VWAGY Q2 2025 Earnings Call
Operator: Ladies and gentlemen, welcome to the Volkswagen AG Investor/Analyst and Media Call Half Year Q2 2025 Conference Call. I'm Moritz, the Chorus Call operator. [Operator Instructions]. The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's a pleasure to hand over to Dr. Sebastian Rudolph, Vice President, Global Group Communications. Please go ahead, sir.
Sebastian Rudolph: Thank you, Moritz, and a warm welcome, good morning, to the half year 2025 results call of Volkswagen Group. With me is Rolf Woller, our Head of Group Treasury and IR, because this is a joint call, media and investors and analysts. Our main actors are with us as well, Oliver Blume, our CEO; and Arno Antlitz, our CFO and Chief Operating Officer. A few remarks before we start. So you should have received the press release, the interim financial report, and all other related materials which were published this morning. If you have not received these documents, please give us a call or drop us an e-mail, and we will take care. And with this, Rolf, I hand over to you and you guide us through the next time.
Rolf Woller: Thank you, Sebastian. Very good morning to everyone on the call also from my side, and thanks for joining us today. Let's have a look at our agenda. Oliver will present the key developments of the first half year, and Arno will then take you through the financial results and the updated full year outlook. This time, not an easy task, but this is why we have him and he is super prepared, so we are looking very much forward to the explanations. Following the presentation, we will first host the Q&A session for the investor and analyst community, moderated by myself. And after this session and a short break, we will continue with the media Q&A, which is then hosted by Sebastian. Since our call will include forward-looking statements, the safe harbor language and other cautionary statements on the slide will govern today's presentation. I encourage you, as always, 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. And with that, I hand it over to Oliver. Oliver, go ahead, please.
Oliver Blume: Yes. Thank you, Rolf. Thank you, Sebastian. Oliver Blume speaking. Good morning to everyone. Let me start by highlighting the key developments in the first half of the year before Arno walks you through our financial results. After that, Arno and I look forward to your questions and a lively discussion. The first half of 2025 was marked by major challenges, challenges that were not foreseeable at the beginning of the year. First and foremost, the sharp increase in U.S. import tariffs and the associated trade policy uncertainties. Despite these challenges, we continued to consistently implement our strategic initiatives. Our model offensive is making great progress, and we are successfully launching new models in our markets. This year, we are placing particular emphasis on our cost reduction and the execution of our group-wide performance programs. The results show that our measures are beginning to take effect. At the same time, they are initially causing high expenses. All these factors have had a significant impact on our operating results. With overall stable sales, the Volkswagen Group generated sales revenue of EUR 158 billion in the first half of the year. This was on par with the previous year. The operating result declined by about 1/3 to EUR 6.7 billion, mainly due to the aforementioned effects. The operating return on sales was 4.2%. Excluding the effects of increased tariffs and restructuring costs, the return on sales was 5.6% in the first half of the year. The second quarter was even slightly higher at 6.8%. This means that we are within the forecast range communicated at the beginning of the year. Given the challenges and in a phase of extensive restructuring, this is a respectable result. But it also makes one thing clear. Volkswagen must consistently pursue the performance programs it has embarked upon. We need to shift our cost efforts into high gear and accelerate implementation. After all, we cannot assume that the tariff situation is only temporary. The changed import tariffs in the U.S. resulted in expenses of around EUR 1.3 billion in the first half of the year. If the current import tariffs remain in place, the burden would increase to several billion. We, therefore, have had to adjust our forecast for the full year. Our plea to the negotiation partners is therefore clear. We are counting on the EU Commission and the U.S. government to reach a balanced outcome on the tariff issue, an outcome that continues to ensure rule-based trade, open markets and stable trade relations. This is a basis for competitive economy on both sides of the Atlantic. North America and the U.S. market, in particular, are strategic growth markets for the Volkswagen Group. Investments of over USD 14 billion to date in local production partnerships and cutting- edge technologies are clear evidence of our strong commitment to local investment and value creation. Added to this are our significant investments in the construction of the new Scout plant in South Carolina, you can view on the picture, and our partnership with Rivian. We intend to continue on this path. In 2025, we are continuing the most extensive product offensive in the group history with increasing success. We increased deliveries by 1% to 4.4 million units in the first 6 months of 2025. By region, growth was driven by strong performance in Europe and South America. Here, our brand achieved increase of 2% and 18%, respectively. This was offset by a slight decline of 2% in China. Deliveries to North America customers fell significantly by 7% due to the tariff situation. In the second quarter alone, the decline amounted to 16%. The overall positive development was driven by numerous new model launches across all brands from Volkswagen and Audi to Škoda and CUPRA to Porsche. These market launches underscore our consistent focus on innovation, customer orientation and sustainable mobility in all market segments. Each new model strength strengthens our global competitiveness and reinforces our commitment to leading the industry's transformation towards electrification and digitalization. Deliveries of battery electric vehicles recorded particular strong growth. They reached 465,000 units, representing 11% of group deliveries and an increase of 47%. In addition, there were almost 200,000 plug-in hybrids, 40% more than in the same period last year. Our BEV share in Western Europe grew even more strongly. It doubled compared with the previous year to around 20% of our sales. We have succeeded in further expanding our leading position in electric vehicles in Europe. We now have a market share of around 28%. 4 of the 6 best-selling BEVs in Europe this year come from the Volkswagen Group. We also increased our share in North America to 8% in China. However, it declined to 4.5%. This is part of our value over volume approach. We are preparing for the market launch of our new models starting in the fourth quarter of this year. Our new models are well received by customers. We are receiving very positive feedback on the design, technical performance, software and features offered. New vehicles across all brands and drive types are in a high demand, including SBW, ID.7 Tourer, CUPRA Terramar, Škoda Elroq, Audi Q6 e-tron and Porsche 911 to name just a few. This is clearly reflected in our order intake, which has developed very positively in Western Europe with an increase of 19% compared to the previous year. BEV orders are developing particularly dynamically, rising by 62%. The order backlog in Western Europe grew to around 925,000 vehicles by the end of June and extends well into the fourth quarter. BEV account for over 22% on this figure. With numerous new models coming to the market in the next months, we expect additional momentum. This shows our strategy is working, and we are implementing it consistently. Our model offensive will also kick off in China in the fourth quarter with a new generation of intelligent connected vehicles that have been developed entirely in China for China and that are tailored precisely to the wishes of our customers. Our technology is state- of-the-art with our newly developed electric and electronic architecture and advanced safe Level 2++ ADAS systems. We cover the entire NAV spectrum with flexible drivetrain solutions, including BEVs, PHEVs and EREVs. We will bring 30 new models to the road by 2027 and 50 by 2030. Thanks to consistent cost management and a structured fixed cost program, we have already reduced the material cost of our compact main platform by 40%. We have set ourselves a further target of 10%. This puts us on par with leading competitors in the Chinese market in terms of cost. This is our approach, local, customer-focused, cost optimized and technologically leading. We are making great strides in the automotive driving even outside China. With the ID. Buzz AD, we are putting Volkswagen Group's first fully autonomous series production vehicle on the road. It has been consistently designed for use in mobility services. MOIA's turnkey platform gives cities and operators access to safe, scalable and intelligent ride pooling solutions, initially in Hamburg, and from 2026 also in the U.S. MOIA's comprehensive solution combines all components to turn an autonomous vehicle into a ready-to- use mobility system. Our software meets key regulatory requirements for Level 4 vehicles according to the SAE standard. The ID. Buzz AD brings future technology to the market. This is an important step on our journey to become the global automotive tech leader in the industry. We have also achieved significant milestones in the implementation of our group-wide earning improvement programs. And this includes, in particular, the future Volkswagen agreement reached at the end of 2024. This agreement lays the foundation for the economically successful future of Volkswagen and our German locations. Besides of labor cost reductions, we will achieve EUR 1 billion a year actually and more than 4,000 employees have left the company since the end of the year. A further 20,000 departures have been contractually agreed and are already certain. In the medium term, we are expecting an annual savings of over EUR 4 billion. Competitive personnel and plant structures linked to the company agreements to accelerate implementation. We have agreed on similar approaches in Germany at CARIAD and Porsche and also at Audi. In June, the brand group Progressive around Audi reached agreements with employee representatives on specific measures to reduce the workforce by around 7,500 positions, primarily in indirect areas. Performance-related pay will also be adjusted. In the medium term, Audi expects annual savings of more than EUR 1 billion. These measures are part of a clear plan. We are shaping change responsibly, proactively and in dialogue with others. Future-ready products and technologies will also be the focus of our presentation at the IAA Motor Show in Munich in September. We are taking this opportunity to invite you, our investors and analysts, to a product and technology update on the Volkswagen Group and its brand groups on September 9 in Munich. My colleagues on the Board of Management, and I look forward to providing you with key insights to our product strategy and the convergence of our platform software, battery technology, electric-electronic architecture and other key innovations. And of course, we would also like to take this opportunity to engage in a personal dialogue and answer your questions. Our Investor Relations team look forward to receiving your registrations. Let us now take a closer look at the financial performance in the first half of the year. I will hand over now to Arno. Thank you very much.
Arno Antlitz: Yes. Thank you, Oliver, and good morning also from my side, colleagues. Our half year results continue to tell a story with 2 sides. On the one hand, there is tremendous success of our products, combustion engine and electric vehicles. In Europe, every fourth vehicle comes from the Volkswagen Group, and we are making good progress in restructuring our company. On the other hand, operating results are down by 30% year-on-year. This is due to the continued margin dilution effect of the ramp-up of our electric vehicles. On top of that, U.S. tariffs and restructuring have left their marks. In the first half of the year, the burden from increased U.S. import tariffs amounted to EUR 1.3 billion. Restructuring added cost of EUR 0.7 billion. Excluding these effects, results in the second quarter came in at 6.8%, which is at the high end of our expectations. This gives us the confidence that we are on the right track, both strategically and financially. But ultimately, it's only the cash in our bank account that counts. This is clear, and that's why it's necessary to decisively implementing the ongoing programs and in some areas, take even further measures. With that, let's move to the details of the financial result. Vehicle sales totaled 4.4 million in the first 6 months, a slight increase of 1% compared with the prior year. The group sales revenue remained stable at EUR 158 billion. The operating result totaled EUR 6.7 billion, minus 33% versus H1 2024. The operating return on sales stood at 4.2%. In the first half of 2025, our business was marked by intense competition, high expenses related to U.S. import tariffs and restructuring costs, as mentioned. U.S. import tariffs and restructuring costs had a total negative impact of EUR 2.2 billion in the first half of the year, EUR 1.7 billion in the second quarter alone. A look at the corresponding key figures before these effects show that the product momentum of exciting vehicles and our restructuring efforts are gradually paying off. Restructuring expenses will help us to achieve leaner cost structures in the future. However, tariffs are likely to remain a permanent burden, and we must increase our efforts to offset this effect. The development of profit before tax, after tax and earnings per share follows largely the operating result with a positive effect from income from participations and a negative effect from interest result. Net cash flow in the automotive sector amounted to minus EUR 1.4 billion in the first half of the year. The year-on-year decline in operating profit was largely offset by a lower cash flow, cash outflow from working capital and lower CapEx and R&D expenditures. On top of that, cash flow development was affected by cash out related to U.S. import tariffs of around EUR 0.7 billion and payments of around EUR 0.7 billion for restructuring measures. In addition, EUR 0.9 billion were spent on the acquisition of additional Rivian shares, which was triggered as planned by Rivian reaching financial milestones. Net liquidity in the Automotive business decreased by around EUR 6 billion compared with the end of 2024. In addition to the operating performance, the following factors explain this development. M&A expenditures, EUR 1.4 billion, dividend payments of around EUR 3.8 billion in the second quarter, interest payments to hybrid bondholders in the magnitude of EUR 0.4 billion. Overall net liquidity remained at a solid level of EUR 28.4 billion at the end of the second quarter of 2025. Let's move to the performance of the divisions. Passenger Cars generated an operating result of EUR 4.4 billion in the first half of 2025, down 40% versus prior year. This corresponds to an operating return on sales of 3.7%. Commercial Vehicle recorded a decline of operating profit to EUR 1.2 billion, and the margin stood at 5.9%. The Financial Services division performed well with an operating result of EUR 1.9 billion. Let's now take a look at the drivers of earnings development in the Passenger Car segment. Volume had a positive impact of EUR 0.8 billion compared with the same period last year. Price/mix had a negative impact of around EUR 2 billion. This was mainly due to the significant increase in BEV share and a negative product mix and brand mix. CO2 provision had a cumulative negative effect of around EUR 0.5 billion on earnings in Europe and the U.S., and ForEx had a negative effect of EUR 1.1 billion, mainly due to the valuation effect of balance sheet items in foreign currencies. The development of product costs and fixed costs had a positive effect, the latter improving by EUR 0.1 billion despite continued restructuring efforts and the ramp-up of new businesses. Looking at the development of our overhead cost, the Automotive division was able to keep overhead costs stable. Overhead cost ratio improved slightly, specifically in the second quarter. An increase at TRATON and brand group Progressive as well as the ramp-up of our new businesses were fully compensated by positive effects from restructuring measures throughout the group. A key factor in this development is the consistent implementation of efficiency programs, particularly at Volkswagen AG. Future Volkswagen is having an increasingly positive impact, partly due to progress in realigning the workforce. The new collective agreement, which has now come into full force, is also having an effect. In the 6 months of the year, the number of active employees at Volkswagen AG was again reduced by 4,300. Since the end of 2023, the reduction has amounted to almost 9,000. Further programs are being developed and implemented at Audi, Porsche and CARIAD, and the programs have been extended to all units, entities and regions of the group. As a result, the number of employees at group level has been reduced by a net total of 10,600 in the last 6 months. And the corresponding positive effects on our cost structures will be reflected in our accounts in the subsequent quarters. Let's move on to the development of the brand groups, platforms and financial services. Within the Passenger Cars, the brand group Core achieved overall a solid result with sales revenue up 5% in the first half of the year. Operating profit amounted to EUR 3.5 billion, and the margin stood at 4.8%, in line with the previous year. Brand group Progressive also achieved a 5% increase in sales revenue, driven primarily by the continued product offensive. Positive volume effects were offset by ramp-up costs for new models. U.S. import tariffs and the provision in connection with the agreement on the future of Audi burdened the results with approximately EUR 750 million. All in all, the brand group achieved an operating profit of EUR 1.1 billion. The margin stood at 3.3%. Excluding the effects of restructuring and U.S. tariffs, the margin would have stood at 6.1% at brand group Progressive. Porsche vehicle sales declined by 11% to approximately 135,000 units, with the Macan emerging as the best-selling model, 25,000 of which were fully electric. Sales revenue dropped by 9% to EUR 16.1 billion. Operating result fell to EUR 0.8 billion, primarily due to extraordinary charges driven by battery-related activities, U.S. tariffs and strategic alignment measures totaling of about EUR 1.1 billion in the first half of the year according to Porsche AG. Porsche AG will report on its half year results at July 30. Let me outline some effects of brand group Core. Škoda impressively demonstrated that exceptional performance is possible even in a difficult market environment with first-class products on Volkswagen Group platforms combined with a competitive cost base. Škoda achieved the best quarterly results in its history with around EUR 740 million. The operating margin of 9%, even 9.5% in the second quarter speaks for itself. Volkswagen Passenger Cars recorded stable sales development. Nevertheless, the brand increased its reported operating margin by 30 basis points to 2.5% and achieved an operating result of EUR 1.1 billion, 20% above prior year. The efforts are starting to pay off. The consistent implementation of measures agreed at the end of last year is beginning to have first positive effects on the cost structures of Volkswagen brand and our component business. On top of that, an advanced booking from our China business, which had actually been expected for the second half of the year, had a positive effect. Leaving aside all nonoperational effects, the operational performance was even slightly stronger. U.S. import tariffs and further expenses in connection with restructuring activities and the diesel issue had a negative impact. Excluding these effects, Brand Volkswagen operating margin after 6 months stood at 4.2%, in line with the target set for the full year. And brand group Core achieved almost 6% margin before restructuring and tariffs. But again, one word of caution here. Restructuring expenses burden the result now, but help us to achieve leaner cost structures in the future. However, we need to prepare for a scenario where tariffs are to stay in a certain level as part of our operating business. And this clearly means the restructuring work has to continue and we even need to speed up the measures. CARIAD reported rising license revenue, supported by higher volumes on software platforms 1.1 and 1.2. Revenue rose by 32% to around EUR 0.6 billion. The operating result was minus EUR 1.2 billion, roughly on par with previous year. PowerCo is making good progress in ramping up battery production in Salzgitter, which is scheduled to start production at the end of the year. And the company reported an operating loss of EUR 0.6 billion, around EUR 400 million more than in the first half of 2024, mainly related to the ramp- up activities for battery production at Salzgitter, at Valencia and at Ontario, Canada sites. TRATON recorded a decline in sales in the first half of the year due to weaker demand in Europe and customer restraint in North America. As a result, revenue fell by 7% to around EUR 21 billion. The lower volume, higher fixed costs combined with the impact of exchange rate fluctuation led to a significant decline in operating profit of 39% to EUR 1.2 billion. TRATON results have been released this morning. The Financial Services business developed positively in the reported period. This was due to an increase in contract volume by roughly 10%, particularly in Europe. The credit loss ratio was broadly stable and the operating profit rose by 35% to EUR 1.9 billion. Investment and expenditures on R&D in the automotive business declined by around 6% to EUR 16.3 billion in the first half of the year. This corresponds to 11.4% of automotive sales revenue and is slightly below our forecasted range for the full year. However, the magnitude overall reflects the high upfront investments from the transformation and the ramp-up of future businesses such as batteries and autonomous driving. We intend to and will bring down investments by leveraging group synergies even more consistently and reducing complexity beyond the level of today's range. Let's move on to the performance of our joint ventures in China. In a market environment that remained highly competitive and characterized by intense price pressure, deliveries declined by 2% to around 1.3 million vehicles in the first half of the year. The proportionate operating profit of our joint venture activities in China amounted to EUR 506 million in the first half of 2025. And based on the current sales and earnings development, we are reiterating our expectation of reaching the upper end of the forecasted range of EUR 0.5 billion to EUR 1 billion for the full year. And this brings me to the full year outlook. The continuation of model offensive and the renewed product portfolio of exciting vehicles across all brands support mix effects, and the second half of the year, we also expect to see increasingly positive effects from the consistent implementation of our cost programs and ongoing restructuring measures. At the same time, we expect the increase in the share of battery electric vehicles to continue to have a negative impact on the margins. Furthermore, we anticipate negative effects from the increased import tariffs with a chance resulting from potential mitigation measures. As promised in Q1 call, we have now factored all these effects into our outlook for 2025. Our adjusted annual forecast is based on 2 scenarios. The lower end of the range for the operating margin assumes that the current U.S. import tariffs of 27.5% of imports from Europe and Mexico to the U.S. will remain in place. On a 12-month basis, tariffs at this level would impact us by around 100 basis points before any mitigation measures. At the upper end of the operating margin, we assume a scenario for much of the second half of the year in which the current tariffs are reduced to 10% for both deliveries from Europe to U.S. and from Mexico to U.S. With these tariffs, the impact would be around 60 basis points on an annual basis before any mitigation. As a result, we now expect revenues at the previous year's level. Based on the U.S. tariff scenarios just outlined, the operating return on sales is now expected to be in the range between 4% and 5%. The CapEx ratio in the Automotive division is expected to remain between 12% and 13%. We expect Automotive net cash flow to be in the range of EUR 1 billion to EUR 3 billion. These figures include expected cash outs of around EUR 2 billion in connection with the implementation of restructuring measures, of which EUR 1.3 billion will be in the second half of the year. We now expect net liquidity to be in the range of EUR 31 billion to EUR 33 billion. One more comment on the outlook. We have taken note of TRATON's mandatory announcement from last night. We will be able to reflect the new range for the operating result of the industrial business of TRATON within our existing range of 4% to 5% return on sales for the Volkswagen Group. For the new forecast of net cash flow from TRATON, that means that we will end at the lower end of the range for the net cash flow. And from here, we will increase in our efforts to work our way back towards the midpoint of our guidance. Ladies and gentlemen, our model offensive is proving successful for both combustion engines and electric vehicles. In Europe, one of our vehicles now comes from the Volkswagen Group. Our cost reduction measures are beginning to take effect. At the same time, we are pushing ahead with the implementation of our strategy by continuing our extensive product offensive in China. We are working a renewed model lineup for Volkswagen brand. In view of renewed challenges, we must increase our efforts and accelerate the implementation of our performance programs and continue absolute cost discipline, so that we are well prepared and on a stable footprint for the future. Thank you very much. And with that, I hand back to Rolf.
Rolf Woller: Thank you, Arno. And with this, we conclude the prepared remarks and let us now enter into the Q&A session.
Rolf Woller: [Operator Instructions] And we would start the Q&A session with the first question coming from Tim Rokossa from Deutsche Bank.
Tim Rokossa: It's Tim from Deutsche. Arno and Oli, probably to both of you. Firstly, thank you for giving us the tariff sensitivity. I think that's very useful to work with. Now the Japan-U.S. deal seems to be the most likely scenario also for an EU-U.S. deal at the moment with 15% tariff. Can you quantify what impact that would have on you regarding EBIT and free cash flow? And also to that, Oli, probably more you, do you also think that a 15% tariff is now the most likely outcome, not anything that involves investment credits or export credits that the industry was actually pushing for? And secondly, probably again to both of you or maybe more Oli, to understand the underlying business ex all of this obviously very material tariff noise. In contrast to Stellantis and Renault, your mass market business seems to do very well in Europe. Do you feel like you have cut the corner when it comes to restructuring and product improvements on the mass market business? Are we going to see further strength from here? And likewise, are we now also pretty much there for Audi? Is Audi going to improve from here?
Arno Antlitz: Yes, Tim, thanks for your question. And, look, we promised to give transparency now in the second quarter. And we gave you all the scenarios. So it's a lot of math we need to do to start with the tariffs of potentially 15%. Look, the 25% on top and now the 27% we have today is 25% on top. And the 15% would basically 12.5% on top, and that's exactly 100 basis points. So mathematically, you would roughly end in the middle of our guidance if we would end at the Japan deal. But I must make sure that this is completely understood. That has to be applied for Mexico then and for Europe both, because the combined figures we gave are always for Mexico and for Europe. We have a significant import from Mexico to U.S. as well. To give you a rough idea, it's more like 60%, 65% from Europe, but that means that you can also do the math then if there would be a deal from Europe and not from Mexico later on. And the second word of caution, obviously, we are already in July, so the longer we go into the second half of the year, the more we tend to the lower end of the guidance. That's clear as well.
Oliver Blume: Yes. Tim, good morning. And from my point of view, we hope that it will come to a well-balanced deal between U.S. and EU, which allows fair trade in between the regions. And yes, we are expecting maybe around 15%. And for us, it's important being able to continue with a specific additional deal for Volkswagen. We have a very attractive investment package we will do there. We are acting with 8 brands in the U.S. in between these 8 brands, also 2 American brands with Scout and International. And I think that this package is very attractive for the U.S. government. We have been already in good discussions with them, and we need then the opportunity after the EU deal to enter with a specific deal. Coming to your second question, we see a positive trend, especially in the EU. And when we look to our market share, we were able to improve to over 25% overall market share, and electromobility, we are by far market leader now with 20%, 28%. And what's positive for the future is a very promising order intake. Overall, drivetrains 20%, and electric vehicles 60% better than last year. And the positive momentum is that there are a lot of more products to come. There, our huge investments of the past are paying off with improved design, improved technologies and also the quality aspect. And what we have mentioned also in the second quarter is a positive momentum on our product costs. And finally, our restructuring programs in all brands are step-by-step the way to pay off. So there is a positive momentum on the EU market, and we will use also this momentum for the rest of the world. Talking about Audi, our expectation is that we will touch the bottom this year at Audi. As you know, at Audi, we implemented a huge restructuring process on the organization, but especially also for the product strategy. We developed a completely new design language. The first glimpse we will show at the IAA, but also the technological concept. And we are facing now a huge product momentum. And on the other side, also Audi is working heavily on restructuring the company and reducing the costs. And I would give you an additional point because Audi and Porsche are also discussed right now. At Porsche, situation is a bit different. Porsche has got a very positive substance and in spite of a complete new product lineup, this year is very weak. Why? Porsche is in a sandwich positioning because of 100% export to the U.S. on China. China and the U.S. are by far biggest single markets of Porsche. And so at Porsche, we have had the need to restructure also the company in terms of cost to adapting this to this new situation. And we adapted also the product strategy in terms of the development of electromobility in the different regions of the world. Porsche is strong in electromobility. For example, electric cars in Europe count already 60% volume share in between Porsche. And from this 60%, 36% are BEVs. So electromobility is working for Porsche, but the market is still very, very small. So we decided to adapt the product strategy even more, taking investments for more flexibility in between the different model lines. And on the other side, as you have mentioned also from the media, we kicked off a structuring program in Porsche to reduce labor cost to adapt the employees, and we will enter in a second package in the second half of the year. So for both companies, Audi and Porsche, we are expecting that we will touch the bottom this year with positive momentum from '26 onwards.
Rolf Woller: Thank you, Oli, for the comprehensive answer. And the next one in line is José from JPMorgan. José Maria Asumendi: Great to see the progress done so far in the year. Arno, one question on cash flow. I'm looking at all the exceptionals you have this year and last year, right, in terms of cash outflows, investments in XPeng, Rivian, exceptional restructuring cash outflows, battery investments, et cetera. So the question is, beyond the quarter, when you look at the year and you look at your free cash flow guidance, if you exclude the exceptional restructuring cash outflows and M&A, et cetera, what is the underlying free cash generation of the group? I think this is very important because, obviously, if you can go back again to that EUR 6 billion to EUR 8 billion or more than EUR 8 billion free cash flow for the group in 2026, this will be definitely, I think, a game changer for Volkswagen. Second, Oli, on robotaxi and Level 4 and 5 autonomous driving, I think, look, I would love to get your comments in the light of the strong progress done by Tesla and Waymo deploying robotaxis in the U.S. What is Volkswagen doing about this technology? And do you think this is vital for VW to be present in this field to ultimately ensure the competitiveness of the group?
Arno Antlitz: Yes, José, thanks for the question. Look, perhaps you could see it quite nicely on the exhibit we provided for the first half. We report the net cash flow and then also the clean cash flow. And the clean cash flow is before M&A and diesel. So obviously, the Rivian transaction is not included. And if you look then at the info in the box we provided, it's basically EUR 0.7 billion related to restructuring and EUR 0.7 billion related to U.S. tariffs. So if you want then basically kind of underlying take out from the clean net cash flow, the EUR 1.4 billion, we end up roughly on the cash flow from previous year. And this is the current cash flow performance in the first half.
Oliver Blume: Yes, José, [Foreign Language]. Coming to robotaxis. And there, the expectation, especially for [indiscernible] is a huge, huge market of around USD 400 billion yearly. And we worked heavily on this field, making good progress, and we are happy to present during the last weeks our concept with the ID. Buzz autonomous driving. And there, we feel also comparing with competition, as you mentioned, Waymo or, for example, Tesla, we are in a good position. We have a kind of turnkey solution. We have everything in our hands. We have a very advanced technology. And that's nothing for the 30s. We will be in the market already in '26, still with a driver. And our aim is to be able in '27 driving driverless, making good progress in our test fields in Germany, in Hamburg and Munich, and in Austin in the U.S. Then we have the car in our own hands, and that gives us the opportunity for scale effects also beside a very attractive car with ID. Buzz. And that makes us special. We have a platform for the whole fleet management, and we have the platform for the customer management already implemented with MOIA. And so for us, it's very promising. We have a lot of interest of many cities in Europe and Middle East, for example, wants to implement our solution. We have the first external customer with Uber starting in '26 in Los Angeles. And so we are ready to compete. And you know around 50% of the market cap of Tesla is counting on this. And so I think there's still also a potential for Volkswagen Group and the market cap for Volkswagen. And we will speed up the process, and this could be an interesting business field for Volkswagen Group.
Rolf Woller: Thank you, José, [Foreign Language]. And the next one in line is Patrick Hummel from UBS.
Patrick Hummel: First question, maybe for you, Oli, regarding your U.S. investment strategy. To which extent are these U.S. investments going to be dependent on a Volkswagen specific tariff deal post a potential 15% EU-U.S. deal? And more specifically, as far as the Scout brand is concerned, and I know we shouldn't think in presidential election terms. But right now, it's definitely not a great environment to launch electric or range extended rugged SUVs or pickup trucks. But you do have cash cows in the U.S. that even after a tariff deal would still face a significant tariff. I'm talking about the Audi and Porsche vehicles. So I'm wondering to which extent you've got flexibility here to maybe come to a very efficient use of your investment or existing footprint even rather than spending several billions more to deal with the U.S. tariff environment. And my second question, Arno, that's probably for you regarding the cash flow. To which extent do you factor in a significant working capital tailwind for the second half? It seems you can only get to that free cash flow guide number if you do get such a tailwind, because your investments tend to be skewed towards the second half or specifically 4Q? And does that free cash flow guide now include any further disposals? There was just an article, I think, yesterday in Manager Magazin talking about a series of smaller assets that could be up for disposal. So any comment on that would be appreciated.
Oliver Blume: Patrick, thanks for your questions. And we will intend to discount the tariffs as far as possible. We will make a clear calculation behind what would it mean for investments. So we have a scalable program we could offer there. All of these projects are connected with a clear positive business case and linked to our growth strategy. You are right. We have very, very strong products still, especially in the ICE and plug-in hybrid segment. You mentioned Porsche and Audi. For Porsche, in the U.S. we were able to achieve historic deliveries in the first half of this year. So our product momentum is very, very strong. And so we are counting on a better tariff situation at Audi. Audi is the same. Also, we can think about localizing Audi products there. And besides of Porsche, Audi, also for Volkswagen, we see opportunities. We have successful cars and making them even more American is our intention. And besides of the investments, on the one hand side, we focus on American brands like Scout and International, like school buses and heavy trucks. And on the other side, technology. As you know, our partnership with Rivian, which started very well, and we see more opportunities there. And so that's a whole package there and everything linked with a clear business case and then entering into the discussions with the government.
Arno Antlitz: Yes, Patrick, concerning the cash flow, we expect a tailwind in the second half of the year, and that has 2 effects. First and foremost, it's like a typical effect on the industry. Towards the end of the year, towards Christmas, pipelines are basically lowered, factories are shut down. And then in January, you start up the business, you fill the pipelines. So we expect, by and large, inventory of working capital on the level of last year. But this is easily said. What we did 2 to 3 years ago, we started really an extensive working capital management project. We look at inventories on deliveries, on other effects. And in terms of percentage of sales, this team did so far a very good job. And also going forward, our target is to, by and large, keep inventories on the current level while growing the business slightly. So that would mean that also going forward, we expect a positive effect from the teamwork, finance, production, sales on our net liquidity going forward. So this is the situation on that side. Yes, a positive effect, but typically in the industry and not a one-off for this year. And in terms of disposal, on our Capital Markets Day in, I think, Hockenheim, we said we look into our noncontrolled shareholdings. We gave you a number of that. There's a team in place. We extensively work on that. For obvious reasons, we cannot go into details there. We don't expect major cash inflows today for this year, for the second half. But rest assured, we work on that topic, and you could expect some, I would say, success stories from this team as well going forward.
Rolf Woller: Thank you, Patrick. And we move on to the next question, which is coming from Horst Schneider from Bank of America.
Horst Schneider: First of all, I want to give you my congratulations for these numbers, especially in the brand group Core. Not too long ago, I think you were taking Stellantis as a benchmark and now you maybe benchmark for Stellantis and also for Renault. So just side remark from my side. But in that context, we have seen warnings from these 2 peers. Renault talked about increasing commercial pressure, particularly in Europe. Can you give any comment what you see in the European market? I think your order intake also lately came a little bit down. Is the outlook still good? Is it concentrated on certain segments, markets? And in that context also to Oli. Oli, you mention all the time that you are value over volume. I think Stellantis is a proof that this does not really work. So how do you look at this value over volume approach for the Volkswagen mass market business? Is that really good strategy? And then the last one on that brand group Core, the great EBIT margin we have seen in Q2. Was that now peak? Will that come down? Why will it come down?
Arno Antlitz: Yes, Horst, first of all, thank you very much for your comment. It's really very motivating for us to continue on that path. Look, if you look at the EBIT bridge, the pricing is minus EUR 0.5 billion. And this is largely due to the ramp-up of BEV, and we see a pretty stable pricing environment on our combustion engine cars, but this might be also due to the great product substance. If you look at our cars, brand-new Tiguan, brand new Passat, Golf, and also from Audi, the cars are doing very well in the market. And on top, we have the ramp-up of the electric vehicles, which are margin dilutive. In the price segment, there's obviously a positive pricing effect from last year and an incentive burden from this year from the BEVs. But all in all, the EUR 0.5 billion is even slightly better than we originally thought. And there's also some effect in the mix. Mix is obviously also diluted by the electric vehicles and some brand mix, obviously. And yes, this is on that side. And you remembered you mentioned the great success or the great steps of our volume brands, specifically brand Volkswagen and the brand group. And before I also referred to Škoda, almost 10% in the second quarter shows basically what can be done in this environment with good product substance combined with a good cost structure, and Volkswagen brand is on the way to achieve that cost structure. It will take some quarters. Obviously, we gave you the outlook that we reduced the headcount by 35,000 in Volkswagen AG, but that takes some years. And this is also the reason why for the full year, brand Volkswagen guides for roughly 4%. And so that's also the answer to the question. Q2, from a single quarter, will be peak with basically 2 reasons. First, from a seasonality point of view, it's always the best season. Q3 will be burdened by summer shutdowns. And so this is one effect. And the other effect, we had a slightly positive effect from China, and this will not repeat in the magnitude, but we are on a very good way to achieve basically the 4%, but one word of caution, excluding the effects we had now. This is, I think, very, very clear. And the last word, at the end of the day, we have to achieve 4% and more than also in a situation where tariffs are here to stay. So this is why I said we have to anticipate and speed up some of the measures and increase our efforts, so that we are able at brand group eventually to deliver also the 4% and 6.5% in a potential scenario with tariffs.
Oliver Blume: And Horst, let me come to your point, value over volume, which still is our orientation. And I would like to answer coming from our product focus. That was one of the main points, restructuring Volkswagen Group, bringing in order software, improving design, improving quality, improving technologies. And then when you're able to deliver exciting products to the market, which are convincing the customers, it has got an impact also on discounts and incentives. And so this is bringing us step-by-step in a stronger position and the product momentum is just to start. So that's the positive aspect. On the other side, we have to differentiate when it comes to BEVs, because there we need to fulfill the CO2 regulations. We were happy to come to averaging between '25 and '27. But beside of this, we need to fulfill the target. And therefore, we are leveraging sometimes in between putting incentives into. But the positive feedback we are getting from the market in terms of order intake allows us to be more restrictive with discounts and incentives. And everything is driven by the products we are bringing to the market right now. That's core. And there we will focus in the future as well.
Horst Schneider: But then just a quick follow-up. You don't see a deterioration of the market in terms of volume or pricing at the moment in Europe?
Oliver Blume: Yes. Look, when you look to the European market, the European market decreased during the last 5 years of over 15%. We have, in many segments, 3x more product in the market, but we don't expect any more effect. For Volkswagen, we are stable. That's a clear message. And everything is driven by the strong product momentum that gives us more space than others and even more for the future, what we see right now.
Rolf Woller: Thank you, Horst. And we are moving on to Adrian. Adrian from Redburn. Good to have you back, Adrian.
Adrian Yanoshik: Just a couple from me. So I was curious to know a little bit more in the Q2 earnings bridge. Some of the benefits from both the product costs and the fixed costs in Q2 were impressive, almost a couple of billion between the two. Could you give us a little bit more color on the sources of some of those? And I guess, also importantly, the outlook into H2. So that's kind of my first one. I guess the second one is a little bit more tactical. The tariff costs were a little over EUR billion in terms of the P&L, a little bit less than that in the free cash flow. So clearly, some timing mismatch. Just curious your thoughts on how that plays out through the rest of the year as well in terms of the mismatch.
Arno Antlitz: Yes, Adrian, thanks. Yes, Q2, if you do the math and deduct it, there was actually really a strong element from product cost and the other first positive signs, I would say, from fixed cost. I'll start with the fixed cost. We see really positive signs in the fixed cost, in the overhead cost. And that's despite the ramp-up of new businesses like Scout, like battery and others. So in this quarter, the first time, and of course, we want to continue on that path. We want to lower the overhead cost despite the ramp-up of these new businesses. And we need to do that, and we want to do that in order to compensate for the margin dilution effect of the BEVs. And if you look at just the reduction in overhead of the 4,300, we are on a good path there. And just to remind you, several programs are underway at Audi and Porsche, like Oliver mentioned. Audi communicated reduction of 7,000. And they are slightly behind in terms of schedule, and then they will kick in also in the next quarters. In terms of product cost, to understand that, the majority, of course, is the material cost. There were some one-off burdens last year that we don't see this year. Again, we saw some first improvements of product, and there's also, I don't know what's in English [indiscernible] there the first small sign is on the product cost, also the cost of our factory costs, so productivity and first signs of productivity improvements are also now seen in the product cost, specifically in the German plants. They make really good progress in Emden and in Wolfsburg in terms of factory costs, not in the magnitude as planned, but significant progress, and this is also seen under the product cost improvement in the second quarter.
Oliver Blume: Giving you an additional information about product costs. And to reduce product cost does not happen from alone. And I mentioned the reduction we have done in China, for example, which is 40% of our product cost. It's a very detailed hard work we are doing there, thousands of measures, and we implemented over all our model lines product events where every areas come together and fighting for every cent. That's an ongoing going process. But now we have a structured process like we implemented it with the performance programs in all brands and also with our Executive Board members, we are watching on this process regularly.
Rolf Woller: Thank you, Adrian, actually for your questions. And then with the green shoots, we are moving on to Philippe Houchois from Jefferies. Philippe?
Philippe Jean Houchois: I got a couple of questions. The first one is to be clear on the reduction in the revenue guidance from up to 5% to flat, is it right to assume most of that is demand destruction in the U.S. as a result of tariffs? And to what extent you also factor in the fact that so far, I don't think you have increased prices in the U.S. to compensate. When should we start to see price increases? And again, if that's all factored in, what drives the cut in the revenue expectation? Or are there any other factors? And my second question, if possible, is on this whole discussion we hear in Germany about private public investment to catch up on infrastructure. Curious to have your views on what would you like to see as investment in Germany to improve your competitiveness and thinking about the telecommunications and stuff like that, that would be worth investing in? And to what extent, if you do participate in that effort, does it -- how does it impact your ambitions to reduce the investment ratio initially 12% to 13% and eventually 10%? Would that be a headwind to that ambition?
Arno Antlitz: Yes, Philippe, I'll take the first question and I assume the second one Oli is answering. Yes, the answer is very clear, yes, basically, the reduction in outlook is due to the reduction in sales in the U.S. due to the tariffs. If I have it rightly in mind, I think June, single month, June was 25% down in the U.S. and that makes it even more clear that we need a good compromise and a solution on that topic that both fits the needs, of course, of the administration and us as a company, but it has also an impact of our local organization on our dealers and their families. So it's really -- this you can see on the single month of June. Of course, there are mitigation measures. If you look at the industry, there were some first announcements. For obvious reasons, I cannot talk about price increases in public. This is very clear. But in our sensitivity analysis of the impact, when we said, for example, if it stays at 27.5% and the 200 basis points, we clearly indicated this is before mitigation measures. And as soon as we have more clarity, we also look at potential mitigation. That's very clear.
Oliver Blume: And let me come to the initiative made for Germany. And we have had a kickoff meeting this week together with the German Chancellor, which was very positive, 60 companies in Germany. We put together our investments in Germany to an amount of over EUR 630 billion. We will invest during the next 4 years. This initiative is more than investment, it's to bring a positive momentum to the German economy. And this one is linked with improving all the framework conditions for investing and for doing business in Germany. That's the main part. And in the past, there have been also a lot of good ideas, but what missed was the execution. And therefore, it's very important, and I've had the opportunity also for meeting with the chancellor afterwards to talk about a very professional product and program management with milestones, targets, responsibilities, clear transparency to execute these programs. And therefore, that was a very good kickoff of the initiative, and we will follow up. In terms of Volkswagen, we have a part of this amount of [ EUR 60 billion -- EUR 30 billion ], over 10%. But everything is included into our planning round, no additional investments. That is what we have planned. And the main investments are going to product and our engineering we do have in Germany, and everything is completely in line with our restructuring program we are doing into Germany. And so we think for Volkswagen Group, we are well prepared, and we support to improve the business situation in Germany.
Rolf Woller: Thank you very much, Philippe. And we are moving on. We still have 2 questions in line. And the next one is Henning Cosman from Barclays.
Henning Cosman: I wanted to talk a little bit about the true underlying margin, if we can. We have the 6.8% in the second quarter, but we understand that this China license payment pull forward is a little bit inflated, but you haven't really included any of the Porsche restructuring or indeed the EUR 500 million impairment. So if we just broadly think that's a wash perhaps between the two, I wanted to ask you to talk about a bit where you see the true underlying on a group level. Is the 6.8% a good number, and then we can make our own tariff assumption to get to a reported figure? Or would you want to highlight any particular puts and takes?
Arno Antlitz: Yes, Henning. So the thing is we gave some transparency, but of course, it's really not very easy to dig even deeper into that number. We said underlying basically in the second half was 6.8% -- sorry, in the second quarter was 6.8%, in the second half 5.6%. And you're quite right, there was anticipation on brand Volkswagen from China. On the other hand, there are some restructuring on an operative basis, not included in that. So I think it's a good view to say it's basically a wash. If you look at the second quarter, I talked about seasonality. And so the second quarter is typically the strongest one, and we are basically proud that we could achieve that significantly on the upper end of our guidance due to, what we said before, strong products and restructuring. So now if you look out on the second year and you take out all the one-offs, you could expect the second quarter, call it, underlying roughly in line performance-wise. In like the first quarter, due to seasonality, we expect a slightly higher sales, but margin roughly on par on the first half.
Rolf Woller: To be very clear, Henning, we meant the second half to be roughly on par underlying with the first half, yes? So the EUR 9 billion in the first half underlying, second half to be roughly in line with that.
Henning Cosman: Okay. And can I just ask as a second question with respect to the investment. Sort of a relatively wide range now, still at 1 percentage point with the second half. First half was below the corridor. Could you just help us understand what would take you to the top or bottom end of that? And yes, are you hoping to come perhaps at the bottom end of that given the disciplined performance in the first half?
Arno Antlitz: Yes. First and foremost, I said before that we have set up a comprehensive program to really increase efficiency on investment, both in CapEx but specifically R&D, without making compromise on our ramp-up of product and the new businesses like battery and Scout and others, which will help us in the future. So what's very clear, we see the effect of the tariffs, and we have even then to compensate some of the effect. That might be a small chance on that. But on the other hand, it's also a significant seasonality in our spending, specifically in R&D. And so the guidance of 12% to 13% is roughly where we expect to end also for the full year 2025. And we gave a very specific outlook now for sales basically on par with prior year, EUR 325 billion, and that gives you an indication what we expect in terms of R&D and CapEx.
Rolf Woller: Thank you, Henning. And that brings us to the final question here, which is this time best for last, Mike Tyndall. Mike from HSBC.
Michael John Tyndall: I've got 2 very, very quick ones. The first one, just regarding the guide. Am I right in assuming there's very limited mitigation in that? You've talked about 200 basis points on margins for tariffs, and that's ex mitigation. Is that true in the 4% to 5% as well? And then the second question is just a little bit of confusion here. In the cash flow walk, you've got EUR 0.7 billion for tariffs, but it was EUR 1.3 billion in the P&L. Is that just a timing issue? Or is there something else in there that I've missed?
Arno Antlitz: Yes. You're quite right. We said 200 basis points at 27.5% tariffs before mitigation. So mitigation is a chance either for the guidance, for the outlook, or to compensate for potential additional headwinds. This is clear. And yes, when we now -- it becomes very technically. Look, I make one example why it's different what we see in the P&L and in the cash flow. And that example makes it hopefully clear. Expecting tariffs for the future, that means all the accruals we have to do, for example, for warranty, we have to take up because the part for the warranty, which comes from Mexico and will come from Germany, will in future be more expensive. So this is one technical effect why the P&L burden is right now slightly higher than the cash flow burden. But I mean, at the end of the day, the 2 figures will be the same.
Michael John Tyndall: Got it. Can I quickly follow up? So if the tariff was then to fall, would you see a possible reversal of those provisions?
Arno Antlitz: Can you say it again?
Michael John Tyndall: Sorry, if the tariff was to fall, would you potentially see a reversal of that provision then for the warranty, the higher part cost?
Arno Antlitz: If there -- in a world where we find hopefully an agreement that's below the 27.5%, we would see a small improvement, because some of the -- not all, but some of the accruals would be partially reversed. But a word of caution. We always talk about Europe and Mexico. And we must not forget that in order to make that happen, we need basically an improvement on both sides.
Rolf Woller: Thank you, Mike. Thank you, gentlemen, for the very comprehensive Q&A session. We are now at the end of the investor and analyst call. And as always, if you found anything was left and unanswered, please contact the IR team in Wolfsburg. Thank you already in advance for keeping us employed. Our next event will be the Volkswagen Group Product and Tech Update in the context of the IAA in Munich on September 9, and the 9 months results will be released on October 30. Thank you very much for attending. We have now a short break and we'll continue after that, 5 minutes about, and we'll continue after that short break with a question-and- answer session for the journalists. Thanks very much again for your numerous participation. We hope you will have a great summer holiday and some time with your families. And take care and speak soon. [Break]
Sebastian Rudolph: [Foreign Language] [Operator Instructions] You can ask your question either to Oliver Blume, our CEO; or to Arno Antlitz, our Chief Operating Officer and CFO. And with this, I switch to German. [Foreign Language] Now I switch to English because we're going to the Wall Street Journal and Stephen Wilmot. Stephen, the floor is yours.
Stephen Wilmot: Great. Yes. Well, to just follow up on that, and apologies if I've missed anything because I've been following in German. But the -- so you talked about this potential quid pro quo deal. So if I understand it correctly, following an EU-U.S. deal, there could be a special Volkswagen deal? Or is this something that will be available also to the other companies? Maybe you can clarify that. And also, you talked, I think, earlier on the analyst call about -- or maybe it was earlier on this press call, sorry, about the possibility of exporting Audis, I think you were talking about. So investing in an Audi factory, which could then potentially be used for export. I guess that plays into this idea that you just mentioned of making American products and then perhaps using them for export. Does that mean you're also supporting the idea of, I think, duty drawbacks, I think they're called in English, or the kind of compensatory kind of where you can count exports against imports for duty purposes. Maybe you can clarify those points in the way that you're thinking about how the U.S. situation could work out.
Oliver Blume: Stephen, every company has got a special situation in the U.S. And therefore, I think it should be possible to add a specific deal on company level in between U.S. and the automotive companies. And there are some companies that are exporting from the U.S. And therefore, I think that's also positive to talk about export credits or offsets, how do you call it. And the other approach are investments. And our idea is, with our growth plan in the U.S., we can offer huge investments and then having the opportunity to discount the tariff level, but also with potential for the future to export cars from the U.S. to other parts of the world. This is a Volkswagen model. And I think it should be open for European companies, that's not only automotive, that's pharmaceutical products or chemistry or whatever you deal, to make specific deals. In the past, also when you invest in a region, sometimes you're getting support, local support, because the multiplier is much better than in this case, from the onetime effect having tariffs. And that is our aim to come to a win-win situation in between the U.S. government and then our company with a very attractive package.
Sebastian Rudolph: And we have 2 more questions on the list. The first is Les Echos; the second, Autocar. We start with Les Echos, Thibaut Madelin, please?
Thibaut Madelin: [Foreign Language].
Oliver Blume: [Foreign Language].
Sebastian Rudolph: And the last question for this call goes to Autocar and Mark Tisshaw. Please, Mark.
Mark Tisshaw: A couple of quick ones for me. So Porsche seems particularly hard hit in its markets and its sales at the moment. How does Porsche turn it around? Is it on cost control? Or is it in terms of market appeal and products relevant to the market? And then just on China, what you presented this morning is really interesting. It kind of seems a bit odd to what many Europeans are sort of pulling out or the European OEMs are pulling out of China, but your investment is huge. What are the risks of a Western OEM in China? And do you -- or is it having that level of investment with 50 new products to 2030 helps mitigate that risk?
Oliver Blume: Yes, Mark, let me start with the Porsche situation. On the one hand side, Porsche invested a lot during the last years for the new product lineup, which is very well received in the market. For example, the record sales in the U.S. is one example that the products are received well. On the other side, Porsche is in a special, I would call it, a sandwich positioning in between the development in China. There, the market segment and there -- some figures were published in German Handelsblatt this week that luxury market went down 34% last year and another 50% in the first half of this year. And therefore, Porsche lost a lot of volume because of the structural effect in the China market. On the other side, Porsche is exporting 100% to the U.S. from Europe. And the tariff level is hitting Porsche heavily. And why is Porsche in the sandwich positioning more than other manufacturers? Because China and the U.S. are by far the biggest single market for Porsche. Then the third effect is that the ramp-up of electromobility is not as strong as expected. On the one hand side, Porsche is very successful with electric cars. As I mentioned before, in Europe, the volume share of Porsche is already 60% of electrified cars, BEVs and plug-in hybrids, and 36% BEVs only. And Porsche there is in the top line of the traditional car manufacturers in terms of electrification. But all these effects together puts the business model of Porsche under pressure. We reacted already with the first package in the first half of this year to improve the structural cost of Porsche, continued by a second package we will negotiate now in the second half of this year. And on the other side, to being more flexible in terms of product strategy, we kicked off a huge investment program for more flexibility in the program to having in between combustion engines and hybrids and electric cars, so kind of hedging, having more offers in each segment. And all of this is being done in this year. So we are expecting that we are touching the bottom with a very positive perspective for the future because Porsche is counting on a great product lineup and on the other side, a great company structure. And so we have to adapt it in these framework conditions. And the second question was about China. In China, we are still market leader in combustion engine cars. We are one of only few companies in China still earning money. And what we have done around 2 to 3 years ago to switch our strategy completely with a clear product assessment. And we changed our product strategy. We changed our philosophy, doing more business in China for China. We ramped up, in the meantime, a new engineering center in Hefei with over 3,000 colleagues working there. We implemented also with partnerships a new electric-electronic platform, which will come at the end of the year and a completely new lineup. We were able to reduce our costs of over 30%. We speeded up our engineering process of 30%. And now we will enter up to the end of '27 with 30 new models to the market and up to the end of 2030, with over 50 new models to the market together with our joint venture partners. And the first feedback we are getting, we presented the first glimpse of our cars at the Shanghai Auto Show was very positive. And so we think that's promising because we are on the level on the competition in terms of technology, what our Chinese customers are expecting. We are in line with our cost positioning. So pricing plays an important role in the market. And we have a big advantage because we have 50 million customers in China. We have very strong dealer partners, and we have a service network. And a lot of the new Chinese brands don't have this all-in-one solution. We are offering good products, great customer base, strong partner network and service network and high quality what our customers are used to from our brands. And so we think we need 1 or 2 years, and then we will have also a great comeback in terms of volume also in the electric segment.
Sebastian Rudolph: [Foreign Language].
Operator: Ladies and gentlemen, the conference has now concluded and you may disconnect. Thank you for joining and have a pleasant day. Goodbye.