VOLKSWAGEN AKTIENGESELLSCHAFT (VOW3) Q3 2026 Earnings Call Transcript

Welcome to the Volkswagen Group 9 months 2026 results conference call. At this time, our participants are in listen-only mode. After the speaker's presentation, that will be the question and answer session. We will first take questions from the investors and analysts after a short break followed by a separate Q&A session for members of the media. To ask a question during the session, you need to press star 11 on your telephone. You will not hear an automatic message advising your hand is raised.

Good morning, everyone, and a warm welcome to our call about the nine-month results of the Volkswagen Group. As usual, this is a joint call for both the media as well as investors and analysts, and moderated by Rolf Voller, our head of Group Treasury and Investor Relations. And myself, Pietro Zolino, I'm the deputy head of Group Global Communications. With us today is also, as usual, Arno Antlitz, our CFO and COO. A few remarks before we start. You should have received the press release, the interim financial report, and all other related materials which were published this morning. If you do not have them yet, you can find all documents on our website, or if you have any issues, give us a call or drop us an email, And we will send them straight to you. Now, let me hand over to Rolf. We will give you a brief run-through of the next about one and a half hours.

Thank you, Pietro, and good morning to everyone on the call. Let us have a look at our agenda. Arno will take you through the nine-month results and the full-year outlook for 2026. Following his presentation, we will first conduct a Q&A session for the investor and analyst community, which is moderated by myself. And after this session and a short break of between 5 and 10 minutes, where you will hear no music, we will continue with the media Q&A moderated by Pietro. Since our call will include forward-looking statements, the safe harbor language, and other cautionary statements on the slide will govern today's presentation. As usual, I encourage you to read the disclaimer carefully, as all forward-looking statements are qualified by this language. And with that, I hand it over to Arno. Oh, no. Please, go ahead.

Thank you, Rolf, and a warm welcome to everyone on this call. Ladies and gentlemen, the third quarter has once again shown how demanding our environment remains. China's market is contracting sharply, driving further export growth into other regions. Terrific geopolitical tensions and unprecedented competition add to the pressure. Europe's shift from combustion engines to electric vehicles has accelerated. All these factors wait on our volumes, mix, and margins. We are managing this environment with discipline. At the same time, we are moving ahead to our strategic initiatives. We are ramping up our attractive new electric and combustion engine vehicles. We continue to reduce investment spending and overhead costs. First, we are making progress on workforce reduction as planned, and we deliver on automotive net cash flow. $4.4 billion year to date is a strong achievement. However, even before special effects, our operating margin stood at 3.8% after nine months, which shows the clear need for action. We must accelerate and broaden our efforts to structurally lower our cost base. This is essential to earn adequate returns and deliver on our financial ambitions. For this, we need lasting structural improvements across the group. It means lowering vehicle costs without compromising product substance, lowering overhead costs, and substantially improving efficiency in our plants. It also means faster technology development and decision making. These are all areas addressed by the group target picture 2030. What matters now is swift, discipline, and consistent execution. The developments in our industry show we have no time to lose. With that, let's dive straight into the presentation. Our product momentum remains strong. The launch of our electric urban car family was an important milestone. All four models, including their entry-level versions, are now available to order. Customer interest is strong with around 150,000 orders received so far. At the Paris Auto Show, we also unveiled the new ID Tiguan, electrifying one of the group's most successful models. In the United States, we started production of the next-generation Atlas. Audi is strengthening its premium SUV offering with the all-new Q9, developed specifically for U.S. customers. It will reach showrooms in the coming weeks. Alongside this strong product momentum, we continue to advance the strategic transformation of the group. In early September, the Supervisory Board approved the group's target picture 2030. The objective is clear, a stronger, more competitive, and more effective group and brands. We also advanced our active portfolio management in the third quarter. Following the announcement of sale of a maturity stake in Everlands, we sold a further stake in Sinodrack, divested MHP, and sold our remaining stake in Bugatti Rematch. Together, the completed and announced disposals are expected to generate cash proceeds of around €10 billion. Active Portfolio Management also means selectively opening our business to strategic partners where this creates additional value for Volkswagen. PowerCoin and Goshen have agreed to accelerate the development of a regional battery supply chain for Europe. Goshen will contribute up to €1 billion. Building on their long-standing cooperation, PowerCore and Goshen plan three joint ventures at Valencia, Zorani, and Genitra in Morocco. These will cover industrial production of LFP battery cells and cathode active material. The partnership is strategically important for Volkswagen Group. It will give access to competitive LFP cell technology and diversify our supply of critical battery materials in Europe. The partnership combines power cost, capabilities, and European footprint with Goshen's LFP technology and industrialization expertise. The partners will share investment requirements and industrial responsibility. Before we turn to the numbers, let me briefly comment on Audi's announcement from last weekend. Audi plans to establish its first U.S. production site in Peach County in Georgia. The brand intends to invest around €4 billion in a plant that is designed for an annual capacity of up to 200,000 vehicles. Construction is scheduled to begin in 2027, with production planned to start in the early 2030s. The focus will be on premium SUVs tailored to the North American customers and built locally. The final decision still requires approval by the relevant committees. We therefore ask for the understanding that we are not yet able to comment on financial implications. This step would be fully consistent with our regional strategy in U.S. for U.S. as part of our global strategy to broaden our regional footprint, especially in one of the financially most attractive markets in the world, the U.S. In North America, we are closing portfolio gaps in the most attractive segments, specifically large SUVs and pickups. Together with the Volkswagen plant in Chattanooga and the Scout plant under construction in Blythinwood, all this new site would be an important element to create a targeted and resilient local-for-local footprint in the U.S. This would reduce our exposure to trade barriers and currency movements. With that, let's now turn to our deliveries in the first nine months of the year. Global deliveries declined by 9% year-on-year in the first nine months to 6 million vehicles. The decline was driven by China, where volumes fell 30% amid the sharply contracting markets and the weak consumer sentiment. Our combustion engine volumes in particular remained under significant pressure as a result of the increased gasoline prices. Outside China, deliveries to customers were broadly flat. In Europe, deliveries rose by 1.7% in the first nine months. BV demand grew strongly while demand for combustion engine vehicles weakened. South America achieved 4% growth rate year-to-date. In contrast, deliveries in North America declined by 4% year-on-year in the first nine months due to lower BV deliveries and model changeovers, particularly the new Atlas. Turning to electrified vehicles, the regional picture remains mixed. Strong growth in electric vehicles in Europe in the last month only partially offset the market pressure in China and U.S. Globally, we delivered 679,000 fully electric vehicles in the first nine months, down 5.4% year-on-year. Nevertheless, the global BV share rose by 40 basis points to 11.3%. In Europe, electric vehicles accounted for 20% of our deliveries, up from 18% a year earlier. And the immense success of our electric urban car family has contributed only modestly so far as deliveries have just begun. Our order situation in Europe remains robust. In the first nine months, order intake increased by 4%, about 3 million vehicles. At the end of September, the total order book in Europe stood at 1.1 million vehicles, around 11% higher than at year-end 2025. The increase was driven above all by BEVs with particularly strong demand for the electric urban car family. Based on this development, we are increasingly confident that we will meet EU2's EU2 fleet targets for 2025 to 2027 compliance period, since our BVs now account for roughly 40% of the order book. At the same time, the shift in mix-sort BVs is still dilutive to our margins in the short term, despite the clear process we make on the BV cost side. We have already seen some of this negative mix effect in Q3, and we expect a BV ramp-up to put greater pressure on margins in Q4 and the first half of 2027. Let's now turn to the group financial and operating performance in the first nine months of 2026. Lower vehicle sales reduced group sales revenue by 2% to 233 billion euro. The operating result was close to break-even at 0.1 billion euro. This was mainly driven due to significant special effects and the soft China business. Our nine-month result was burdened by special effects totaling 8.7 billion euro, 7.8 billion of which were recorded in the third quarter. The main items within the 7.8 billion are a Porsche Goodwill impairment of 6.4 billion euro, an impairment of assets of fully consolidated companies in China of about 1 billion euro, and before special effects, operating result came in at 8.8 billion euro with a margin of 3.8%. This is slightly below our recently revised full-year expectation of around 4%. And just as a reminder, this operating result before special effects contain a burden from tariffs paid to 1.2 billion euro in the first nine months of 2026. For the full year, we expect the U.S. tariff to impact our results with about 2.8 billion euro. And it contains roughly $500 million related to early retirement schemes in the Volkswagen AG. Profit before tax declined to €0.5 billion in the first nine months. This was mainly due to the lower operating result. The financial result turned out positive for the nine-month period. This was largely due to the further sale of Sinodruck shares. The share sales reduced our stake to below 20%, triggering a reclassification of our remaining holding. The total book gain from the sale and reclassification contributed to around $2 billion to the financial result. After tax, we recorded a loss of €2.7 billion. This is due to the unusually high taxes, mainly because some of the special items booked in Q3 are not tax-deductible, particularly the goodwill impairment. In addition, no deferred tax assets were recognized on tax losses incurred in Germany in the current year, as these losses are not expected to be utilized within our planning period. Nevertheless, the resulting tax loss carry forwards have not been permanently profited. Our cash flow performance shows that the processes we made and established to strengthen cash generation at Volkswagen Group are delivering lasting results. Automotive net cash flow improved to €4.4 billion in the first nine months. The improvement was supported by lower investment spending as well as net inflows from M&A. Net inflows from M&A amounted to €0.6 billion. The 0.9 billion investment in Rivian was more than offset by the cash-in from other portfolio measures. Proceeds mainly included 0.7 billion euro from Trayton's Sinatuck stake sales and 0.9 billion from the remaining Bugatti Rematch stake. Porsche AG used some of the proceeds from the Bugatti Rematch disposal to fund pensions totalling 500 million euro in the first nine months. Cash flow performance supported a solid net liquidity position. Automotive net liquidity remained at €33 billion at the end of September, some €1.5 billion below the level at year-end 2025. We fully offset dividend payments and forged additional pension funding. Let me now turn to the performance of our divisions in the first nine months. Passenger cars recorded an operating loss of €2.6 billion largely as a result of special effects and our performance in China. Commercial vehicles delivered a solid operating result of €1.7 billion and a margin of 5.2%, roughly on par with prior year period. Financial services remained robust with an operating profit of €3.0 billion despite higher residual value risk. In a passenger car's profit bridge, volume and other effects reduced the result by 1.1 billion Euro year-on-year. Mix impacted the result by minus 1.8 billion Euro. This reflects an unfavorable regional and product mix, particularly driven by higher mix of electric vehicles and a negative segment mix. High incentives more than offset the positive pricing effects, resulting in a net burden from price of 0.6 billion euro. Product costs reduced the result by 0.4 billion euro, mainly due to the higher raw material costs. Favorable hedging positions provided a partial offset here. Fixed and other costs made a positive contribution of 0.4 billion euro with a sizable contribution from lower overhead costs. Special effects were a year-on-year headwind of €3.1 billion. This mainly reflects a Porsche Goodwill impairment, partly offset by lower restructuring costs and the absence of last year's burden related to the realignment of Porsche's product strategy. Our overhead costs benefited significantly from consistent implementation of the 2024 and 2025 agreements future Volkswagen. These include the agreed headcount reduction of around 50,000 across Volkswagen, Audi, Porsche, and carried in Germany. Since at the end of 2023, about 19,000 employees have left Volkswagen AG and around 25,000 have left Volkswagen Group in Germany. Over the same period, our global headcount has declined by around 40,000 or 6%. Automotive overhead costs fell by 0.7 billion euros in the first nine months from 33.8 to 33.1 billion euros. Our savings more than offset the ramp-up of new businesses such as PowerCore and Scout, as well as inflation in the current year. Turning to the brand groups, the platforms, and financial services. Brand Group Corp delivered vehicle sales and sales revenue broadly in line with the prior year. Operating profit declined by 8% to 4.3 billion euro, corresponding to a margin of 4.1%. The Brand Group Progressive operating profit declined to $1.2 billion and a margin of 2.7%. This was driven by a market decline in volumes in China and the U.S., cost discipline, and lower overhead provided a partial offset. Brand Group Sport Luxury Vehicles sales fell 11% and sales revenue declined 7%. Operating profit nevertheless rose significantly to 1.5 billion euro with a margin of 6.7% lower special effects compared to prior year, a better mix, and cost improvements more than offset the weaker top line. Let's take a closer look at the brands in the Brand Group core. Volkswagen Brand reported an operating profit of 0.8 billion euro and a margin of 1.3%, one percentage point below the prior year. Even before special effects, the margin stands at 2.6%, which is clearly not where we want it to be. Skoda continued its strong performance in a challenging environment. Vehicle sales rose by 3% and sales revenue by 4%, Building on a highly competitive cost base, the operating margin increased by 30 basis points to a strong 8.3%. SCOTA again shows what can be achieved based with first-class products based on Volkswagen platforms when operating on a right cost base even in a challenging market environment. Carrier sales revenue increased by 31% to 1.3 billion euro on the back of higher volumes on the 1.1 and the 1.2 software stacks. The operating loss improved by 0.2 billion euro to 1.3 billion, supported by higher sales and continued execution of the transformant broker. The power cost was 1.1 billion, despite the production ramp-up in Salzgitter. Construction in Valencia and St. Thomas increased investment and net cash outflows. Great. Industrial operations maintained their improved momentum in the third quarter. Sales revenue in the first nine months increased by 2% to 31.9 billion euro, backed on higher volumes. Operating profit was 1.1 billion euro with a margin of 5.2 percent. Operational improvements offset higher tariffs, input costs, and restructural charges. Volkswagen Financial Services delivered a solid operating performance. Contract volumes rose by 1.5 percent to almost 28 million, and residual value risk also increased, particularly as the European market shifts towards battery electric The credit loss ratio remained solid at 0.41%. Operating profit at 3.0 billion euro was 3% below the prior year period. We are taking early actions to address growing residual value pressure, and we have therefore adjusted the Financial Services Division's full-year operating result outlook to now more than 3.5 billion euro. Our investment discipline continues. Automotive investment in R&D and CapEx fell by almost €2 billion to €22.4 billion in the first nine months. This is equivalent to an investment ratio of 10.9%, some 50 basis points below the prior year level. For the full year 2026, we continue to expect an investment ratio of 11% to 12%. As part of the group target picture, we target 9% of sales in 2030, which equals 135 billion euros over the next five years, 2027 to 2031. The plant or the plant is not included in this figure. However, our aim is to compensate as much as possible of additional investment within the upcoming planning round through stricter prioritization and further efficiencies across our investment portfolio. For us, investment discipline and targeted growth in attractive markets are not a contradiction. They go hand in hand. In China, the automotive market remains under severe pressure. Market volumes are down 21% year-to-date, changes in subsidies and tax policies, higher fuel prices, and weaker customer sentiment are driving the decline. Competition remains intense. In this environment, our unit sales declined by 35% to 1.2 million units, with combustion engine models particularly affected. Significantly lower volumes and costs for new NEV models ramp-up waited on the proportionate operative result. The step-up cost measures could only partly offset this pressure. In addition, Volkswagen Group China recognized impairments on legacy MEP-related assets in the third quarter, which reduced the proportionate operating result by about 0.2 billion euro. Before impairments, the proportionate operating result for the first nine months amounted to 110 million euro. For the full year, we now expect proportionate operating result from our Chinese transventures before impairments to be around break-even. However, there is a significant risk that Q4 will push the full-year result even before impairments into the negative territory. Nevertheless, we continue to implement our own China for China strategy with full force. We are continuing our NEV model offensive rigorously and our cost reductions and capacity adjustments. This brings me to our financial outlook for the full year 2026. We expect sales revenue of around €315 billion and a reported operating margin of up to 1%. Before expecting special effects of about €10 billion, our full year margin outlook is around 4%. Our current run rate is 3.8% and we expect a higher B-EV share in Europe in Q4. So please keep in mind that around 4% means that we are more in line with the run rate the first nine months. Building on the performance in the first nine months, we expect an automotive investment ratio of 11 to 12 percent, and we continue to expect reported net cash flow of 3 to 6 billion euro. But we are confident that net cash flow in Q4 will be positive, adding to the 4.4 billion euro we achieved in the first nine months. We expect net liquidity of 32 to 34 billion euro, but also here we see a good chance to end the year at or even above the upper end of the range. Importantly, these KPIs exclude any effect from the sale of a metrology stake in Everlands or from group target picture 2030. Ladies and gentlemen, we are delivering on our strategy and the agreements reached in 2024 and 2025. Yet the world has changed fundamentally since we launched our group-wide efficiency programs. We face tariffs, a sharply contracting Chinese market, and intense competition in Europe from new Chinese entrants. The market success of our electric cars also weighs on our margins in the short term. Against this backdrop, incremental cost measures are not enough. We must fundamentally reshape our business model and deliver a decisive improvement in cost competitiveness. This requires a substantial reduction in complexity across the company. The group target picture 2030 provides a framework for these changes. Now, it's our task to implement it swiftly and with discipline. Our financial performance leaves no room for delay. Thank you very much. And with that, I hand over back to Wolf.

Thank you, Arno. And with that, we conclude the prepared remarks. And let us now enter into the Q&A session. As a reminder, if you want to ask a question, please press star followed by 1 and 1. And if you would like to withdraw your question, then you press again star 1, 1. So with that, we are expecting the first question. And the first question comes from Patrick Hummel from QBS. Patrick, please go ahead.

Hi, good morning. Can you hear me?

Very good and loud.

Okay, great. Thanks, Rolf. Good morning, Arno. Two questions, please, for me. The first one, I'd like to double-click on your comment about the BV mix dilution. You said it's going to be larger in the fourth quarter and even more so in H1 2027. Now, it has already taken a toll in the third quarter, and looking at the whole complex of EV mix shift and with that also lower CO2 compliance cost, on the other hand, how much of a headwind is this going to be in 2027 if the current trend continues or to take it even on a higher level? If we look at the big picture, all the puts and takes that you see from today's perspective, I guess significant romance inflation, but on the other hand, substantial cost saves that you're also working on. Can you just elaborate a little bit on the largest building blocks for the EBITDA bridge going into next year, starting off that, say, 3.8% clean run rate basis that you're basically endorsing for 2026? And my second question, how important is China still from an earnings standpoint? You know, JV, a proportionate result now guided break even or slightly below. We've got a pretty decent idea about what Porsche still makes in China. Can you give us an idea about the consolidated result within Volkswagen Group, ex-Portion, meaning predominantly, I guess, Audi, that still contributed by China? Including all royalties and spare parts, parts, et cetera, just to get a sense of the remaining downside risk related to group numbers coming from China. Thank you.

Patrick, good morning, and thank you for your questions. As always, and hopefully you're not disappointed, I have to start with it's too early to give you an outlook for 2027. This is what we typically do, as you know, in March next year. But still, some of the building blocks, and you mentioned them basically already. Look, the BVs are still margin dilutive, but over time they improve. This is the positive news, for example, from the new electric car family, the ID Cross. There's already, I would say, an 80% margin, 70% to 80% versus combustion engine. The cars, the smaller cars like ID Polo are still weaker. What happens over time is, of course, we bring all the cost-down measures into the BVs and improve our costs there with LFP batteries, with more integrated drivetrains, but they come only over time. And what happens now is due to the fuel prices, specifically in Europe, And I would say also the great performance of our new electric urban car family, the ramp-up of our BEV share is much faster than the ramp-down of the cost. Ultimately, we expect margin parity and also cost parity towards 2030 with the SSP, but now we are faced with a mix in the order book of 40%. Just to give you an indication, 40% was the BEV share we were planning for 2029. And in Europe. So this is what we are facing. This is one of the headwinds. In terms of raw materials, yes, it might be a headwind. But here we have a lot of hedging and a lot of long-term agreements on energy. And also Rolf and his team does a lot of hedging on aluminum and other raw materials. But yes, there's steel price, and there's also a certain risk for semiconductors. In terms of momentum, we bring fantastic new models to the market, specifically Audi, with a Q7 and a Q9 and later then also Q8. So there should be also continued product momentum. And the biggest building block in that equation is obviously our restructuring program. The group target picture is an immense cost program of more than $30 billion. And from that, the overhead cost reduction we want to achieve is $11 billion. And here we want and we need to get really a step down in 2027. It's not our plan that we linearly reduce overhead costs and reduce them linearly by $11 billion towards 2030, but rather a step down with certain measures we're just discussing and working out. With tariff partners and with our internal partners, and this is really the future step we are planning for 2027, and this is really too early to give you an indication on that. But this might be the building blocks, and in terms of regional development, China stays very competitive as markets in Europe. We expect the competitive pressure to stay, although there might be first effects from the agreement the European Union reached with China. That might give a small relief, and we expect a broader momentum in the U.S. despite the tariffs by the new cars from Audi and also the new Atlas and the new Tiguan.

Let me, if you don't mind, Arno, just follow up on China. Basically, the idea is really to understand what's the remaining downside risk to group earnings related to China if China remains on a constant decline path. Another way to ask the question is, do you think the volume share that China still has in the group context for you, for Volkswagen Group, is representative of the profit share you have in China? Or would you say by now it's, you know, the volume share is actually higher than the profit share because the JVs are profitless?

Patrick, you know we are reluctant to disclose these combined effects from China to competitive reasons, but what I can say, you see the proportion of obituary's result, which is already basically at break-even, and there's a certain risk that it turns negative this year, so we don't expect any further contributions from dividends in the cash flow next year, so this is basically affected in our guidance. And also from the volume, it's a much smaller part than in the past, and also the profitability, specifically in the premium market, is lower. So that all is factored in, and also Porsche gave some indication of what they expect in China. So overall, the dependence on China's market in terms of profit has significantly decreased over the time. And I think, Rolf, you want to add the comment?

Yeah, or put it positively, we have successfully diversified our group profits from China. And, you know, in history, I think the contribution on group level was close to 50 percent. And in the meantime, I think it's very fair to say that we should be well below 25 percent in the meantime, Patrick, if that helps.

It does. Thanks very much to both of you.

Very good. Then we continue in the Q&A row with Tim Rokossa from Deutsche Bank. Tim, please go ahead.

Thank you very much, Wolf, and good morning, Arno, as well. I have two questions as well. The first one is, there's always a lot of moving parts with you guys, Arno, but when I think about two of the absolute key elements outside of China that determine your immediate and midterm future, it's A, the union negotiations about the plan, obviously, And then the future of Audi. Can you update us on what you're thinking is about the two of them? Will the negotiations likely be done before year end? Is this something that could very well drag into next year? And secondly, should you not get this Audi deal, which, by the way, does it include tariff reliefs potentially, or is this just a CapEx deal? What's really the plan to turn around Audi here? I hear you on the Q7 and Q9, but arguably someone like Mercedes has an even better product momentum currently, and they really struggle. And then secondly, perhaps also when we think about modeling the next few years, those elements that are still pretty loss-making, like PowerCo, Carrier, now Scout also, how shall we think about the loss-making contributors going forward? Will you cut these losses most likely, or should we continue to model that as a drag?

Thank you.

Yeah, Tim, thanks for your question. First and foremost, obviously, we want to close the deal with the unions or the negotiation with the union as fast as possible. And if you look at our results, we need urgent contributions on that. But we don't have it in our own hands alone. So I cannot now predict whether we get an agreement at the end of this year or early next year. What I can say, I really ask everybody to remind him of the responsibility we have for this company and for a broader picture for our suppliers and partners. So we need the contributions of the $11 billion, and part of the $11 billion, obviously, is the headcount reduction by 50,000 of indirect worldwide. So we have started in some areas there already, but we need the contributions, definitely. In terms of Audi, yeah, Audi, first and foremost, has a certain product momentum. The RS models are doing very well, RS5, and now with the Q7 and Q9, we will see some very mixed, strong cars. But let's not forget, also Audi has a huge job to do on the cost side and on the productivity side in their plans. So it's not only Brand Volkswagen or Volkswagen AG that has to discuss with the unions and has to reduce headcount. It's also Audi that has to do the job there. And, yeah, in terms of U.S., what I can say I said would be a huge step in terms of localization. U.S. is one of the most profitable markets and the most promising markets in the long term. Our share is basically limited so far, our market share, and it's really, it's a long-term strategy. If you remember, Tim, back then in Hockenheim, 2023, remember my presentation. We said, look, we want to defend Europe, we want to turn around China, and we want to grow in the U.S., and this is a long-term plan we're pursuing with Scout, with small local-for-local, And also for more localization for Audi, and now with the tariff scheme and the regulatory uncertainty, it's the local for local strategy is even more important, which we pursue for Europe, for US, and China. In terms of the loss-making, there are basically three to four loss-making areas. One is PowerCo, which we are very transparent, also carry it. Obviously, Scout. And there's a fourth loss-making element. It's our fully consolidated unit in China. It's Anhui. They also make losses, upfront losses today, and what I gave you already is an indication that the losses are one and a half to two percentage points currently, and we want to turn them at least to break even by 2030, and here more or less the combined effect would be linear over the next years. And as we discussed in Paris, the turnaround of these four loss-making units is planned to contribute also by one and a half percentage points, almost two percentage points, to the turnaround plan towards 2030.

Thank you very much, Arnold.

Thank you, Tim. And we continue with Stuart Pearson from Oxcap. Stuart, please go ahead.

Just China and the joint ventures and just the path forward from here. I just wonder if you're considering, obviously, you have quite a patchwork of joint ventures and alliances there and just noticing what the consolidation with Toyota and GAC and their FAW JVs. Is that something that is possible for Volkswagen Group in China or are there just too many moving parts and different interests that make that impossible? So I just wondered whether the China positioning could be streamlined. And then the second question, just quickly, on the urban BV orders. I get that it's margin dilutive. I just wonder if you're kind of answering it in terms of the percentage of your order book, but how much is it cannibalizing orders for Polo and the ICE cars in that segment, or is it incremental volume that's coming into the group, Or is it really cannibalizing the ice almost one-for-one? Thank you.

Stuart, look, it all starts with the volume protection. And Ralph Franchetter was very clear about that in an interview. He just gave some, I think, some days ago. And we had in our market in China, capital markets in China, we are expecting some two, three years ago, 30 million vehicles in China in total market. And we reduced that to 27, 25, and now we have an expectation of more than 19 to 21 million. So let's count with 20 million total market. And if we keep our market share protection of 11%, that definitely would reduce our volumes to more like 2.2 million euros. So there's one missing element in that. But as other Chinese manufacturers, we have the chance to increase that volume in the local production by export. So we are already planning a significant amount of export, 200,000, 300,000 cars. We call it Global South. We will start first deliveries to certain regions, Mexico, also South America, Which might then add to the 2.2 million units I just derived from the math of the total market. So we need to do the math then, and definitely when we have to do more restructuring, and that more restructuring starts with looking at the manufacturing footprint. So we have to further reduce our manufacturing footprint. It also is the classical cost work of our units in China, more synergies. We have a huge holding there, so they have to do the cost works as well. And then we look into the chance of export. And at the end of the day, we need to also look at the question you just raised, how many partners and how many entities we have there. But this is much too early to give you an answer there. I cannot comment on that topic. But at the end of the day, it has to start with a realistic volume assumption and then work back from then. And this is what the team is doing. Yeah, new electric car family, it really, segment by segment, it comes on top. The Polo orders is running on previous year. And so it really adds significantly to the volume and our order intake and order bank speaks for itself. So this is very, very, very good news. And as always, I must say, yes, the cars are margin diluted, but there's also a very positive signal in that whole topic. Look, Volkswagen was always wrong when we delivered on three virtues. First, great products with second, great quality, and affordable prices. And the good news is once we deliver on these three dimensions, We are very successful. Unfortunately, it's more like an upfront investment in terms of margin, because currently we give affordable prices to the customers, but our cost base is not there so far. And this is what we have quickly aligned now. The good news is our winning formula still works, and in order to make that a long-term success, we have to lower the cost base because you can only provide affordable prices if you have a competitive cost base. Everybody in the company is aware of that fact, and so this is what we set up now in the group target picture.

Thank you very much. loss-making at the EBIT level?

So far they are still loss-making at the EBIT level, yeah.

Okay, thank you.

But it's clear, but I want to say, of course, we have a clear positive contribution margin. That's clear. Yeah, understood.

Thank you, Stuart. I like winning formula. We continue with Daniel Schwartz from Metzler. Daniel, please.

Yeah, thank you for taking my question. I have three quick questions. Firstly, who needs to approve the Audi plant? Does it need the two-third majority in the Volkswagen Supervisor Report, or is it the Audi Supervisor Report that could approve the factory? And a follow-up on China. If the JV would start to burn cash, would you potentially transfer cash to China? I.e., could JV contribute negatively to cash flow or is zero dividend from China really the downside risk? And lastly, financial services, the equity that keeps going up every quarter, it's now 48 billion, and the return on equity is quite low if you apply the full 48 billion. It seems overcapitalized. What is the target here? Thank you.

Yeah, Daniel, first and foremost, for obvious reasons, and I hope you have understanding for that, I cannot give certain details on our internal processes on the approval of that plant. I think there was some information already given on that process. Yes. To turn to China, the downside risk is really zero dividend. But, yeah, to be very honest, if our proportion of opportunities reside this year's negative with a certain risk that I mentioned, then we are on that situation in 2027. And we have to factor in in our cash flow guidance for 2027 that there might be no very limited China dividends. Yeah, and the return on equity on our Finco, we are heavily regulated in the Finco business. There are certain capital markets rules on core capital and other elements of the capital. You know them very well. They are disclosed very well. We are aware that we are slightly above this capital scheme. But on the other hand, there's still some room for growth. And what we expect over the planning round, that we need not to increase the capital. But rather with the growth of our FinCo, they will more and better utilize this equity scheme they have currently so far. This is our planning going forward. And if it's well disclosed where we stand and what our capital right now is, then we expect at the end of the planning round that we are exactly, in terms of capital need, On what we need from a regular point of view, this is what we factored in now in the planning.

And so could you remind us what the dividend inflow is in 26 from China?

Roughly, Daniel, the year with the proportional operating profit we did in 2025, that's the logic.

Okay, thank you.

Okay. So very prudent approach on the equity within the Finco meeting the requirements we expect from the growing business by 2030 and the Volkswagen Bank, obviously heavily regulated. And with that, we continue with Henning Kossmann from Barclays. Henning, please go ahead.

Yeah, good morning, everybody. Thanks for taking the question. I just have one question, really, which is on the free cash flow for next year. I appreciate you don't want to go into the guidance for next year too much, but just conceptually, and I understand the China dividend could be down, but you seem to be tracking very well against your free cash flow guidance for this year, and you have this very big step down in CapEx next year. There should also be less M&A outflow to Rivian. So it seems like there could be, you know, everything else equal. It could be eight, nine billion free cash flow next year. I'm just wondering if I'm missing anything there conceptually, right, not to hold you to a certain number. Where I'm coming from, consensus isn't remotely at that level. So I'm just wondering if I'm missing anything. And related to that, if you could just remind us what sort of capital requirements you've previously said you have to sort of threefold approach to cash allocation. If you could just remind us on the balance sheet what you're aiming for before more of that super strong cash flow that should be coming very soon before you can allocate more of that to shareholder returns, if you can just remind us of how much you want. Before you can look into that. In fact, actually, one quick clarification, I'm not sure if I didn't hear, but I believe Tim asked earlier about the potential tariff implications related to the Audi plant. I think Oli always made it very clear that he wanted some sort of tariff offset in exchange for committing to incremental investment in the U.S. I think there was something in the media, but could you just confirm that that's still the case, that it's a precondition to actually go ahead with that investment, that you get a tariff offset that's equivalent to the investment? Thank you very much.

Yeah, Henning, a lot of questions. Yeah, first and foremost, free cash flow. It's even more important that we wait until March next year for the guidance. There are some obviously moving parts. It starts with the operating result and the cash conversion rate. Yes, we want to be even more disciplined on R&D and Quebec combined, and we are a very good trajectory there. On the other hand, as I said, operatively, we see headwind from the marginal illusion effect of the BV, specifically in the first quarter and the first half of the year, 40%. And it depends very much also on M&A, but don't be afraid. We are not planning to spend a significant amount on M&A. I just see that this year, clearly, we had some positive effects from disposals, as promised, Sinotrack, Bugatti Remarge, MAP, and others. And, yeah, we want to continue on that path, and we haven't discussed about Everlands, but it's not very clear that next year we will do the next significant steps. We have to look at the entities that we want to sell, and is it the right time, and are they in the right shape? And we do it when it's best for the company and our shareholders and us in terms of value creation. So we are not desperate. So it very much depends, as said, also on M&A and asset disposal next year, which we will give you an indication. Yeah, in terms of our net liquidity, first and foremost, you know how important the rating for our companies and how we strongly look at our rating. We need that for the refinancing capacity and the competitiveness of our Finko. And so there's this one element, obviously, next to margin, net cash flow, it's net liquidity. Our policy is more than 10%, but we're also aware that some of our competitors are much stronger in terms of balance sheet, and they have much better rating. Look at some peers that are more like acting 20%. We haven't changed more than 10%, but obviously, in difficult times, a strong balance sheet is an asset, and we want to increase that. And it's too early to give you the combination of the three elements we said, a strong balance sheet, a second, obviously, a dividend policy with more than 30% payout. But then the third element of that is we look at our hybrid bonds, how to cautionly reduce the exposure there. And this is where we stand. It very much also depends on Everlands, whether we close the deal this year or next year. Just to give you a reminder, this would be another cash inflow of 7.2 billion euro, which is also a strong signal. But again, it's too early to give you a concrete number. But we carefully balance these three dimensions in the best interest of all the stakeholders, including our shareholders. And as I said before, we cannot comment on any potential agreements on the ODI deal. Fair enough. Thank you, Anu.

Thank you, Henning. And we continue with Philippe Ochoir from Jefferies. Philippe, please go ahead.

I'm taking the question. My question is on the – we have, again, a very, very strong performance in financial services, and we've seen positive surprises yesterday, Ford and Mercedes. I'm just trying to understand what is driving such upside and how we should think about it next year in terms that we know result values might be a headwind, rates are a headwind. And do we still have kind of a momentum of all the values that will carry us into 2027? That's my first question. The second one, if you can maybe give us a bit of visibility on what will drive, I mean, I think you clear the Q4 cash flow will be good again. We know capital spending is going down, but is it going to be more of a working capital benefit as you end the year with low inventory or what is what is driving the positive cash flow in the fourth quarter? Thank you.

Yeah, thanks for your questions. The Finco is basically a lot of elements. First and foremost, it's a very stringent process of managing the risk, including residual I mentioned that before, we see some risk on the combustion engine cars, but it's still, from our perspective, well-managed. In the FNCO, we also studied a significant cost and improvement and efficiency program, because at the end of the day, our FNCO provides lease rates, and they are partly subsidized by the groups. And so we have a huge performance program, which includes the Finco. And third, we look at optimizing refinancing in certain areas. For example, in the U.S., we have a cooperation with Wells Fargo to optimize refinancing. And we look in other areas where we could potentially optimize refinancing, which then also would improve performance. So it's really managing the risks, manage down the overhead costs, and we have really instant overhead cost ratios given our Finko, and optimize refinancing. I would say these are the elements of the performance of our Finko so far, but to be very transparent, as I said, we see also risk there, and this is why we adjusted our outlook with this caution. And cash flow Q4, yes, I mean, obviously, there are some elements why we think we should expect, on top of the cash flow we achieved so far, a positive one in Q4, first and foremost, some kind of seasonality on working capital, on inventory. It's even that despite some of the – a lot of processes in the working capital management work really very well, and they are continued since months and years, there's a slight burden currently on the working capital due to the ramp-up of our electric car family. And there's even more chance to, once these cars flow into the market, so working capital, then obviously a positive operative business. Everything starts with operative business. We expect a positive margin and operative business in Q4. And then there are very stringent investment disciplines. Currently so far, we're $2 billion below last year. In absolute terms and also percentage point-wise, we have some basis points below last year, and there's no reason why we shouldn't continue that performance throughout the year because we have to reduce anti-CAPEX anyway target-wise for the next year and for the $135 billion. And so I would say this should be the major contribution to a positive net cash flow in Q4. What do you want to add? No, I think everything is well explained.

If I can squeeze another one. Are you happy as well, Philippe? I'm happy that your cash flow remains positive. Very good. Can I ask another one? Your hedging on raw materials seems to be delivering impressive results, but usually it's a timing difference. We get bad news from GM, we get bad news from Ford overnight on commodity, on D-run, etc. How are you managing that, or is there a step they should worry about in 2027 where your hedging kind of runs out?

I would propose that I hand over to Rolf, because he's responsible for that whole process, so I would ask Rolf to answer.

Philippe, as always said, we started into the year well-hatched. On those raw materials, actually, we can hatch. We always have to say that there's obviously certain raw materials like plastics or oil-based components where it's obviously difficult to hedge, or also steel is something actually which we don't hedge. But in particular, on the battery raw materials, we have also some reasonable good hedge positions left actually for the remainder of the year, which make us confident that the impact in fourth quarter is limited. And we recently saw, in particular, lithium hydroxide as well as lithium carbonate coming down quite significantly. And we obviously used the opportunity to increase our hedge ratio, particularly for 2027. Cobalt also recently came down in our favor. And we still have a very reasonable position hedged of our 2027 exposure on the aluminum side. So, yeah, that's similar to what Arno has said to the building block, yeah, where we are refraining from giving already an outlook for 2027 on the profit bridge, but we are using the optionalities which are offered by the fluctuation in raw materials to mitigate the issue as much as we can and do this reasonably successful. For those raw materials, which we can manage.

Thank you very much.

Very good. Then we continue with Frank Biller from LBBW. Frank, please go ahead.

Thanks for taking my question. It's just one remaining on the dividend strategy here. So you are targeting more than 30% payout ratio. So on what basis are you calculating this more than 30%? And this is including or excluding the one-offs or only the non-cash one-offs, or what is your thinking behind that?

Frank, yeah, absolutely. I have understanding for that question. But currently, it's really rare. As I said earlier, we have a lot of building blocks. We have our reported operative result in all transparency last year. We said we won't take into account the write-down of forged goodwill impairment. We haven't said that so far because we have too many building blocks. We have the Porsche ride-down impairment, which is not basically cash-relevant. On the other hand, we don't know whether we achieve the closing of the Evelyn's deal this year or next year. We are absolutely confident that we will close it, but it's not in our hand. We depend on a lot of authorities worldwide for the agreement. They have to agree on the deal and the agreement we get potentially this year or next year. We don't know whether we so far achieve a major breakthrough in the negotiation with the unions And in the headcount reduction, which might incur also burdens on the result this year or next year. So we have a lot of building blocks, and I really must ask for your understanding that currently we cannot reliably communicate and forecast what the basis of that 30 percent is. And, yeah, this is where we stand today. And you're not including the share price here, or the dividend yield?

If we include the share price for the dividend yield, you mean that we want to take into consideration the share price at the time?

Yes, if it's attractive or not, if the share price is very low, so it's a very high dividend yield, and maybe you'll incorporate this.

Frank, this is only one element or one reasoning of that. But we really, you need to be patient once we have all the building blocks together in this year. As said, perhaps we get an agreement with the unions, which might also burden our result. And then from there, we decide what is the right dividend for next year, and also it takes into account what our dividend policy is. And we really also look at all the stakeholders, including our shareholders, look at the, for example, division.

That's okay. So you feel comfortable with this more than four euros on the consensus basis for this year?

I think we see less than four euros currently on the consensus basis. But as I said, if we would now comment if we feel okay or not, then obviously we would give a chance.

Thank you.

Thank you very much, Frank. And best for last, Jose Azumendi from JP Morgan with the last question. Thank you, Jose, for coming on stage.

Thank you very much. A couple of questions, please. Thank you very much. Back to the building blocks. Can you comment a bit on cost savings for 20-20-7? And if you cannot, obviously, you know, give us a number, at least directionally, in the building blocks, like where do you see the cost savings, the efficiencies coming through, and which pockets do you think will be bigger? Is it purchasing? Is it labor? Is it any other category that we should have in mind in terms of supporting earnings next year? And then second, I was wondering if you could give us any comments. When you are having discussions on the finance front, and you're comparing your manufacturing footprint in China, the work you have done there with the suppliers, the Anhui Center, and you look at, let's say, manufacturing costs of an e-motor or transmission, how does this compare China versus what you have in Europe, and which opportunities do you think you have there to make the cost footprint in Europe more efficient? Any numbers you could provide or any examples?

Yeah.

If you jump back to the building blocks of the cost program in the Zukunft Lend 2030, just as a reminder, I know you have all the facts and figures in your head. It's around $30 billion, $31 billion, about $20 billion of that is operational, and $11 billion should come from overhead costs. And from the operational side, we talked about material costs, we talked about incentives, material costs over the five years, the magnitude of 10% incentives, and then productivity in the plant. So, obviously, to optimize material costs, it takes some time. Included in that is LFP and NMC switched in the battery front. So we said we want to use the material cost reduction to offset potential mix effects in the margin side of the BVs. And that we have to commentate as much as possible, but they will basically come over time. We expect another step down in terms of productivity in the plants. The process we just launched and the discussion we just had with the four plants in Germany, which don't have an allocation so far, and the transparency we give on factory costs and the competition we put on the plants was very healthy in terms of motivation for the teams. So there should be good improvement there. As I said, the biggest cost improvement should really come from overhead costs. It should not be linear. We need a step down in 2027, both in terms of headcount and ideally also in terms of labor costs. This is too early to say, but this is what I would expect and what we need in order to stay competitive, and this is what we are negotiating for so far. And so these are some of the building blocks. And in terms of what we utilize, our knowledge in China, I'll make you one example. We have achieved significant costs down in China on the whole electric platform, on engines, on electric engines, of course, on battery, but also on conventional components like steering, like seats, structures, and so on. And in setting up our new SSP toolkit for 2030, we take basically benchmarks from our Anhui factory, which is 100% Volkswagen-owned entity, and compare them where we stand in China, what potential costs are in Europe, and we do some of a, like, I would say a walk. If you localize, either we take the components from China as well, like the ID.1, the ID.1 will get an electric engine from our 100% electric engine plant in China, which is significantly cheaper. Or if we localize, we do kind of a cost walk, say, look, these are the costs in China, these are potential higher localization in Europe, and then have very stringent targets for each component. And the teams in Europe work against these targets, and we are not closing, and we are not giving the approval of the component if it's not close or on par on that target. So we really utilize the knowledge and the experience we have in China by designing our new components, first, and second, also use our China manufacturing base for potential exports of components into the next generation platforms. Of course, that might conflict with the European EAA regulation, and so we carefully balance that, and in most of the times, we have basically two sources. We have a potential component we have in China, and the potential component we will localize in Europe, and then we are very flexible. This is very specific on the process, how we manage that.

Thank you very much.

I think that's it. Thank you for all your questions, and we are now at the end of the investor and analyst call. If anything was left unanswered, or if there is a question which is popping up as consequence of the discussion, please contact the team here in Wolfsburg, around Lars, Christian, Christopher, and obviously Andy. We look very much forward actually seeing you on one of the upcoming conferences and roadshows, and you see them here on the slide where there is the next opportunity to meet with us, either in person or virtually, and now after a short break of, let's say, five, ten minutes, we will host then the media session, which is moderated by Pietro. Thank you very much for your numerous participations. Have a great rest of the week. Take care, all the best, and speak soon. Thank you.

Thank you very much, Rosa, from my side.

Operator, so from our perspective, we could start in about a minute.

Yes, of course. Thank you.

Hello, operator, are we ready? Please, carry on.

Operator, can we continue, or do we have to wait for any...

I just advise, please, can you start at any time? Thank you.

We can start at any time.

Okay, good.

So, hello, everyone, and back to the media Q&A now. And I just want to remind you, if you want to ask a question, then to press star 1-1. If you want to withdraw your question, please star 1-1 again. And first on the line would be Hans Evert from Automobilwoche. Hans, please go ahead. I can't hear you. Hans, are you in the line?

Can you hear me now?

Now, perfect. Cloud and clear. Thanks.

Ah, sorry. Yeah, thank you for taking the question. I would like to ask a question regarding your opening statement. I think you mentioned the planned Audi investment in Georgia, and you said if it comes through the supervisory board, then the Audi investment of $4 billion might be compensated through the planning round. Could you explain a little bit what that would mean? Thank you.

Yeah, Hans, this was referring to the upfront investment of $135 billion. As you know, we engaged in a plan to reduce our R&D capex combined. Look, some years ago, we were planning over a five-year period, $180 billion, And then we proved it to 170, 160, and in the long term, basically aligned also with our surgery we communicated in Hockner in 2023, we want to reduce the R&D CapEx combined ratio to 10% and then 20, 30 to 9%. And so how is that calculated? Look, if you take a sales of roughly in automotive business, 300 billion and multiply that with 9%, and this is a yearly run rate of 27 billion, and then times five over five years is 135 billion. So this is our investment budget we agreed on in the Zukunftsplan, 135 billion euro for research and development and CAPEX. And this was very detailedly planned out in terms of projects, in terms of brands, and in terms of investment into certain regions. And now Audi is potentially planning or is planning to invest a factory of 4 billion euro in the U.S. And what I said, in 135 billion, this plant was not part of the investment budget. It basically theoretically comes on top. But now we try to compensate as much of the investment on top with other saving measures, Even more stringent use of synergies to compensate for that as much as possible within $135 billion. So find other measures and compensate on other projects, R&D or CapEx, or find even more synergies. We cannot promise that we can compensate for the whole amount, but we try to compensate as much as possible in the next five years.

Okay, thank you very much. The next line would be Christina Ammann from Reuters. Christina, can you hear us?

Good morning, Mr. Antlitz. I have a few questions. For one, the Audi plant, can you say something about what the promises from the U.S. side were? There was reports on $1.4 billion by the state of Georgia, but I assume there's also some subsidies from the federal level we haven't heard of. Second question, SSP is considered as a margin parity essential for Volkswagen. Do you have any news on the timeline? When's that going to come? And there was reports recently about Volkswagen wanting to use the Chinese architecture, CEA, in Europe. When do we expect a decision on that? Will that come? What does that mean for the Rivian joint venture? And also you have said that you're expecting significant step-downs in expansions next year and savings. How much of that has already been agreed, and what does that actually mean, and what costs do you expect for the potential headcount reduction that comes with further savings?

Yeah, thanks for the question, quite some of you. I look at, first and foremost, as I said before, I hope for your understanding, but at the time now, we cannot comment on any potential agreement we are negotiating in the U.S., and I hope for you really, for your understanding, that it's not possible for us to comment publicly on that. In terms of margin parity, this is a very important topic for us, and it's even more important to look a little bit more deeper. Margin parity is one topic, but that obviously depends on pricing. We think you're only robust if you achieve also cost parity, not only margin parity, and our target is to achieve the cost parity in our new platform, SSP, towards 2030. There's a lot of measures I just described, and one of the most important measures is also we use intensive benchmarking from our components in China, in our Anhui operations where the teams reduce the platform cost by almost 50%, and we use some of these measures to optimize our components here. A second element is that we will also use some of the components which we import from China, for example, for the ID Every One, which is a very cost-competitive car. Just as a reminder, it's even below the ID Polo. It's a 20,000 euro electric car, which we bring next year. And there, for example, the electric engine is from our fully consolidated electric engine factory in China. So we bring that component to Europe. So we look selectively what can we use from China, what do we want to use from China, and where we localize the components in Europe, obviously developed by ourselves, then use at least benchmarks from what we learned from China. In terms of margin parity, as I said, 2030, but we don't stand still. For example, the ID Polo has still a rather weak margin. The ID Cross, which is also one of the cars on the electric car family, you can compare that car to the T Cross, and that has about 70% to 80% of the contribution margin of the T Cross already. So we are moving, but it just takes time to implement all the measures here because we invested in NMT batteries. Now we bring LFP batteries, which is the next cost down, but that comes only over time. The topic of, you just mentioned, potentially also some speculation externally on the architecture. Look, we decided on basically a split of our electric architecture. We have an electric architecture for the Western world, basically Europe and U.S., and the Western world that we developed together with Rivian, and we worked on the China electric architecture, which we developed together with Xiaoping. But our own teams now have a lot of responsibility, and we develop that now further by ourselves. So we have basically two toolkits, one for the Western Hemisphere and one for China, and we call it Global South. So some of the cars we develop and sell in China, we also look into export chances like Australia, Southeast Asia, Brazil, or even Mexico, like the other Chinese competitors are doing. And we also look whether we evaluate whether we can use certain elements of our China architecture and of our China platform in certain areas in Europe. But the basic decision that we have a Western Hemisphere platform and have a basically Eastern China platform with the global south is where we stand today, and this hasn't changed. And, yeah, in terms of step down in overhead cost, the biggest chance we have and the biggest necessity we have, which we could really achieve in the third term in terms of cost down, is overhead cost. In terms of personnel cost, obviously, and in terms of other costs in overhead area, marketing and these kind of things. And as I said before, we need a step down there. It's not linear. The 11 billion we want to achieve, we need a step down in 2027. And that obviously goes then hand in hand with the question of what are the instruments. Currently, we mainly use early retirement programs. And these early retirement programs that you do the accrual contract by contract, once one employee signs, you do the accrual. Just to give you an indication, it costs us currently, or we invest currently, around 500 million euros per year, every year, in the Volkswagen AG for the early retirement program. In the Zukunftspan 2030, the early retirement would be not enough to do a step-down. We want to and need to reduce headcounts by another 50,000, half of that in Europe and in Germany and half of that outside Germany. And there we need other instruments, and we discuss currently the instruments with the unions, and depending on the instruments, we then look on how expensive they are and how much accruals we have. This is where we stand. I ask for your understanding that I can be not more specific on the numbers, but the numbers obviously depend on the agreements we have with the unions. But one thing is clear, the early retirement as an instrument would be not enough. We need other instruments.

Okay, so thank you very much. The next one on the list that I'm currently seeing is Kana Inagaki from Financial Times. Kana, can you hear us?

Hello, can you hear me?

Yes, perfect. Go ahead. Great.

Thank you so much for taking my question. I just wanted to ask a bit about, I have two questions. One on the China. I realize that the rising fuel prices is obviously leading to the collapse in combustion engine models in China. And there's also obviously the change in subsidies that are affecting EV sales there as well. But it really does seem that every single carmaker is not keeping up with the pace of the correction that's happening in the market. Arno, I wanted to get your sense of, I mean, is this a deeper correction in the Chinese market that is going to last for years? Because I think, you know, around the same time last year, some people, some executives in the industry were talking that things might start to stabilize. So I just wanted to hear your take on the nature of the correction that's happening at China. And then my second question is on the Audi plant again. I realize you can't comment on what this deal entails in terms of what the broader impact is for the group in terms of lower tariffs, but it's the fact that you can't comment. And is that also a signal that you are still in ongoing negotiations with the Trump administration for some kind of a broader deal?

Thank you.

Kanaya, China, you're quite right. Our teams are confronted with that situation, and though they're very well. Look, when we started the new production of the very competitive new set of cars, IDR and Aura and others, we gave them the task to reduce platform costs by 40%. And in the course of the optimization, we realized that it was not enough because prices fell further, and we gave them a task of an additional 10%, and they achieved that task almost, 47%, 48%, but yes, it's a constant challenge in terms of pricing and in terms of volume. In terms of volume, we currently predict that this year the volumes might be around 19 million, reduced from 20 million, about 20 million, and now we predict for 2030 also the market to stay at between 19 and 21 million. So no further decrease in the market stabilization, but a significant reduction versus our expectations of growth of the China market just a year or half a year ago, and not only us, but also the external things. It very much depends on what happens with the China local market and export. And currently, I think 30% of the production in China goes to export. Roughly 20 million sold locally and 10 million export. But we cannot rule out that the competition stays as fierce as it is. But in terms of market contraction, we expect it being like now a level which might be feasible over time in terms of volume for the overall market. And in terms of how we are affected, we are much more affected because in that 20 million, the ramp-up of BVs will continue and the ramp-down of combustion engine cars will continue. So we are affected more than the overall market. We are affected by 30% because we are market leader in the combustion engine segment, and this is shrinking faster than the BV segment. Yeah, I must really refer to what I said earlier. We cannot currently really comment on any negotiations that take place around the Audi plan, and I really ask for your understanding on this position.

Okay, so look, guys, no offense, but I mean, if you keep asking Audi questions, you will always receive the same answers or no answers. So I would advise, kindly advise and really being humble to focus maybe on the topics that need clarification. And the next one on the line would be Christoph Kapolczynski from Welt. Christoph, are you on the line?

Good morning. Thanks for having me. You have these Porsche write-downs in European L. Can you elaborate a bit on this, why it was necessary to have those write-downs again, because we felt that Porsche is now having their new plan and maybe got some traction? And could you say, a bit forward-looking, if there's more to come on these kinds of surprises? Thank you. Thank you.

Yeah, Gustav, the Porsche ride-on, look, we have, it works as follows. On our balance sheet, we have certain elements that we allocate to the Porsche subsidy. This one is R&D and CapEx, which is basically in a balance sheet, and then we have the brand name and the so-called Goodwill. And that whole sum, we have to test versus the cash flows we achieve in the future and compare that to the cash flows in the future of Porsche, what we expect for Porsche. It's driven by their volumes, by their margins, and obviously then also by the interest rates, we have to discount that. And all of these factors have an element of, when you compare the sum we have in our balance sheet, and the discounted cash flows from the future, they are still higher than this amount. This is technically called, basically, impairment test we have to do every year. And now what happens? In their planning, Porsche basically stick to their own guidance between 20% and 50% due to various elements in their planning. For example, the overall market in China and their volume in China, they change the volume assumption. And what's an even more important factor is we had to work with higher capital costs. And the higher the capital costs are, the lower the discounted cash flows are. And these are the technical factors we have to look at once it's a so-called triggering event. And the triggering event was basically the agreement of Porsche Supervisory Board. And so we had to adjust, based on that, our goodwill we have in our balance sheet. And the impairment incurred was $6.4 billion, but this is not cash-relevant. Obviously, it basically depends – it only refers to a non-cash item on our balance sheet. Christophe, was that clear enough?

Yeah, that's clear. And do you think there are more surprises like this in the next month or years?

I mean, obviously, we can never rule out that further goodwill adjustment has to take place. Specifically, when I talk about parameters we don't have in our own hands, like interest rates, And specifically, the interest rates we have to calculate and use, the so-called VEC, the cost of capital, and this is also a peer group VEC, but the management of the business plan is fully in the hands of Porsche, and they're making significant progress in implementation and measures. They have also a positive product trajectory, a combustion engine, Macan type of products, what they expect, and so this is where we stand. We can never rule out that further steps need to follow, but from today's perspective, we don't see any need.

Okay, now we would like to move to Berlin. Bill Bosten, are you on the line, Bill?

Bill, can you hear us?

I can hear you, and we can hear you. Great, great. You can hear me now? Yes, perfect, loud and clear. Okay, great, perfect. Some of my questions have been answered, so I just wanted to follow up. One, I'm wondering about if you could give some more, just more detail on China as an export base for Volkswagen production. If you look at the vehicles and components that you're building there, what countries are you serving now in terms of exporting from China to countries with vehicles and components? And what share is that of the Chinese, of production of vehicles and components in China? And, you know, what's your target, say, over the next three to five years of ramping that up?

Yeah, Bill, as I said, we talk about the so-called global south. I think this is a term that we didn't invent, but it's basically countries like Brazil, South Africa, interestingly enough, even Mexico, I think, is part of the global south. And so these are potential countries, Australia, and the first export already started. And we have to obviously look country by country what are the circumstances. In some countries, you have right-hand drive versus left-hand drive. And unfortunately, in China, it's difficult to serve some countries like Australia. And so, the potential we see currently is conservatively about 300,000 vehicles. This is what we currently estimate. Of course, we work on additional opportunities. Please, as I said before, if we take then the 90 to 21 million cars that our teams in China estimate for the total market in 2030, and we apply the 11% market share we want to achieve, that only would lead to 2.1 to 2.3 million vehicles. And just a month ago, a year ago, we were planning 2.7, 2.8. So we try to fill the gap now as our competitors with export opportunities. And the first export opportunities we see are estimated around roughly 300,000 vehicles by 2030.

Great. Thank you. I just have a question by Mike. But how does China fit into the global restructuring that you're doing now? Are you cutting back capacity in China the way you've been talking about in Europe?

We have to do the same. As I said before, I would say a year ago in the China Capital Market Day, we were planning with a much higher total market in China. As I said before, like two to three years ago, we were planning 30 million cars. We took that then back to 27 million cars. And now we talk more than 90 to 21 million cars. And even adding a chance of 300,000 would end up with 2.3, 2.4 million cars. And a year ago or two years ago, we were planning more like 2.7 or 3 million. So we have to, in China, we have basically two similar steps we did in Europe. They did already, they reduced already the capacity significantly versus the past. We had much more volume in the past, but there are still steps to go. I would say another 500,000 capacity should we take out of the system, and the same steps in our overheads. We have to work on the overhead and on our China holding, and in the current setup, it has to be leaner, more consolidated, less complex. It'd be exactly the same measures we do in Europe. The team around Ralph Franchett has started already and have a will to continue. Workforce development, for example, we reduced workforce by about 20,000 since 2019 already, and, yeah, more steps, unfortunately, need to come in order to improve the operating results. And I talked about an operative site is now, basically, we expect it close to break even, and we cannot rule out that we, even before one-offs, there's a significant risk that we end up in the negatives on the operative proportionate result this year.

Okay, thank you very much. I would piggyback on that one with a question that I received via email because Matthias Schmidt had technical issues. He's asking if we are considering of a kind of licensing our plans to other Chinese competitors here in Europe, or at least bring China models into Europe, our own ones.

Yeah. I mean, I assume you referred to the fact that, from today's perspective, we cannot secure the efficient allocation of four plants in Germany due to the reduction of the overall market in Europe. Basically, three elements. First, the overall market in Europe is not there where it was pre-COVID. Pre-COVID, we had 60 million cars. Now, we have 40 million cars. We have 25% market share. So, basically, we are missing 500,000 just for the overall market. Then Chinese competitors coming to Europe, and also a third element, we export less and less cars out of Europe into other regions. This has also something to do with the competitiveness here, which we have to improve. So these factors that we have, from today's perspective, capacity of more than 500,000 cars idle, and we cannot just secure the operation of these third-term plans. We discussed that in detail to the six-month earnings call. And now you ask, what can we do? So one element might be, look at the cars we don't have in Europe, for example, huge SUVs for Volkswagen as a successor for the Touareg. That might be a chance for a factory in Europe, but only if it's a Volkswagen nameplate on it. And also, we have to take into account, if we invest a car from China in a German plant, and it's equivalent, for example, it's a small SUV, and it's equivalent to the Tiguan, then we would have built one plant with a China-based Tiguan, but then that will subsidies and take volume away from our current Tiguan and put pressure on Wolfsburg. So we have to look at, is that really a chance? Is it a new segment? And is it new customers? Or is it always substitution? And the second, and we look at that. We look at potential chances, specifically investing in Europe cars in segments for Volkswagen, brand Volkswagen, we don't have. But I would not advise, let's put it that way. I would not advise building competitors in your own plant. They will take you, and they will take volume from yourself, and you make them stronger. So this is my position on potential investment of competitors in our plant. I would not advise this.

Yes, thank you very much. So we have two more colleagues lined up. I would continue with Madeleine Thibault from Les Echos. And I think with two calls, we should meet also our timeline regarding 11 o'clock. So Madeleine, please go ahead.

Yes, Thibault Madeleine, thank you for taking my question. Can you give us an overview? I would have three if I may. Can you give us an overview of the special effects or exceptional items you've booked over the last year? In the last two years, since 2024, it must be perhaps tens of billions. That would be interesting. On the BEV shares, the 40% you plan to achieve in 2029, now you're ahead of that target. What do you think should be an updated target for 2029 in Europe for the share of electric vehicles? And lastly, could you give us a figure of the workforce in China today? Thank you, Madeleine.

Special effects we booked so far this year. It's restructuring at Brand Group Co-op, Brand Group Progressive, also Trayton, about 400 million. And the biggest portion, obviously, is Porsche, a goodwill impairment of the 6.4. And we booked a write-down of assets of Volkswagen Anhui, and we booked some smaller elements from our restructuring programs, for example, like the sale of Osnabrück plant was also part of that. And that led to, after nine months, to restructuring of 8.7 billion euro, and including what we expect, for example, for early retirement scheme in the remainder of the year 2026, this will roughly add up to 10 billion. This is what we communicated so far, yeah. And in terms of 2025, it's actually the total number was roughly 8.8 billion on special effects, also restructuring. We had also the Porsche Goodwill impairment back then of $2.7 billion. We had the Porsche product realignment, which we communicated, of about $2 billion. So that ended, and basically, yeah, the total sum in full year 2025 was, the accept number was $8.8 billion. A BV share, 2029? Look, this is a very good question. I want to share with you some of the discussions we had. At the beginning of the year, we were rather worried that our BV share was not high enough and we would have to sell much more BVs and even support them in order to meet our CO2 targets. And then, all of a sudden, there was a huge incentive program from the German government, which we appreciate, and all of a sudden, the conflict of the Strait of Hormuz escalated, and prices went to the roof, and thus, and very important, our new electric car family were very, very received. And taking this together now, we achieved a BV share of now 40%. What we currently exactly do is look in the planning round, look for 2027, and towards 2030, which of that elements which pushed BV share in Europe are lasting and which will mitigate over time. And obviously, a very important factor is the cost of diesel and petrol. If it stays very high, that, from our perspective, will push PV share higher. But hopefully, at some stage, Sato-Formuz will be completely open again. Again, fuel prices would normalize, and that would, from our perspective, relieve some of the pressure and then also give some tailwind also to the combustion engine cars. But this is exactly the discussion we have so far, and we will give you an update also at the beginning of March when we communicated our number of workforce in China. Currently, it's about 70,000 in our 100% JVs and in our JVs that we operate together with SAIC and FAV.

Okay, so last but not least, Rachel, you would be the one closing the call today. Can you hear us?

Hi, good morning. Yes, I can hear you. Can you hear me?

Hello.

Yes, perfect. Go ahead. Hi, thanks for the question. I just wanted to ask again for some detail on the SSP, given how critical it's going to be for profitability in Europe. I understand the timeline is towards 2030. It's already been delayed. Can you give more concrete timeline and details on any challenges that you expect to face in achieving this?

Rachel, the SSP is a very important

toolkit for us, for next generation PVs,

and it will start in 2029, but that market availability with a certain volume would be then at 2030, and it's a toolkit which we set up throughout the whole group, from Volkswagen to Audi to Porsche, And with that, we really, from today's perspective, we want to achieve not only margin parity, but also cost parity with our combustion engine cars. And this is also how we derive the targets. They are derived from really what we know from China today. But obviously, we want to invest and implement that SSP in the major volume. We want to invest that in Europe to be ready for the European AI, but it's also highly flexible, so some of the components might also come from China, and this is where we stand. And it will be a highly competitive new toolkit for BVs with software from Rivian and product features and also in terms of battery. Battery will come from our power core with 50% of the volume, also localized. And in Spain, some will come also from Canada, from Ontario. And this is where we stand. In terms of margin parity, we are on the way already. As I said, there are some cost-down measures and improvement measures already coming in the current platforms, both in terms of cost, LFP battery, charging time, and others. But the major step-down will be SSP.

Okay, so I would say this concludes the call. Thank you for joining. I hope we could answer all your questions, as always. If you have any follow-ups, please reach out to us. And that leaves me just to say have a great day, stay safe, and talk to you soon. Bye.

Thanks very much for your time.

This concludes our conference call. Thank you for participating. You may now all disconnect. Have a nice day.