VOLKSWAGEN AKTIENGESELLSCHAFT (VOW3) Q1 2026 Earnings Call Transcript

good morning everyone and a warm welcome to our first quarter 2026 results call of volkswagen group thanks for dialing in this is as usual a joint call for both the media as well as investors and analysts moderated by rolf volle our head of treasury and investor relations and myself pietro solino head of corporate communications with us today are oliver blume our ceo of the Volkswagen Group, and Arno Antlitz, the CFO and COO of Volkswagen Group. You should have received the press release, the interim financial report, and all other related materials which were published already this morning. If you do not have them, you can find all documents on our group website. In case of any issue, give us a call or drop us an email. Now let me hand over to Rolf, who will give you a brief run-through of the next, let's say, one and a half hours. Thank you.

Thank you, Pietro. Good morning to everyone from a very sunny day in Wolfsburg. Thank you for joining us today. Let's have a look at our agenda. Olli will start with the financial highlights of the first quarter and will then present our transformation plan towards the Volkswagen Group target picture 2030. Arno will go on with the key developments of the first quarter, and after that, we will take a closer look at the financial results and the full year outlook 2026. Following the presentation, we will first host the Q&A session with Olli and Arno for the investor and analyst community, moderated by myself. And after the session, we will have a short break before we continue with the media Q&A, which will then be hosted by Pietro. Since today's call includes forward-looking statements, the safe-haver language and other cautionary statements on the slide will govern today's presentation. I encourage you to read the disclaimer carefully as all forward-looking statements are qualified by this language. In the interest of time, I will not read it to you. And with that, I hand it over to Olli. Olli, please go ahead.

Thank you, Rolf. Thank you, Pietro. Good morning, ladies and gentlemen. Also a warm welcome. Let me start with a highlight year-to-date. Our model momentum in Europe continues. Importantly, the first two of a series of new vehicles of the electric urban car family have been launched to the market. The Cupra Raval and yesterday the ID Polo and books are now open for customer orders. In China, we are switching to delivery mode with our In China for China strategy. the Beijing Auto Show marked an impressive start of our model offensive with locally developed NEVs geared to Chinese customers' taste and highly competitive in terms of technology and costs. In the U.S., Volkswagen Chattanooga assembly plant will shift to higher volume models such as the second generation of the Atlas, which will be in the showrooms from fall. While the electrical ID.4 still is available in the U.S., we decided to end local production on the ID.4 from April 2026. The Rivian Volkswagen Technology joint venture successfully completed winter testing of the first vehicles equipped with the newly developed software-defined vehicle architecture. Lastly, we continued the implementation of our active portfolio management. Trayton reduced the holding in Sinotrack, recording a cash inflow of 0.2 billion in the first quarter. A second step followed in April in the magnitude of 400 million. In addition, Porsche has closed an agreement to sell its stake in Bugatti Rimac Group. Closing of the transaction is contingent on regulatory approvals. Looking at the financial highlights. Deliveries to customers were down 4% in quarter one, mainly due to the declines in US and China. Nevertheless, we kept our global market share stable. Our order book situation in Europe remains very encouraging. It shows that our new vehicles are resonating well with customers. Revenues in the first quarter were down 2% in line with the unit sales decline excluding China joint venture volumes. Automotive net cash flow was strong at around 2 billion euros. This shows that the working capital measures implemented last year by Arno and the teams are delivering lasting results. Net liquidity was almost on par with year-end 2025, despite the redemption of 1.75 billion Euro hybrid bond in February. Group operating profit stood at €2.5 billion against the backdrop of increased geopolitical tension and declining vehicle markets, as well as again significant special effects. The achieved return on sales of 3.3% is a solid result. But we must also be clear, our current business model in the changed environment is not generating sufficient returns. Even before special effects, our margin is at 4.3% only, US tariffs are not included in the special effects. This is clearly too low to finance future investments, pay attractive dividends and strengthen our financial position at the same time. We must and will continue to reduce complexity focus investments on what wins customers and continue execution across a group while navigating industrial transformation geopolitical uncertainty and stagnant revenue prospects in our industry especially in europe the need for action was clearly recognized in 2023 a comprehensive realignment was therefore kicked off and communicated in June of that year in a capital market stay. Since then, a comprehensive action plan has been put into implementation across the key success factors, products, regions, software and cost programs. We have already made great progress. These achievements helped offset significant earnings headwinds and enabled us to regain the competitive flexibility and freedom to act that we need. At the same time, from 2025 onward, headwinds intensified further, driven by geopolitics, tariffs, and accelerated competition, particularly in China and Europe, against a backdrop of generally high uncertainty. This environment makes it clear that we need to step up our transformation plan. The progress we have made in recent years gives us momentum and the confidence to take the next steps now this is why the executive board agreed on a substantial step up and acceleration of our transformation plan the result is the volkswagen group target picture 2030 it focuses on distinct levers the most relevant are laid out on the chart reducing complexity in products technology and modular platforms while putting our customers at center stage aligning our production footprint to market realities exploiting gross priorities in the regions streamlining the portfolio and improving execution through operational excellence leadership and lean government. First, product portfolio. We must reduce complexity and consequently drive synergies across a group. We will achieve this by significantly cutting the number of models from current about 150 and reducing the number of variants. We will focus on these projects that make a tangible difference for our customers second technology roadmap we will streamline our technology technology club toolbox and implement a much more focused approach with a targeted number of modular platforms electric electronic architectures aida stacks and infotainment systems our tech Stacks, RBT, and SEER for the Western and Eastern Hemisphere serve as a blueprint. Third, production network. We must adapt our production network to market realities. Based on a low or no growth environment, this requires realigning our global technical capacity to approximately 9 million units per year. Consistently focus on customer demand in each region. This will lower our break-even point to a level that gives us the necessary flexibility in such a dynamic environment. Fourth, regional growth. We must foster regional growth opportunities. We steer centrally but drive the business in the regions with more independence and decision-making power. North America and the Global South offer significant growth opportunities for Volkswagen Group. Fifth, operational excellence. We already bundled cross-functional responsibilities for development, procurement, production, sales and quality at CEO level. This will allow us to increase the speed in decision making, exploit synergies across the group, improve efficiency and quality while keeping entrepreneurship at brand level. Sixth, portfolio management. Our ambition must be to significantly streamline our portfolio, consistently aligned with the principles of the best owner approach. Arno will provide an update of our progress year to date. Seventh, leadership and culture. we will foster an even stronger performance culture the changes we have implemented since the capital markets day in june 2023 demonstrate fewer hierarchy levels and effective lean management structures with clear responsibility and targeted integrated incentive system are to key drive to change we will build on this and aids group governance clear decision-making structures streamlined processes and greater accountability at all levels will make our company more effective and help us remain competitive in the long term today marks the start of our journey to bring the Volkswagen Group target picture, 2032 reality. The good news is, thanks to all efforts implemented already since 2023, we have a very solid basis to start from. We have all the talent we need. We get strong support from our stakeholders. We have it in our own hands, and the team has the skills, will and the spirit to excel. The strong progress achieved with our performance programs to date makes us confident that we can now take into the next level. We will drive this step in transformation decisively and will deliver on our margin and cash ambitions in 2030 by implementing our transformation plan. And as you have seen, it's from us since June 2023, we will take you on that journey through clear priorities, measurable milestones and regular updates on our progress. With that, I would like to hand over to Arno.

Thank you, Oliver. And welcome also from my side. in 2026 geopolitical tensions have risen and the competitive environment intensified even further against this backdrop we made further progress order intake in europe and the order book improved our cars are resonating well with our customers implementation of our china for china strategy continues with full speed we reduced group wide overhead costs by almost 1 billion in a quarter and we achieved a net cash flow of 2 billion euro, which is quite substantial for our first quarter, taking into account that we had to refill the product pipelines. Despite this progress, the operating margin, even before special effects, stands at 4.3% only, reflecting the current challenges of the industry and the weak spots of our current business model. Ladies and gentlemen, we bring attractive new vehicles to our customers, making technological progress and consistently delivering on our cost programs. Nevertheless, our financial figures make clear that these efforts are not yet sufficient to generate an adequate return and ensure a robust path into the future. Since we launched Volkswagen Zukunft's program one and a half years ago, the operating environment has deteriorated significantly. U.S. tariffs have been introduced and are weighing on our earnings by $4 billion annually. Pricing and competitive pressure in China has identified further, particularly for our premium brands Audi and Porsche, and Chinese competitors are increasingly exporting this pressure to Europe. In addition, geopolitical tensions such as the conflict in the Middle East are worsening the global economic outlook. Against this backdrop, incremental cost measures will not be enough. We must fundamentally reshape our business model through structural and lasting improvements. This includes a step-up in cost competitiveness of our product, reduced overhead costs, improved efficiency in our plants, and higher speed, both technologically wise and in terms of decision-making. Achieving this is not possible within our current setup. To create the conditions for long-term success, we must drastically reduce complexity in terms of size, our product portfolio, number of platforms and technology stacks we run, in terms of the number of entities and layers, and the way we steer the group. We need to put the customer at the center and structurally strengthen the core of our business. These are the priorities we will execute over the coming month. Let's now turn to the operational and financial developments of the quarter, starting with deliveries to customers. In the first three months of the year, deliveries to customers amounted to 2.05 million vehicles, some 4% below the prior year period. Deliveries differed by region. North America declined by 13%, mainly due to U.S. tariffs, which became effective in April 2025. In China, deliveries to customers declined by 15%, slightly less than the overall weak market. Declines in both China and North America could be partially offset by increases in South America and Europe. South America recorded growth of 7%, and in Europe, our strong momentum continued in the first quarter with deliveries up 5% year-on-year. The order situation in Europe continues to be strong, thanks to the enhanced model line-up and further product momentum. In the first three months of the year, order intake increased by 3% to 1.1 million vehicles, driven by increases across all brands. And as a result, the total order book in Europe grew by 15% compared to year-end 2025 to about 1.1 million vehicles. This corresponds to an order reach of more than three months. Global deliveries of battery electric vehicles were down 8% year-to-date to 200,000 units on lower demand in China and the U.S. Our BV shares stood at 10%, some 40 basis points below the prior year level. BV deliveries in Europe saw robust demand and increased by 12%. The corresponding BV share expanded year-on-year to 18.1%. Skoda LROC continued to ramp up extremely successfully with around 30,000 vehicles delivered in the first quarter, underlining strong customer demand in the fast-growing compact battery electric vehicle segment. With that, let's move on to the financial and the operating performance of the Volkswagen Group in the first quarter. Vehicle sales came in at 2 million euros, down 7% year-on-year, or by 2%, excluding the China JVs. Group sales revenue declined by 2% to 75.7 billion euros. The lower vehicle sales were partially compensated by strong growth in the financial services business. Operating result came in 14% lower year-on-year, at 2.5 billion euros, corresponding to a margin of 3.3%. Our continued product offensive across all brands as well as significant cost where continue to pay off in our earnings. The result declines mainly due to special effects amounting to 800 million or about 100 basis points margin specifically at Brand Volkswagen and at Tratton. 0.5 billion euro have been booked related to the announced end of the production of the ID4 in Chattanooga. around €0.3 billion were incurred by restructuring measures at Drayton as well as to a smaller extent Brand Group Core. In addition, Drayton booked an impairment related to the stop of an individual battery project. Including the effects, the Q1 operating margin would have amounted to 4.3% corresponding to the lower half of our full-year outlook range. Cash flow in the automotive division came in rather strong and totaled €2 billion in Q1 2026 compared to minus €800 million in the prior year quarter. Gross cash flow improved by €2.2 billion year-on-year mainly due to the operating performance before special items and about €1.1 billion lower tax payments in the quarter. Investments in CapEx and R&D were largely unchanged, and in the absence of further M&A, we recorded a cash inflow of 0.2 billion euro related to the sale of a stake in sign-out truck by Trayton. Working capital movements at minus 0.9 billion euro were a slight headwind in the first quarter, but on a similar level as in Q1 last year. This development clearly confirms the sustainability of working capital measures implemented in particularly in the second half of last year. Automotive net liquidity came in at 34.2 billion euro at the end of March, almost on par with the year-end 2025 number and on a solid level. Net cash flow of 2 billion more than compensated for the net liquidity outflow from the redemption of a hybrid bond with a nominal value of 1.75 billion euro moving on to the performance of the division passenger cars recorded an operating result of 0.3 billion in the first three months of 2026 43 percent above prior year period the margin amounted to 4.1 percent up by one per c 1.3 percentage points commercial vehicles saw a decline to 40 million corresponding to an operating margin of only 0.4 percent to a vast majority driven by special effects. The financial services division came in almost on par with last year's level with an operating result of 1 billion euro. Coming to the Abbott Bridge, volume price mix had a slightly negative impact of 0.2 billion, positive pricing partially compensated for negative mix effects, change rate movement posed a tailwind of 0.4 billion, broader costs were largely flat year-on-year, and last but not least fixed costs and others had a positive effect of 0.8 billion, with overhead cost reduction being the biggest contributor. This is also visible when taking a more detailed look at the overhead cost development. In the first three months of the year, overhead costs in the automotive division have been reduced by 0.9 billion euro. According, the overhead cost ratio improved by 70 basis points, which is quite significant. This overhead cost reduction was largely driven by the consequent implementation of restructuring measures. In the first three months of 2026, Volkswagen AG reduced the number of active employees both in the indirect and direct area at its German sites by another around 1,000. Overall, since the end of 2023, headcount was reduced by approximately 15,000. In addition, Audi Porsche and Carriot are pushing ahead with their respective programs. As a result, headcount in Germany on group level have been reduced by a total of 3,000 in the first three months or 18,000 in a bit more than two years' time. And group-wide restructuring resulted in a reduction of 29,000 headcount since 2023. Let's now turn to the development of the Brand Group's Platforms and the Financial Services Within the passenger car segment, Brand Group Core recorded sales revenue almost on par with last year's Q1. Operating result came in at 1.5 billion euro, 38% higher than in the prior year period, despite the significant effect related to the end of the ID.4 production in the U.S. of 0.5 billion euro. The margin stands at 4.4%, and I will provide some more detail on Brand Group Core in a minute. Brand Group Progressive saw sales decline by 6%, while sales revenue were flat. Ebit increased by 10% to €0.6 billion compared to a prior year quarter that has been impacted by costs related to U.S. emissions regulation and restructuring charges. Porsche automotive business delivered an operating result of 0.5 billion corresponding to a margin of 7%. This was driven by a significant improvement in mix from higher volumes of 9.11 offsetting volume headwinds in China and the US. Let's have a look at the brands of the brand group core. The operative result was largely driven by Skoda and the component business. Volkswagen Volkswagen passenger cars recorded a decline in profitability by 20 basis points to 0.4%, mainly due to the cost related to the ID.4 production stop in the U.S., as well as significant headwinds from U.S. tariffs. Skoda continued their impressive earnings trajectory and improved operating margin by 80 basis points to a remarkable value of 8.3%. Excluding the non-operational effect, the financial performance of Volkswagen Brand and Brand Group Core are decent. Before effects of €0.5 billion from the ID.4 production stop at Chattanooga, Volkswagen reported a margin of 3.3%. This is slightly below the margin target of 4% that the brand has set itself for the full year 2026. And a reminder that we must continue to rigorously implement the measures agreed under Volkswagen Zukunfts agreement and intensify speed and magnitude of the restructuring programs. Backed by increasing volumes, Carid recorded sales revenue of 0.4 billion, up 64% year-on-year. Operating loss was reduced to minus 0.4 billion euro, benefiting from the implementation of restructuring measures and higher volumes. PowerCore kept operating results at a stable level despite the ongoing ramp-up of sale production at the Salzgitter plant and intensifying construction works at the Valencia and St. Thomas plant. Drayton recorded a slow start to the year driven by lower unit sales. In particular, in South America and North America, sales in Europe were up and order trends in the region remained promising. Mainly as a result of lower volumes, sales revenue declined by 5% to 9.8 billion euro. Operating result came in at 40 million euro, significantly below the prior year quarter. Lower volumes, U.S. tariff costs, foreign currency effects, and special effects mainly related to the adjustment to the electric mobility projects, the sale of Springfield side, and the EU truck case negatively impacted results. Our financial services business delivered a solid performance in the period under review supported by improved contract volume, specifically in Europe. The credit loss ratio continues to be on a solid level. Operating result at 1 billion euro was almost on par with the prior year level. Investment spent for CapEx and R&D in the automotive division was slightly lower in the quarter by 0.2 billion euro to 7.5 billion in the first three months of the year. The invest ratio stood at 11.3%, largely unchanged year over year. We remain fully committed to sustainably reducing investment spend in the years to come. Moving on to the performance of our China joint ventures. In an overall weak market and continued high competitive pressure, specifically in premium unit sales, were 90% lower year on year at 0.5 million vehicles. At the same time, Volkswagen Group China is launching its unprecedented model offensive, which is burdening results now, and we expect contributions from Q3 onwards. As a result, and as expected, the proportionate operating result of our joint ventures in China came in at 83 million euro in the first quarter of 2026. We confirm the bandwidth for proportionate operative result for the full year and continue to expect an operational and financial turnaround in fiscal year 2027. This brings me to the full year outlook, which we confirmed today. Continue to expect the operating return on sales in a bandwidth between 4% and 5.5%, building on a strong start to the year. We continue to expect automotive net cash flow to the range between 3 and 6 billion euro. Ladies and gentlemen, six strategic fields will determine the success of our strategy. The ramp-up of electric vehicles, software, China and North America, robust operating margins in a low-growth environment, capital efficiency and cash conversion and the lean governance and reduce complexity for most of these action fields we have developed comprehensive plans that now must be implemented consistently and with strict discipline at the same time the economic environment has changed significantly since the launch of the volkswagen zukunft program which has this was designed to achieve a sustainable margin for volkswagen brand the world has changed dramatically in In this environment, it's not enough to just incrementally increase cost measures. We need to fundamentally change our business model with a step up of structural and lasting improvement in terms of cost competitiveness of our product, in terms of overhead cost reduction and efficiency improvements in our plant and in terms of speed. To be able to achieve this, we must significantly reduce complexity of our business model. These are the priorities we will address with determination over the coming months.

Thank you very much. and with that i hand back to rolf thank you ollie thank you arno for the concise presentation and before we move to the q and a let me give you some instructions you should be dialed in into the conference call in order to raise a question will not work if you dialed in via webcast if you want to raise a question you must press star one and after that another one and to withdraw the question, you do the same procedure. Let me briefly highlight the next events where you can follow us. We will continue on June 10th with our ESG conference. There will be the annual shareholders meeting on June 18th and then the H1 call on July 24th. And with that, I would like to move on to the Q&A session. And see here, the first question coming from Tim Rokassa from Deutsche Bank. Tim, please go ahead with your question.

Target program. Very interesting to see that. Much needed with the Chinese OEM coming to Europe, Tariff CTC. And it's also good to learn about here first and not the media. Now, obviously, we want to know what all of this will cost you. We want to know what it brings you. And I suspect you're not yet ready to say that. So let me ask you a different way. Do you expect a material net EBIT improvement from this program, from the levels that you are at right now, or is it just nearly enough to counter the headwinds that we're seeing in the market? And given it says, again, a reduced number of variants, and I've heard this many, many times over the 18 years I cover you guys now from VW, can you give examples for how much you see on that side being possible? And on the capacity side, is it fair to assume that most of this comes out of Europe? And secondly, Arno, for you, just thinking about seasonality of cash and earnings here, free cash flow is obviously quite strong. It's helped by taxes, but also the underlying number is quite strong. So two questions. Should we expect normal seasonality in Q2 from what you can tell right now, i.e. that it should be stronger underlying on earnings and also cash in Q1?

And since you didn't upgrade your free cash flow target now, is that just a sign of what's going on in the world with all the uncertainty? you or is there any cash outs that you already foresee today that prevent you actually printing possibly a higher than previously guided for figure thank you yeah Tim good good morning and let me start with you always your first question in terms of improvement in terms of a bit as Anna mentioned we keep our expectation year to year on a profit margin between four and five point five percent and with this we expect a net a bit improvement and all this despite of all the headwinds we are we are faced geopolitically the regulations the the market and the expenditures and transformation and this we are able because of all the work we have done during the last years and so year to year we expect a better event. Then in terms of models, variants and then capacities. With the program we have launched we want to reduce our models and variants with a double digit percentage and also the options there the idea is more to to bundle offers and so making it easier at the end also for our customers and more more transparent to order a car in terms of capacities we come from an invested production footprint from over 12 million units we already reduced 1 million in in China in several plants and also linked to component plants. Then one million in Europe. There, for example, we closed Brussels, Russia, Dresden now turning to a technology and innovation campus. Then Osmar Brück is on the way and Volkswagen and Audi We adapted technological capacity, so one plus one. So we are on 10 million, and we think that 9 million will be reasonable. The percentage of the last five years has been on this level. So last week we announced another 500,000 in China, and we are aiming now for reducing capacity in Germany, Europe, with another 500,000 to come to 9 million. and we will bring down our cost level to to this nine nine million and aiming for more profitability yeah Tim think thanks for your question and I would like to add on on what Oliver just said no all these measures he mentioned look we Oliver laid out or we laid out our our strategic margin target of eight to

ten percent some some months ago and obviously this transformation program we just lay out is the way in steps to achieve this margin target at the end of this decade. And we now fill the gaps from where we currently trade, which our current margin target is what the headwinds are and still be able to come up to the 8 to 10 percent. And in terms of cash flow, So, yeah, we are quite pleased with the strong cash flow in Q1, giving the seasonality of our business, normally in Q1, and we fill up the order bank. But to be very transparent, it's about a billion coming from the operative business before special effects, a billion, slightly less, coming from tax payment versus last year. And last but not least, we were very disciplined on M&A, which is another billion. And so we have to take into account that there's a slight visionality. As you know, we were successful in the winter test where we make good progress in our JV with Rivian. But as you also know, subsequent to the successful winter test, we will invest in another billion, about a billion in Rivian, which will see an outflow in the second quarter. All in all, we are really confident, and we said that last year on the conference call for last year, that the working capital measures are really well in place. The whole company is focused on cash flow. You know, we were like for years and years, we focused on EBIT. Now we really see a cultural change in the company. People are fighting for cash flow and net liquidity for better working capital. So this is really now implemented in everybody's minds and gives us a confidence that we will achieve the $3 to $6 billion this year. Obviously, it's much too early to change the guidance, but the building blocks are clear. Stringing cost work, I would like to remember your overhead cost reduction of almost a billion in one quarter, which is significant, much more disciplined M&A and disciplined R&D and CapEx combined should by far compensate for potential headwinds we see from the market. Thank you very much.

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

Thank you, Rolf. Good morning, everybody. I would just like to follow up, Oli, please, regarding your comments about the cost and capacity alignment. I think the point Tim brought up was also about whether you can get ahead of the wave, so to say, or you remain reactive to safeguard margins rather than driving a margin recovery. So can I ask a bit more precisely what kind of timeline we have to expect here for the exercise to cut the capacity by another million? I guess the focus here is on that half million that's yet to come in Europe. Are we talking about the next one to two years so that we will already see a significant positive bottom line impact in 2027, 2028? Or is it really back and loaded towards the end of the decade? And my second question, Arno, goes to you. I'd just like to get a quick update on the sensitivities to the Middle East situation. We're now two months into that crisis and so far it seems the demand impact is very limited. it. Can you just remind us for the coming quarters what your biggest potential pain points would be? Is it just the softening of global SAR? Is it maybe an acceleration of the commodity inflation in the second half, as we've heard from some of your competitors, just to get a better feel about the risks related to the Middle East situation? Thank you.

Patrick, in terms of cost reduction, as you know, the implemented programs we are running are providing already results. For example, the overhead reduction Arno mentioned. On the other side, what we will strengthen right now is we call it operational excellence. is even more cost work in terms of engineering, purchasing, production, sales, and then quality, for example. This is a program which has already started. It will provide results already this year and even more in the period up to 2030. the other part adapting capacities in China the 1.5 are already done in Germany we announced the 1 million in which is which is on a good way we will complete up to 2028 for for example the the adaption we have done already in Audi in Neckarsulm and in Ingolstadt and the adaptions we are we are doing it at Volkswagen and a further 500 000 will be in the program by 2030. Now that depends a bit what we do have the production lines right right now what opportunities we have to switch but most importantly is the reduction of our plant costs you know that's the main target and last year we will be able to reduce our plant cost of over 20 percent and that's that's ongoing and and even more and there's no argument not being able working on the same cost level like competitors in in europe and there especially our plants in eastern and western europe are are helping yeah patrick i would like to give you some some flavor perhaps a little bit more on the on the

details on fuel and on other costs um we expect 20 to 30 million a month uh for for transportation um we have planned about 50 to 100 000 cars in the region which which is less than than one percent of our volume but which now try to find alternative ways um to to deliver the cars to the customer specifically for the premium brands i think porsche found good good ways there um on the raw material side we we we are hedged most of it of course you you never hedge 100 but we we have some good hedgings um so and and and also on the on the auto intake we i just said i just said that the auto intake is also slightly increased so what we cannot rule out second round effects both in terms of global demand and on material cost of course this is a risk um and and we cannot rule out that but but this is another motivation to to increase our our efforts on the cost side to on the cash flow side to compensate for that so this is where we stand currently thank you both thank you patrick and we will continue now with mike tindall from HSBC Mike please go ahead hello not sure if you can hear me still showing muted

we can you can hear me excellent Mike from HSBC just a couple of questions if I can I'm trying to get my head around the 9 million of capacity which is broadly where we are in current sales but we've got growth in North America and the global south, and if I'm not wrong, growth in China, is there an implication here that potentially Europe gets smaller from a volumes perspective, or am I just trying to jiggle the numbers around too much? And then the other question is, your components business did a 9% margin in Q1. I mean, compared to other suppliers, that's a very rich margin. And I know that one part feeds into the other, but where are you in terms of benchmarking what you're paying the components business versus third parties? Is there scope there to actually squeeze more costs out of that? Curious to know why that margin is so high when brand group core is potentially lower than it should really be. Thanks.

Mike, let me start with your first question and then I hand over to Tano with a component question. To make it very clear, the 9 million capacity is what we have seen on average during the last five years. Our product planning is ambitious and also our sales planning is ambitious. But what we are doing here is, on the one hand side, to adapt our cost structure for 9 million cars in terms of a risk scenario. What could happen if? And on the other side, we are working on a more ambitious sales planning. And this leads us to bring down our break-even situation and making our financial situation more robust. Well, that's behind this planning. And when at the end, all the new products, and we are very confident because of the feedback we are getting right now for all the new products coming to the market right now, it would be better. There will be a positive effect in terms of our margin situation and EBIT at the end.

Yeah, Mike, and a second question. First and foremost, the component business, the majority of the component business is also part of the Volkswagen AG. Just to remind you, in the Volkswagen AG, we have the component business in Kassel, which is doing gearboxes, Salzgitter engine plants and Braunschweig steering and extra components. And so all the cost efforts we see so far, for example, I said since 2023, 15,000 reductions in the Volkswagen AG is always also happening in the component business because they have three big plans there. Also, the improvement in overhead costs. So, and what you can see now here is we haven't basically changed the pricing logic between the brand group and the brands and the components business, and we kept basically the logic of the prices stable. and what you see now is basically we measure the improvement of the Volkswagen turnaround of the Volkswagen Zukunft project that is working in the component business. Nevertheless, we need more contributions also from our component business. The competition is coming to Europe and our component business, for example, It's also producing electric engines, producing batteries for the material, and we need also to significantly step up the improvements there in order to be competitive for our cars versus competition.

Okay. That sounds great. Thank you.

Thank you, Mike. And we will continue with Tom Narayan from RBC. Tom, please go ahead.

Hi. Thanks, Tom Narayan, RBC. The first one, Arno, on the 26 guidance, I noticed there wasn't any booking for the benefit on the IEPA, the Supreme Court ruling in the U.S. Other competitors have booked pretty large benefits there in Q1. So I was just curious why you guys didn't book that. And then, I know you have a lot of hedging, but the other OEMs are noticing pretty big H2 headwinds. Is it that you're not expecting those H2 headwinds? That's the first question, the guidance. And then, Holly, on the Chinese partnerships, is there any potential for the U.S.? I know it's a politically maybe sensitive topic, but what do you see out of that as a possibility of Chinese relationships in the U.S.?

Tom, I start with the second question in terms of, I assume you're referring to the EBITDA bridge, right? That it's basically positive. Yeah, that's a little bit counterintuitive. It shows that we have some very good hedging there in place. But if you, I would say, and it's also versus last year. it was the EBIT bridges the effect was last year and last year I think it was negative first quarter by minus 300 something also minus 400 so it's basically a reversal of some of the effects but we don't expect that the positive effect throughout the year to stay here I mean we have to face realities major currencies are weak we have a lot of exports in dollar regions and others since we are hedged We don't expect a significant headwind in that topic in terms of Abbott Bridge, but for the operative business, it's obviously a headwind. And as you know, hedges don't last forever, and the next hedges will be more expensive. So yes, it's a headwind. It's, I would say, a temporary effect positive, but it shouldn't turn significantly negative throughout the year. And in terms of EAPA, nothing is booked in Q1 results. It's too early to say to what extent we will book a benefit in the reminder of the year. We will come back to all of you with that topic potentially in Q2.

Coming to your second question in terms of Chinese partnerships. First of all, Volkswagen Group is there in a very positive situation as a global automotive player, having a strong footprint in China, but also in the Western world, where we can benefit from innovation speed and then processes. We decided to go for two ecosystems. One is China, also with our partnership there, for example, with Xiaoping and then Horizon Robotics. We can see already the first results with our first sonal architecture, the SEER. We presented at the end of last year, and the first cars are entering into the market right now. And this is a blueprint in terms of architecture also for our Rivian joint venture. In the Western world, we have a distance of around one, one and a half year, comparing with our Chinese activities. And this brings us in the situation to have a clear comparison in terms of speed and content, what we have achieved in China. But we are very happy about the progress I mentioned with our Rivian joint venture. Coming back to the two ecosystems, what we are doing in China right now will help us also for the whole southern hemisphere. We can localize our local platforms from China, the China main platform, bringing this to a global main platform, for example, for South America. And we have huge export opportunities now from China, being on the competitive technological level, but also cost competitive with the Chinese competitors. And this helps us to enter Southeast Asia, for example, Middle East, India, but at the end also Africa. And in the Western Hemisphere, this footprint from China helps us to speed up and build the right offer for the Western world, where we are restricted because of regulations to use Chinese software. And therefore, we have made a clear differentiation in between the two worlds. But now we have the flexibility and having the right product for the right region to fulfill the customer expectations, but also the right cost structure.

Thank you. Thank you. And we move on to the next question, which comes from Jose Azumendi from JP Morgan. Jose, please go ahead.

Thank you, Rolf. Morning, Oli and Arno. A couple of questions. Oli, can you speak a bit about your tech stack that you have in China? Thank you very much for the capital markets they recently did. I'd like to understand a bit better which parts of that tech stack and know-how that you're building in China you can actually bring back to Europe, or maybe which suppliers you think you're going to collaborate closer in Europe to improve the cost competitiveness and bring that tech stack into the European businesses. Clearly, the project launching in China are some of them clearly superior to what you're offering in Europe. Also interested, please, in hearing if you will be open to open up your production sites, your capacity in Europe to your partners SAIC or FAW and second question Arno can you talk a bit about the margin progression on your progressive brand do you think there's a chance to see sequential margin improvement in Q2 versus Q1 in the light of the improved earnings in the first quarter thank you Jose on the one hand side we can benefit from the innovation speed and from from China which we can transfer also the process

knowledge but especially the cost work we have done what we presented last week was a cost reduction of 40 to 50 percent depending on the platform and all these measures and that's a great opportunity we can implement right now on our western and platforms which is already has already been kicked off and on the other side all activities we are doing there also with our component business Arnold talked before and and suppliers in terms of hardware we can benefit in terms of sourcing because knowing I'm the right partners there and the best solutions that's an opportunity and software we will be more restrictive because I'm developing my own software for the Western world, but innovations and speed and processes helps a lot. Overall, and having been in China last week, the media feedback was great. We got the by far biggest media feedback and reach of all companies, including the Chinese companies they're in China and that has shown the great response and how well our products are received in the market in terms of capacities we always look for intelligent solutions as you have seen in terms of Tristan or we are now in good negotiations for Osnabrigg for example with defense companies that's one approach and the other approach we also will check if there are opportunities for our Chinese cars in in Europe or for opening this for partnering maybe with our partners we do have in China we haven't taken a decision but the solution field is flexible and this is always a clever solution to reduce capacities in terms of changing this to a different owner like defense company or sharing capacities with other business opportunities and the second option at

the end and that's the worst one the most costly one is to close a plant but we will go on this topic very very openly yeah Jose in terms of margin we we expect and and we need a step up in marginal our guidance is four to five and a half percent we currently reported at 3.3 and and we want to achieve a reported margin within within that guideline and we have also some promising results look at brand volkswagen no yes they are more closer to zero currently but if you take into account the the the write-off for for the id4 in in in us they they are 3.5 percent currently running um and we have a typical seasonality in our business that q3 and sorry q2 and specifically q4 are normally stronger than the first quarter and it's also a good chance for Audi. Audi have a refreshed portfolio. They are currently trading at 4.2. They expect 6 to 8 with a lot of product momentum coming, specifically S and RS models, which are really doing very well in auto intake. And last but not least, we really drive forward the restructuring methods throughout the whole group. You saw the the fixed cost improvement first quarter billion and obviously we want to continue that the chips should us give also um a more tailwind after a little bit cautious now we will ramp up the bvs in the second half of the year which are margin dilutive and yes there might be some economic um headwinds uh from from the conflict in the middle east but all in all taking this into account, we still are fully underway to achieve our guidance of 4% to 5.5% and confirm the guidance. Super, thank you. Super, thank you.

Thank you, Jose. And we will continue with Horst Schneider from Bank of America. Horst, please go ahead.

Yes, thank you. And good morning, team. Good morning, Oli. Good morning, Arno. The first question that I have that relates to the impact on consumer demand coming from the high oil price, since you are one of the largest car makers of the world, clearly the market share monster in Europe, I think you can maybe best answer this question. And it's not just about Q1 average, it's more about the latest trends that you have seen since the oil price spiked. So what shift do you see in terms of demand shift from ice to bath, down trading in segments, differences in premium versus mass, and also between diesel and gasoline? So that's question block number one. The number two is a little bit following up to that, but also Jose has asked on if you are prepared to share plants with Chinese OEMs. This seems to become kind of industry trends. So we heard that also Stellantis wants to do that. So it seems that several car makers are thinking about that. And I just want to get then your view on the European outlook more in general. Isn't that a bad sign for Europe? because in the way the industry is opening up the market to the chinese competition opening up to evolve in cheap clothing potentially so is the outlook from here that europe can just get worse the competition is is heating up and that the incumbents lose more market share thank you Yeah, I start with, just like two days ago, a discussion, Rolf, what is your department called?

The economics. Economic team, and they showed us all the risks, and they did some really great scenarios on how long the conflict lasts, what has been for full prices in different scenarios. And, yes, there might be a headwind coming up in terms of overall market demand. But you ask. And then Steniput and others, they will include that in their total market guidance. But what we currently see within us, we don't see these effects right now. We have a strong order book. Yes, the march was a little bit weaker, but still strong. And what we specifically saw, January, February, we saw a little bit more pressure on the residual values of the BVs, and that turned in March, which is really positive. And in total, we see more, I would say, demand for BVs or interest in BVs, let me put it that way, although ice and BV order intake both increased. Yeah, this is where we currently stand. Of course, we cannot rule out that there are headwinds. We prepare for them on the cost side. We are cautious on capacity, what Oliver said. And we don't want to end up with being like on the inventory side above ideal stock. We carefully monitor that.

But we don't see a major effect so far in Europe. um anu just quick follow-up when you talk about uh rising bath demand i wonder if that is in the end then positive or negative for volkswagen you potentially save uh rebates that you don't have to provide anymore but you also lose profitable ice cars so is what's the net equation is that positive or negative if best demand is increasing that is a great question um currently we are we are on the balance.

That means we have a margin dilution on the BV side, but we still expect full year to book $400 million to $500 million on burden because we don't achieve our CO2 targets. So more demand means more margin dilution. On the other hand, less burden on the CO2 regulation, but net-net, if we were to significantly increase our BEF share, that would be a margin dilution going forward, which is what we always said. Structurally, we must distinguish between three, I would say, technology platforms. One is the MAB platform, for example, in our volume brand, we run currently ID3, ID4, and now with the arrival of the id2 family comes an mmb plus which which has an lfp battery um cell to pack um next generation for electric trains so there the margin delusion effect um is is still there um but but it's smaller now the id2 cross is much closer to the T-Rock and so we have to take into account but until we implement our

next generation SSP platform the margin dilution effect will continue smaller than today but it will continue okay thank you Horst good morning let me come to your second question situation in Europe we expect tougher competition in the next years especially from from the Chinese carne manufacturers but we see ourselves well prepared first of all we have a great product momentum order intake is increasing both on ice and and baths we by far market leader for both and the new products we kicked off three years ago are now entering into the market the polo and there are others one example but um others also in the best segment um and anana mentioned also the product momentum at audi with a um s and rs models um so um First, we are counting on our own strengths while keeping with our cost initiatives to have at the end more profit with our products. Second approach is what we will check is what own China products could fit for the European markets, especially in segments where we are not present right now. But that depends at the end on tariffs, on logistic costs and so on, if we see opportunities there. Because we are now in a positive situation having our own Chinese products, which are very attractive to the customers. And third approach is at the end for capacities, to check if we could share capacities with Chinese partners. But, I'm saying this very clear, our first approach is what we are doing right now in Osnabrück, is being in contact with the defense industry that is also very intelligent to solve overcapacities with this manner. On the other side, to protect or bringing more or equal competitiveness in Europe, we have a clear position in terms of made in europe companies who make business here in europe should have an european footprint and therefore we are in contact also with the european commission the made in europe initiative making making progress and so i think this will bring the market situation and the competition in Europe to a more fair trade situation. And that's also important because we are facing other regions of the world, these restrictions, and this is more a European interest policy. It's not protection, but I think we need it. So the companies who are investing in Europe can benefit.

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

Thank you, Kost. And we continue with Michael Ponset from the Z-Bank. Michael, please go ahead.

Yes, Michael Ponset, good morning. I have one question regarding a report of the Handels Platform last week, mentioning that you have to increase your net liquidity.

So far, you gave us a target of roughly 10% of revenues. can you give us any indication for the new target and maybe also the topics which you need to increase net liquidity and if this has any impact on upcoming dividend payments yeah michael look i'll give you a little bit of color overall we want to make sure that in the transformation we have a really strong balance sheet and and rating is really important for us And so this is not the only reason, but another reason why we have focused on improving our result, on improving our net cash flow. So net liquidity, we said always at least 10% of revenue. But if you look into the industry, others have an even stronger balance sheet. And going forward, it is clear that we want to improve our operative result and the cash conversion rate with more discipline and being more disciplined on R&D, and that's driving also our cash conversion rate. And so although it's too early to discuss it, but let's assume we achieve that, we are rather confident, very confident that we achieve that, then it's a question, what are potential ways to use that cash flow? And one net cash flow is obviously let's strengthen our net liquidity position and our balance sheet. Another possibility is or means is let our shareholder participate on a much stronger Volkswagen. And third, we have also hybrid bonds. We look into potentials there. And this is why we said 10% of revenue is the minimum we want to keep. and with a stronger Volkswagen going forward in an uncertain world we potentially also want to increase that ok thank you maybe a short follow up you mentioned the sale of Bugatti Rimac will this have also no impact on your industrial net cash and all this stuff or will you have different accounting compared with Porsche that will also strengthen our balance sheet because Porsche is fully consolidated in the group

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

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

Okay. Thank you, Michael. And we continue with Christian Frenes from Goldman Sachs. Christian, please go ahead.

Goldman Sachs. most of my questions have been answered just I'd have a question on pricing your pricing for passenger cars and light commercial vehicles was up in a quarter could we look into that a little bit more especially specifically within EU pricing given emerging Chinese OEMs localization efforts and you mentioned I think the minimum pricing discussions between the EU and China how do we how How do you expect, you know, pricing to evolve throughout the rest of the year in this year? And what impact do you think the minimum pricing discussions will have on that? And then secondly, just also sticking with pricing, looking at China, thanks for your Capital Markets Day event. And we just had the Beijing Motor Show where we saw a lot of the impressive product you have coming. and also your strategy and targets. But could you comment a little bit about your expectations for China pricing, again, for the remainder of the year this year?

Yeah, thanks for your question. Obviously, we cannot make public discussions on what prices we plan and what we expect, what we can say and what we prepare for. The competition is clearly increasing. You know, Chinese competitors are bringing their cars to Europe, and they're also basically exporting the competitive pressure to Europe. What we see in our EBITDA bridge, we saw a pretty strong movement based on our really good product substance and our portfolio. You saw pricing was even slightly positive in the first quarter with 0.2 billion. Of course, we have to take into account the negative mix basically from the ramp-up of the BVs. In total, we expect more pressure, but this is also why we compensate on the cost side in order to be prepared on the cost level. We have great products, we have good technology, and we have to have the commutative cost base, and this is what we work on.

Yeah, and maybe to China, we have seen during the last two years an average decline of 15% of pricing, and we don't expect that the pricing level will come back to where it has been years and years ago. So margin improvement will come only over tough cost work. And this process has already been kicked off. We have shown you a cost improvement of 40% to 50% depending on our platforms in China. And we will continue to do so. And the same what we are doing there is our task in Europe to being more competitive in terms of pricing while having the opportunity and improving margin and then maybe as a quick follow-up not much is being said about your supply chain or Middle East and that's in line with the rest of the industry I would add but if you when would you expect to have more clarity on 2027 regarding these issues thank you yeah today our supply chain is not affected and also in terms of raw materials for example we have hatching what would it mean for 27 is too early to predict that depends on the conflict and how we don't we don't know what what will happen but for 2026 you can be for sure that we won't be affected terms of cost thank you thank you Christian brings us to the next question which comes from Frank Biller from LBBW.

Frank, please go ahead.

Yes, hello, Frank Biller from LBBW. Thanks for taking my question. It's about possible divestments, thinking about Everlands stake or a floating of Trayton. Are you also thinking of divestment of maybe Ducati or Lamborghini IPO?

No, we were very transparent about our plans for Everlands, and we are pretty confident that this is a really very good process and it's progressing well. In Drayton, we always said we don't rule out the next step. We want to increase the flea float. We made the first step. Also, Drayton made some steps, for example, in terms of cyanodrug. But these are the topics we decided on so far. We look at various alternatives for PowerCore. We open our capital structure there. But, Frank, please have understanding for that. We can only talk about topics like this once we have decided on.

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

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

Thank you.

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

First of all that hasn't been an interview in Handelsblatt but talking about the figures that's the direction we want to go to yeah and we are very confident that we have turned to the right direction right now. The first results from having reduced our plant cost in Germany over 20% last last year that's that's massive now we haven't achieved this over the last 10 or 20 years this in one year 20% and that's that's not not the end today we can say that our plants in Eastern and in Western Europe are competitive to all the others are acting in Europe and therefore we decided for example to bundle our urban car family in Spain and the ID want to come in Portugal on a very competitive plant level in Germany we still have work ahead but also very clear measures to reduce. And so a plant cost level per car of around 3,000 euros is a feasible level comparing to the competition. In China, the level of plant cost is even lower. That's clear because of labor costs and energy and everything around. But this you can't compare with Europe. and for us it's important to compare our situation in the different regions of the world and there we can confirm in Europe already Western and Eastern on competitive level in Germany still work to do on China completely on a competitive level and while we have also strong footprint in South America we are working on a competitive level yeah and that's what what we have to do and um the 3000 uh which was written there is an average um like like a goal to go to i just we just got a question a follow-up question on my remark on

on the number of entities and and layers um and i must confirm we have we are we are 100 convinced that we are the best owner of lamborghini lamborghini is a is a integral part of brand group progressive they there's a lot of synergies between the three brands there and so that that's not not hopefully it didn't gonna cut it wrong so we clearly stick to the current setup in the brand crew progressive including Lamborghini right now thank you Arno for the clarification there is we have Henning Cosman from Barclays actually with difficulties with our

asking the question, so he wrote me an email and two questions. One is on, I think, Oli, can you update us on U.S. localization? Is there a chance that localization would take Scout into consideration? And if we would localize, would that be compensated within the $160 billion investment budget for 2026 to 2030, so in the current planning round? And the second question is for Arno. Update on Everlands. There are obviously shortlisted PE names, if you would like to comment on that. And capital allocation from proceeds of the potential sale of Everlands, if this is still true, that this is in line with our current dividend policy, and if the potential proceeds are included in the cash flow forecast.

Yeah, let me start with the first question in terms of U.S. localization. With the scout plant, we have great opportunities, making good progress. We are in line with our milestones, and the capacity also provides opportunities for other brands of Volkswagen Group. But we are not at the point today to communicate what are the concrete plans in terms of more capacities in the U.S. We are still in contact with different states, but at the end this depends in terms also support we are getting there. and there I stick to my position, we can't do both, paying high tariffs on the one hand side and on the other side heavily invest in new capacities. And so there are some states interested in our investment, but at the end the balance between support and investment is important. And so we plan step by step. First, now ramping up the scout capacities, maybe using them for other brands of Volkswagen Group, and then thinking to the next step. But our goal is clear to improve the local footprint in the U.S., having the U.S. as an opportunity market for the future.

And regarding Everlands, needless to say, this is a great company with a strong position in the market, convincing strategy, and in consequence, the interest is very strong. I obviously cannot comment on specific steps of the process. What we said, we want to sell the maturity, and the process is very well underway. The potential process are not included. in the in the cash flow um this is what we always always make very clear and and this also have understanding that we decide on the dividend um towards the end of the year taking all the factors into account um and this is then decided on by by the group board and and management the supervisory board and this is too early to to commit on on now um specificities on on on the dividend thank you arno and henning i hope this has answered all your questions and coming to the last um best for last um it would be harold from city harold please go ahead

let me bring you up on stage and now we should can you hear me okay yes yes now we perfect um Yeah, so a slightly difficult question again, and I don't like the short-term ones, but interesting conversation in relation to Horst's question earlier with regard to IAA. The market's largely ignored that, and by the way, just wanted to congratulate you on the incredible work you're doing in what is, I think, the most challenging cycle that I have seen in this industry, and as you know, I've been around probably as long as most of you. So, but with relation to policy and IAA specifically, first question, how do you see the IAA impacting on the potential fleet sales for Chinese OEMs? How restrictive do you think the IAA made in Europe policy might be? I suspect you're closer to that than we are, and I'd love to understand that better because I think there is some potential here. And then secondly, same question, but with relation to other policy, you're seeing some German government now looking to subsidize industrial electricity. You've seen the EU protecting the steel industry much more carefully. To what degree should we hope, you know, I always want to hope and I'm always disappointed, but to what degree should we hope that the EU or the European governments will actually start to try to finally, finally start to help this industry? So I hope you understand where my question is coming from.

Yeah, in terms of the made-in-Europe policy from the European Commission, It hadn't been already fixed completely, but it is a European interest politic, which we support. And this starts with a European production footprint, but then also to have different levels for components. And therefore, this has to be carefully balanced. and I also agree that at the end the different regions would be comparable what we see in other regions should happen in Europe and then you have a fair competition and this has to be worked out hardware components focusing also on battery cells battery systems but at the end also in electric electronics um what could be it could be included and uh we feel ourselves well prepared in europe as a european player and um we expect um their um fair fair or better better better conditions in terms of of trade comparing with the competition energy is a important point and there i think should be important to focus also on the most important industries and for example the battery industry right now in Germany for example is excluded from the energy regulations and that's for me a wrong decision they have to expand the energy regulations also for battery plants because the battery industry is a crucial one for Germany and Europe and this has to be supported it's battery manufacturing or production is high energy intensive and therefore I think they have to adapt the the regulations that's that's only only one one example and at the end energy counts counts for all also for the charging infrastructure that's what we've seen in other regions of the world where the energy is on a very low level so the customer is calculating and switching to battery electric vehicles and there we still have something to do especially in Germany okay thank you thank you thank you all actually for

a very lively discussion a lot to ask a lot to debate clearly you see that Volkswagen is moving ahead and this concludes the Q&A session for the investor and analyst call for today if anything was left unanswered yeah please contact the R team here in Wolfsburg they're really happy that you're keeping them employed and after a short break of about five minutes we will then continue with the media Q&A at about I would say 10 40 10 42 something like that thank you we will now begin the q a sessions for members of the media as a reminder to ask a question you will need to press

star one and one star 11 on your telephone that's different than we added in the in the previous calls and wait for your name to be announced please if you want to withdraw your question it's the same procedure please press star one and one and the first questions come question comes from Frank Johansen from DPA. Please, Frank. Okay, I think we have an issue here, so then maybe we will start with Christina Ammann. Christina, you want to start, please? Fortunately, we can't hear you. There seems to be technical issues.

Irgendwas stimmt nicht.

Hallo? Hallo, ja, jetzt kann ich Sie hören?

Yes, now it worked. That was something.

Perfect.

Okay. I got a few questions. The first thing, Mr. Blum, you talked about German or English?

I think English because we have maybe some English-speaking guests as well.

You have talked about chances talking to Chinese companies producing cars in European Volkswagen plants. Do you have any details what kind of companies you're talking about, what kind of plants you're talking about? is there anything going on already, or is that rather an option for the future? Would that be your existing partners like FAW, SAIC, or Xiaoping, or would that be completely different companies? The second question is, have you already asked for refunds on the AIPAA tariffs and others which are doomed illegal in the U.S. now? Do you expect anything? Do you expect a negative reaction from Trump? The third question is regarding the capacity numbers in Europe. You said $500,000 should go. Would that be mostly brand Volkswagen? Would that be other brands? What about Porsche? And do you have any figures on how many jobs would need to be cut already?

And on what oil price is your outlook based? and is there a risk of outlook if the oil price is staying where it is right now thank you yeah good morning then I will take the first and the third question and maybe Arno can answer the refunds and the oil pricing Chinese companies in in Europe we have clear priorities in adapting capacities and for example in Osnabrück we are in constructive talks with defense industry that's first first approach because there's a big need and I think this is good also great support from Volkswagen to our interest in Germany and for the NATO to support with our knowledge of automation and the qualification of our people first of all then we haven't kicked off any any thinking about Chinese products or partners to work in in Europe if we would do it in our activities of adapting capacities we would start with our own products from heavy province, Volkswagen product. Then a second step could be Volkswagen product from our joint venture partners. We are working together and that sets the priorities, but we haven't kicked off because at the end we need the free capacities. Today the plants in Germany have saturated with this product and at the end this is part of the transformation plane we would would have in terms globally and to say once once again the steps we have taken we come from a invested footprint of over 12 million units then we have already reduced 1 million in China 1 million in Europe the next 500,000 are agreed in in China so coming to a level of 9 million which I explained before the investors call we are working now to check where we do have the the opportunities that Germany and Europe overall we have the production cost per car to come to an average level of 3,000 which is competitive in in Europe now that it's our primary goal and then we are coming with flexible approaches to achieve to achieve this yeah and this 9 million level is not what we are expecting in the market our plans in the market are more ambitious terms of sales it's more to bring us in a better situation and

on the other side bringing down our break break-even level it's that the is the intention and then handing over to Arno yeah the remaining two questions very quick in terms of refunds of tariffs their audit tariffs are still in They are not changed, and there are some minor refund possibilities, for example, for parts, not vehicles, and obviously if we have the chance to get a refund, we have to fight for that, but it's more like a small double-digit million in magnitude. And this compares to the $4 billion to $5 billion headwind, just to give you an idea. And in terms of oil price outlook, I talked on that already in the investor call. Our direct headwind is about $20 million to $30 million for fuel per month. In terms of demand, we see still a strong demand in the first quarter, both for ICE and BV vehicles. We cannot rule out that the total demand overall will be weak. There might be some headwinds depending on how long the closure of the Strait of Hormuz will continue, so we prepare for a potential more headwind going on. But so far, we don't see an impact on order intake in Europe.

Okay, thanks both. Frank, we believe in second chances. Frank from DBA, you want to try again? Can we now?

Yes, perfect. Okay, actually, to follow up questions to the last question, the first one, if you want reduce 500,000 additionally in Europe? Does it mean preliminary in Germany or is it not still decided? And will that work without closure of plans in Germany or Europe, especially of course in Germany? And the second question facing Osnabrück, the NOZ newspaper today reported that you are in advanced talks with Raphael or Dynamit Noble, which is part of Raphael, about the production facilities in Osnabrith and the plant. And the newspaper says there's already a letter of intent which is signed. Can you confirm that? Can you tell any details what's planned there? Yes, thank you.

We have announced that we want to come to a feasible production footprint of 9 million cars. That's what we have sold per average during the last five years. Our ambition in terms of sales is higher, but we think to be on the safe side and improving our breakeven situation, that would be the feasible one. And talking about Osnabrück, as I mentioned already, our talks are advanced already. We do not comment the partners we are dealing with. Overall, I think we feel ourselves as an experienced company in terms of automation with very qualified people, also in the responsibility for the goals of the German government, for the country protection. And this, from our part, is also to provide, to stabilize democratization in Germany. Therefore, I think it's a win-win situation at the end to adapt plant capacities and, on the other side, support the goals of the German government and European governments in terms of NATO.

Okay, I hope this answers the question. Next line would be Lazar Bakovic from Handelsblatt. Lazar, please, the line is yours.

Thank you, Anna, and you mentioned your plant costs during the investor call and repeated it here. Your goal is to reach 3,000 euros in Europe. You are conducting reviews at your German plants. Can you tell us where you stand in the first quarter of 2026 and whether you met your cost target there at your key plans. That will be the first question. And the second would also be on Chinese vehicles and Chinese VW models, which could possibly build in Europe. I mean, technically, they are based on a different platform, on the CSP. So will this platform be localized for Europe? Can you comment on that?

Mr. Pakowicz, we have a clear goal that we want to achieve. We make progress in the German plant by 20%, which is significant last year. But we have still a long way to go to be cost competitive. And obviously, we have to pull all the levers. Productivity, and this is also why we discuss the topic of capacity. The Chinese are coming to Europe, building also factories, which are highly efficient, and we cannot compete with underutilized plants. So improving the utilization is a key lever to make our German plants competitive. And this is why we continue to work also on improving the utilization.

In terms of Chinese platforms, I talked before only about options, and today it's too early to decide if we want to localize a Chinese platform in Germany. in germany but our priority would be first of all when we if we would do it to take one of our own platforms first because this year we are ramping up the cmp platform and the ramp up for the csp is planned for 2027 in china and this work has to be done first and then we could think about options in Europe and on the other side also to to check which products could could be the right ones we are getting right now the feedback and response from the market for our first new products in China and there are many more to come and then at the end we will decide depending on the success we have in China which model would fit in Europe especially in segments where we are not present with our current portfolio in Europe right so step step by step but it's true to Elke and we haven't kicked off the process and we haven't taken a decision quick quick or short follow-up because it wasn't a question so the first quarter of 2026 you did meet your cost targets in the plants or or can you can you not comment on that we we are on track to improve no we we have a still a target gap last year and then we make progress um and but it's but it's too early to give you an indication for 2026 okay but being being very very clear the progress we are doing yeah and i'm personally from from production we have never seen a process and progress what we have seen last last year yeah over 20 percent it's massive and we haven't seen this 10 or 20 years before there was more or less in terms of production cost a compensation of inflation with our productivity work and this 20 percent is also compared to the competition a massive progress being very clear on this and we are continuing on this part and we know how to do it Thank you, Oliver. Okay, very well.

Thanks, Lazar. I can see Bloomberg is next in line. Monica, good to have you on the call. Can you please take the mic? Can you hear me all right?

Yeah, very good. Thanks so much. I guess I would just expand on some of the questions surrounding Chinese partnerships and how those could potentially be leveraged in European plants. Mr. Bluma, have you discussed the possibility of Chinese partnerships with labor leaders? And I'm wondering how they have reacted to this option. How far along would these talks be? And I guess on the labor side, are there certain red lines or concrete conditions of such a partnership? And then my second question would focus mostly on what's happening in the Middle East. I know the fallout so far has been limited, specifically when it comes to deliveries in the region, but we know that the conflict has raised energy and shipping costs in the short term, and GM was already saying that it's seeing higher costs across the board from aluminum and steel.

Okay, did you finish your question? Hello? Can you hear me?

I think she has disconnected so maybe wait a couple of seconds and then we maybe start answering the part that we got can we get a signal if you're able to hear us I think you have Monica I think you would have to reconnect yeah then I think we take it would take the next call and then give her a chance to when she's back on the call to get an answer so the next one would be Sebastian Ash from Financial Times. Sebastian, please.

Hi there. I hope you can hear me. I actually would have liked to have fallen on from Monica's questions, but I mean, I would ask the same thing when it comes to the Middle East, when it comes to potential for, you know, rising material costs in particular. I mean, what have you seen in the first quarter and how do you expect that to develop over the course of the year? I mean, is there any potential that we can see this have an impact on the price of vehicles at the end? And then I think the other element that I would touch on in terms of plant utilization and talks with Chinese companies or producing your own Chinese vehicles in European factories is that we heard again in the investor call or that you're a supporter of local content rules, the Industrial Accelerator Act, how would that work together with Chinese production in your factories? Do you see that as complementary, or is there any friction between those two positions?

May I start? Monika also touched this question, and I hope she's connected again. To be very clear, today we haven't got a concrete plan to share capacities with a Chinese partner and there are no activities. We are talking about only options and these options are with clear priorities. And the first priority would be to think about an own Volkswagen product. we have designed engineered and we are producing in in China to make a localization here here in Europe but first of all we have to ramp up the new product in China and if you have mentioned the huge momentum we are bringing now to the market has to be executed yeah and for this year and the next year we have a lot of work to bring all this to life we are talking about 20 new models this year and overall 30 new models by the end of 2027 and so step step by step and being very clear on this no activities right now to to partner in in europe in terms of capacities we will do it for the next steps in terms when we have decided where we want to reduce capacities then we are thinking about the options we do have and their defense could be a part but also own products from China but step after step but the positive way of thinking is that now we as a global player have the opportunities to benefit what we are doing in China in terms of innovation in terms of processes and at the end also in terms of products we could have the opportunity not only for the global south which is our first priority from from china to asia pacific middle east india south america and africa and europe is a maybe step for the upcoming years but not decided yeah and since it's a lot of interest there will give a little bit more details on on Middle East.

First and foremost, direct effect on our cost. For example, shipping and transport, it's about 20 to 30 million burden a month. This is what we currently see due to the higher costs of fuel. On raw material costs and others, we have quite some good hedging in 2026. So there we We expect a lower burden, but obviously hedging, it doesn't last forever, so we expect there some rising costs. We don't see so far second-round effects, but obviously we cannot rule out that some of the materials we buy, some of our materials, our suppliers buy plastics, chemicals, others become more expensive. In terms of demand, we have about 50,000 to 100,000 sales in the region. Obviously, there's a risk. It's less than 1%, but it's nevertheless important for our premium brands. And demand overall, as said, we cannot rule out there's a headwind. The overall market in the first three months is down about 4% total market, mainly due to China, and we cannot rule out that the outlook of the year will worsen if the conflict and the closure of the Hormuz stays, and this is what we prepare for on the cost side. We have to prepare for these kind of disruptions and make Volkswagen more robust.

Okay, thank you very much. I can see, Monika, you're back on the call. I believe your first question has been answered about Chinese partnerships. The second one we didn't get to, unfortunately, you brought up. Do you want to start with the second one?

No, I think it's been tackled already by my colleague. I just wanted to raise my hand to say I'm back, and I appreciate you waiting and then answering the question.

No problem. Good. Then I would say the next one could be Christian Mueskens from FAZ. Christian, can you hear us? Yeah, hello. Okay, okay, okay, because I saw you on the list. Good, then, okay, that's fine. It's a good sign if we answered all the questions already. It seems to be the right ones. Then the next in line would be Lutz Meyer from Capital.

Go ahead, please. Thank you for taking my question. I'm referring to something Arno Antlitz mentioned earlier in the analyst's call. He said that you are calculated with the burden of 400 to 500 millions for CO2 costs in Europe, and you have to calculate against the margin delusion of the model. So first of all, I'd like to know the $400 million to $500 million per year in this three-year period, which is running currently. And the second is maybe you can elaborate a bit how you calculate this tradeoff. So to which amount of BV models you have to sell to lower this potential burden and how are you dealing actually with and maybe also to what extent still the BV margins are below the ICE margins. because I know, as it's mentioned, they are pretty much higher now, but it's still not the same level if I cut it right. Thank you very much.

Yeah, to be a little bit precise on that, we expect a miss of the CO2 targets also on the three-year period, 25, 26, 27. One reason is we expect really a very positive feedback and ramp-up of the ID.2 family. And then later on, ID.1, also a very promising car, but they come late, 26 and 27. So we expect a miss of 400 to 500 million CO2 costs per year. So basically almost 1.5 billion over the three-year period. And so the obvious question for you is why don't you just sell more electric cars? We must really expect the fact that we have to sell more electric cars than the natural demand in Europe is. So we have to help these cars with prices that put us into a situation that the margin is much lower than in capacity-engine cars. So we make a trade-off between money we lose due to the CO2 fine and money we lose due to the margin of the BEVs. This is our responsibility, and this is currently where we stand. So the obvious solution is improve the margin of the BEVs. This is what we heavily work on. The first generation, like the ID.3, they have really a very weak margin. Next generation, we call it MEP+, has a much better margin margin. They get an LFP battery. Great cars were introduced so far. Just yesterday, we saw the ID Polo. And if you compare, for example, the ID Cross, ID2 Cross, with the T Cross, which is a combustion engine car, the margin is much, much closer. 70% to 80% already, but still not on the same level. We expect the margin the fully comparable uh margin only with our future platform ssp this is why we concentrate on developing that and until the time when this platform arrived we have to make sound trade-offs between bath volumes and and co2 uh fines okay i can see one more question um Rachel, you're waiting as well.

Rachel from Thomson Reuters.

Yes, good morning. Thanks. Good morning. You said improving utilization is a key lever. I wanted to ask what this means for the Zwickau plant. Are you planning similar defense partnerships there like in Osnabrück or can you share any other plans for Zwickau?

And then I wanted to ask if you can give any specifics on streamlining the product platform so are there any models that you have that will be discontinued any brands that will be affected in particular or synergies any detail there if you can please all over speaking and let me start with some defense first of all we want to close the the solution for the author brick planned and this will give us a bit of feeling how does it work up to now it's very constructive and with a positive perspective um what what we could do there and at the end we know about the need of the defense industry and they're being very clear folks won't go at the end for for weapons well that's it's clear we are providing our experience of serial production automation and and so on which is very useful for the defense industry and our knowledge is more on military transport or safety safety systems. Then for the next step and there in Zwickau we have made some decisions for the upcoming years with our agreement we closed at the end of 24 and so we are going for recycling in Zwickau. We have done a reduction of the capacity technically and the same for other German plans and then we will enter into the next steps in terms of solution finding no decisions taken but defense is interesting and we will have the first experience there in terms of products we have the clear intention to reduce the number of our products worldwide double digits percentage and But also to reduce the options by reducing complexity and also reducing our capital investment on this and making our structures cleaner and also providing for our customers a clearer profile with our products. We have already started this process, and the products which will come to the market right now, for example the Polo or the Cupra Rawal, have already benefited from these activities, and we will continue to do so. Today we won't announce any concrete thinking. We have concepts already, and then step by step we will announce where we want to go. but clear goal overall is complexity reduction cost reduction investment reduction and being being more focused and at the end having more and better product customer sites for the different regions of the world okay thank you all for your excellent questions think this concludes the Q&A session and we are now also at the end of our call if anything was left unanswered as Rolf also mentioned during the investors and analyst call please contact us in Wolfsburg here drop us a note call us and I can only wish you all a pleasant

week and stay safe and looking forward to your next time thanks