Half Year 2026 Volkswagen AG Earnings Call

Operator: Good morning, and thank you for standing by. Welcome to the Volkswagen Group H1 2026 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. We will first take questions from investors and analysts, after a short break, followed by a separate Q&A session for members of the media. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dr. Sebastian Rudolph, Vice President, Global Group Communications, VOLKSWAGEN AG. Please go ahead.

Speaker #1: Good morning, and thank you for standing by. Welcome to the Volkswagen Group H1 2026 results conference call. At this time, all participants are in a listen-only mode.

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

Speaker #1: To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker #1: To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dr. Sebastian Rudolph, Vice President, Global Group Communications, Volkswagen AG.

Speaker #1: Please go ahead.

Speaker #2: Thank you, and good morning, everyone. A warm welcome to the half-year 2026 results call of Volkswagen Group. This is a joint call for both the media as well as investors and analysts, moderated by Rolf Woller, our Head of Group Treasury and AR, and myself, Sebastian Rudolph.

Sebastian Rudolph: Thank you, good morning, everyone. A warm welcome to the H1 2026 results call of Volkswagen Group. This is a joint call for both the media as well as investors and analysts, moderated by Rolf Woller, our Head of Group Treasury and IR, and myself, Sebastian Rudolph. With us today are Oliver Blume, our CEO of Volkswagen Group, and Arno Antlitz, our CFO and COO of Volkswagen Group. A few remarks before we start. You should have received the press release, the interim financial report, and all other related materials, which were published this morning. If you do not have them yet, you can find all documents on our website or just drop us an email. Let me hand over to Rolf. The floor is yours.

Speaker #2: With us today are Oliver Blume, our CEO of Volkswagen Group, and Arno Antlitz, our CFO and COO of Volkswagen Group. A few remarks before we start.

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

Speaker #2: Now, let me hand over to Rolf. The floor is yours.

Speaker #3: Thank you, Sebastian. Good morning to everyone on the call. Thank you for joining us today. Let's have a look at our agenda. Oliver will start with the key developments of the first half-year, and Arno will then take you through the half-year financial results and the full-year outlook for 2026.

Rolf Woller: Thank you, Sebastian. Good morning to everyone on the call. Thank you for joining us today. Let's have a look at our agenda. Oliver will start with the key developments of the H1, Arno will then take you through the H1 financial results and the full-year outlook for 2026. I will hand it back to Oli, who will guide you through the current status of the Group Target Picture 2030. Following their presentations, we will first host a Q&A session for the investor and analyst community, which will be hosted by myself. After the session and a short break, we will continue with the media Q&A moderated by Sebastian. Since our call will include forward-looking statements, the safe harbor language, and other cautionary statements on the slide you should currently see on the screen will govern today's presentation.

Speaker #3: And I will hand it back to Olli, who will guide you through the current status of the group target picture 2030. Following their presentations, we will first host a Q&A session for the investor and analyst community, which will be hosted by myself.

Speaker #3: After the session and a short break, we will continue with the media Q&A moderated by Sebastian. Since our call will include forward-looking statements, the Safe Harbor language and other cautionary statements on the slide you should currently see on the screen will govern today's presentation.

Speaker #3: As usual, I encourage you to read the disclaimer carefully, as all forward-looking statements are qualified by this language. In the interest of time, I will not read it out loud.

Rolf Woller: As usual, I encourage you to read the disclaimer carefully, as all forward-looking statements are qualified by this language. In the interest of time, I will not read it out loud. With that, I hand it over to Oli. Oli, please go ahead.

Speaker #3: With that, I hand it over to Olli. Olli, please go ahead.

Speaker #2: Thank you, Rolf. And good morning, and also a warm welcome to everyone on this call. Let me start by providing you with an overview of key developments in the first half of the year.

Oliver Blume: Thank you, Rolf, and good morning, and also a warm welcome to everyone on this call. Let me start by providing you with an overview of key developments of H1. We are operating, as you know, in a more than challenging environment. Major markets face weak consumer confidence, subdued demand, and intense competition. In China, the market declined by 20% in H1, further increasing excess capacity. Everything in spite of over 500 new models arrived in H1 in the market. As a result, Chinese OEMs have sharply increased exports, adding pressure in Europe. US tariffs create a significant burden and restrict international trade. In our home market, regulatory requirements and high energy costs add further pressure. This affects not only Volkswagen, but the European auto industry as a whole. We at Volkswagen are acting early on and decisively.

Speaker #2: We are operating, as you know, in a more than challenging environment. Major markets face weak consumer confidence, subdued demand, and intense competition. In China, the market declined by 20% in the first half of the year, further increasing excess capacity.

Speaker #2: Everything, in spite of over 500 new models arriving in the first half of the year on the market. As a result, Chinese OEMs have sharply increased exports, adding pressure in Europe.

Speaker #2: U.S. tariffs create a significant burden and restrict international trade. In our home market, regulatory requirements and high energy costs add further pressure. This affects not only Volkswagen, but the European auto industry as a whole.

Speaker #2: We at Volkswagen are acting early on and decisively. Before I take you through our Group target picture for 2030, let me start with where we stand after the first six months of 2026.

Oliver Blume: Before I take you through our Group Target Picture 2030, let me start where we stand after the first six months of 2026. In the environment described, group deliveries came in 6% lower at 4.1 million vehicles. Underlying demand for Volkswagen is stronger than the headline figures suggest. Europe remained positive, with deliveries up 3% in our home market. We thus retained the clear number one position. North America returned to growth, with volumes increasing 8%, despite continued BEV weakness and supported by the new models. South America also delivered solid growth of 9%. In China, deliveries declined 37% in Q2 and 26% in H1, reflecting very weak consumer sentiment, the end of subsidies, and the ongoing model transition. In light of a weak energy market in Q1, we started the year as number one in China.

Speaker #2: In the environment described, Group deliveries came in 6% lower at 4.1 million vehicles. But underlying demand for Volkswagen is stronger than the headline figures suggest.

Speaker #2: Europe remained positive as deliveries were up 3%. In our home market, we thus retained the clear number one position. North America returned to growth with volumes increasing 8%, despite continued BEV weakness and supported by the new models.

Speaker #2: South America also delivered solid growth of 9%. In China, deliveries declined 37% in Q2 and 26% in half-year one, reflecting very weak consumer sentiment, the end of subsidies, and the ongoing model transition.

Speaker #2: In light of a weak energy market in Q1, we started the year as number one in China. After six months, in 2026, we continue to be strongly positioned in the top three.

Oliver Blume: After six months in 2026, we continue to be strongly positioned in the top three. Excluding our China JVs, deliveries increased 2% year-on-year the first six months, and by 3% in Q2 standalone. Our renewed SUV portfolio is creating momentum across key markets. In North America, Tiguan and Atlas supported growth, while T-Cross and Audi Q3 continued to drive volumes in Europe. Even in China, initial customer response to locally developed models such as AUDI E7X and Volkswagen ID.ERA-9X is encouraging, strengthening our confidence in China for China strategy. We are not standing still. The ID. Cross is complementing the electric urban car family in Europe. The vehicle was just introduced to the market. Order intake remains strong and increased 4% year-on-year to 2.1 million vehicles in H1.

Speaker #2: Excluding our China JVs, deliveries increased 2% year on year in the first six months, and by 3% in the second quarter standalone. Our renewed SOV portfolio is creating momentum across key markets.

Speaker #2: In North America, Tiguan and Atlas supported growth, while T-Cross and Audi Q3 continued to drive volumes in Europe. Even in China, initial customer response to locally developed models such as Audi E7X and Volkswagen ID.

Speaker #2: Era 9X is encouraging, strengthening our confidence in the China—in China—Ford China strategy. We are not standing still. The ID. Cross is complementing the electric urban car family in Europe.

Speaker #2: The vehicle was just introduced to the market. Order intake remains strong and increased 4% year on year, to 2.1 million vehicles in the first half of the year.

Speaker #2: As a result, the order book grew to around 1.1 million vehicles at the end of June, providing visibility of more than three months of sales.

Oliver Blume: As a result, the order book grew to around 1.1 million vehicles at the end of June, providing visibility of more than three months of sales. We are especially encouraged by the strong momentum in our BEV order book, which increased by 57% year-on-year to 330,000 vehicles. BEVs now account for 31% of the European order book, up from 22% at year-end 2025. A major contributor is our new electric urban car family. For the first time, Volkswagen Group has a comprehensive and highly competitive offering in the entry-level BEV segment, opening up a large customer group that we were previously unable to address effectively. The Volkswagen ID. Polo, Škoda Epiq, and Cupra UrbanRebel have already generated more than 70,000 orders within weeks of launch, even before entry-level variants become available.

Speaker #2: We are especially encouraged by the strong momentum in our BEP order book, which increased by 57% year on year, to 330,000 vehicles. BEPs now account for 31% of the European order book, up from 22% at year-end 2025.

Speaker #2: A major contributor is our new electric urban car family. For the first time, Volkswagen Group has a comprehensive and highly competitive offering in the entry-level BEV segment, opening up a large customer group that we were previously unable to address effectively.

Speaker #2: The Volkswagen ID. Polo, Škoda Epic, and Cupra Raval have already generated more than 70,000 orders within weeks of launch, even before entry-level variants become available.

Speaker #2: Together with the recently launched ID. Cross, this provides a strong foundation for future BEV growth and market share gains in Europe. This shows how our platform strategy is working: one platform shared by three brands, across four models.

Oliver Blume: Together with the recently launched ID. Cross, this provides a strong foundation for future BEV growth and market share gains in Europe. This shows how our platform strategy is working. One platform shared by three brands across four models. Unique cars and highly differentiated, yet about 80% shared parts. Produced together in two factories in Spain. Overall, realizing synergies of more than EUR 600 million. Importantly, this will also put us in a better position to reduce the remaining gap to the CO₂ targets in Europe. In such demanding environment, Volkswagen Group held up also financially. The group generated stable sales revenue of EUR 158 billion. Operating profits amounted to EUR 5.9 billion, corresponding to a 3.8% margin. Excluding restructuring costs and the ID.4 related write-off in the US, the margin reached 4.3%. The consistent implementation of our performance programs is increasingly visible in our results.

Speaker #2: Unique cars and highly differentiated, yet about 80% shared parts. Produced together in two factories in Spain, overall realizing synergies of more than €600 million.

Speaker #2: Importantly, this will also put us in a better position to reduce the remaining gap to the CO2 targets in Europe. And in such a demanding environment, Volkswagen Group held up, also financially.

Speaker #2: The Group generated stable sales revenue of €158 billion; operating profits amounted to €5.9 billion, corresponding to a 3.8% margin, excluding restructuring costs and the ID.

Speaker #2: For related write-offs in the US, the margin reached 4.3%. The consistent implementation of our performance programs is increasingly visible in our results. Over the past years, these measures have enabled us to weather substantial market-related headwinds, with a cumulative headwind in the double-digit billion-euro range to date.

Oliver Blume: Over the past years, these measures have enabled us to weather substantial market-related headwinds with a cumulative headwind in a double-digit billion euro range to date. At the same time, cash generation remains strong, with EUR 3.2 billion automotive net cash flow in H1, up EUR 4.5 billion year over year. Net industrial liquidity amounted to EUR 32.7 billion. This is providing us with a solid base to stay successful in the market environment and to decisively push ahead with our Group Target Picture. Looking at the results of our passenger car business, the operating profit increased from EUR 4.4 billion to EUR 4.8 billion in H1. As Brand Group Core, Volkswagen Brand stayed firmly on the path of improved efficiency while simultaneously advancing the largest product campaign in its history. The Brand Group Core margin, excluding special effects, improved to 5.9% in H1 2026.

Speaker #2: At the same time, cash generation remains strong, with €3.2 billion automotive net cash flow in half-year one, up €4.5 billion year over year.

Speaker #2: Net industrial liquidity amounted to €32.7 billion. This is providing us with a solid base to stay successful in the market environment and to decisively push ahead with our group target picture.

Speaker #2: Looking at the results of our passenger car business, the operating profit increased from €4.4 billion to €4.8 billion in the first half of the year. The Brand Group Core, Volkswagen brand, stayed firmly on the path of improved efficiency while simultaneously advancing the largest product campaign in its history.

Speaker #2: The Brand Group Core margin, excluding special effects, improved to 5.9% in the first half of 2026. The Brand Group posted progressively increased results with improved performance in Europe, outweighing the headwinds in China and the US.

Oliver Blume: Brand Group Progressive increased results with improved performance in Europe, overweighting the headwinds in China and the US. In H2, the operating margin is expected to accelerate to 6% to 8%. Brand Group Progressive should benefit from product launches such as the new Q7, Q9, and RS 5 models, as well as continued cost work. At Porsche, we undertook a comprehensive restructuring and repositioning in 2025, including a sharper focus on our core business and expanded cost program. As forecast, the restructuring measures are beginning to gain traction, with operating profit increasing to more than EUR 1 billion in H1 2026. On a reported basis, results were up by 45% to a corresponding margin of 8%. With that, I hand over to Arno for a more detailed presentation of our financial results.

Speaker #2: In half-year two, the operating margin is expected to accelerate to 6% to 8%. Brand Group Progressive should benefit from product launches such as the new Q7, Q9, and RS5 models, as well as continued cost work.

Speaker #2: At Porsche, we undertook a comprehensive restructuring and repositioning in 2025, including a sharper focus on our core business and an expanded cost program. As forecast, the restructuring measures are beginning to gain traction, with operating profit increasing to more than €1 billion in the first half of 2026.

Speaker #2: On a reported basis, results were up by 45% to a corresponding margin of 8%. With that, I hand over to Arno for a more detailed presentation of our financial results.

Speaker #1: Yeah, thank you, Oliver. And good morning, everyone. Ladies and gentlemen, the market environment has remained challenging in recent months and pressure has intensified. The ongoing conflict in the Middle East continues to create volatility in China.

Arno Antlitz: Yeah, thank you, Oliver, and good morning, everyone. Ladies and gentlemen, the market environment has remained challenging in recent months, and pressure has intensified. The ongoing conflict in the Middle East continues to create volatility. In China, the overall market is down by 20%. Chinese competitors not only export their vehicles to Europe, but they also export competitive pressure. In this environment, we continue to manage the situation with discipline while consistently advancing the implementation of our strategic initiatives. We continue ramping up our attractive new vehicle portfolio, both electric and combustion engine models. We continue to reduce investment spending and overhead costs while workforce reduction is progressing as planned. Automotive net cash flow was strong at EUR 3.2 billion in H1, EUR 4.5 billion above the first six months of 2025.

Speaker #1: The overall market is down by 20%. Chinese competitors not only export their vehicles to Europe, but they also export competitive pressure. In this environment, we continue to manage the situation with discipline, while consistently advancing the implementation of our strategic initiatives.

Speaker #1: We continue ramping up our attractive new vehicle portfolio, both electric and combustion engine models. We continue to reduce investment spending and overhead costs, while workforce reduction is progressing as planned.

Speaker #1: Automotive net cash flow was strong, at €3.2 billion in the first half of the year, €4.5 billion above the first six months of 2025.

Speaker #1: And the announced sale of 51% of Avalanche, with expected proceeds of around €7.4 billion, is further evidence of our active portfolio management. But despite this progress, our operating margin is still not at a sustainable level: at 3.8% after six months, or 4.3% before special effects. Results clearly reflect the environment we are operating in and the challenges of our business model, as well as an overly high cost structure.

Arno Antlitz: The announced sale of 51% of Everllence, with expected proceeds of around EUR 7.4 billion, is further evidence of our active portfolio management. Despite this progress, our operating margin is still not at a sustainable level. At 3.8% after H1 or 4.3% before special effects, results clearly reflect the environment we are operating in and the challenges of our business model and an overly high cost structure. The 4% margin shows that the cost reductions currently agreed under the existing programs are not sufficient in today's economic and competitive environment. In short, the H1 results are another wake-up call for action. We must accelerate and broaden our efforts to lower our cost base structurally, generate adequate returns, and safeguard the delivery on our financial ambitions.

Speaker #1: The 4% margin shows that the cost reductions currently agreed under the existing programs are not sufficient. In today's economic and competitive environment, in short, the half-year results are another wake-up call for action.

Speaker #1: We must accelerate and broaden our efforts to lower our cost base, structurally generate adequate returns, and safeguard the delivery on our financial ambitions. This requires structural and sustainable improvements across the Group—improving vehicle cost structures without compromising product substance, reducing overhead costs, increasing plant efficiency, and accelerating technology development and decision-making.

Arno Antlitz: This requires structural and sustainable improvements across the group, improving vehicle cost structures without compromising product substance, reducing overhead costs, increasing plant efficiency, and accelerating technology development and decision-making. Requisites are clear. To achieve this, we need substantially lower complexity and faster execution across our product base and technology platforms, our portfolio of participations, and our leadership and decision-making structures. These are the areas addressed by the Group Target Picture 2030 Oliver will present later. What matters now is swift and disciplined and consistent implementation. With that, let us dive straight into the operating and financial performance of H1. Vehicle sales totaled 4 million units in H1, 8% below the prior year level, or 1% higher, excluding the China joint ventures. Group sales revenue remained broadly stable on EUR 158 billion as growth in financial services offset lower revenue in passenger cars.

Speaker #1: The prerequisites are clear. To achieve this, we need substantially lower complexity and faster execution across our product base and technology platforms, our portfolio of participations, and our leadership and decision-making structures.

Speaker #1: These are the areas addressed by the Group Target Picture 2030. Oliver will present later. What matters now is swift, disciplined, and consistent implementation.

Speaker #1: With that, let us dive straight into the operating and financial performance of the first half of the year. Vehicle sales totaled 4 million units.

Speaker #1: In the first six months, that was 8% below the prior year level, or 1% higher excluding the China joint ventures. Group sales revenue remained broadly stable at €158 billion, as growth in Financial Services offset lower revenue in Passenger Cars.

Speaker #1: The operating result came in at €5.9 billion, 12% below H1 2025, corresponding to a margin of 3.8% in Q2 alone. The margins to that 4.2%.

Arno Antlitz: The operating result came in to EUR 5.9 billion, 12% below H1 2025, corresponding to a margin of 3.8% in Q2, alone the margins to that 4.2%. H1 results were burdened by special effects of around EUR 0.9 billion, equivalent to approximately 50 basis points of margin. Excluding these effects, operating profit reached EUR 6.9 billion and the operating margin was 4.3%, slightly below the midpoint of our full-year outlook range. Profit before tax declined by 26% to EUR 4.8 billion in H1 2026. This was driven by the lower operating result and a negative swing in our other financial result, mainly due to valuation effects and impairments on participations and shareholdings. Profit after tax decreased to EUR 3.1 billion. Automotive net cash flow increased to a solid EUR 3.2 billion, compared with an outflow of EUR 1.4 billion in the prior year period.

Speaker #1: H1 results were burdened by special effects of around €0.9 billion, equivalent to approximately 50 basis points of margin. Excluding these effects, operating profit reached €6.9 billion, and the operating margin was 4.3%, slightly below the midpoint of our full-year outlook range.

Speaker #1: Profit before tax declined by 26% to €4.8 billion in the first half of 2026, and this was driven by the lower operating result and a negative swing in our other financial result, mainly due to valuation effects and impairments on participations and shareholdings.

Speaker #1: Profit after tax decreased to €3.1 billion. Automotive net cash flow increased to a solid €3.2 billion, compared with an outflow of €1.4 billion in the prior-year period.

Speaker #1: Excluding M&A, clean net cash flow increased to €3.7 billion, and cash out for M&A amounted to €0.4 billion. This includes €0.9 billion for the investment in Rivian, partially offset by a €0.5 billion cash inflow from TRATON's disposal of a stake in Sinotruck.

Arno Antlitz: Excluding M&A, clean net cash flow increased to EUR 3.7 billion. Cash out for M&A amounted to EUR 2.4 billion. This includes EUR 9 billion for the investment in Rivian, partially offset by EUR 0.5 billion cash inflow from Traton's disposal of a stake in Sinotruk. This development underlines our continuing M&A discipline. Automotive net liquidity at the end of June came in at EUR 32.7 billion. Net cash flow of EUR 3.2 billion, more than offset dividends to shareholders and hybrid bonds, interest payments totaling EUR 3.1 billion. Overall, Automotive net liquidity remained very solid at EUR 32.7 billion at the end of June. Moving on to the performance of the divisions in H1 2026. Passenger cars recorded an operating profit of EUR 4.8 billion, some 8% up on H1 2025, corresponding to a margin of 4.1%.

Speaker #1: This developed underlines our continued M&A discipline. Automotive net liquidity at the end of June came in at 1.8 billion, came in at 2032.7 billion euro, net cash flow of 3.2 billion euro, more than offset dividends to shareholders and hybrid bonds interest payments totaling 3.1 billion.

Speaker #1: Overall, automotive net liquidity remained very solid at €32.7 billion at the end of June. Moving on to the performance of the divisions in the first six months of 2026.

Speaker #1: Passenger Cars recorded an operating profit of €4.8 billion, up around 8% on H1 2025, and corresponding to a margin of 4.1%. Commercial Vehicles were impacted by costs related to restructuring and alignment measures, booked in the first quarter.

Arno Antlitz: Commercial vehicles were impacted by costs related to restructuring and alignment measures booked in Q1. Supported by a stronger Q2, the operating result came in 24% lower year-on-year at EUR 0.9 billion. Financial services delivered a robust performance with EUR 0.9 billion operating profit, roughly on par with prior year period. Looking at the profit bridge of the passenger car business area, volume and other had a negative impact of EUR -0.7 billion compared with the same period last year. Price mix had a negative impact of around EUR -1.6 billion. This was mainly due to higher incentive levels for electric vehicles and an unfavorable regional and product mix. Product costs were slightly down by EUR 0.3 billion due to higher raw material costs and increased memory chips and logistics prices.

Speaker #1: Supported by a stronger Q2, the operating result came in 24% lower year-on-year, at €0.9 billion. Financial Services delivered a robust performance, with €0.9 billion operating profit, roughly on par with the prior year. The Passenger Car business area, volume, and other had a negative impact of minus €0.7 billion compared with the same period last year.

Speaker #1: Price mix had a negative impact of around minus €1.6 billion. This was mainly due to higher incentive levels for electric vehicles, and an unfavorable regional and product mix.

Speaker #1: Product cost was slightly down by €0.3 billion, due to higher raw material cost and increased memory chip and logistics prices. Fixed costs and others had a positive effect of €2 billion, supported by improved overhead cost and significantly lower restructuring compared to last year.

Arno Antlitz: Fixed costs and others had a positive effect of EUR 2 billion, supported by improved overhead costs and significantly lower restructuring compared to last year. Fixed costs continue to be supported by further improvement of automotive overhead costs. Overhead costs were reduced by EUR 0.7 billion, supported by strict cost discipline across the organization. The overhead cost ratio improved by 20 basis points. The development of overhead costs was supported by the continued reduction of workforce, which is progressing according to plan and is delivering tangible results across the group. Under the current agreement, we decided in 2024 to reduce headcount at VOLKSWAGEN AG by 35,000, including Audi, Porsche, and CARIAD. We are planning to reduce headcount by 50,000 in the German entities by 2030. The reduction refers to the manufacturing as well as the administrative part of our business in Germany.

Speaker #1: Fixed costs continue to be supported by further improvements in automotive overhead costs. Overhead costs were reduced by €0.7 billion, supported by strict cost discipline across the organization. The overhead cost ratio improved by 20 basis points.

Speaker #1: The development of overhead costs was supported by the continued reduction of workforce, which is progressing according to plan and is delivering ten different results across the Group.

Speaker #1: Under the current agreement, we decided in 2024 to reduce headcount at Volkswagen AG by 35,000, including Audi, Porsche, and Carrier. We are planning to reduce headcount by 50,000 in the German entities by 2030.

Speaker #1: The reduction refers to the manufacturing as well as the administrative part of our business in Germany. So far, roughly 21,000 employees have already left the company in Germany, for the most part in the context of early retirement schemes.

Arno Antlitz: Roughly 21,000 employees have already left the company in Germany, for the most part, in the context of early retirement schemes. Despite all the progress made so far, SG&A costs remain a major structural gap versus automotive peers, and this gap amounts to roughly 30%. It's largely driven by the complexity of the group structure across all levels, creating a clear cost disadvantage. Sustainably closing this gap is essential to strengthen our financial robustness. Under the Group Target Picture 2030, we aim to reduce overhead costs globally by around EUR 11 billion. Consistent execution would bring the overhead cost ratio in the automotive division down to around 12% by 2030, from roughly 16% today. That four percentage point improvement would translate directly into a four percentage point margin uplift.

Speaker #1: But despite all the progress made so far, SG&A costs remain a major structural gap versus automotive peers, and this gap amounts to roughly 30%.

Speaker #1: It's largely driven by the complexity of the group's structure across all levels, creating a clear cost disadvantage. Closing this gap in a sustainable way is essential to strengthen our financial robustness.

Speaker #1: Under the Group Target Picture 2030, we aim to reduce overhead costs globally by around €11 billion. Consistent execution would bring the overhead cost ratio in the Automotive Division down to around 12% by 2030, from roughly 16% today.

Speaker #1: That 4 percentage point improvement would translate directly into a 4 percentage point margin uplift. Since personnel costs account for roughly 60% of total overhead costs, closing the gap to competition would imply a further workforce reduction of around 50,000 employees in addition to the current program, mostly in the administrative areas of the group worldwide.

Arno Antlitz: Since personnel costs account roughly 60% of total overhead costs, closing the gap to competition would imply a further workforce reduction of around 50,000 employees in addition to the current program, mostly in the administrative areas of the group worldwide. Turning to the development of the brand groups, the platforms, as well as the financial services. Brand Group Core delivered a performance on last year's level in H1 2026. Vehicle sales and sales revenue were up by 3% and 1% respectively. Operating results came in broadly stable at EUR 3.6 billion and a margin of 4.9%. Brand Group Progressive reported a market decline in sales by 8% and sales revenue by 10%, reflecting weaker volumes in China and the US. Nevertheless, operating results came in broadly stable compared to prior year period at EUR 1.1 billion. This corresponds to a margin of 3.8%, up by 50 basis points.

Speaker #1: Turning to the development of the Brand Group, the platforms, as well as Financial Services: Brand Group Core delivered a performance on last year's level in the first six months of 2026.

Speaker #1: Vehicle sales and sales revenue were up by 3% and 1%, respectively. Operating result came in broadly stable at €3.6 billion, with a margin of 4.9%.

Speaker #1: Brand Group Progressive reported a market decline in sales by 8% and sales revenue by 10%, reflecting weaker volumes in China and the US. Nevertheless, the operating result came in broadly stable compared to the prior-year period at €1.1 billion.

Speaker #1: This corresponds to a margin of 3.8%, up by 50 basis points. Results in H1 2025 had been impacted by restructuring charges and higher costs related to US tariffs, which posed a smaller headwind to results in the first half of 2026.

Arno Antlitz: Results in H1 2025 had been impacted by restructuring charges and higher costs related to US tariffs, which pose a smaller headwind to results in the H1 2026. Despite the pronounced decline in vehicle sales, Porsche automotive business delivered strongly improved financial results. Operating profit came in 45% higher year on year at EUR 1.2 billion, corresponding to a margin of 8%. Porsche will report H1 results on 29 July. Let's have a closer look at the brands in the Brand Group Core. Volkswagen recorded an operating margin of 2.4%, broadly on par with the prior year level. If adjusting for non-recurring effects, operating margins stood at 3.8%. Škoda continues to show impressively what can be achieved in a highly competitive environment based on strong products and a competitive cost base.

Speaker #1: Despite the pronounced decline in vehicle sales, Porsche Automotive business delivered strongly improved financial results. Operating profit came in 45% higher year-on-year at €1.2 billion, corresponding to a margin of half-year results on July 29.

Speaker #1: Let's have a closer look at the brands in the Brand Group Core. Volkswagen recorded an operating margin of 2.3 to 2.4%, broadly on par with the prior year level.

Speaker #1: If adjusting for non-recurring effects, operating margins are at 3.8%. Škoda continues to show impressively what can be achieved in a highly competitive environment, based on strong products and a competitive cost base.

Speaker #1: The operating margin of 8.5% in the first six months of 2026 gives us confidence that we are on the right track. Carrier sales revenue increased by 44% to €0.8 billion, backed by increased volume of the 1.0, 1.1, and 1.2 software stacks.

Arno Antlitz: The operating margin of 8.5% in the H1 2026 gives us confidence that we are on the right track. CARIAD sales revenue increased by 44% to EUR 0.8 billion, backed by increased volume of the 1.1 and 1.2 software stacks. Operating results improved by EUR 0.3 billion to EUR -0.9 billion. PowerCo kept the operating results broadly stable despite the ongoing production ramp-up at the Salzgitter plant and continued construction works at the Valencia and St. Thomas sites. After a slow start to the year, industrial operations of Traton caught up in the Q2. Overall sales revenue in H1 was slightly down on lower unit sales, operating results came in at EUR 0.9 billion, 24% below the prior year level. Operating margin stood at 4.5%. Lower volumes, costs related to US tariffs, and special effects negatively impacted the results. The financial services business delivered a robust performance.

Speaker #1: Operating results improved by €0.2 to €0.3 billion, to minus €0.9 billion. PowerCo kept the operating results broadly stable, despite the ongoing production ramp-up at the Salzgitter plant and continued construction works at the Valencia and St.

Speaker #1: Thomas Seitz: After a slow start to the year, industrial operations of TRATON caught up in the second quarter. Overall sales revenue in H1 was slightly down on lower unit sales, and operating result came in at €0.9 billion, 24% below the prior year level. Operating margin stood at 4.5%. Lower volumes, costs related to US tariffs, and special effects negatively impacted the results.

Speaker #1: The Financial Services business delivered a robust performance. Contract volumes increased by around 3% in the first half of the year. At the same time, residual value risk slightly increased.

Arno Antlitz: Contract volumes increased by around 3% in the H1. At the same time, residual value risk slightly increased. The credit loss ratio was broadly stable on a solid level, and operating profit at EUR 0.9 billion was slightly down compared to the prior year period. Investments, CapEx and R&D in the automotive division were further reduced by EUR 1.5 billion to EUR 14.8 billion in the H1. This corresponds to an investment ratio of 10.6%, 80 basis points below the level recorded in H1 2025. Going forward, we will focus our resources more consistently on the areas that matter most for the future competitiveness and value creation. At the same time, we will reduce complexity in our product portfolio and variants, leverage group synergies more systematically, and apply an asset-light approach where appropriate, aiming for an investment ratio of around 9% in 2030.

Speaker #1: The credit loss ratio was broadly stable at a solid level, and operating profit at €0.9 billion was slightly down compared to the prior year period.

Speaker #1: Investments in CapEx and R&D in the automotive division were further reduced by €1.5 billion to €14.8 billion in the first half of the year.

Speaker #1: This corresponds to an investment ratio of 10.6%, 80 basis points below the level recorded in H1 2025. Going forward, we will focus our resources more consistently on the areas that matter most for the future competitiveness and value creation.

Speaker #1: At the same time, we will reduce complexity in our product portfolio and variants, leverage Group synergies more systematically, and apply an asset-light approach where appropriate, aiming for an investment ratio of around 9% in 2030.

Speaker #1: China’s automotive market has come under increasingly strong pressure since the beginning of the year. Factors including changes in subsidy and tax policies, rising fuel prices, and ongoing price competition have impacted consumer confidence.

Arno Antlitz: China's automotive market has come under increasingly strong pressure since the beginning of the year. Factors including changes in subsidy and tax policies, rising fuel prices, and ongoing price competition have impacted consumer confidence. In this weak market environment, our unit sales were 31% lower year on year at 0.9 million vehicles. At the same time, Volkswagen Group China continues its model offensive under the In China for China strategy. To counter these pressures, Volkswagen Group China intensified its cost work and was able to compensate for parts of the pressure. As a result, the proportionate operating profit of our joint ventures activities in China amounted to EUR 184 million in the H1 2026. Before moving on to the outlook, let me briefly comment on the agreed sales of 51% in Everllence.

Speaker #1: In this week's market environment, our unit sales were 31% lower year-on-year at 0.9 million vehicles. At the same time, Volkswagen Group China continues its model offensive under the In China for China strategy.

Speaker #1: To counter these pressures, Volkswagen Group China intensified its cost work and was able to compensate for parts of the pressure. As a result, the proportionate operating profit of our joint venture activities in China amounted to €184 million in the first half of 2026.

Speaker #1: Before moving on to the outlook, let me briefly comment on the agreed sale of 51% in Everlands. The agreement with Brain Capital is a result of a highly competitive and transparent bidding process based on clearly defined criteria.

Arno Antlitz: The agreement with Bain Capital is a result of a highly competitive and transparent bidding process based on clearly defined criteria. The winning bid provided a compelling combination of ambitious growth, committed future investment in Everllence, and an attractive valuation. The transaction is expected to generate proceeds of around EUR 7.4 billion for the Volkswagen Group. Beyond the financial benefits, this step further sharpens our focus on the automotive core business and supports a more efficient allocation of capital. This brings me to the financial outlook for the full year 2026. Against the backdrop of development in the H1, we now expect sales revenue to be up -3% below the previous year. At the same time, we continue to expect operating return on sales in the range between 4% and 5.5%.

Speaker #1: The winning bid provided a compelling combination of ambitious growth, committed future investment in Everlands, and an attractive valuation. The transaction is expected to generate process proceeds of around €7.4 billion for the Volkswagen Group.

Speaker #1: Beyond the financial benefits, this step further sharpens our focus on the automotive core business and supports a more efficient allocation of capital. This brings me to the financial outlook for the full year 2026.

Speaker #1: Against the backdrop of the developments in the first half-year, we now expect sales revenue to be down 3% compared to the previous year.

Speaker #1: At the same time, we continue to expect operating return on sales in the range between 4% and 5.5%. Building on a strong cash flow in the first half-year, we continue to expect automotive net cash flow to range between €3 billion and €6 billion, and net liquidity in a bandwidth of €32 billion to €34 billion.

Arno Antlitz: Building on a strong cash flow in the H1, we continue to expect automotive net cash flow to range between 3 and 6 billion and net liquidity in a bandwidth of EUR 32 to EUR 34 billion. Ladies and gentlemen, since the launch of Volkswagen Zukunftspakt, the world has changed fundamentally. In this environment, it is not enough to just incrementally step up cost measures. We need a fundamental change in our business model with a pronounced step-up of structural and lasting improvement in terms of cost competitiveness of our products, in terms of overhead cost reduction and efficiency improvement in our plant, and in terms of speed. To achieve this, we must significantly reduce the complexity of our business, or better, of this company. We are convinced if we are able to simplify our business, we will become more agile in adapting to the world around us.

Speaker #1: Ladies and gentlemen, since the launch of the Volkswagen Zukunft program, the world has changed fundamentally. In this environment, it's not enough to just incrementally step up cost measures.

Speaker #1: We need a fundamental change in our business model, with a pronounced step up of structural and lasting improvement in terms of cost competitiveness of our products.

Speaker #1: In terms of overhead cost reduction and efficiency improvement in our plants, and in terms of speed. To achieve this, we must significantly reduce the complexity of our business—or better, of this company.

Speaker #1: Be convinced that if we are able to simplify our business, we will become more agile in adapting to the world around us. These are the priorities we will address with determination over the coming months to achieve our long-term targets for 2030: a group operating margin of 8 to 10%, an automotive cash conversion of above 60%, an overhead cost ratio of 12%, and an investment ratio of around 9%.

Arno Antlitz: These are the priorities we will address with determination over the coming months to achieve our long-term targets for 2030. A group operating margin of 8% to 10%, automotive cash conversion of above 60%, an overhead cost ratio of 12%, and an investment ratio of around 9%. Together, these targets form a comprehensive framework to lead the Volkswagen Group towards a successful future. With that, I hand back to Oliver.

Speaker #1: Together, these targets form a comprehensive framework to lead the Volkswagen Group towards a successful future. With that, I hand back to Oliver.

Speaker #2: Yeah, thank you very much. Arno, three years ago we set out an ambitious transformation agenda. Until today, we have demonstrated tangible progress across all key pillars of our strategy.

Oliver Blume: Yeah. Thank you very much, Arno. Three years ago, we set out an ambitious transformation agenda. Until today, we have demonstrated tangible progress across all key pillars of our strategy. In short, progress delivered, major operational targets achieved, promises kept. In products, software, and technologies in the regions, and with our performance programs. Reality is that the automotive industry is faced with fundamental challenges, geopolitics, trade barriers, regulatory pressure, adverse demand trends, technological disruption, unprecedented competitive intensity. These factors are reshaping our industry across all major regions, and they are not cyclical, they are increasingly structural. The measures that were adequate in the past are no longer allowing us to achieve our goals. Therefore, the Group Target Picture 2030 represents the next phase of our transformation.

Speaker #2: In short, progress delivered, major operational targets achieved, promises kept. In products, software, and technologies, in the regions, and with our performance programs. But the reality is that the automotive industry is faced with fundamental challenges: geopolitics, trade barriers, regulatory pressure, adverse demand trends, technological disruption, and unprecedented competitive intensity.

Speaker #2: These factors are reshaping our industry across all major regions. And they are not cyclical; they are increasingly structural. The measures that were adequate in the past are no longer allowing us to achieve our goals.

Speaker #2: Therefore, the Group Target Picture 2030 represents the next phase of our transformation. This is not just a cost reduction program; it is a comprehensive plan with a holistic approach to make Volkswagen faster, more resilient, more competitive, and even more innovative.

Oliver Blume: This is not just a cost reduction program, it is a comprehensive plan with a holistic approach to make Volkswagen faster, more resilient, more competitive, and even more innovative. The program comprises 12 fields of action clustered into three main areas: Technology, performance, and group steering. Let me highlight some of the initiatives that we have decided and started to implement. Covering key vehicle segments with fewer models, thereby creating significant added value for our customers. That is what we want to achieve. To that end, we will streamline our model lineup by up to 50%. This allows us to consolidate our development and production resources to focus our expenditure on even higher level innovation, equipment, and quality of our cars. To reduce segment overlaps and substitution. By doing so, reduce complexity and cost, and ultimately increase the volume and profit per model.

Speaker #2: The program comprises 12 fields of action, clustered into three main areas: technology, performance, and group steering. Let me highlight some of the initiatives that we have decided on and started to implement.

Speaker #2: Covering key vehicle segments with fewer models, thereby creating significant added value for our customers—that is what we want to achieve. To that end, we will streamline our model lineup by up to 50%.

Speaker #2: This allows us to consolidate our development and production resources, to focus our expenditure on even higher-level innovation, equipment, and quality of our cars; to reduce segment overlaps and substitution; by doing so, reduce complexity and cost; and ultimately increase the volume and profit per model.

Speaker #2: Every remaining model shall lead its segment in driving and technology experience. At the same time, we have looked through all parts and supplies and found that we could reduce the number of available equipment options by up to 75% without compromising product substance.

Oliver Blume: Every remaining model shall lead its segment in driving and technology experience. At the same time, we have looked through all parts and supplies and found that we could reduce the number of available equipment options by up to 75% without compromising product substance. Implementation has already started. Depending on the component, complexity will be reduced by up to 90%, for example, in seats, variants, windscreens, and similar parts. Customers will continue to have a meaningful choice. We are cutting what is not ordered, and we scale what customers demand. A key element of our technology strategy is a consolidation of platforms, electric electronic architectures, and software stacks into two regional technology ecosystems. One for the Western Hemisphere and one for the Eastern Hemisphere. This allows us to tailor solutions to local customer requirements while reducing complexity, eliminating duplicate development, and improving investment efficiency.

Speaker #2: Implementation has already started. Depending on the component, complexity will be reduced by up to 90%—for example, in seats, variants, windscreens, and similar parts.

Speaker #2: Customers will continue to have a meaningful choice via cutting what is not ordered, and we scaled what customers demand. A key element of our technology strategy is the consolidation of platforms, electric electronic architectures, and software stacks into two regional technology ecosystems.

Speaker #2: One for the Western Hemisphere and one for the Eastern Hemisphere. This allows us to tailor solutions to local customer requirements while reducing complexity, eliminating duplicate developments, and improving investment efficiency.

Speaker #2: At the same time, we maintain our ambition of technology leadership by focusing resources on scalable technologies and selective strategic partnerships, such as Rivian and Cariad.

Oliver Blume: At the same time, we maintain our ambition of technology leadership by focusing resources on scalable technologies and selective strategy partnerships such as Rivian and Cerizim. We are fully on track in all these activities. The goal is not to create more technology ecosystems, but fewer and stronger ones. The objective is simple: Maximize synergies globally while localizing where it creates customer value. In the West, we build on Rivian partnership in the RV Tech joint venture, in the East, on China electric electronic architecture and Cerizim ecosystem. We therefore intend to make full use of our presence to fill market gaps. For example, serving the Global South from our China hub. As the only international player, we are able to act like a Chinese OEM in terms of technology and cost base, going global from China.

Speaker #2: And we are fully on track in all these activities. The goal is not to create more technology ecosystems, but fewer and stronger ones. The objective is simple.

Speaker #2: Maximize synergies globally while localizing where it creates customer value. In the West, we built on the Rivian partnership in the RVT tech joint venture. In the East, on China electric electronic architecture and Carism ecosystem.

Speaker #2: We therefore intend to make full use of our pre-presence to fill market gaps. For example, serving the Global South from our China hub. As the only international player, we are able to act like a Chinese OEM in terms of technology and cost base, going global from China.

Speaker #2: By further streamlining our technical capacities, we are aligning our production network to the changed market environment. Our cost base will be aligned to a production volume of 9 million units per year.

Oliver Blume: By further streamlining our technical capacities, we are aligning our production network to the changed market environment. Our cost base will be aligned to a production volume of 9 million units per year. Prior to the COVID pandemic, the company was invested for production capacity of approximately 12 million vehicles per year. During the past year, we have already made significant progress with a reduction of 2 million units. We are currently discussing a further reduction of technical capacities by more than 500,000 vehicles in each China and Europe. Our target is to lower the break-even point to a production level of less than 8 million units. Operational excellence is about tackling the structural costs and complexity embedded across the group. We are focusing on six key levers: R&D, procurement, production, quality, sales, and overhead.

Speaker #2: Prior to the COVID pandemic, the company was invested for production capacity of approximately 12 million vehicles per year. During the past year, we have already made significant progress with a reduction of 2 million units.

Speaker #2: We are currently discussing a further reduction of technical capacities by more than 500,000 vehicles in each China and Europe. Our target is to lower the break-even point to a production level of less than 8 million units.

Speaker #2: Operational excellence is about tackling the structural cost and complexity embedded across the Group. We are focusing on six key levers: R&D, R&D procurement, production, quality, sales, and overhead.

Speaker #2: Through greater standardization, increased scale effects, simpler processes, and higher productivity, we aim to reduce structural costs while improving speed and competitiveness. Sometimes, the simple things have the greatest impact.

Oliver Blume: Through greater standardization, increased scale effects, simpler processes, and higher productivity, we aim to reduce structural costs while improving speed and competitiveness. Sometimes the simple things have the greatest impact. Simplifying technical specifications and purchasing processes, consequently, use AI to support the development process or in product testing. Implement use of shared services across the group and eliminate, consequently, dual work within the organization. We need to consequently look for growth opportunities in parallel. First, in regions, for example, in North America, India, and the Global South are tomorrow's growth engines for us. Second, market instruments. Fleet business, used cars, after-sales, and insurance business offer growth opportunities we want to further explore for Volkswagen. Third, technologies. We are moving decisively into future-oriented fields, including circular economy, SOCs, energy storage, or robotics.

Speaker #2: Simplifying technical specifications and purchasing processes, consequently using AI to support the development process or in product testing. Implement use of shared services across the group and eliminate, consequently, dual work within the organization.

Speaker #2: And we need to consequently look for greater opportunities in parallel, first in regions, for example, in North America, India, and the Global South, which are tomorrow's growth engines for us.

Speaker #2: Second, market instruments. Fleet business use cars aftersales and the insurance business offer gross opportunities we want to further exploit for Volkswagen. And third, technologies.

Speaker #2: We are moving decisively into future-oriented fields, including the circular economy, SOCs, energy storage, and robotics. This is how we are turning our engineering strength into entirely new sources of value creation and competitiveness.

Oliver Blume: This is how we are turning our engineering strength into entirely new sources of value creation and competitiveness. With consistent implementation across all action fields of our Group Target Picture, we are safeguarding achievement of our 2030 ambition, an operating return on sales of 8% to 10% by 2030. Over the past months, the program has been developed and detailed. The setup is in place. Objectives are defined. Initial measures have been established. In the months ahead, measures will be further specified across all 12 initiatives, with implementation already started in parallel. The entire process is supported by close tracking at group and brand level, complemented by regular reporting to the board. You will have noticed that while the announced initiatives are already far-reaching, not all potential fields of action are finally agreed. We are in constructive dialogue and plan to obtain outstanding approvals as fast as possible.

Speaker #2: With consistent implementation across all action fields of our Group target picture, we are safeguarding achievement of our 2030 ambition, and an operating return on sales of 8 to 10 percent by 2030.

Speaker #2: And over the past months, the program has been developed and detailed. The setup is in place. Objectives are defined. Initial measures have been established.

Speaker #2: In the months ahead, measures will be further specified across all 12 initiatives, with implementation already started in parallel. The entire process is supported by close tracking at group and brand level, complemented by regular reporting to the board.

Speaker #2: You will have noticed that, while the announced initiatives are already far-reaching, not all potential fields of action are finally agreed. We are in constructive dialogue and plan to obtain outstanding approvals as fast as possible.

Speaker #2: Let me conclude the presentation with three main messages. First, the underlying demand picture is stronger than headline deliveries suggest, as we continue our model offensive.

Oliver Blume: Let me conclude the presentation with three main messages. First, the underlying demand picture is stronger than headline deliveries suggest as we continue our model offensive. Excluding China, vehicle deliveries increased by 2%. Our enhanced model lineup is resonating well with customers. The European order book rose to more than one million vehicles, with particular strength in battery electric vehicles and the strong early momentum of the electric urban car family and customer response to our newly launched China models like ID.ERA-9X or E7X from Audi are encouraging. Second, despite a highly challenging environment, particularly in China, the group held well with regards to financial performance in the H1. We continue to act from a position of strength with a very solid net liquidity position and strong net cash generation. We confirm the full-year outlook for operating margin, net cash flow, and net liquidity.

Speaker #2: Excluding China, vehicle deliveries increased by 2%. Our enhanced model lineup is resonating well with customers. The European order book rose to more than 1 million vehicles, with particular strengths in battery electric vehicles.

Speaker #2: It's a strong early momentum of the electric urban car family, and customer response to our newly launched China models like the ID. Era 9X or E7X from Audi are encouraging.

Speaker #2: Second, despite a highly challenging environment, particularly in China, the Group held up well with regards to financial performance in the first half-year. We continue to act from a position of strength, with a very solid net liquidity position and strong net cash generation.

Speaker #2: And we confirm the full-year outlook for operating margin, net cash flow, and net liquidity. Third, we have launched a truly unparalleled, far-reaching corporate program.

Oliver Blume: Third, we have launched a truly unparalleled, far-reaching corporate program, our Group Target Picture 2030, and we have got our foot on the gas pedal. We are aligning our products, technologies, and structures to succeed in the new market realities. We are reducing complexity, accelerating execution, improving competitiveness, and allocating capital more selectively. We are sizing growth opportunities in key future fields. In short, while market conditions remain extremely tough, we act early on, and we see encouraging progress in the areas that matter most. This gives us conviction to successfully master the next phase of Volkswagen's transformation. With that, I hand back to Rolf.

Speaker #2: Our group target picture is 2030. And we have got our foot on the gas pedal. We are aligning our products, technologies, and structures to succeed in the new market realities.

Speaker #2: We are reducing complexity, accelerating execution, improving competitiveness, and allocating capital more selectively. And we are seizing greater opportunities in key future fields. In short, while market conditions remain extremely tough, we act early on, and we see encouraging progress in the areas that matter most.

Speaker #2: This gives us conviction to successfully master the next phase of Volkswagen’s transformation. With that, I hand back to Rolf.

Speaker #1: Thank you, Ollie. Thank you, Arno. With this, we conclude the prepared remarks, and let us now move to the Q&A session. If you want to ask a question, please press star followed by one-one.

Rolf Woller: Thank you, Oli. Thank you, Arno. With this, we conclude the prepared remarks. Let us now move to the Q&A session. If you want to ask a question, please press star followed by one. Looking here at the queue, I have the first question coming from Tim Rokossa from Deutsche Bank. Tim, please go ahead.

Speaker #1: Looking here at the Q&A, I have the first question coming from Tim Rocosa from Deutsche Bank. Tim, please go ahead.

Speaker #3: Yeah, thank you very much. So first of all, Ollie, Arno, Rolf, I think I speak for the capital markets in general when I say that we appreciate that you, against all of this pressure, start the 2030 program despite having just shortly launched the other one.

Tim Rokossa: Yeah. Thank you very much. First of all, Oli, Arno, Rolf, I think I speak for the capital markets in general when I say that we appreciate that you, against all of this pressure, start the 2030 program despite having just shortly launched the other one. It would be nice if it wasn't needed, but in this world, it clearly is. To my questions. The first one is the discussions in the press often focus on plant closures when we discuss about the 2030 plan. I agree that a plant closure would obviously be a pretty powerful message. But at the same time, I don't think it's feasible to assume that that would be possible pre-2030. We're discussing about a 2030 plan here. Could you just confirm that plant closures are not needed to achieve the 2030 targets that you also just spoke about?

Speaker #3: It would be nice if it wasn't needed, but in this world it clearly is. To my questions—the first one is: The discussions in the press often focus on plant closures when we discuss the 2030 plan.

Speaker #3: I agree that a plant closure would obviously send a pretty powerful message. But at the same time, I don't think it's feasible to assume that that would be possible post or pre-2030, and we're discussing a 2030 plan here.

Speaker #3: So could you just confirm that plant closures are not needed to achieve the 2030 targets that you also just spoke about? And secondly—it's not easy with you guys given all of the complexity, but I think drilling it down to the key issues, one of the key issues for the group is Audi right now. I had the question again this morning from a lot of investors: if Audi, with this model initiative, isn't working, will it ever? And what do you say to people when you think about this? When should we get our hopes up again for Audi? Thank you.

Tim Rokossa: Secondly, never easy with you guys, given all of the complexity. I think drilling it down to the key issues, one of the key issue for the group is Audi right now. I had the question again this morning from a lot of investors, if Audi with this model initiative isn't working, will it ever? What do you say to people when you think about this? When should we get our hopes up again for Audi? Thank you.

Speaker #2: Yeah, Tim, thanks. Thanks for your remarks and your questions. And, yeah, first of all, I think we have built, during the last three years, a foundation for everything to come.

Oliver Blume: Yeah, Tim. Thanks for your remarks and your questions. First of all, I think we have built, during the last 3 years, a foundation for everything to come. Now we are a more stable situation in terms of product, technology, also in regions, and especially the performance programs, which helps us to compensate the major part of the headwinds we have faced. Now we are entering in the next phase of our transformation with our Target Picture 2030. We have the need because of the risk scenario. We are acting early. To make it very clear, this is not only a cost reduction program, it's a comprehensive program, which touches all fields of our company. It's the deepest and the most innovative program we have ever implemented in the history of Volkswagen Group.

Speaker #2: And now we are in a more stable situation in terms of products, technology, also in regions and especially the performance programs, which help us to compensate the major part of the headwinds we are faced with.

Speaker #2: And now we are entering the next phase of our transformation with our target picture 2030. We have the need because of the risk scenario, and we are acting early.

Speaker #2: And, to say it very clearly, this is not only a cost reduction program; it's a comprehensive program which touches all fields of our company.

Speaker #2: It's the deepest and most innovative program we have ever, ever implemented in the history of Volkswagen Group. And so, for us, it's very motivating that we have already started with a lot of fields.

Oliver Blume: So, for us, it's very motivating that we have already started with a lot of fields. One part, of course, is adapting furthermore our capacities. We were able to reduce already during the last 2 years, to reduce 2 million of capacities with around 7 plant closures we have done. Now, we have a work to do of over 500,000 in China and also in Europe. On the one hand side, in our existing plants, especially in Germany, we have models in production, and we need these models. So, it's not realistic to talk about plant closures up to the end of this decade on the one hand side. On the other side, to close a plant is also the last solution. First, we will focus on competitiveness and this in a European context. There, we have opportunities.

Speaker #2: One part of the course is to adapting, furthermore, our capacities. And we were able to reduce already, during the last two years, to reduce 2 million of capacities with around seven plant closures we have done.

Speaker #2: And now we have work to do of over 500,000 in China and also in Europe. And on the one hand, in our existing plants, especially in Germany, we have models in production.

Speaker #2: And we need these models. So it's not realistic to talk about plant closures up to the end of this decade, on the one hand. On the other hand, closing a plant is also the last solution.

Speaker #2: First, we will focus on competitiveness, and this in a European context. And there, we have opportunities. And when I talk about intelligent solutions, we can also consider, for example, different industry usages or opportunities, also more in the future, to pick some of our Volkswagen Group products from China to bring them into plants in Europe.

Oliver Blume: When I talk about intelligent solutions, we also can consider, for example, for a different industrial usage or opportunities also more in the future to pick some of our Volkswagen Group products from China to bring them in plants in Europe. Step by step, first focus is on competitiveness. At the end, the last option would be to close a plant. We have done this during the last 2 years in some cases, and this is always the consideration we have to take. Coming to Audi. The response from the market is very positive on the new product, especially our RS 5, Q7 or then the Q9, and this will bring momentum. We started 3 years ago, a deep restructuring in Audi. So now we can see step by step that Audi will recover.

Speaker #2: But step by step, the first focus is on competitiveness, and at the end, the last option would be to close a plant. We have done this during the last two years.

Speaker #2: In some cases—and this is always the consideration we have to take—coming to Audi, the response from the market is very positive on the new product, especially RS5, Q7, or then the Q9.

Speaker #2: And this will bring momentum. We started three years ago a deep restructuring in Audi, and now we can see, step by step, that Audi will recover.

Speaker #2: And now, with a new Pro product, momentum, and everything to come, yeah, it's quite promising. And we think that will be possible.

Oliver Blume: Now with the new product momentum and everything to come, yeah, it's quite promising and we think that will be possible.

Speaker #1: Thank you, Tim. And we have the next question coming from Horst Schneider from Bank of America. Horst, please go ahead.

Rolf Woller: Thank you, Tim. We have-

Tim Rokossa: Thank you

Rolf Woller: The next question coming from Horst Schneider from Bank of America. Horst, please go ahead.

Speaker #4: Yes, thank you. Good morning. I hope you can hear me. The first question that I have relates to the guidance for this year. So, you kept the operating margin guidance unchanged.

Horst Schneider: Yes, thank you. Good morning. I hope you can hear me. The first question that I have relates to the guidance for this year. You kept the operating margin guidance unchanged, and that implies that H2 needs to be stronger than H1. Maybe a question for Arno. Arno, maybe you can explain us what is getting better exactly in H2. It does not seem to be volume, so it should be maybe price mix or it should be other sign of costs. Maybe you can provide more details on that. Then maybe for Oli, since you said you aim to reduce complexity of the group, do I get it right that this means also that you want to accelerate disposals?

Speaker #4: And that implies that H2 needs to be stronger than H1. So maybe a question for Arno. Arno, maybe you can explain to us what is getting better exactly in H2.

Speaker #4: It does not seem to be volume, so it should maybe be price/mix, or it could be another line of costs. So maybe you can provide more details on that?

Speaker #4: Then maybe for Ollie, since you said you aim to reduce complexity of the Group, do I get it right that this also means you want to accelerate disposals?

Speaker #4: So maybe you can provide here more details also on the timeline—how quickly they're going to come, and if they come, what you want to do then with the liquidity that you increase by that.

Horst Schneider: Maybe you can provide here more details also on the timeline, how quick they're going to come, and if they come, what you want to do then with the liquidity that you increase by that. The last one, of course, on restructuring. I know it's for you difficult to talk about that because, in the end, you need the approval maybe also from the Works Council, and they probably also listen to this call. Maybe you can at least tell us what's the ambition on the timeline. By when can you basically think you can make an agreement or does it require in the end, if it comes from bad to worse, an AGM, and that could basically extend the agreement to, I don't know, maybe even H1 2027. Thank you.

Speaker #4: And the last one, of course, on restructuring. I know it's difficult for you to talk about that because, in the end, you need approval maybe also from the works council, and they probably also listen to this call.

Speaker #4: But maybe you can at least tell us what's the ambition on the timeline. So by when can you, basically, you think you can you you can make an agreement?

Speaker #4: Or does it require, in the end, if it comes to worst-case scenarios, an AGM—and that could basically extend the agreement to, I don't know, maybe even H1 2027.

Speaker #4: Thank you.

Speaker #3: Yeah, hello Horst. I'll take the first question. Yeah, obviously, it implies a better second half of the year. But there are some factors that give us tailwind.

Arno Antlitz: Hello, Horst. I take the first question. Obviously, it applies a better H2, but there are some factors that gives us tailwind. First and foremost, obviously, Audi. We expect a strong improvement in margin in the H2 based on the product momentum, both in terms of model mix. They just launched their RS models and S models, which are really well-received by the customers with good margins. Last but not least, they will launch a new Q7, and then at the end of the year, also a Q9, which will hit some of the markets. That should give momentum at Audi. Second, cost program. You saw the reduction on headcount we achieved so far. I think we stand at 20,000, 21,000. We expect at least to end up with reduction of 25,000, 26,000 at the end of the year.

Speaker #3: First and foremost, obviously, Audi. No, they they they we expect a strong improvement on in margin in the the second half based on the product momentum.

Speaker #3: Both in terms of model mix, they just launched their RS models and S models, which are really well received by the customers with good margins.

Speaker #3: And last but not least, they will launch a new Q7, and then at the end of the year also Q9, which will hit some of the market.

Speaker #3: So th this shows should give momentum at Audi. and and second, cost program. You saw the, the the the reduction on on headcount we achieved so far.

Speaker #3: I think we stand at 21,000. We expect to end up with a reduction to 25,000 or 26,000 at the end of the year.

Speaker #3: So, this should also provide a continuous, head-tail tailwind. And last but not least, a technical—the third question as well. From today's perspective, we don't expect major restructuring in the second half of the year so far.

Arno Antlitz: This should give also a continuous tailwind. Last but not least, taking the third question as well. From today's perspective, we don't expect major restructuring in the H2 so far. We had quite some restructuring in the H1, for example, the discontinuing of the ID.4 in the US. These are the effects. Based on that, we're confident that we achieve a margin in the corridor.

Speaker #3: and and we had some quite some restructuring in the first half. For example, yeah, the con discontinuing of the ID4 in the US. and so so these are the the facts we based on that we we we confident that we achieve a a a margin in the corridor.

Speaker #4: Mm-hmm. But in the end, Arno, you expect Q3 is always weak. You expect now a very strong Q4, right?

Horst Schneider: In the end, Arno, you expect Q3 is always weak. You expect now a very strong Q4, right?

Speaker #3: Ex, yeah, exactly. Horst, you know us very, very well. Q3 is typically the quarter when we have the summer holidays in major German plants.

Arno Antlitz: Exactly. Horst, you know us very well. Q3 is typically the quarter when we have the summer holidays in major term plans. Yes, as last year, and also as already, we expect a strong Q4.

Speaker #3: So yes, as last year, and also as Audi, we expect a strong Q4.

Speaker #4: Okay. Thank you.

Horst Schneider: Okay. Thank you.

Speaker #1: And Horst, Ollie speaking, coming to your second and third question. First of all, on complexity, no? We were working on reducing complexity in terms of products and technologies.

Oliver Blume: Horst, Oli speaking, coming to your second and third question. First of all, complexity. We are working on reducing complexity in terms of products, technologies, but also investment portfolio, as we have done in the last weeks, which was Everllence. It was a very positive result. All of this, we have further opportunities, as you know. First of all, safeguarding our liquidity position and having their stability, but also safeguarding an attractive dividend on the one hand side. Further on, it depends a bit on the steps we will do with our investment portfolio. We will consider how we will deal with some other liquidity options. Too early to predict. First of all, work has to be done, having the stability and offering opportunities also for our investors.

Speaker #1: But also, investment port portfolio, as we have, done in in the last weeks with with Avalanche, no? With with a very positive, result. And, all of this and and we have further opportunities as as you know.

Speaker #1: First of all, safeguarding our liquidity position, no? And having their stability, but also safeguarding an attractive dividend on the one hand side. Further on, it depends a bit on the steps we will do with our investment portfolio.

Speaker #1: We will consider how we will deal with other liquidity options, but it's too early to predict. First of all, work has to be done.

Speaker #1: And then, having the stability, and and offering opportunities also for, our our investors. And, when you look, to to our cash flow situation, first half, of this year, already 5 point, 4.5 per billion euro better than than last year.

Oliver Blume: When you look to our cash flow situation, H1 of this year, already EUR 4.5 billion better than last year. That shows a stable situation. Also, after the strong cash flow we have shown last year. We keep on working on safeguarding our stable situation on cash flow liquidity, step by step to decide. Restructuring. The major part of our program is not part of to be agreed of the supervisory board, that is already in an execution and in all cost positions. To the main deeper restructuring, we are executing the agreement we have done in 2024 already. It's a 50,000 reduction of headcount, where 37,000 we have agreed contracts by our employees. It's well received. We are well on track. In terms of the adaptation of our production capacity, we are making good progress.

Speaker #1: That shows a stable situation. Also, after the strong cash flow we have shown last year, no? And so, we keep on working on safeguarding our stable situation on cash flow and liquidity.

Speaker #1: And then, step by step, to decide—restructuring. It's a major part of our program. It's not part of being too, too agreed of the Supervisory Board.

Speaker #1: And that is already in execution, no? And in all cost positions. To the main, deeper restructuring, there we are executing the agreement we have done in '24 already.

Speaker #1: It's a 50,000 reduction of headcount, where 37,000— we have agreed contracts with our employees. It's well received. We are well on track.

Speaker #1: And, in terms of the adoption of our production capacity, we are making good progress. Already, 2 million per year we have already reduced.

Oliver Blume: Already 2 million per year we have already reduced. There you can see the speed. Only in 2 years, what we have done in the past, it wouldn't have been thinkable to come to this direction. Now we are entering in the next period of transformation. I think we will come to a conclusion agreement during this year. We started two weeks ago with the first overall presentation at the supervisory board, it's clear that there are some points to be discussed in terms of plant utilization, what competitiveness means for our plants, especially in a European context, also for the overhead costs. There we have set a clear benchmark where we want to go, now we are working this out with all our brands, our organizations, and regions.

Speaker #1: And there you can see the speed. Only in two years, what we have done in the past, it wouldn't have been thinkable to come to this direction.

Speaker #1: And now, we are entering into the next period of transformation. I think we will come to a conclusion or agreement during this year. We started two weeks ago with the first overall presentation in the Supervisory Board.

Speaker #1: And that's clear, that there are some points to be discussed in terms of plant utilization, what competitiveness means for our plants, especially in the European context.

Speaker #1: And also for the overhead costs, there we have set a clear benchmark for where we want to go. And now, we are working this out with all our brands, our organizations, and regions.

Speaker #1: What's possible in terms of headcounts and adoption? And on the other side, in terms of labor costs, yeah? And at the end, the product in between both of them will be the adoption of our costs.

Oliver Blume: What is possible in terms of headcount adaptation, and on the other side, in terms of labor costs. At the end, the product in between both of them will be the adaption of our costs. Summing up, the major part of our Target Picture is already in execution, especially in terms of all the technologies, products, and costs. The part of the restructuring has to be discussed furthermore, especially with worker union and our supervisory board, then we will take decisions during this year.

Speaker #1: So, summing up, the major part of our target picture is already in execution, especially in terms of all the technologies, products, and cost.

Speaker #1: And the part of the restructuring has to be discussed further, especially with the workers' union and our Supervisory Boards. Then we will take decisions during this year.

Speaker #4: Okay, that's great. Thanks, Ollie. Good luck.

Horst Schneider: Okay. That's great. Thanks, Oli. Good luck.

Speaker #1: Thank you, Horst. And we are moving on in the Q to José Azumendi from JP Morgan. José, please go ahead.

Rolf Woller: Thank you, Horst. We are moving on in the queue to Jose Asumendi from J.P. Morgan. Jose, please go ahead.

José Asumendi: Thank you, Rolf. A couple of questions, please. Oli, can you talk a little bit about the business model in China? It's been a difficult H1. Obviously, you've done a lot of work with half there to take down capacity, launch new vehicles, launch new products. Are you seeing signals of stabilization in the business model in China? Is this not a vote of confidence also when you're discussing with the unions that you're able to restructure the business and stabilize the business model in China? This will have also, as you bring these best practices into Europe or some of them at least, it will also help to improve the business in Europe. If you could talk about this, please.

Speaker #2: Morning. Thank you, Horst. Couple of questions, please. Ollie, can you talk a little bit about the business model in China? I mean, it's been a difficult first half of the year.

Speaker #2: But obviously, you've done a lot of work with Rolf there to take down capacity, launch new vehicles, and launch new products. Are you seeing signals of stabilization in the business model in China?

Speaker #2: Is this not also a vote of confidence, when you're discussing with the unions, that you're able to restructure the business and stabilize the business model in China?

Speaker #2: And this will have also, you know, as you bring these best practices into Europe— or some of them at least— it will also help to improve the business in Europe.

Speaker #2: If you could talk about this, please. Then second, Arno, when we think about the different cost measures, what do you think is the biggest sort of cost bucket where you see a big difference in terms of, you know, the competitiveness?

José Asumendi: Second, Arno, when we think about the different cost measures, what do you think is the biggest cost bucket where you see a big difference in terms of the competitiveness? I think you mentioned there are several of them, but the biggest one that for you stands out. When you think about the restructuring cash outflow we should be expecting over the next years, can you give us any signals, any guidance? Or maybe talk about liquidity and the sale of Everllence, how that is going to be helping to potentially fund restructuring cash outflows on a 3-year view. Thank you.

Speaker #2: I think you mentioned several of them, but the biggest one for you stands out. And when you think about the restructuring cash outflow, what should we be expecting over the next years?

Speaker #2: Can you give us any signals, any guidance? Or maybe talk about liquidity and the sale of Avalanche, and how that is going to help potentially fund restructuring cash outflows over a three-year view?

Speaker #2: Thank you.

Speaker #3: Hold on. Let me start with your first question. The environment in China is clear. In the first half of this year, the market went down by more than 20%.

Oliver Blume: Jose, let me start with your first question. The environment in China is clear. H1 of this year, the market overall went down of more than 20%. We have over 150 competitors in the market, there have been over 500 new model launches in H1. That shows the tension in terms of competitiveness in the market. In spite of this, we started in Q1 as market leader, Q2 or H1, under top 3. This underlines the strong position of Volkswagen Group in China. We have done a huge restructuring during the last 3 years with our In China, for China business, with the engineering center, the biggest one outside of Germany. We have brought to life our new electric-electronic architecture and all the new products to start now in the market.

Speaker #3: We have over 150 competitors in the market, and there have been over 500 new model launches in the first half of the year, yeah?

Speaker #3: And that shows the tension in terms of competitiveness in the market. In spite of this, we started in the first quarter as market leader.

Speaker #3: And, second quarter or half year, under the top three. And this underlines the strong position of Volkswagen Group in China. We have done a huge restructuring during the last three years with our "in China, for China" business, with the engineering center—the biggest one outside of Germany.

Speaker #3: We have brought to life our new electric/electronic architecture and all the new products to start now in the market. Our intention is to launch over 30 models up to the end of next year.

Oliver Blume: Our intention is to launch over 30 models up to the end of next year. The first market response is very positive. This opens us other opportunities. I'm often asked, is it worthwhile to invest in China? My clear answer is yes. It's on the one hand side, China, it brings us on this technology level and this cost level. We can see also our Chinese competition. On the other side, it opens us the same opportunities Chinese competitors are executing right now in other regions of the world. For us, especially export opportunities to Southern Hemisphere, in Southeast Asia, Australia, India, South America, and Africa, but also in Europe. Where we are not present in some segments with products from Europe, we could consider to bring our own products from China to Europe.

Speaker #3: And the first market response is very positive. But this opens up other opportunities. I'm often asked, is it worth it to invest in China?

Speaker #3: And my client says, "Yes." It's, on the one hand, China. It brings us, on this technology level and this cost level, closer to our Chinese competition.

Speaker #3: But on the other side, it opens up the same opportunities that Chinese competitors are executing right now in other regions of the world. And for us, especially, export opportunities to the Southern Hemisphere—Southeast Asia, Australia, India, South America, and Africa.

Speaker #3: But also, in Europe, where we are not present in some segments, this product from Europe—we could consider bringing our own products from China to Europe.

Speaker #3: And now, this shows that we are the only international player who is in a position to use all these global opportunities: what we have done in China, our strengths and core business in Europe, and, on the other side, our corporations and businesses we are doing in the US.

Oliver Blume: Now, this shows that we are the only international player who is in conditions to use all these global opportunities. What we have done in China, our strengths and core business in Europe, and on the other side, our corporations and businesses we are doing in the US. Combining this is a unique offer to the markets for the future.

Speaker #3: And combining this, this is a unique offer to the markets for the future.

Speaker #1: Yeah. José, thanks for your question. From if I look on our business, the biggest advantage is clearly reducing overhead cost, so far. And and and if you look at our our our our business and Oliver, mentioned it, we are rather complex in front of the customer with a lot of model, a lot of offers.

Arno Antlitz: Yeah, Jose, thanks for your question. If I look in our business, the biggest advantage is clearly reducing overhead costs so far. If you look at our business, and Oliver mentioned it, we are rather complex in front of the customer with a lot of model, a lot of offers, but we are also very complex internally. A lot of layers, a lot of entities. This weighs on our costs and also makes us slow in decision-making. So I'm deeply convinced in simplifying our business. This is one of the biggest advantages and chances we have as a Volkswagen Group. Become more leaner and more agile in adapting to the world around us. Also in terms of cost, we did an in-depth benchmark versus competition about SG&A and applied that to our overhead costs. As you know, they are roughly EUR 45 billion today.

Speaker #1: But we are also very complex internally—a lot of layers, a lot of entities. And this weighs on our costs and also makes us slow in decision-making.

Speaker #1: So I'm deeply convinced that simplifying our business is one of the biggest advantages and opportunities we have as the Volkswagen Group. The Group becomes more lean and more agile.

Speaker #1: in adapting to the world around us. And also, in terms of cost, we did an in-depth benchmark versus competition about SG&A and applied that to our overhead costs.

Speaker #1: And as you know, they are roughly 45 billion today. And if if we close the gap to competition, this is a chance of or or a an improvement of of about 10 to to 11 billion.

Arno Antlitz: If we close the gap to competition, this is a chance or an improvement of about EUR 10 to 11 billion. Then we aim for overhead cost ratio from today, 16% to 12%, which is a 4 percentage point improvement in an industry that makes only 4% to 5% to 6% to 7% margin. This is the magnitude we see there. Don't get me wrong, we need to improve our other costs as well. We need to improve our material costs without sacrificing product substance, as Oliver mentioned. We also need to improve the efficiency and productivity in the plants. The competition is coming to Europe. Chinese competitors are building plants in Southern and Eastern Europe, and it's hard to compete with underutilized plants. It's a comprehensive program which addresses all the levers of cost in the company.

Speaker #1: And then we we aim for a for overhead cost ratio from today 16% to 12%, which is a 4% point, improvement in a industry that makes only 4 to 5 to 6 to 7% margin.

Speaker #1: So this this is is a magnitude we we we see there. But but don't get me wrong, we we need to improve our other costs as well.

Speaker #1: We need to improve our material costs without sacrificing product substance, as Oliver mentioned. We also need to improve the efficiency and productivity in the plants, you know?

Speaker #1: The the competition is coming to Europe. Chinese competitions are building plants in Southern and Eastern Europe. And it's we we we it's hard to compete with underutilized plants.

Speaker #1: So it's a comprehensive program that that which which addresses all the levers. of of of cost in in the company. But clearly, the biggest advantage is reducing complexity and and and and and overhead cost.

Arno Antlitz: Clearly, the biggest advantage is reducing complexity and overhead cost. In terms of restructuring, it's obviously too early to tell or to give specific numbers. We need to wait until we have the detailed decisions and then come up with detailed figures on that. It's very clear. We look on a company with a net liquidity on more than EUR 30 billion, EUR 33 to 34 billion. The proceeds of Everllence will give us further positive effects on that topic. We have a very solid balance sheet still. We increase that robustness with a good cash flow Q1, more than EUR 3 billion and we kept our outlook. This is a company that will clearly be able to manage also the restructuring, the potential restructuring measures.

Speaker #1: And, in terms of restructuring, it's obviously too early to to to tell or to to give specific numbers. We we we need to wait until we have the detailed decisions.

Speaker #1: And then come up with with, detailed, figures on that. But it's but it's very clear. we look on a company with with with a net liquidity on on more than 30 billion.

Speaker #1: 30 33 to 34 billion. And and, the proceeds of Avalanche will give us, further, positive effects on on on that on that topic. So we have a very solid balance sheet still.

Speaker #1: And and we we increase that that robustness with the good cash flow first quarter. more than 3 billion. And, we we kept our outlook, so this is a company that will clearly be able to to to manage also the restructuring, the potential restructuring, measures.

Speaker #2: Thank you. Thank you.

José Asumendi: Very clear. Thank you.

Speaker #1: Thank you, José. And we are moving on to Patrick Hummel from UBS. Patrick, please go ahead.

Rolf Woller: Thank you, Jose. We are moving on to Patrick Hummel from UBS. Patrick, please go ahead.

Speaker #4: Thank you, Rolf. Good morning, Oli and Arno. My first question to you, Arno, regarding the 50,000 headcount reduction, or at least the target picture that you painted in the first wave. You've been using early retirement, which was, let's say, relatively straightforward and relatively low cost.

Patrick Hummel: Thank you, Rolf. Good morning, Oli and Arno. My first question to you, Arno, regarding the 50,000 headcount reduction, or at least target picture that you painted. In the first wave, you've been using early retirement, which was, let's say, relatively straightforward and relatively low cost. This time it seems to get more expensive. I understand you can't give us any details, but is it fair to say that at least a significant share of the Everllence proceeds will be required for that restructuring? You said, Oli, before actually, that you expect a deal with the unions to be reached by the end of this year. Arno, you said no restructuring you currently foresee for the H2. That sounds a little bit like contradicting. Should we expect that incremental restructuring to be booked this year or not?

Speaker #4: This time, it seems to get more expensive. So, I understand you can't give us any details. But is it fair to say that at least a significant share of the Avalanche proceeds will be required for that restructuring?

Speaker #4: And, you said, Oli, before actually, that you expect a deal with the unions to be reached by the end of this year. But Arno, you said no, no restructuring you currently foresee for the second half.

Speaker #4: That sounds a little bit contradictory. Should we expect that incremental restructuring to be booked this year or not? And what would be the impact, if I put it all together, on the dividend?

Patrick Hummel: What would be the impact if I put it all together on the dividend? Is it fair to assume a flattish dividend trend? Is that what you're targeting? Could we see a cut in dividend? Any color you can give on that? The second one, just on the implementation of that restructuring. The Chinese are gaining share in Europe at the speed of light. It feels every two to three months they're gaining one percentage point of market share in Europe. If the implementation of what you're trying to do here is skewed towards the back end of the decade, it might not even be fast enough. What can you actually do to get those headcount related savings sooner rather than later? Oli, do you actually expect any support on the political front? It feels all very half-hearted so far on the Industrial Accelerator Act.

Speaker #4: Is it fair to assume a flattish dividend trend? Is that what you're targeting? Could we see a cut in the dividend? Any color you can give on that?

Speaker #4: And the second one, just on the implementation of that restructuring. You know, the Chinese are gaining share in Europe at the speed of light—it feels like every two to three months they're gaining one percentage point of market share in Europe.

Speaker #4: So if the implementation of what you're trying to do here is skewed towards the back end of the decade, it might not even be fast enough.

Speaker #4: So, what can you actually do to get those headcount-related savings sooner rather than later? And, Oli, do you actually expect any support on the political front?

Speaker #4: It feels all very half-hearted so far, on the Industrial Accelerator Act. It's not really banning Chinese cars from entering Europe. The plug-in hybrid tariff, that's under discussion.

Patrick Hummel: It's not really banning Chinese cars from entering Europe. The plug-in hybrid tariff that's under discussion. Are these instruments that you think will change this market share shift trend, or is it just fair to say for as long as China as a market is weak, these Chinese companies will push as much as they can into Europe?

Speaker #4: Are these instruments that you think will change this market share shift trend? Or is it just fair to say that, for as long as China as a market is weak, these Chinese companies will push as much as they can into Europe?

Arno Antlitz: Patrick, I take the first question, then I hand over to Oliver. First and foremost on the topic of restructuring. Yes, we embarked on a first strategy we agreed on 2024 with the restructuring of 50,000 headcount, mainly in Germany, in the indirect and direct area, so administrative and manufacturing part of our business. We use for the most of the time early retirement schemes. They are in place, but let's not forget they weighed on our margins and our results with EUR 400 to 500 million a year so far already. It's just not seen in the bridge because we spend every year roughly EUR half a billion. If you take out this restructuring piece, our operating business is even stronger. The second wave is, as I explained, is a benchmark on a worldwide basis.

Speaker #2: Patrick, I take the first question, and then I hand over to Oliver. First and foremost, on on on the topic of restructuring, yes, we embarked on a on a first strategy on we agreed on 2024 with the restructuring of 50,000 headcount mainly mainly in Germany.

Speaker #2: in in the indirect and direct areas, so administrative and manufacturing, part of our business. and we use, mo for the most of the time early retirement schemes.

Speaker #2: And they're there in place. But let's not forget the weight on our margins and our result, with €400 to €500 million a year so far already.

Speaker #2: It's just not seen in the bridge because we spend every year, roughly half a billion. So if operative business is is even stronger. So the the second wave is is, as I explained, is a benchmark on a on a worldwide basis.

Speaker #2: And so, the second wave of up to 50,000 is mostly on the administrative side, and on a worldwide basis. And really, Patrick, it's too early.

Arno Antlitz: The second wave of up to 50,000 is mostly in the administrative side and on a worldwide basis. It's really, Patrick, it's too early. First, we have to identify where we want to reduce. On the other hand, there are also other potential. We are not looking for job reductions per se. We are looking for a much better cost base and the structural reduction of our cost base to be more competitive. There might be also elements in the labor cost that will help us there. This is where we stand. Let me be very precise. What I have to say is in the 4% to 5.5% margin guidance and outlook, obviously in this guidance is no restructuring incurred. If we had to decide on restructuring in the H2, this is clear that comes on top.

Speaker #2: We have need first, we have to identify where where we where we wanna reduce. on the other hand, there also other po po potential.

Speaker #2: Now, we we are not we are not looking for job reductions per se. We are looking for, a much better cost base. And and the structural reduction of our cost base to be more competitive.

Speaker #2: So there might be also elements, in in in in the labor cost that that will help us there. and so so this is where we stand.

Speaker #2: And now, let me be very precise. What I have to say is, in the 4 to 5.5 percent margin guidance and outlook, obviously, in this guidance, there is no restructuring incurred.

Speaker #2: So if we had to decide on restructuring in the second half, it is clear that that comes on top.

Speaker #4: Patrick, coming to the second part of your question—how could the politics be supportive—let me go to three approaches. First of all, we have to do our homework.

Oliver Blume: Patrick, coming to the second part of your question, how could the politics be supportive? Let me go to three approaches. First of all, we have to do our homework. We have done it already in terms of products. They are competitive, they are attractive for our customers. Our order intakes show this in spite of the competition we are faced right now, and the deliveries also in Europe. What we have done to furthermore is cost work. Now reducing more and more our costs and being there in a better positioning, earning more money with our products. That's our homework. Second, we will benefit from our China opportunities. You can see us also as a China player, we can do the same like the Chinese do and having the same opportunities, being competitive in terms of products, technologies, and also costs. Also for exports.

Speaker #4: We have done it already in terms of products. They are competitive. They are attractive for our customers. Our own order intakes show this, in spite of the competition we are faced with right now.

Speaker #4: And, the deliveries also in in Europe. What we have done, to furthermore is, cost work, you know, reducing more and more our costs. And bringing our there in a in a better positioning, earning more money with with our products.

Speaker #4: But that's our homework. Second, we will benefit from our China opportunities. Yeah? You can see us also as a China player. And we can do the same like the Chinese do.

Speaker #4: And, having the same opportunities, being competitive in terms of products, technologies, and also costs, right? Also for exports. Then the third aspect, in terms of politics.

Oliver Blume: The third aspect, in terms of politics. We need a level playing field, not more, not less. In some areas it's already working. The regulations on BEV is working. There we are competitive also in terms of pricing. Where it's still not working are the plug-in hybrids, for example. What has to be done is the Made in Europe. I think this will adapt the market, I hope during the next month, the European politic with the support of the German politics, will bring the European automotive market to a level playing field, which today does not exist. That the end, with our homework we are doing right now and benefiting from the China business, I think we have the opportunities in Germany, but the politics have to accelerate the upcoming decisions in terms of plug-in hybrids, for example, and Made in Europe strategy.

Speaker #4: We need a level playing field—not more, not less. And in some areas, it's already working. The regulations on BEV are working.

Speaker #4: There we are competitive, also in terms of pricing. Where it's still not working are the plug-in hybrids, for example. And what has to be done is the made in Europe.

Speaker #4: And I think this will adapt the market, and I hope during the next month, the European politics, with the support of the German politics, will bring the European automotive market to a level playing field.

Speaker #4: Which today does not exist. And at the end, with our homework, we are doing right now and benefiting from the China business, I think we have the opportunities in Germany.

Speaker #4: But political the politics have to accelerate the upcoming decisions in terms of, plug-in hybrids, for example, and made in Geo Europe strategy. And and Oli, may maybe a quick word on the implementation timeline of this, of this upcoming program.

Patrick Hummel: Oli, maybe a quick word on the implementation timeline of this upcoming program. Is that like a savings target that we'll only hit by 2030? Or is there a chance that we could hit that already in 2028, let's say?

Speaker #4: Is that like a savings target that will only be reached by 2030, or is there a chance that we could hit that already in 2028, let's say?

Speaker #2: Well, not only 2028. I expect that the politicians will react this year, yeah? We have no time to lose, and that's a clear expectation.

Oliver Blume: Well, not only 2028. I expect that the politics will react this year. We have no time to lose, that's a clear expectation from an industry leader. The level playing field has to be built in Europe. That should be a European industry interest to do so. Then from 2027 on, we will benefit from the current product portfolio and everything to come already, then step by step, also with our Chinese opportunities. We are well prepared for everything to come, the politics has to do the work which we talked about.

Speaker #2: From an industry leader, the level playing field has to be built in Europe. That should be in European industry interest. To do so, yeah?

Speaker #2: And then, from '27 on, we will benefit from the current product portfolio and everything to come, already. And then, step by step, also with our Chinese opportunities.

Speaker #2: We are well prepared for everything to come. But the politics has to do the work, which we talked about.

Speaker #4: Thank you very much.

Patrick Hummel: Thank you very much.

Speaker #1: Thank you, Patrick. We are moving on in the queue to Mike Tindle from HSBC. Mike, please go ahead.

Rolf Woller: Thank you, Patrick. We are moving on in the queue to Mike Tindall from HSBC. Mike, please go ahead.

Speaker #5: Yes. Morning, gentlemen. Thanks for taking my question. I've got a few, if I can. Can we just talk a little bit about China as an export base?

Mike Tindall: Yes. Morning, gentlemen. Thanks for taking my question. I've got a few if I can. Can we just talk a little bit about China as an export base? I think that story is changing because back in 2024 it was China for China. In April, it was China to the global south, we are now talking about China into Europe. Am I reading that right? When will we see this tangibly happening? That's question number one. The second question is just around, I know that when you were initially looking at plans for Osnabrück, you were looking for alternative uses. I'm curious whether or not some of the people that approached you at that time said, Osnabrück doesn't fit, but we like Hanover, we like Emden. What's the potential for finding alternative uses for some of those German plants?

Speaker #5: I think that story is changing, because back in '24, it was China for China. In April, it was China to the global south. But we're now talking about China into Europe.

Speaker #5: Am I reading that right? And when will we see this tangibly happening? So that's question number one. The second question is just around—I know that when you were initially looking at plans for Osnabrück, you were looking for alternative uses.

Speaker #5: I'm curious whether or not some of the people that approached you at that time said, "Osnabrück doesn't fit. But we like Hanover. We like Emden." You know, what's the potential for finding alternative uses for some of those German plants?

Speaker #5: And then the last one, a very quick one, just in terms of disposals. I just wonder if you can talk at all about trade-on, trade-on.

Mike Tindall: The last one, a very quick one, just in terms of disposals. I just wonder if you can talk at all about Traton. Traton clearly having a pretty good run at this point in time. I know you've sort of said before that you would like to reduce your stake. I wonder if you could just give us sort of an update on that. Thanks very much.

Speaker #5: Clearly, you're having a pretty good run at this point in time, and I know you've mentioned before that you would like to reduce your stake.

Speaker #5: I wonder if you could just give us sort of an update on that. Thanks very much.

Speaker #2: Yeah, Mike, that's correct. We started in China, for China. Then three years ago, still with different market conditions. But the advantage now is that we brought ourselves into the same competitive situations where many Chinese competitors are.

Oliver Blume: Mike. That's correct, that we started in China for China. Three years ago, still with different market conditions. The advantage now is that we brought ourselves in the same competitive situations where many Chinese competitors are. Volkswagen Group in China is a China player. With the changed market conditions, that the market is going down, the margins are under pressure. This opens for us the same what Chinese OEM are doing, in terms of export. Furthermore, it opens us opportunities we have never had in the past, because of our cost structure, not having the right product, for the southern hemisphere, but also for Europe. We can benefit in terms of our complete products we have there in China, but also in terms of technologies. I'm thinking about autonomous driving.

Speaker #2: Yeah, so Volkswagen Group in China is a China player, and with the changed market conditions—the market is going down, the margins are under pressure.

Speaker #2: This opens up for us the same opportunities that Chinese OEMs are pursuing in terms of export. And, furthermore, it opens up opportunities we have never had in the past, because of our cost structure and not having the right product for the Southern Hemisphere.

Speaker #2: But also for Europe, we can benefit in terms of our comp fleet products. We have them in China, but also in terms of technologies.

Speaker #2: I'm thinking about autonomous driving; this could be an option. And maybe also for our existing combustion engine product portfolio. So we have many, many opportunities, also benefiting from engineering and from parts we are producing there in China.

Oliver Blume: This could be an option. Maybe also for our existing combustion engine product portfolio. We have many opportunities now also benefiting from engineering, from parts we are producing there in China with our own organizations, processes we can adapt. That's many advantages. Talking about the timeline, we are implementing right now our experiences from China to Europe in terms of products. It needs a bit of time. We need to ramp up the current product portfolio in China, I think it would be realistic in 2028 with complete products, technologies maybe, we have to do it step by step. Now we already launched the first models in the last months in China. Many attractive products on our own platform, the CSP platform, are entering in the market in China in 2027. This offers both opportunities up to, I would think, realistically from 2028.

Speaker #2: With our own organizations and processes, we can adapt. There are many, many advantages. Talking about the timeline, we are implementing right now our experiences from China.

Speaker #2: to Europe in terms of products. It needs a bit of time. We need to ramp up the current product portfolio in China.

Speaker #2: And I think it would be realistic in ’28, with complete products, technologies maybe, but we have to do it step by step by step.

Speaker #2: No, we already launched the first models in the last months in China. Many attractive products on our own platform, the CSP platform, entering the market in China in '27.

Speaker #2: But this offers PO opportunities up to, I would think, realistically, from '28. Talking about Osnabrück, there we are in very advanced negotiations with the defense industry.

Oliver Blume: Talking about Osnabrück, there we are in very advanced negotiations with defense industry. It's not a secret, we can't deep dive any further more there. It's confidential, we expect a decision during this year. Talking about other plans, first of all, as I said before, is European competitiveness. That's a headline. Second step is, do we have usage with other products, also usage in an industrial context. Therefore, also we will check each plant, where we have need for action, what opportunities we would have. Every plant has got different conditions, we have to develop a specific plan, and that's what we are kicking off right now. We have done, I think, very hard and deep work during the last two years to reduce capacities to 2 million cars a year.

Speaker #2: It's not a secret, but we can't deep dive any further there. It's confidential. However, we expect a decision during this year. Talking about other plans, first of all, as I said before, is European competitiveness.

Speaker #2: Yeah, that's the headline. Then, the second step is: do we have usage with other products? And then also, usage in an industrial context.

Speaker #2: And therefore, we will also check each plant where we have need for action, what opportunities we would have—yeah? And every plant has got different conditions.

Speaker #2: And so we have to develop a specific plan. And that's what we are kicking off right now. We have done, I think, very hard and deep work during the last two years to reduce capacities.

Speaker #2: to 2 million cars a year. That is not a small part of capacity reduction. And also, the 50,000 of headcount reduction we are doing.

Oliver Blume: This is not a small part of a capacity reduction, and also the 50,000 of headcount reduction we are doing, which is well on track. Now we are entering in the next phase, which has to be done to being more competitive as we are today.

Speaker #2: which is, well on well on track. And and now we are entering in in the next phase, which has to be done to being more competitive as we are are to today.

Speaker #1: Yeah. And in terms of trading, in our target picture, it's clearly what we continue to say in the past. We want to stay a responsible shareholder with 75% plus one share.

Arno Antlitz: Jan, in terms of trading in our target picture, it's clearly what we continued to say in the past. We want to stay a responsible shareholder with 75% plus one share, we are on the way to that, we are aware of the current share price performance, which reflects the very good performance at Traton and the strategic positive outlook and also the good work of the management team. This is where we stand today, we can only announce the next steps once we have decided on them.

Speaker #1: And we are on the way to that. And we are aware of the current share price performance, which reflects the very good performance in trading.

Speaker #1: And the strategic, positive outlook, and also the good work of the management team. But this is where we stand today.

Speaker #1: And we can only announce the next steps once we have decided on them.

Speaker #5: Got it. Thank you very much.

Mike Tindall: Got it. Thank you very much.

Speaker #2: Thank you very much.

Speaker #1: Thank you. And we are moving on. Steven is the next one—Steven Reitman from Bernstein. Please, go ahead.

Arno Antlitz: Thank you. We are moving on, and Stephen is the next one. Stephen Reitman from Bernstein. Please go ahead.

Speaker #6: Yes, thank you. I have a question about China again. You made roughly about €200 million or so in the first half of the year.

Stephen Reitman: Yes, thank you. I have a question about China again. You made roughly about EUR 200 million or so in H1, and your guidance for the full year is basically EUR 200 to 600 million, so basically from flat to EUR 400 million. I just want to look at how you're judging your progress so far. You talk about the new models you've launched with Anhui, the ID. Unyx models and suchlike, and the models from Audi. How would you judge how successful they are? What kind of volume numbers are you looking at? Because obviously the figures we're seeing when we look on a monthly basis, registration is still very low, and there's also quite a lot of volatility, where sometimes they appear to have initially one month, which is quite good, and then it's kind of like tailing off, I think, again.

Speaker #6: And your guidance for the full year is basically €200 million to €600 million, so basically from flat to €400 million. I just want to look at how you're judging your progress so far.

Speaker #6: You talk about your, you know, the new models you've launched with Anhui, the Unix models and such like, and the models from Audi.

Speaker #6: what would be how would you judge how successful they are? What kind of volume numbers are you looking at? Because obviously, the figures we're seeing when we look on a monthly basis registrations are still very low.

Speaker #6: And there's also quite a lot of volatility, where sometimes they appear to have, initially, one month which is quite good, and then it kind of tails off again, I think.

Speaker #6: And we've seen that. with the Audi model, the S5. But also, you know, now we're seeing, other ones picking up a bit. But where would what would you be your criteria for success given the fact that the volume seems to be very low relative to some of the launches that are or the models that are we're seeing from the Chinese brands?

Stephen Reitman: We've seen that with the Audi model, the S5. Also, now we're seeing other ones picking up a bit. What would be your criteria for success, given the fact that the volume seems to be very low relative to some of the launches or the models that we're seeing from the Chinese brands? Secondly, more a philosophical question about the expectation for change within the Volkswagen Group. It seems to me that probably one of the most successful periods of change, in terms of cost reduction and reorientation of the company, happened in the 1990s. That really occurred when the company basically went into loss, and it seemed that really you'd reached the end of the road, and that caused a situation maybe where you could actually make deep changes.

Speaker #6: And secondly, more of a philosophical question about the expectations for change within the Volkswagen Group. It seems to me that probably one of the most successful periods of change, in terms of cost reduction and reorientation of the company, happened in the 1990s.

Speaker #6: But that really occurred when the company basically went into loss. And it seemed that you'd really reached the end of the road. And that caused a situation, maybe, where you could actually make deep changes.

Speaker #6: At the moment, you know, your numbers, you say, are not satisfactory, and I think that most people would agree with that. But you're still generating reasonable free cash flow margins, and your guidance is still quite positive as well.

Stephen Reitman: At the moment, your numbers, you say, are not satisfactory. I think most people would agree with that, still you're generating reasonable free cash flow. Margins are still, your guidance is still quite positive as well. Do you feel there's sufficient urgency that's fully appreciated by all the parties that they need to make the sacrifices that you're seeking? Thank you.

Speaker #6: Do you feel there's sufficient urgency—and is this fully appreciated by all the parties—that they need to make the sacrifices that you're seeking? Thank you.

Speaker #2: Yeah. Maybe I can start with our model launches in China. Maybe Arno can add some aspects in terms of the financials.

Oliver Blume: Yeah. Maybe I can start with our model launches in China. Maybe Arno can add some aspects in terms of the financials. Then I'll talk about if there is sufficient urgency, what we are planning right now. About the China models, what we can say is that the first response we are getting, first of all, media tests, the AUDI E5 Sportback was voted as the Car of the Year in China, is very positive. In concrete, talking about the ID.ERA-9X, we have over 10,000 deliveries right now since the launch. That's very positive. Also, the ID. Unyx 07 was around 6,000. We see very positive opportunity with the ID. Unyx 08, which is a product which starts with around 200,000 renminbi, and offering already our new electric, electronic architecture. The response on the AUDI E7X is also positive.

Speaker #2: and then, I would I would talk about, if there's sufficient sufficient urgency what, we are planning planning right now. about, the China models, what we can say that, the first response we are we are getting, first of all, media tests, the the Audi, E5, was voted as, the car of the year in China.

Speaker #2: It is very, very positive. In concrete terms, talking about the era 9X, we have over 10,000 deliveries right now since the launch. That's very, very positive.

Speaker #2: And also, the UNIC 07 was around 6,000. And we see a very positive opportunity with the UNIC 08, which is a product that starts at around 200,000 renminbi.

Speaker #2: And, offering already our new electric, electronic architecture. And the response on the Audi E7X is also positive. We delivered over 4,000 units in June.

Oliver Blume: We delivered over 4,000 units in June. We are ranked among the top three, in the range of 300,000 renminbi level. Yeah. You can see, in between the competition, which is by far very, very strong. We are very well-positioned, and many more to come. Yeah. Expecting now our first premium platform with the CSP we will launch in 2027. There are opportunities. We have the market conditions I talked before, so we will use these opportunities also for export. Then, they're coming to higher volumes, with the help of the export. Now maybe, Arno.

Speaker #2: And we are ranked among the top 10, top 3, in the range of 300,000 renminbi level. Yeah. So, you can see, in between, the competition is by far very, very strong.

Speaker #2: We are very well positioned, and there are many more to come. Yeah. We're now expecting our first premium platform with the CSP. We will launch in 2027.

Speaker #2: There are opportunities. But we have the market conditions, as I mentioned before. And so, we will use these opportunities also for export. And then, there, coming to higher volumes with the help of the export.

Speaker #2: Yeah. Maybe maybe Arno

Speaker #1: Yeah. And in terms of financial, obviously, the the guidance for this year is 200 to 600 million, proportion operative result. And, going forward, it will it will depend on on our plan, to to catch up, market share in the electric segment.

Arno Antlitz: Yeah. In terms of financial, obviously the guidance for this year is EUR 200 to 600 million proportion, operative result. Going forward, it will heavily depend on our plan to catch up market share in the electric segment. We are still a clear market leader in combustion engine, and we bring, as Oliver said, 20 new models this year. Very attractive, both in terms of features, but also in terms of cost and technology, to the market. Next year, again, 20 new models. Based off that, the team wants to achieve in towards 2030, a share between 10% and 12%. Based on that, we gave our outlook some month ago, that we want to achieve EUR 1.6 to 2 billion, proportionate operative result in 2030. This is the way we need to go.

Speaker #1: And we are still the clear market leader in combustion engines. And we bring, as Oliver said, 20 new models this year—very attractive both in terms of features, but also in terms of cost and technology—to the market.

Speaker #1: And next year, again, 20 new models. And based on that, the team wants to achieve, towards 2030, a share between 10 and 12 percent.

Speaker #1: And and based on that, we we we gave our outlook some some month ago that we wanna achieve 1.6 to 2 billion, proportion of operative result in in in 2030.

Speaker #1: And this is the way we need to go.

Speaker #2: Yeah. And coming, Steven, to the second part of your question: Is there sufficient urgency recognized by all the stakeholders? You brought up the comparison to the '90s, when Volkswagen Group was in the losses.

Oliver Blume: Coming, Stephen, to the second part of your question, is there sufficient urgency recognized by all the stakeholders? You brought the comparison to the 1990s, where Volkswagen Group was in the losses and you can't compare the situation of today with the 1990s. That's correct. When you look, on the one hand side, to the profit margins, our long-term average profit margin since the 1990s was exactly on 4%. This year, our expectation is to be better than the average profit margin we have seen since 1990 up today. On the other side, this is not a guarantee. The environment has never been as heavy as we are faced today. As I said before, we are able to compensate a double-digit billion EUR, year by year, by our cost work we have implemented already during the last 3 years. That's heavy work to do this.

Speaker #2: And you can't compare the situation of the NI of today with the '90s. That's correct. When you look, on the one hand, at the profit margins, our long-term average profit margin since the '90s was exactly at 4%.

Speaker #2: This year, our expectation is to be better than the average profit margin we have seen since 1990 up to today. But, on the other side, this is not a guarantee.

Speaker #2: And the environment has never been as heavy as we are faced with today. As I said before, we are able to compensate a double-digit billion euro amount year by year by our cost work.

Speaker #2: We have implemented this already during the last three years, and that's heavy work to do this. Now, without this, we would have been in a completely different situation right now.

Oliver Blume: Now, without this, we would've been in a completely different situation right now. When we look to the future, we have more and more risk coming. You know the pressure in China and, the more than 150 competitors and/or are coming to the market. Yeah. With a low cost positioning and we have to face this position. This means that we have to reduce even furthermore, if we want or not, our cost position. All stakeholders, and, I can confirm this, because we have done also a belief audit, are aware that we are in this risk scenario, not only Volkswagen Group, the whole industry. We are reacting now. Yeah. That's maybe the difference comparing to others. We are after the first period of transformation, looking back to the last three years, now we are entering already in the next phase.

Speaker #2: But when we look to the future, we see more and more risk coming. You know the pressure in China, and more than 150 competitors are coming to the markets.

Speaker #2: Yeah. With with a low, cost positioning. And we have to face this this position. And this means, that we have to reduce even further more, if we want or not, our our cost position.

Speaker #2: And all stakeholders—and I can confirm this because we have done so, and I believe it—are aware that we are in this risk scenario. Not only Volkswagen Group, but the whole industry.

Speaker #2: But we are reacting now. Yeah, that's maybe the difference compared to others. We are after the first period of transformation, looking back at the last three years.

Speaker #2: And now we are entering already into the next phase. And then, we now have to negotiate all the cornerstones of our plan—the target picture 2030.

Oliver Blume: We have now to negotiate all the cornerstones of our plan of the Group Target Picture 2030. I can confirm, the major part of the program is already in execution. The second step of the restructure has to be done, that's clear, urgency is recognized by all stakeholders.

Speaker #2: And I can confirm, the major part of the program is already in execution, and the second step of the restructuring has to be done.

Speaker #2: That's clear. But the urgency is recognized by all stakeholders. Thank you.

Speaker #1: Thank you. Thank you, Steven. And we have to hurry up a little bit given the timeline. We have two remaining questions in the queue.

Stephen Reitman: Thank you.

Rolf Woller: Thank you, Stephen. We have to hurry up a little bit given the timeline. We have two remaining questions in the queue, the first one comes from Christian Frenes from Goldman Sachs. Christian, please go ahead.

Speaker #1: And the first question comes from Christian Freinas from Goldman Sachs. Christian, please go ahead.

Speaker #3: Question: I'll try to keep it brief. First of all, in terms of China stabilization—it sounds like that question's already been answered. It's 2028.

Christian Frenes: I'll try to keep it brief. First of all, in terms of China stabilization, it sounds like that question's already been answered. It's 2028, you expect stabilization. I'm wondering, as we think about Audi specifically, which you also referenced earlier, and the H2, and also 2027, should we expect stabilization in Audi within China when you think about operating profitability to happen before 2028 already? How do we think about that for the H2, for example? In Audi, obviously, the implication is for margin improvement in the H2 overall. I'm just wondering what role Audi China plays within that. That was my first question.

Speaker #3: You expect stabilization. I'm wondering, as we think about Audi specifically, which you also referenced earlier, and the second half, and also 2027, should we expect stabilization in Audi in China, when you think about operating profitability, to happen before 2028 already?

Speaker #3: And how do we think about that for the second half, for example? Because in Audi, obviously, the implication is for margin improvement in the second half overall.

Speaker #3: I'm just wondering what role Audi China plays within that. That was my first question.

Speaker #2: Yeah. Christian, only one comment on China. When I talk about 2028, I talk more about benefiting from Chinese developments in other regions of the world.

Oliver Blume: Christian, only one comment to China. When I talk about 2028, I talk more about to benefit from the Chinese development in other regions of the world. It will start for some regions, the southern hemisphere, already in 2027. In 2028, I think we will be in full swing with all the product launches. We will have a head, especially in this year and the next year. That's what I mean talking about 2028. It's not a stabilization. I think the stabilization starts right now with all the new products to come, while we are still stable in terms of our combustion engine business as market leader with over 22% of market share. Maybe, Arno, you can elaborate a bit the Audi situation and then margin in the H2 and maybe talking about the residual values.

Speaker #2: Yeah. And it will start for some regions in the southern hemisphere already in '27. But in '28, I think we will be in full swing with all the product launches.

Speaker #2: We will have ahead, especially in this year and next year. Yeah, that's what I mean, talking about 2028, no? It's not a stabilization.

Speaker #2: I think the stabilization starts right now with all the new products to come. While we are still stable in terms of our combustion engine business as market leader, with over 22% of market share.

Speaker #2: And maybe, Arnaud, you can elaborate a bit on the Audi situation and margins in the second half—and maybe talk about the residual values.

Speaker #1: Mm-hmm. No, I I think we addressed, Audi already. And, the the the the tailwind basically, from from from the product momentum, as we said, the Audi is ramping up, Q Q7, Q9, brand new.

Arno Antlitz: I think we addressed Audi already, the tailwind basically from the product momentum. As we said, Audi's ramping up Q7, Q9, brand new, then also the model launches on the S and RS models bring headwind. This should really help Audi for the H2 of the year. Obviously, Audi also embarked on a strategy to significantly reduce costs, specifically overhead costs, which should also be part of the much stronger H2 of the year. Also overall, Audi and specifically our part of the group, what we haven't talked about so far, the successful ramp-up of BEVs weighs on our margin so far. It's also a chance in terms of the CO₂ fines from today's perspective over the 3-year period.

Speaker #1: And then also the model launches on the S and RS models bring headwind. This should really help Audi for the second half of the year.

Speaker #1: Obviously, Audi also embarked on a strategy to significantly reduce cost, specifically overhead cost, which should also be part of a much longer second half of the year.

Speaker #1: And also, overall, Audi—and specifically our part of the group—what we haven't talked about so far is the successful ramp-up of BEVs, which has weighed on our margin so far.

Speaker #1: But it's also a chance in terms of the tCO2 fines from today's perspective over the three-year period. There might also be a financial chance in the second half of the year.

Arno Antlitz: There might be also a financial chance in the H2 of the year that we need not to book any provisions for CO₂ fines in Europe anymore. These are the major effects.

Speaker #1: But we we need not to book any provisions, for for CO2 fines in in in, in Europe anymore. So these these are the major facts.

Speaker #3: Okay. Thank you. And then my second question is on restructuring. Broadly speaking, you you have a I think you talked mentioned the 8 million capacity goal, longer term.

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

Speaker #3: Could you elaborate—you know, if you export from the Global South, the China model, you know, just thinking maybe, for example, Latin America—should we, is this implying then that you would close capacity, presumably, in China?

Speaker #3: and and because you have capacity, obviously, in Latin America, or how do we think about that? And also on the on the topic of closing factories, obviously, you've had a supervisory board meeting, is this topic over now?

Speaker #3: Or should there be more to come? And maybe a third point here: we've also seen a different model that Stellantis has talked about, basically partnering up with Chinese OEMs.

Speaker #3: To share capacity, is this also an option for you? Or is this not really a strategy? Thanks.

Speaker #2: Yeah. Giving giving you some some figures, we we will adapt, our cost structure, on around, 9 million cars, that we think will be realistic, in the next years, especially, looking to our 2023, also with with our opportunities.

Oliver Blume: Yeah. Giving you some figures. We will adapt our cost structure on around 9 million cars, that we think will be realistic in the next years, especially looking to 2030. Also, with our opportunities we have in the southern hemisphere, I talked about. The intention is to bring down our break-even situation and lower than 8 million. To have a margin there and a robustness. At the 9 million cost structure, under 8 million, the break-even situation. In terms of adapting capacities, we have still the needs coming from over 12 million a year, and we want to bring it down to 9 million. We are already working on 10 million. We were able to reduce 2 million during the last 2 years. We have closed around 7 factories already. Looking ahead, that's what I said before.

Speaker #2: We have, in the Southern Hemisphere—I talked about the tensions—but to bring down our break-even situation and lower it, lower than 8, 8 million, no?

Speaker #2: To have a margin there, and a robustness, no? At the €9 million cost structure, under €8 million is the break-even situation. In terms of adapting capacities, we still have the need, coming from over 12 million a year.

Speaker #2: And we want to bring it down to 9 million. We are already working on 10 million. We were able to reduce 2 million during the last two years.

Speaker #2: We have closed around seven factories already. And, looking ahead, that’s what I said before—we will adapt capacities. But we also think in improving competitiveness of our plants.

Oliver Blume: We will adapt capacities, we also think in improving competitiveness of our plant and also thinking about a different use in an industry context. The last part of your question was, if we are considering something like Stellantis. We are in different conditions. We have the opportunities of our own business we have built in China, and we don't need to think about other competitors to bring them in our plants. We have our own products there in China, and when there are opportunities and on the other side, also the need for a plant, we could do it. That's a major difference to all the other international players, that we are a Chinese, like all the other Chinese OEMs, a China player. This we could use for export on the one hand side, but also for plant utilization in Europe.

Speaker #2: And also thinking about a different use in an industry context. And then, the last part of your question was, if we are considering something like Stellantis, we have different conditions.

Speaker #2: Yeah. We have the opportunities of our own business. We have built in China. You and we don't need to think about other competitors, to bring them in our plants.

Speaker #2: We have our own products there in China. And then there are opportunities, and on the other side, also the need for a plant. We could do it.

Speaker #2: Yeah. And that's a major difference to all the other international players—that we are, like all the other Chinese OEMs, a China player.

Speaker #2: And this, we could use for export, on the one hand. But also for plant utilization in Europe.

Speaker #3: Great. Thank you very much.

Christian Frenes: Great. Thank you very much.

Speaker #1: Chris and Rolf, still one remark in all transparency. Knowing that Audi has their own conference call next week, and we don't want to take too much information here, or give too much information on Audi there, we want to leave it to Jürgen Wildersberger.

Rolf Woller: Christian, one remark in all transparency. Knowing that Audi has their own conference call next week, we do not want to take too much information here or give too much information on Audi there. We want to leave it to Jürgen Stackel, but you should expect that Audi takes down their guidance from 6% to 8% to 5% to 7%, which is still a significant uplift from the H1. All the measures and all the tailwind topics, they are in place. Also rest assured, this 5% to 7% margin, which would be an uplift in the Q2, is also included in our group outlook for the full year.

Speaker #1: But, you you should expect that Audi takes down, their their guidance from 6 to 8 percent to 5 to 6 from 5 to 7 percent.

Speaker #1: which is still, significant uplift from the first half. So all the all the the the measures and all the the the tailwind topics, they they are in place.

Speaker #1: And and also, rest assured, the this 5 to 7 percent margin, which would be an uplift in the second quarter, is is also included in our, our group outlook for for the full year.

Speaker #3: Great, thank you for clarifying. Thanks.

Christian Frenes: Great. Thank you for clarifying. Thanks.

Speaker #1: Okay. In light of the time, I'm super sorry, Daniel and Philip. I see you’re still in the queue, but we have to make a cut here on the analyst side.

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

Speaker #1: And we’ll, without taking a break, directly hand over to the media question session. Thank you for your understanding. And Daniel and Philip, please reach out to the IR team and we will make sure that all your questions get answered.

Speaker #2: Okay. Thanks, Rolf. And we go right away into the media call. As we have some English-speaking colleagues, we will stick to English. Happy to get your questions.

Sebastian Rudolph: Thanks, Rolf. We go right away in the media call. As we have some English-speaking colleagues, we stick to English. I'm happy to get your questions. The first goes to Christina from Reuters. You could also speak in German, though.

Speaker #2: And the first goes to Christina from Reuters. You could also speak in German, though, but vice versa. Guten Morgen.

[Company Representative] (Reuters): Good morning

Sebastian Rudolph: vice versa. Guten Morgen.

Speaker #4: Guten Morgen. Good morning. Thanks for the first question. I was wondering, on your elaboration, Oliver Blume, on Chinese cars for German plants—I understand the first step would be to import the cars.

[Company Representative] (Reuters): Guten Morgen. Good morning. Thanks for the first question. I was wondering on your elaboration, Oliver Blume, on Chinese cars for German plants. I understand the first step would be to import the cars, the second could be to produce them here. What does that mean for your development operations in Europe? On the margin outlook, I'm a little bit wondering, because the margin was so bad or the income was worse in H1, what is driving your optimism for H2? What should really uplift the margin towards the end of the year? Do you have first visibility towards next year?

Speaker #4: The second could be to produce them here. What does that mean for your development operations in Europe? And, on the margin outlook, I'm a little bit wondering, because the margin was so bad or the income was worse in the first half of the year.

Speaker #4: What is what is driving your optimism for the second half? what, what should really uplift the the margin in at what's the end of the year?

Speaker #4: And do you have a first visibility towards me, towards next year?

Speaker #2: Okay, may I start with your first question in terms of China, China products? Of course. What I explained in the analyst call is that we are now in a very great situation.

Oliver Blume: Okay, may I start with your first question in terms of China products? Of course. What I explained in the analyst call is that we are now in a very great situation as an international player, benefiting from our Chinese achievements, having products like Chinese competitors in terms of technology and cost, which brings us in a situation to export. First of all, to the southern hemisphere, where already Chinese OEMs are winning market shares. This brings us in the same situation. In Europe, we would bring and would bring only products and segments which are not invested with European products. So these exports won't impact or won't have an impact on our European development. Completely different cars, and there isn't single segments. You are right, we will do the step, first export, then checking how's the response in the market.

Speaker #2: As an international player, benefiting from our Chinese achievements, having products like Chinese competitors in terms of technology and cost, which brings us in a situation to export, no?

Speaker #2: First of all, to the Southern Hemisphere. We are already—Chinese OEMs are winning market shares. And this brings us into the same situation. In Europe, we would bring, and would bring, only products and segments which are not invested with European products.

Speaker #2: Yeah. And so these exports won't, in fact, or won't have an impact on our European development, no? Completely different cars. And there's a single segment.

Speaker #2: And you are right. We would do the step first—export, then check how the response is in the market, no? And we already have a good feeling for what works.

Oliver Blume: We have already a good feeling what works, looking to the Chinese competitors. We will carefully plan in which segments we will enter, and then this might open also a opportunity to build one or two products there in European plants. To elaborate more the margin situation, Arno, I would like to hand over to you.

Speaker #2: looking to the Chinese competitors. but, we will carefully plan in in which which segments, we will we will enter. And then, this might open also a opportunity to, build one or two products there in in, European plants.

Speaker #2: Yeah. And to elaborate more on the margin situation, Arno, I would like to hand over to you.

Speaker #1: Yeah. Thank you very much for this question, Christina. Yeah. As I said, first and foremost, every business starts with the products.

Arno Antlitz: Thank you very much for this question, Christina. As I said, first and foremost, every business starts with the products. We see some products momentum at Audi. Also on the whole group, we talked about a very successful new urban electric car family, which I will elaborate on in a minute. The product momentum at Audi should drive margins there and see improved margins in the H2. As I said before, their updated margin guidance would be 5% to 7%, which is significantly stronger than in the H1. Cost work. We will continue our cost work, specifically on overhead costs, also on productivity in the plants. Hopefully, we see even first effects on the transformation program in 2026 already. As Oliver said, we don't wait. We started working already.

Speaker #1: We see some product momentum at Audi. Also, on the whole group, we talked about a very successful, new open electric car family, which I will elaborate on in a minute.

Speaker #1: the product momentum at Audi should should drive margins there. and see improve margins in the second half of the year. As I said before, they they they are up, they did margin guidance would be 5 to 7 percent, which is significantly stronger than in the first half of the year.

Speaker #1: Cost work. No? We will continue our cost work, specifically on overhead cost, and also on productivity in the plants. And hopefully, we see even first effects on the transformation program in 2026 already, as Oliver said.

Speaker #1: We we don't wait. We we we we we started working already. And, so there are two technical effects. Let let me call them technical effects.

Oliver Blume: There are two technical effects. Let me call them technical effects. One effect is we had restructuring burden of about EUR 1 billion in the H1, which we, from today's perspective, don't foresee. Last but not least, we also booked CO2 provisions for not meeting the CO2 guidance, with a very encouraging order intake of the new urban electric car family. We have already 70,000 orders on hand. Our renewed outlook for the three-year period, it seems that we do not need to book this CO2 provisions in the H2, or even can we see some of the reversals. In all fairness, as you know, the margin dilution effect of the electric cars ramping up will also be a headwind, but at least we see a compensation on the relief on the CO2 burdens.

Speaker #1: One effect is, we had restructuring burden of about €1 billion in the first half of the year, which we, from today’s perspective, don’t foresee.

Speaker #1: And last but not least, we also booked CO2 provisions for not meeting the CO2 guidance. But with the very encouraging order intake of the new urban electric car family, we have already 70,000 orders on hand.

Speaker #1: Our renewed, outlook for the three-year period, it seems that we we we we do not, need to book, this restructuring this, CO2 provisions in the second half of the year or even, can can we see some of the reversals.

Speaker #1: In all all fairness, as you know, we the margin dilution effect of of of the electric cars ramping up will also be a be a headwind.

Speaker #1: But we at least see some compensation on the relief of the CO2 burdens.

Speaker #2: And given your adding three examples of the restructuring work we have implemented already during the last years, on the one hand side, you can see the progress in terms of overhead cost.

Oliver Blume: Giving you, adding three examples of the restructuring work we have implemented already during the last years. On the one hand side, you can see the progress in terms of overhead costs. You can see the progress of the restructuring we have done in Brand Group Core, not only on the products, but also on the results, and especially at Porsche, where we have done a huge restructuring last year. There you can see already the results. We have promised already last year on a profit margin level on 8% H1 and in terms of operating profit of 45% better than last year. There you can mention already all the effect we have implemented last year or in the other years before, for the other aspects. Now there are some arguments which will pay off now step by step.

Speaker #2: You can see the progress of the restructuring we have done in Brand Group Core—not only on the products, but also on the results.

Speaker #2: And especially at Porsche, where we have done a huge restructuring last year. And there you can see, Audi, the results. We have promised already last year on a profit margin level of 8% for half year one.

Speaker #2: And, in terms of operating profits, up 45% compared to last year. Yeah. And there, you can already mention all the effects we have implemented last year, or in the years before.

Speaker #2: For the other aspects, no? There are some arguments which will pay off now, step by step.

Speaker #1: The next question goes to the Financial Times, Sebastian Ash, please.

Sebastian Rudolph: The next question goes to The Financial Times, Sebastian Ash, please.

Speaker #4: Good morning, Oliver and Arno. I hope you can hear me. I just had a couple of questions. The first one was about Chinese competition.

Sebastian Ash: Good morning, Oliver and Arno. I hope you can hear me. I just had a couple of questions. The first one was about Chinese competition. I think you both mentioned the idea that Chinese manufacturers were exporting competitive pressures increasingly to Europe. I'm wondering whether you can elaborate on that point a little bit. How are you seeing that at this point in time, and how do you expect that to affect your business in future? Is it going to be through prices or will it be harder to kind of sustain the same market share going forward? Then secondly, I wanted to ask a question about US tariffs. In your forecast, you say it's based on the current tariff situation in international markets. Overnight, we've had what seems like a potentially significant change.

Speaker #4: I think you both mentioned the idea that Chinese manufacturers were exporting competitive pressures increasingly to Europe. I'm wondering whether you can elaborate on that point a little bit.

Speaker #4: How are you seeing that at this point in time? And how do you expect that to affect your business in future? Is it going to be through prices, or will it be harder to sustain the same market share going forward?

Speaker #4: And, yeah. Then, secondly, I wanted to ask a question about US tariffs. In your forecast, you say it's based on the current tariff situation in international markets.

Speaker #4: I mean, overnight we've had, what seems like, potentially significant change. I'm wondering whether that was factored into the forecast. And then whether you have any, thoughts on, yes, what the what the most recent announcements, what effect they could have on Volkswagen.

Sebastian Ash: I'm wondering whether that was factored into the forecast then whether you have any thoughts on what the most recent announcements, what effect they could have on Volkswagen. Thank you.

Speaker #4: Thank you.

Speaker #2: Yeah. Sebastian, may I start with your first question? And then I'll hand over to Arno to elaborate a bit on the situation with tariffs.

Oliver Blume: Sebastian, may I start with your first question and then I hand over to Arno to elaborate a bit situation on tariffs. Chinese competition in Europe. It's heavy. It's heavier than we expected some years before. The market share already is over 8% of Chinese OEMs in Europe, and in some segments like the plug-in hybrids, which are not protected with tariffs right now, which has to be done, but hasn't been done in the past. There, the market share is already over 30%. So first of all, there has to be built a level playing field. That is a task for the European Union to establish quickly. Then, the Chinese competitors are there because they have the pressure in their home market in China, and export is their only opportunity to be successful.

Speaker #2: Chinese competition in Europe, yeah? And it's heavy. It's heavier than we expected some years before. The market share already is over 8% of Chinese OEMs in Europe.

Speaker #2: And in some segments, like the plug-in hybrids, which are not protected with SEV tariffs right now—which has to be done, but hasn't been done in the past.

Speaker #2: There, the market share is already over 30%. Yeah? And so, first of all, there has to be a level playing field built. That is a task for the European Union.

Speaker #2: To establish quickly. And then, the Chinese competitors are there because they have the pressure in their home market in China, and export is their only opportunity to be successful.

Speaker #2: And, therefore, we think even if we had a level playing field in Europe, we would still face this strong, strong competition there. So, that's a need for us to enter now into the second period of our transformation plan, to reduce our costs even more, besides this.

Oliver Blume: Therefore, we think, even if we would have a level playing field in Europe, we are faced with strong competition there. That's a need for us to enter now in the second period of our transformation plan to reduce even more our costs. Besides this, and that is the positive aspect, is that our products are so attractive. We are by far market leader for combustion engines. We are by far market leader for the electric cars. We have the strong order intake for our urban car family with over 70,000 orders only in the first weeks. We have products, or we are the strongest positioned player in the BEV model. For example, the Škoda Elroq is number 2 top BEV model in Europe. Now, with the promising new models to come, we have opportunities.

Speaker #2: And that is the positive aspect: that our products are so attractive. We are by far the market leader for combustion engines. We are by far the market leader for electric cars.

Speaker #2: We have a strong order intake for our urban car family, with over 70,000 orders only in the first weeks. We have products that are some of the strongest positioned among players in the BEV model—for example, the Škoda Elroq.

Speaker #2: It's the number two top BEV model in Europe. And now, with promising new models to come, we have opportunities, no? On the one hand side, level playing field.

Oliver Blume: On the one hand side, level playing field, politics, costs, our homework, to continue with our strong momentum, we will need. I think, we could face a Chinese competition, but they are there, and that's the biggest risk for the whole European automotive industry right now. I hand over to Arno for the Tariffs. Yeah, Sebastian, on the tariff side, as we communicated several times, the tariff situation is really one of the factors besides the competition in China for premium OEMs and also the competitive pressure in Europe, Oliver elaborated on, that we have to step up our restructuring efforts in order to stay competitive. We still continue to calculate with a burden of EUR 4 to 5 billion on a yearly basis, and that burden consists of basically the tariffs we pay.

Speaker #2: Politics, costs, our homework, and then, to continue with our strong momentum, we need—and then, I think—we could face Chinese competition.

Speaker #2: But they are there, and that's the biggest risk for the whole European automotive industry right now. And then I hand over to Arno for the tariffs.

Speaker #1: Yeah. Sebastian, on the tariff side, as we communicated several times, the tariff situation is really one of the factors, besides the competition in China for premium OEMs and also the competitive pressure in Europe.

Speaker #1: Oliver, elaborate on that—that we have to step up our restructuring efforts in order to stay competitive. And, we still continue to calculate with the burden of €4 to €5 billion.

Speaker #1: On a yearly basis, that burden consists basically of the tariffs we pay. But let's not forget, we also have a significant impact on the volume.

Arno Antlitz: Let's not forget, we also have a significant impact on the volume. First and foremost, we had to take out some of the entry-level models from Mexico that we export from Mexico to US, like Jetta or Taos, which are not profitable anymore. Also from Europe. We had to increase prices to at least partially offset the tariff. Look, we are in an industry with 4% to 5% margin, and we talk about 50% tariffs from Europe. We increase prices. We have also lower exports from Europe to US, which also, in turn, puts pressure on plant utilization and the volumes in Europe.

Speaker #1: First and foremost, we had to take out some of the entry-level models from Mexico that we export from Mexico to the US.

Speaker #1: like Jetta or Taos, which are not profitable anymore. And also, from Europe, we had to increase prices to at least partially offset the tariff.

Speaker #1: Look, we are in an industry with a 4 to 5% margin. And we talk about 50% tariffs from Europe. So we increase prices, and so we have also lower exports from Europe to the US, which in turn also puts pressure on plant utilization and the volumes in Europe.

Speaker #1: So, and from today's perspective, we we expect this this burden to continue. And this is why it's so important that we make progress on the on on the restructuring program we we we just discussed, both in terms of, cost and in in terms of of of capacity utilization.

Oliver Blume: From today's perspective, we expect this burden to continue. This is why it's so important that we make progress on the restructuring program we just discussed, both in terms of cost and in terms of capacity utilization and efficiency in our plants.

Speaker #1: And efficiency in our plants.

Speaker #3: Now we go to the FRZ, Christian Miskens.

Sebastian Rudolph: Now we go to the FAZ, Christian Müßgens.

Christian Müßgens: Two questions, if I may. The first would be on the Porsche agreement on the cost reduction that we saw this week. There was an agreement regarding the cost-cutting program. Even as talks will continue until Monday, it seems like they reached an agreement, and there has been a lot of talk about this agreement being difficult for VW because it entails significant concessions for the labor representatives in Stuttgart. The question is to Oliver Blume, do you foresee any impact on VW and on the negotiations that you are having in Wolfsburg with the cost-cutting program for the Volkswagen concern? Maybe is it an option for you to extend an employment guarantee to Audi and VW as well? I don't know, I'm just speculating. Could you elaborate a little bit on the Porsche effect?

Speaker #4: Two questions, if I may. The first would be on the Porsche agreement—on the cost reduction that we saw this week. There was an agreement regarding the cost-cutting program.

Speaker #4: Even as stocks will continue until Monday, it seems like they are reaching an agreement. And there has been lots of talk about this agreement being difficult for VW because it entails, I don't know, significant concessions for the labor representatives in Stuttgart.

Speaker #4: And the question is to Oliver Blume: Do you foresee any impact on VW and on the negotiations that you are having, involved with the cost-cutting program for the Volkswagen concern?

Speaker #4: And maybe, is it an option for you to extend an employment guarantee to Audi and VW as well? I don't know, I'm just speculating.

Speaker #4: Could you elaborate a little bit on the Porsche effect? And the second would be, just could you give some examples of which models—concrete models—you want to cut out of the portfolio in the group?

Christian Müßgens: The second would be just, could you give some examples of which concrete models you want to cut out of the portfolio in the group? Are there any A or A0 models from SEAT or Cupra that you are cutting? Can you give some specific examples?

Speaker #4: Are there any A or A-zero models from SEAT or Cupra that you are cutting? Can you give some specific examples?

Speaker #2: May I start with the Porsche situation? First of all, what is important from our group view is that we have agreed on the profit margins we want to achieve in each brand and brand group in 2030.

Oliver Blume: Yeah. May I start with the Porsche situation? First of all, what is important from our group view is that we have agreed the profit margins we want to achieve in each brand and brand group in 2030. Yeah, this is our guideline. At the end, the situation of each brand is a bit specific. In terms of restructuring, there's a major restructuring at Porsche we have done last year. In terms of overhead adaption, Porsche is doing a two-step approach. The first step we have implemented already last year, and now they are entering in the second step. This is work in progress. They have presented this in the supervisory boards this week, but there are still work to do, so I can't go into any details.

Speaker #2: Yeah, this is our guideline. And at the end, the situation of each brand is a bit specific. In terms of restructuring, the major restructuring at Porsche, we have done last year.

Speaker #2: And in terms of overhead adoption, Porsche is doing a two-step approach. The first step, we have implemented already, last year. And now they are entering into the second step; this is work in progress.

Speaker #2: They have presented this in the Supervisory Board this week, but there is still work to do. And so I can't go into any details, no?

Speaker #2: But from the group view, it's important in the end to achieve the margin corridor, which leads in the end to the margin. We have, as a target for the group, published a profit margin between 8 and 10 percent in 2030.

Oliver Blume: From the group view, it's important at the end to achieve the margin corridor, which leads at the end to the margin we have as a target for the group, published between 8% and 10% profit margin in 2030. Talking about concrete products. First of all, to say what we want to do. We want to focus our expenditures on clear focused products to improve innovations, to improve technologies, to improve equipment, and to improve quality for the single product. To achieve higher volume with a more focused product. With this, at the end, to achieve a higher profit margin per product. Yeah, that's the intention there. We know from today that we have substitutions in some segments in between the brand.

Speaker #2: Talking about products, concrete products, first of all, to say what we want to do. We want to focus our expenditures on clear focus products, to improve innovations, to improve technologies, to improve equipment.

Speaker #2: And, to improve quality for the single product, then to achieve higher volume with a more focused product. And with this, at the end, to achieve a higher profit margin per product.

Speaker #2: Yes, that's the intention there. And we know from today that we have substitutions in some segments between the brands. We also have a high number of derivatives.

Oliver Blume: We have a high number of derivatives, there we will cut at first with the derivatives, then we will come to a number of products, which still will be by far higher than what we see at the competition. For us, it will be major reduction of up to 50% of our product. Where we will start are the derivatives, there we have to plan up to 2035. That's a longer progress because we have our current portfolio currently in production and in the market. Then step by step, we will clean it up and reduce complexity. There, it's too early to predict. We have clear ideas where we want to tackle, where we have substitution in between the brands. Today, I want to address some concrete products.

Speaker #2: And there we will cut at first, with the derivatives. And then we will come to a number of products, which still will be by far higher than what we see at the competition.

Speaker #2: But for us, it will be a major reduction—no, of up to 50% of our product. But where we will start are the derivatives.

Speaker #2: And there we have the plan up to 2035. No, it's a longer process, because we have our current portfolio currently in production and in the market.

Speaker #2: And then, step by step, we will clean it up and reduce complexity. And there, it's too early to predict. We have clear ideas where we want to tackle.

Speaker #2: Where we have substitution in between the brands. But today, I want to address some concrete products. At the end, the customer spend will benefit.

Oliver Blume: At the end, the customer will benefit, we will benefit in terms of profit margin, then at the end, also, the investors will benefit from higher profit margins.

Speaker #2: We will benefit in terms of profit margin. And in the end, the investors will also benefit from higher profit margins.

Speaker #3: Then we go to Handelsblatt and La Laser Backovich, please.

Sebastian Rudolph: We go to the Handelsblatt and Lazar Backovic, please.

Speaker #5: Yeah. Thank you so much for taking my question. I have two questions: the first to Oliver Blume, and the second one to Arno Antlitz.

Lazar Backovic: Thank you so much for taking my question. I have two questions. First to Oliver Blume, and the second one to Arno Antlitz. Oliver, following up on the question of Christian Müßgens, could you imagine offering extending employment guarantees at VOLKSWAGEN AG, or would that be incompatible with your Group restructuring plans? That would be interesting to know, not only in light of Porsche, but if you could just imagine doing so. The second question would be to Arno. It is a question on the proceeds from the Everllence transaction. How should investors think about the use of those funds? Should they primarily expect a stronger automotive cash flow, or will a significant portion of that be needed for finance restructuring measures, such as, I don't know, programs for Abfindungsprogramme, I would say, and transformation costs.

Speaker #5: Oliver, following up on the question of Christian Miskens. I mean, could you imagine offering or extending employment guarantees at Volkswagen AG? Or would that be incompatible with your group restructuring plans?

Speaker #5: There would be interesting to know, not only in the light of Porsche, but, yeah, if you if you could just imagine, doing so. And the second question would be to Arno.

Speaker #5: It's a question on the proceeds from the Avalanche transaction. How should investors think about the use of those funds? Should they primarily expect a stronger automotive cash flow?

Speaker #5: Or will a significant portion of that be needed for finance restructuring measures, such as, I don't know, programs for Abfindungsprogramme, I would say, and transformation costs?

Speaker #5: It would also be interesting to know the share of how you use the money from the Avalanche transaction.

Lazar Backovic: That would also be interesting to know the share of how you use the money from the Everllence transaction.

Speaker #2: Yeah. Lazar, let me let me start with your with your first question. Right? It's too early, to talk about, employment, guarantee. We know, the situation, we are faced, with a, yeah, huge risk scenario, especially in Europe, being faced, with a Chinese, com competitors.

Oliver Blume: Lazar, let me start with your first question. It is too early to talk about employment guarantee. We know the situation. We are faced with a huge risk scenario, especially in Europe, being faced with Chinese competitors. We will do it step by step. 2 weeks ago, we have been, for the first time, in the supervisory board to present the overall transformation plan and with our Group Target Picture 2030. There are some points to elaborate and to discuss furthermore. One of these points is the adaption of overhead. There, we are deep diving now into brands in our subsidiaries, but also in the regions. At the end, it will be a combination in terms of overhead adaption and labor cost. At the end, we will have to talk about how to deal.

Speaker #2: And so, we will do it step by step. Two weeks ago, we have been, for the first time in the Supervisory Board, to present the overall transformation plan.

Speaker #2: And with our Group Target Picture 2030, there are some points to elaborate and to discuss further. And this—one of these points is the adoption of overhead.

Speaker #2: And there we are deep diving now into brands, into our subsidiaries, but also in the regions. And at the end, it will be a combination, in terms of overhead adoption and labor cost.

Speaker #2: And, at the end, we will have to talk about how to deal, and what you have seen in ’24 already, where we came to a very positive agreement at the end, which we are executing right now, making good progress.

Oliver Blume: What you have seen in 2024 already, where we came to a very positive agreement at the end, which we are executing right now, making good progress. We will enter in the next phase of transformation, having done all the analysis, and then to talk about the conditions. There, it is too early to talk about employment guarantee.

Speaker #2: And so, we will enter the next phase of transformation, having done all the analysis, and then talk about the conditions. And there, it's too early to talk about employment guarantees.

Speaker #5: Sure.

Lazar Backovic: Sure.

Speaker #2: And Arno, maybe you can pick up the second part of the question.

Oliver Blume: Arno, maybe you can pick the second part of the question.

Speaker #4: Yeah. Hello, Lazar. In principle, I also have to say it’s too early to talk about potential restructuring. We have to wait, because we have to decide on the measures first.

Arno Antlitz: Yeah. Hello, Lazar. In principle, although I have to say it is too early to talk about the potential structuring we have to book because we have to decide on the measures first. In terms of situation of the group, I mentioned before, we have a net liquidity on hand of EUR 32 billion, which is a solid balance sheet, and the process from Everllence will further increase this net liquidity. Obviously, depending on when we close the deal. Currently, we have so-called signing and the proceeds we get when we close the deal. Then we really need to decide on the restructuring measures, we also look at minimizing restructuring measures for obvious reasons, because it is also money that is outflowing. So we try to optimize that as well.

Speaker #4: But in terms of the situation of the group, I mentioned before we have net liquidity on hand of €32 billion, which is a solid balance sheet.

Speaker #4: And the process from from Avalanche will further increase, this this net liquidity. Obviously, depending on when we when we, close the deal, currently we have signing, so-called signing, and the proceeds we get, in when when we close the deal.

Speaker #4: And then we really need to decide on the structuring measures. But we also look at minimizing restructuring measures, for obvious reasons.

Speaker #4: Because it's also money that is outflowing. And so we we try to optimize that as well. But, wha what what we can say from today's perspective, there there there will be restructuring, efforts and measures incurred.

Arno Antlitz: What we can say from today's perspective, there will be restructuring efforts and measures incurred, and we can finance this restructuring, which is also a strong message to the market.

Speaker #4: And we can finance this restructuring, which is also a strong message to the market.

Speaker #5: Thank you.

Lazar Backovic: Thank you.

Speaker #2: Thank you.

Oliver Blume: Thank you.

Speaker #3: The next question goes to Bloomberg and William, please.

Sebastian Rudolph: The next question goes to Bloomberg and William, please.

Speaker #6: Hi. good morning, everyone. I just had a question on asset disposals. there was a statement after there was a line in your statement after the supervisory board meeting about focusing on automobiles.

[Company Representative] (Bloomberg): Hi, good morning, everyone. I just had a question on asset disposals. There was a line in your statement after the supervisory board meeting about focusing on automobiles. Does that mean that Ducati is up for sale, and when might you start a sales process for that company, which is hugely successful in motorsport and would be an attractive asset to many people, I think. Thank you.

Speaker #6: Does that mean that Ducati is up for sale, and when might you start a sales process for that company, which is hugely successful in motorsport?

Speaker #6: and would be an attractive asset for many people, I think. Thank you.

Speaker #2: Okay. We we do not enter right now in in in the details, of, the plan. we we haven't, an overall re agreement, to to our restructuring plan.

Oliver Blume: Okay. We do not enter right now in the details of the plan. We haven't an overall agreement to our restructuring plan. What we are checking, of course, is our investment portfolio, as we talked about right now about Everllence. Also, we always think about how we will develop our brands. Do we need an investor or something like this? Right now, we do not enter into any details, because we haven't done right now an external information on this internally. We are doing information frequently for our management, for our employees, but also for our labor representatives. In details, we are still not in conditions. Two weeks ago, we started our first overall presentation, and then step by step up to the moment when we have a overall agreement, we will do an external communication of the whole Group Target Picture 2030.

Speaker #2: What we are checking, of course, is our investment portfolio, as we talked about right now regarding Avalanche. And also, we always think about how we will develop our brands.

Speaker #2: Do we need an investor or something like that? But right now, we will not go into any details, because we haven't done any external information on this yet.

Speaker #2: Internally, we are doing information, frequently, for our management, for our employees, but also for our labor representatives. But, in detail, we are still not in condition. Two weeks ago, we started our first overall presentation.

Speaker #2: And then, step by step, up to the moment when we have an overall agreement, we will do an external communication of the whole group target picture 2030.

Speaker #6: Thank you. Thank you.

Sebastian Rudolph: Thank you. We have Christoph Kapalschinski from Die Welt. Please.

Speaker #3: Then we have Christoph Kapalchinsky from Die Welt. Please.

Speaker #5: Hello. Regarding politics, you didn't mention the phasing out of ICEs and the plan of the European Union. You just said that you're optimistic that there will be no fines in the years to come.

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

Speaker #5: Isn't it that it's not high on your mind anymore that there needs to be a change in this regulation concerning phasing out ICEs by 2030? Thank you.

Speaker #2: Yeah. On the one hand, we are well prepared with our product portfolio, which I already mentioned, in terms of deliveries.

Oliver Blume: Yeah. On the one hand side, we are well prepared with our product portfolio, which I already mentioned. In terms of deliveries, we can see this year and also the order intakes, which are very promising, which brings us to a situation to being able to manage the current CO2 regulations. Looking further to 2030, I think there's still need for reaction. There, we are aiming for a more flexible averaging, what they implemented in between 2025 and 2027. If not, the whole industry would be affected. We have to achieve at the end, a regulation which is linked to the real market development. We are very successful right now. We have a best market share of around 20% or a bit more than 20% in Europe, but by far not what is now in the regulations in 2030. This has to be worked out.

Speaker #2: We can see, this year, and also the order intakes, which are very promising. Which brings us to a situation—to being able to manage the current CO2 regulations.

Speaker #2: But looking further to 2030, I think there is still a need for reactions. And there, we are aiming for a more flexible averaging—what they implemented in between '25 and '27.

Speaker #2: If not, the whole industry would be affected. And we have to achieve, at the end, a regulation which is linked to the real market development.

Speaker #2: Also, we are very successful right now. We have a BEV market share of around 20%, or a bit more than 20%, in Europe.

Speaker #2: But by far, not what is now in the regulations in 2030. And this has to be worked out. Now, we have some brands which are on a higher level, like Porsche, for example, who's very successful in terms of electrification.

Oliver Blume: Now we have some brands which are on a higher level, like Porsche, for example, who's very successful in terms of electrification, which is higher than 30%. When you add the plug-in hybrids, it's over 50% in Europe already. This is linked to the successful Porsche electrification strategy. Overall, in average, we are still only on a level of around 20%, and we are by far market leader. When you're a market leader, you should expect that you have no problem with CO2 and with the current regulations in 2030, we have still problems. We need the averaging, which has to be done by the European Union.

Speaker #2: which is higher than 30%. And when you add the plug-in hybrids, it's over 50% in Europe already. But this is linked to the successful...

Speaker #2: Porsche electrification strategy. But overall, on average, we are still only on a level of around 20%. And we are by far market leader, yeah?

Speaker #2: And therefore, when you are the market leader, you should expect that you have no problem with CO2. And, with the current regulations in 2030, we still have problems.

Speaker #2: And so we need the averaging, which has to be done by the European Union.

Speaker #4: Christoph, in in I I would like to to confirm what Oliver just said. And when I was referring to the CO2 topic, it as Oliver said, it's 25 to 27 in this period.

Arno Antlitz: Christoph, I would like to confirm what Oliver just said. When I was referring to the CO₂ topic, as Oliver said, it is 2025 to 2027, this period. The significant step down in 2030 and beyond will put burden on our balance sheet because from today's perspective, we need to sell more electric cars than the customers will accept or would like to buy naturally. This would be still a burden, and we need to discuss this 2030 step, as Oliver mentioned.

Speaker #4: The the significant step down in 2030, and beyond will put burden on on our balance sheet because from today's perspective, we we need to sell, m more electric cars than the customers will will will accept or would like to buy, naturally.

Speaker #4: So th this is, this is would be still a burden. And and we need to discuss this, this 2030 step, as Oliver mentioned.

Speaker #3: We have time for three more questions, starting with Paulina Bluminghausen from Süddeutsche Zeitung.

Sebastian Rudolph: We have time for three more questions, starting with Paulina Würminghausen from Süddeutsche Zeitung.

Speaker #7: Yes, thank you. Mr. Blume, first, regarding the Group target picture, you have just said that you expect to achieve significant progress on this by the end of the year.

Paulina Würminghausen: Yes. Thank you. Mr. Blume, first, regarding the Group Target Picture, you have just said that you expect to achieve significant progress on this by the end of the year. Could you elaborate on that, and isn't that an overly optimistic assumption given the resistance you are facing?

Speaker #7: Could you elaborate on that? And isn't that an overly optimistic assumption given the risk resistance you are facing?

Speaker #2: Yeah. We elaborated a complete Group target picture during the last months with our management board, and with very clear positions, clear answers on what has to be done in the Volkswagen Group.

Oliver Blume: We elaborated a complete Group Target Picture during the last month with our management board, and with very clear positions, clear answers, what has to be done in Volkswagen Group. You know about the foundation we have led during the last years, which brought us in a stable situation, and our financial figures show in terms, especially comparing with the competition, that we are still in a stable situation, but this is not a guarantee for the future in the overall environment. Once again, this is not a Volkswagen crisis. It is an industry crisis we are faced. Because of China, the market went down and the Chinese competitors in Europe, the shrink market in Europe, the tariffs, the regulations we talked about. This is an industry crisis.

Speaker #2: Now, you know about the foundation we have laid during the last years, which brought us into a stable situation. And our financial figures show, especially in terms of comparison with the competition, that we are still in a stable situation.

Speaker #2: But this is not a guarantee for the future. In the overall environment, no? And once again, this is not a Volkswagen crisis. It is an industry crisis.

Speaker #2: We are faced, because of China, with the market going down, Chinese competitors in Europe, the shrinking market in Europe, the tariffs, the regulations.

Speaker #2: We talked about it, and that's the industry crisis. Volkswagen is doing quite well in this industry, but only because we laid the foundation during the last years.

Oliver Blume: Volkswagen is doing quite well in this industry, but only because we laid the foundation during the last years. Now, working from this foundation, we are entering the next period of transformation, our Group Target Picture 2030. We are already executing the major part of the program. We do not need any agreement from our supervisory board, especially in terms of what we are doing in product, in technologies, what we are doing in engineering costs, what we are doing in material costs, sales costs, and so on. There are many fields we are already working, but there are some points which has to be agreed in the supervisory board, and that's my expectation that we will come to a conclusion during next year as soon as possible.

Speaker #2: And now, working from this foundation, we are entering the next period of transformation—our target picture, 2030. And we are already executing, yeah? The major part of the program, we do not need any agreement from our Supervisory Board.

Speaker #2: Especially in terms of what we are doing in product, in technologies, what we are doing in engineering costs, and what we are doing in material costs.

Speaker #2: Sales costs, and so on, no? There are many, many fields we are already working on. But there are some points which have to be agreed upon in the Supervisory Board.

Speaker #2: And that's my expectation, that we will come to a conclusion during next year as soon as possible. What we do not have is time.

Oliver Blume: What we do not have is time. We want to accelerate also these open topics, but the major part is already in a ramping up period. You can see our activities already and our expectation for the end of this year that we announced that our results will be over last year. This is a result of our efforts we implemented during the last years.

Speaker #2: And we want to accelerate also these open topics. But the major part is already in a ramping-up period. And you can see our activities already in our expectation for the end of this year, that we announced that our results will be over last year.

Speaker #2: And this is the result of our efforts we implemented during the last years.

Sebastian Rudolph: The second last question goes to The Wall Street Journal and Stephen Wilmot, please.

Speaker #3: The second-to-last question goes to The Wall Street Journal and Stephen Wilmot. Please.

Speaker #6: Hi there. Thank you for taking the question. Firstly, I wanted to ask about the 8 to 10 percent margin target. Where does this come from, given that it's a number that Volkswagen hasn't achieved in decades?

Stephen Wilmot: Hi there. Thank you for taking the question. Firstly, I wanted to ask about the 8% to 10% margin target. Where does this come from, given that it's a number that Volkswagen hasn't achieved in decades? Is it the result of your benchmarking exercise? It seems more in line with targets that you get from premium players, whereas Volkswagen is 75% or so volume, more mass market brands. Just if you could talk through how you think about that target, which is obviously underpinning a lot of what's going on at the moment. Then the second question was, in terms of your China product push, the results so far, I think you said 6,000 or so sales so far for the ID. Unyx 07. Typically, the Chinese brands, they're reporting sort of 10,000-plus sales in their first sales month when they do these launches.

Speaker #6: Is it the result of your benchmarking exercise? It seems more in line with targets that you get from premium players, whereas Volkswagen has 75% or so volume—more mass market brands.

Speaker #6: So I do, yeah. Just if you could talk through how you think about that target, which is obviously underpinning a lot of what's going on at the moment.

Speaker #6: And then the second question was, in terms of your China product push, the the results so far, I think you said si 6,000 or so vehi sales so far for the the unique seven.

Speaker #6: Typically, the Chinese brands are reporting sort of 10,000-plus sales in their first sales month. When they do these launches, there's a huge emphasis on the initial sales push.

Stephen Wilmot: There's a huge emphasis on the initial sales push. We haven't really seen that at Volkswagen Anhui. Can you just talk through how you're seeing those initial results? Are you targeting a more gradual ramp-up than your Chinese peers would normally do or? Can you just speak to the, I guess, slightly low figures that we're seeing from Volkswagen Anhui after the initial push? Thank you.

Speaker #6: We haven't really seen that, at at Volkswagen Anhui. can can you can you just talk through how how your, s-se-seeing the in those initial results, i-i are you targeting a more gradual ramp up than your Chinese peers would normally do?

Speaker #6: Or, or, yeah. C-c-can you just speak to the kind of, I guess slightly low figures that we're seeing from Volkswagen Anhui, after the initial push?

Speaker #6: Thank you.

Speaker #2: Stephen, I’ll take the first question on the margin target. Technically, yes, I could say it’s derived from benchmarks where typically other OEMs in this industry want to be at the end of the decade.

Arno Antlitz: Stephen, I take the first question on the margin target. Technically, yes, I could say it's derived from benchmarks where typically other OEMs in this industry want to be at the end of the decade. More importantly, if you look at ourselves, we need a robust level of earnings and a robust level of productivity in this uncertain environment. Look, if you shoot only for 4% and something goes wrong or there's a tariff included here or there are some decisions there, you're under pressure. We want to achieve, and we are motivated and committed to achieve a margin, a target of 8% to 10% in order to be much more robust, to be able to invest also in innovation in the future. It's also possible. We talk not only about a program that reduces costs or reduce some of the models.

Speaker #2: But more importantly, if you look at ourselves, we need a robust level of earnings and a robust level of productivity in this uncertain environment.

Speaker #2: Look, if you should only have 4%, then something goes wrong, or there's a tariff included here, or there's some decisions there.

Speaker #2: You you're under pressure. And we we wanna a-achieve. And we we are motivated and and committed to achieve a margin, a target of 8 to 10 percent in order to much be much more robust to be able to invest, also in in innovation in in in the future.

Speaker #2: And it's also possible, no? We talk not only about the program that reduces costs or reduces some of the models.

Speaker #2: It's a fundamental change of our our our our business where we where we, invest in technology. We we streamline the model range, but we take out significant level of of complexity.

Arno Antlitz: It's a fundamental change of our business, where we invest in technology, we streamline the model range, but we take out significant level of complexity and out of our company. We want to streamline our company both in terms of cost, but in terms of also in speed of decision-making. It's derived from competitive benchmarks. It's necessary in order to be robust, to move robustly into the future, it's achievable if we implement our transformation program consequently and with speed.

Speaker #2: And and out of out of our company. And we wanna streamline our our company in both in terms of cost, but in terms of also in speed of decision making.

Speaker #2: So it's derived from from from competitive benchmarks. It's it's necessary in order to be robust to move robustly into the future. And it's achievable if we implement our our transformation program, consequently, and and and with speed.

Speaker #5: And coming to to the sales figures, in in China, you always have to look at at the market and and the competition. Starting with the era, the era I I talked about that we have delivered already over 10,000 units.

Oliver Blume: Coming to the sales figures in China. You always have to look at the market and the competition. Starting with the ID. Era. The ID. Era, I talked about that we have delivered already over 10,000 units, and the ID. Era is number one in the market of extended range, full-size SUVs. Number one. Are the figures as high as we used to see them years ago in China? No. That's about that we have over 150 competitors there in the market. Yeah. For us, the orientation is to be on the top of the market. Second example is the Audi E7X, which is above the top three in the market. When you look to the ID. Unyx 07, that's correct, that we have delivered orders placed because we entered in the market by the end of May of 6,000 units. It's successful, but there we have the situation.

Speaker #5: And the Teramont is number one in the market of extended-range full-size SUVs—number one. Are the figures as high as we used to see them years ago in China?

Speaker #5: No, but that's about it. We have over 150 competitors in the market, yeah? And for us, the orientation is to be at the top of the market.

Speaker #5: Second example is the Audi E7X, which is above the top three in the markets. And when you look to the Uniques 07, that's correct.

Speaker #5: That we have delivered or orders placed, because we entered in the market by the end of May, of 6,000 units. It's successful.

Speaker #5: But there we have the situation that we still have only a small number of dealerships and dealer network, and we have to expand this, yeah?

Oliver Blume: We have still only a smaller number of dealerships and dealer network, we have to expand to come to higher numbers. It was a very positive start also to compare with the competition. Yeah. Always to differentiate in between the situation we have seen with low competition in the last decades in China and now with a very high competition. There we have to be successful. That's one part. The other part then benefiting from these models also for other regions of the world. This is now the new China thinking, where we have unique opportunities as an international player, having a big footprint in China.

Speaker #5: To come to higher numbers. But it was a very positive start, also to compare with the competition, yeah? And there it's always necessary to differentiate between the situation we have seen with low competition in the last decades in China, and now with a very high competition.

Speaker #5: And there, we have to be successful. That's one part. And the other part is then benefiting from these models also for other regions of the world.

Speaker #5: This is now the new China thinking, where we have unique opportunities as an international player, being or having a big footprint in China.

Speaker #2: Then we take the last one for today as an overtime question—Lutz, from Capital.

Sebastian Rudolph: We take the last one for today as an overtime question, Lutz, from Capital.

Speaker #3: Okay. Can you hear me? Good morning. And...

[Company Representative] (Capital): Hey, can you hear me? Good morning.

Sebastian Rudolph: Yes, we can hear you.

Speaker #2: Yes, we can.

Speaker #3: And thank you for taking my question. Two questions, in fact. First, you were talking a lot about China, but I still don't fully get where your confidence comes from.

[Company Representative] (Capital): Thank you for taking my question. Two questions, in fact. First, you were talking a lot about China, but I still don't fully get where your confidence comes from. Is it still the perspective to get back to EUR 1.5 billion of profit in the forthcoming years? Will that only come from this export perspective you cited? You also mentioned the competition and the situation in the Chinese market overall. I heard Li Shaopeng last week, and also he was speaking about the market as being brutal. Is that realistic to compare yourself with the Chinese player, as the Chinese players are saying themselves that they are in a difficult situation in the moment? Can you come back to this perspective of EUR 1.5 to 2 billion profits from China in the coming years?

Speaker #3: So, is it still the perspective to get back to €1.5 billion of profit in the forthcoming years? And will that only come from this export perspective you cited?

Speaker #3: And you also mentioned the competition and the situation in the Chinese market overall. I heard He Xiaopeng last weekend; he was also speaking about the market as being brutal.

Speaker #3: So, is it realistic to compare yourself with the Chinese players, as the Chinese players are saying themselves that they are in a difficult situation at the moment?

Speaker #3: So, can you come back to this perspective of $1.5 billion to $2 billion in profits from China in the coming years? And the second question, you also made the comparison to the situation in the '90s with the Volkswagen Group, and said it's not comparable at all because, on the one hand, you're better off now in terms of profitability.

[Company Representative] (Capital): The second question, you also made the comparison to the situation in the 1990s of the Volkswagen Group then and said, it's not comparable at all, because on the one hand, you're better off now in terms of profitability. In the other hand, the market conditions are worse than they were. Nevertheless, can you learn something from how this situation was solved back then? Thank you.

Speaker #3: And on the other hand, the market conditions were worse then. There was, but nevertheless, can you learn something from how this situation was solved back then?

Speaker #3: Thank you.

Speaker #2: Yeah. Lutz? So may I I take the first question. Look, when I said our the targets we or the the vision we just communicated some some weeks ago, in China, they obviously depend on the successful ramp-up of of our new energy vehicles.

Arno Antlitz: Mr. Meyer, I take the first question. When I said the targets or the ambition we just communicated some weeks ago in China, they obviously depend on the successful ramp-up of our new energy vehicles, which some of them we mentioned already, like the ID. Era, others, they still have to be ramped up throughout this year, next year. We bring in total 20 new models this year, next year. Obviously, it depends on the recovery of the overall market. Our potential market share we want to achieve at the end of the decade of 10% to 12%, because obviously we want to keep our market share in the combustion engine, but the combustion engine market will go down and with these 20 new models this year and 20 new models next year in the new energy vehicle segment.

Speaker #2: Some of them we already mentioned, like the ERA. Others still have to be ramped up throughout this year and next year.

Speaker #2: We will bring in a total of 20 new models this year and next year. Obviously, it depends on the recovery of the overall market. And then, our potential market share we want to achieve at the end of the decade is 10 to 12%.

Speaker #2: b-because then we we obviously, we wanna keep the the the our our market share in the combustion engine. But the combustion engine market will go down.

Speaker #2: And with these 20 new models this year and 20 new models next year in the new energy vehicle segment, we want to regain share to 10 to 12%.

Arno Antlitz: We want to regain share to 10% to 12%, and this then all factors into the roughly EUR one and a half to 2 billion. Obviously, depending on overall situation and obviously depending on the overall market, this is basically factored in this plan. The key element is the successful ramp-up of our In China, for China developed new energy vehicles with very good product substance and a much better cost base, which should give us then these contributions towards the end of 2030.

Speaker #2: And this then all factors into the roughly $1.5 to $2 billion, and obviously, depending on the overall situation, and obviously, depending on the overall market.

Speaker #2: But this is basically factored in in in in this plan. So the the the key element is the successful ramp-up of our in China for China developed new energy vehicles with with goods very good product substance and a much better cost base, which should give us then this contributions towards the end of 2030.

Speaker #5: Yeah. And so coming to your second part of of the question, always you can you can learn from from the past. And what's our colleagues have done in the '90s was was a great great work.

Oliver Blume: Coming to your second part of the question, always you can learn from the past. What our colleagues have done in the '90s was a great work. The conditions were a bit different, but they focused on cost reductions. For example, material cost reductions initiated with Senior Lopez and Mr. Piëch focused on the right products. The main deficits had been on products and costs. On the other side, there was a regular competition in the market, not as tough as today. You have been in growing markets in this period. The situation today is different. The business is more complex. Technologies are more complex. Our group is much bigger than it used to be in the '90s. We are in an environment where we, on the one hand side, have a lot of financial headwinds, double-digit billion EUR.

Speaker #5: The conditions were different, but they focused on cost reductions, no? For example, material cost reductions, initiated with Cyndia Lopez. And Mr. Piech focused on the right products.

Speaker #5: And the main deficits had been on products and costs. And on the other side, there was regular competition in the market.

Speaker #5: not as tough as as today. And you have been in a growing markets in in this period. The situation today is is different. the business is more complex.

Speaker #5: Technologies are more complex, our group is much bigger than it used to be in the '90s, and we are in an environment where, on the one hand, we have a lot of financial headwinds.

Speaker #5: Double-digit billion euros. We have to compensate for what we are already doing. If we didn’t have these headwinds, we would be in a completely different situation right now.

Oliver Blume: We have to compensate what we are doing already. If we wouldn't have this headwinds, we would have been in a completely different situation right now. We have a very tough competition, only from China, over 150 new companies entering into the market. We can mention already in Europe, also. We have the trade barriers, we have the regulation and so on. We have to face it. What we have done in the last years, we built a foundation for Volkswagen Group with all the restructurings we have done. We brought ourselves now in a strong position in terms of products, technologies, and also the software strategy will help us in the future. We have the battery business. We need to manage the transformation. Then we can link also to some achievements from the '90s, especially when I look to the material cost.

Speaker #5: We have very tough competition, no? Only from China, over 150 new companies are entering into the market. What we can mention already is in Europe.

Speaker #5: Also, then we have the trade barriers, we have the regulation, and so on, no? But we have to face them. And what we have done in the last years, we built a foundation for Volkswagen Group with all the restructurings.

Speaker #5: We have now brought ourselves into a strong position in terms of products, technologies, and also the software strategy, which will help us in the future.

Speaker #5: We have the battery business. We need to manage the transformation. and then we can we can link also to to some achievements from the '90s, especially when when I look to to the material cost.

Speaker #5: There's a huge need for us to improve. And there, for example, we can pick some aspects they have done in the '90s.

Oliver Blume: There's a huge need for us to improve. There, for example, we can pick some aspects they have done in the '90s, but you can't compare the situation because the environment is completely different, more complex, and even more and more challenging.

Speaker #5: But you can't compare the situation, because the environment is completely different—more complex, and even more challenging.

Speaker #3: And with this, I say thank you to Oliver Blume and Arno Antlitz for all the answers and all the information. Also, thank you to my colleague Rolf.

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

Speaker #3: And we're at the end of this call. I wish you a good day, a good weekend, and see you soon. Bye-bye.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.