, please?

Speaker #4: So, Steven, let's dig into that. Good morning. Let's start with the reception of the vehicle and the positioning of the vehicle. What we have chosen, obviously—and I know you have familiarized yourself with the electric GLC—we made a quintessential Mercedes, so everything that makes a Mercedes a Mercedes is in that vehicle.

Ola Källenius: Stephen, let's dig into that. Good morning. Let's start with the reception of the vehicle and the positioning of the vehicle. What we have chosen, obviously, and I know you have familiarized yourself with the GLC Electric. We made a quintessential Mercedes-Benz. Everything that makes the Mercedes-Benz a Mercedes-Benz is in that vehicle. From the looks of it, to the safety, how it rides and drives, the quality, all of those things. The appearance of the interior, on and on and on. All of that has been extremely well-received in a market where if you walk up to 20 different SUVs by mostly local brands, and you would take the brand off, you would not recognize a single one of those from each other. Doubling down on being quintessentially Mercedes-Benz is important, and we receive positive feedback from our dealers and the customers for this.

Speaker #4: From the looks of it to the safety, how it rides and drives, the quality—all of those things—the appearance of the interior, and on and on.

Speaker #4: All of that has been extremely well received in a market where, if you walk up to 20 different SUVs by mostly local brands and you would take the brand off, you would not recognize a single one of those from each other.

Speaker #4: So doubling down on being quintessentially Mercedes is important, and we receive positive feedback from our dealers and customers for this. But we have married that with an extremely efficient and competitive electric powertrain.

Ola Källenius: We have married that with an extremely efficient and competitive electric powertrain. The Chinese adapted MB.OS, I would argue, is the farthest established manufacturer in terms of its capabilities on ADAS and smart cockpit in comparison to the new Chinese attackers. That has also been well-received. The fact that we're going to turn it into a six-seater, which is very important in the Chinese market. You know we have a long wheelbase. We're launching the six-seater a little bit later this fall, but that is also feedback that we're getting from our customers. What would we consider success to look like? You know we don't forward guide individually on models volumes.

Speaker #4: And the Chinese-adapted MBOS, I would argue, is the furthest established manufacturer in terms of its capabilities on ADAS and smart cockpit in comparison to the new Chinese attackers.

Speaker #4: That has also been well received. And the fact that we're going to turn it into a six-seater, which is very important in the Chinese market.

Speaker #4: You know, we have a long wheelbase. We're launching the six-seater a little bit later this fall. But that is also feedback that we're getting from our customers.

Speaker #4: So, what would we consider success to look like? And, you know, we don't forward guide individually on models or volumes. Here, we're going to choose an operating point that makes sense because, at the same time as we're launching this, we're in this unbelievably intense price competition.

Ola Källenius: Here, we're going to choose an operating point that makes sense, because at the same time as we're launching this, we're in this unbelievably intense competition, price competition, and we don't want to buy market share at the expense of burning cash. It is very easy to do that. Very many companies in the market do it, and you see it every single quarter. The next one goes up, and then 6 months later it goes down, then the next one goes up, 6 months later it goes down. We will try to, as best possible, avoid that yo-yo effect and that price war. That will come at the expense of some volume. A measured approach towards volume is what I would say at this stage.

Speaker #4: And we don't want to buy market share at the expense of burning cash. It is very easy to do that; very many companies in the market do it.

Speaker #4: And you see it every single quarter. The next one goes up, and then six months later it goes down. Then the next one goes up.

Speaker #4: Six months later, it goes down. We will try to, as best as possible, avoid that yo-yo effect and that price war. That will come at the expense of some volume.

Speaker #4: So, a measured approach towards volume is what I would say at this stage.

Speaker #7: Thank you.

Stephen Reitman: Thank you.

Speaker #3: Thank you very much, Steven. And my next question goes to Michael Tyndall from HSBC. Mike, over to you.

Steffen Scheun: Thank you very much, Stephen. My next question goes to Michael Tyndall from HSBC. Mike, over to you.

Christina Schenck: Thank you very much, Stephen. My next question goes to Michael Tyndall from HSBC. Mike, over to you.

Speaker #8: Yeah, thanks very much. Just a couple of questions, if I may. First one—I don't really want to ask, but I think it has to be asked.

Michael Tyndall: Yeah. Thanks very much. Just a couple of questions, if I may. First one I don't really want to ask, but I think it has to be asked. Can we talk at all about the Connected Vehicle Act in the US, and where you are positioned in that regard? What are the options available? What are you hearing? Then on a more positive note, can we talk about L2++ in Europe, the US, and China? Can you talk about how much you are charging customers for that service, if you are, and what sort of penetration we're looking at? I guess this is a future revenue stream that is worth bringing into the discussion. Thanks.

Speaker #8: Can we talk at all about the Connected Vehicle Act in the US, and where you are positioned in that regard? What are the options available?

Speaker #8: What are you hearing? And then, on a more positive note, can we talk about L2++? In Europe, the US, and China, can you talk about how much you are charging customers for that service, if you are?

Speaker #8: And what sort of penetration are we looking at? Because I guess this is a future revenue stream that is worth bringing into the discussion. Thanks.

Speaker #4: Yeah, Mike, of course we're watching very closely what's happening in that legislative arena, and on the ground we're deeply involved in the conversations surrounding this.

Ola Källenius: Yeah, Mike. Of course, we're watching very closely what's happening in that legislative arena, and on the ground, we're deeply involved in the conversation surrounding this. I would just remind everybody about our current setup. It is true that we have two Chinese shareholders. The nature of those are very different. They are by no means acting in consort, nor are they represented on the board. For those who watch our annual shareholders meetings over the many years where they have been part of the shareholding group, every single time they have voted with the majority on those shareholder meetings. How did that start? We decided some many years ago to take a stake in the parent company of our joint venture partner in China. It was an initiative by Daimler at the time to do this and to demonstrate strength of that relationship. They reciprocated.

Speaker #4: I would just remind everybody about our current setup. It is true that we have two Chinese shareholders. The nature of those is very different.

Speaker #4: They are by no means acting in concert, nor are they represented on the board. And for those who watch our annual shareholders' meetings over the many years where they have been part of the shareholding group, every single time they have voted with the majority at those shareholder meetings.

Speaker #4: How did that start? We decided, many years ago, to take a stake in the parent company of our joint venture partner in China.

Speaker #4: So it was an initiative by Daimler at the time to do this. And to demonstrate the strength of that relationship, they reciprocated. So that is how that shareholding started.

Ola Källenius: That is how that shareholding started. The other is a private entrepreneur, as you know, who invest in many different ventures and sees the future of automotive business in Mercedes, which generally should be regarded as a positive thing. Now, we are not naive about the geopolitical environment, and the current competition between the United States and China. We will see how things develop, what the ultimate wording and interpretation of such acts will be in case they get decided, which is also unknown at this state. If we need to make adjustments to comply with anything, we will make sure that we protect our presence and our business in the US. Now on Level 2++, I would love to show it to you again.

Speaker #4: And the other is a private entrepreneur, as you know, who invests in many different ventures and sees the future of the automotive business in Mercedes.

Speaker #4: This should generally be regarded as a positive thing. Now, we are not naive about the geopolitical environment and the current competition between the United States and China.

Speaker #4: So, we will see how things develop. What the ultimate wording and interpretation of such acts will be, in case they get decided, is also unknown at this stage.

Speaker #4: If we need to make adjustments to comply with anything, we will make sure that we protect our presence and our business in the US.

Speaker #4: Now, on level two plus plus, I would love to show it to you again. My colleague on the board, Jörg Butzer, just came back from San Francisco.

Ola Källenius: My colleague on the board, Jörg Burzer, just came back from San Francisco and drove the latest version of it in the Greater Bay Area. Our colleague in China, Ola Källenius, drove the latest version, and we're kind of updating every 3 months in China, in the rain in Shanghai at night, the Level 2++, and it was bloody amazing, excuse my French. In terms of the pricing, well, you can see it right now in our pricing. Just go into the configurator and order the most sophisticated option that you can buy on the CLA or the GLC or whatever. It's different pricing for different classes.

Speaker #4: And drove the latest version of it in the Greater Bay Area. And our colleague in China, Ollie Turner, drove the latest version. And we're kind of updating, like, every three months in China.

Speaker #4: In the rain in Shanghai at night, the Level 2++ and it was bloody amazing—excuse my French. In terms of the pricing, well, you can see it right now in our pricing.

Speaker #4: Just go into the configurator and order the most sophisticated option that you can buy on the CLA or the GLC or whatever. So, it's different pricing for different classes.

Speaker #4: And the great news is, as we prepare for level two plus plus, and then one day pretty much all markets — but now China, then the US, then Europe — we will have the sensor set, the compute power, and, of course, access to the AI-based software stack.

Ola Källenius: The great news is, as we prepare for a Level 2++ in then one day, pretty much all markets, but now China, then the US, then Europe, is we will have the sensor set, the compute power, and, of course, the access to the AI-based software stack. It's built-in. Even if you don't turn it on at the point of sale, you can turn it on at a later point in time. If you're not that person, maybe you want to be your own Kimi Antonelli and drive yourself, when you sell the car 3 years later, your next customer can turn it on. That's the beauty of this platform. We're incredibly excited about it, and we're pushing forward in a very swift manner.

Speaker #4: It's built in, so even if you don't turn it on at the point of sale, you can turn it on at a later point in time.

Speaker #4: Or if you're not that person, maybe you want to be your own Kimi Antonelli and drive yourself. When you sell the car three years later, your next customer can turn it on.

Speaker #4: So that's the beauty of this platform. We're incredibly excited about it, and we're pushing forward in a very swift manner. Of the established manufacturers, I would go as far as to say that we are the leading company.

Ola Källenius: Of the established manufacturers, I would go as far as to say that we are the leading company, and on the startups and attacker side, it's a neck-to-neck race.

Speaker #4: And on the startups and attacker side, it's a neck-and-neck race.

Speaker #8: Got it. Thank you.

Michael Tyndall: Got it. Thank you.

Speaker #3: Thank you very much. Thanks, Mike. We'll do two quick ones. Horst, one question for you. Horst Schneider from Bank of America.

Steffen Scheun: Thank you very much. Thanks, Mike. We do two quick ones. Horst, one question for you. Horst Schneider from Bank of America.

Christina Schenck: Thank you very much. Thanks, Mike. We do two quick ones. Horst, one question for you. Horst Schneider from Bank of America.

Speaker #5: Yes, good morning. Thanks for taking my question. Horst from Bank of America. Just one last one on the bridge, Harald, that you explained. You said you expect the tailwind from volume, structure, and net pricing in H2.

Horst Schneider: Yes, good morning. Thanks for taking my question. Horst from Bank of America. Just a last one on the bridge, Harald, that you explained. You said you expect the tailwind from volume structure net pricing in H2. Could you maybe clarify if that comes more from volumes or you also expect a positive price mix? Is that also tied to the view that the China sales go up again in H2, which would result into higher royalty payments also for you? I think you show that always in price mix. Also on raw materials, you said negative impact in H2. If I reconcile that with your statements in Q1, does that imply -1% raw mat effect in H2 on margin? Thanks.

Speaker #5: Could you maybe clarify if that comes more from volumes, or do you also expect a positive price mix? And is that also tied to the view that China sales will go up again in H2, which would result in higher royalty payments for you as well?

Speaker #5: I think you showed that always in price/mix. And also on raw materials, you said negative impact in H2. If I reconcile that with your statements in Q1, does that imply minus 1% raw material effect in H2 on margins?

Harald Wilhelm: Horst, in the interest of time, quickly. The favorable impact on volume structure pricing is on the CBU side in H2. I think I mentioned centered more on Q4 than Q3, I think that is a function of the product launch initiative, on which we talked since a long time now. We expect that to happen in H2, I think that is, therefore, fairly balanced, shared between volume structure and pricing. You could see Q2 mix in terms of top end was a bit softer. Definitely the top end in Q4, in H2 should be stronger, as well as the pricing with the new vehicles coming in. That is supporting that tailwind.

Speaker #4: Oh, so in the interest of time—quickly. So the favorable impact on volume, structure, and pricing is on the CBU side in the second half of the year.

Speaker #4: I think I mentioned centered more on Q4 than on Q3. And I think that is a function of the product launch initiative, which we have talked about for a long time.

Speaker #4: Now, we expect that to happen in the second half of the year. And I think that has therefore been fairly balanced, shared between volume, structure, and pricing. You could see in Q2, the mix in terms of top end was a bit softer.

Speaker #4: Definitely the top end in the fourth quarter. In the second half, I mean, should be stronger, as well as the pricing with the new vehicles coming in.

Speaker #4: So that is supporting that tailwind. And in terms of the raw amount, I mean, headwind, I think the order of magnitude you have in mind is, I think, roughly okay.

Ola Källenius: In terms of the raw mat, headwind, I think the order of magnitude you have in mind is roughly okay.

Speaker #5: Okay. Thank you.

Horst Schneider: Okay. Thank you.

Speaker #3: Thank you, Horst. Then we have time for one more quick question from Henning Kossmann at Barclays. Henning, over to you.

Steffen Scheun: Thank you, Horst. We have time for one more quick question from Henning Cosman, Barclays. Henning, over to you.

Christina Schenck: Thank you, Horst. We have time for one more quick question from Henning Cosman, Barclays. Henning, over to you.

Speaker #6: Yeah, thank you, Christina, for squeezing me in. Hi, everybody. Perhaps I can just come back to the shareholder return quickly, but one final time.

Henning Cosman: Thank you, Christina, for squeezing me in. Hi, everybody. Perhaps I can just come back to the shareholder return quickly, but one final time. Harald, I think you tried to be quite forthcoming with your statements there, but perhaps I can just ask in a different way. If you compare it to the original expectation, 4 billion underlying free cash flow, 2 billion M&A plus X, I think was what most people understood at the Q1 stage. I'm just wondering if anything at all has changed. You're now saying up to 1 more billion and by April 2027. I suppose that implies that the maximum is 6 billion. I think you also said in one comment you don't exclude the distinct possibility to sell more DTG in the market.

Speaker #6: Harold, I appreciate all the—I think you tried to be quite forthcoming with your statements there, but perhaps I can just ask in a different way.

Speaker #6: If you compare it to the original expectation—€4 billion underlying free cash flow, €2 billion M&A plus X—I think that was what most people understood at the Q1 stage.

Speaker #6: So I'm just wondering if anything at all has changed, or if you're now saying up to one more billion, and by April 2027. So I suppose that implies the maximum is $6 billion.

Speaker #6: I think you also said in one comment that you don't exclude the distinct possibility of selling more DTG in the market. If you could just clarify what we're actually thinking in terms of how much could be returned this year.

Henning Cosman: If you could just clarify what we're actually thinking in terms of how much could be returned this year. Has anything changed compared to what we were saying at Q1? If anything has changed, what's changed?

Speaker #6: Has anything changed compared to what we were saying in Q1? And if anything has changed, what has changed?

Speaker #4: Yeah, thanks, Henning. So again, let's try to make it simple. At the beginning of the year, we said we see the potential of €6 billion cash generation—€4 billion organic cash and €2 billion from M&A.

Harald Wilhelm: Thanks, Henning. Again, let's try to make it simple. At the beginning of the year, we said we see the potential of EUR 6 billion cash generation, EUR 4 billion in organic cash and M&A EUR 2 billion. That includes Athlon. I mentioned before, technically, that's not in the FCF, please. Obviously it's cash to be generated. If we look at it from today's point of view, I would say, EUR 6 billion is feasible, is possible to be achieved on the full-year basis. The composition maybe is a bit more in favor of the M&A side, so a bit less than EUR 4 billion on the organic side, therefore a stronger contribution on the M&A side. That supports the shareholder return.

Speaker #4: That includes Adlon. I mentioned before, technically that's not in the FCF place. But obviously, it's cash to be generated. If we look at it, I mean, from today's point of view, I would say, I mean, €6 billion is feasible, is possible to be achieved.

Speaker #4: On a full-year basis, the composition may be a bit more in favor of the M&A side, so a bit less than 4 on the organic side.

Speaker #4: Therefore, a stronger contribution on the M&A side. And that supports the capital, the shareholder return: $5 billion accomplished. And on the back of that, you heard the announcement of the new $1 billion SPB to be launched in the third quarter.

Harald Wilhelm: EUR 5 billion accomplished. On the back of that, you heard the announcement of the new EUR 1 billion SPV to be launched in Q3, to be completed in a rather short period of time ahead of the AGM, which basically means end of Q1. A pretty short period of time on which we should be in the market.

Speaker #4: To be completed in a rather short period of time, ahead of the AGM, which basically means the end of the first quarter. So, a pretty short period of time in which we should be in the market.

Speaker #6: Thank you.

Henning Cosman: Thank you.

Speaker #3: Thank you, ladies and gentlemen, for your questions and for being with us this morning. Also, thank you very much to Ola and Harald for answering all of the questions.

Steffen Scheun: Thank you, ladies and gentlemen, for your questions and for being with us this morning. Thank you very much to Ola and Harald for answering all of the questions. As usual, Investor Relations remains at your disposal to answer any further questions you may have. Now to all of you, have a great morning, a great afternoon, and a great evening. Thank you and goodbye.

Christina Schenck: Thank you, ladies and gentlemen, for your questions and for being with us this morning. Thank you very much to Ola and Harald for answering all of the questions. As usual, Investor Relations remains at your disposal to answer any further questions you may have. Now to all of you, have a great morning, a great afternoon, and a great evening. Thank you and goodbye.

Speaker #3: As usual, Investor Relations remains at your disposal to answer any further questions you may have. And now, to all of you, have a great morning, a great afternoon, and a great evening.

Q2 2026 Mercedes-Benz Group AG Earnings Call

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