Operator : Good morning, and thank you for standing by. Welcome to the Volkswagen Group H1 2026 Results Conference Call. We will first take questions from investors and analysts, after a short break, followed by a separate Q&A session for members of the media. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dr. Sebastian Rudolph, Vice President, Global Group Communications, Volkswagen AG. Please go ahead.
Sebastian Rudolph : Thank you, and good morning, everyone. A warm welcome to the half year 2026 results call of Volkswagen Group. This is a joint call for both the media as well as investors and analysts, moderated by Rolf Woller, our Head of Group Treasury and IR; and myself, Sebastian Rudolph. With us today are Oliver Blume, our CEO of Volkswagen Group, and Arno Antlitz, our CFO and COO of Volkswagen Group. A few remarks before we start. You should have received the press release, the interim financial report and all other related materials, which were published this morning. If you do not have them yet, you can find all documents on our website or just drop us an e-mail. Now let me hand over to Rolf, the floor is yours.
Rolf Woller : Thank you, Sebastian. Good morning to everyone on the call. Thank you for joining us today. Let's have a look at our agenda. Oliver will start with the key developments of the first half year, and Arno will then take you through the half year financial results and the full year outlook for 2026. And I will hand it back to Oli who will guide you through the current status of the group target picture 2030. Following their presentations, we will first host a Q&A session for the investor and analyst community, which will be hosted by myself. And after the session and a short break, we will continue with the media Q&A moderated by Sebastian. Since our call will include forward-looking statements, the safe harbor language and other cautionary statements are on this slide, you should currently see on the screen 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. In the interest of time, I will not read it out loud. With that, I hand it over to Oli. Oli, please go ahead.
Oliver Blume : Thank you, Rolf, and good morning, and also a warm welcome to everyone on this call. Let me start by providing you with an overview of key developments of the first half year. We are operating, as you know, in a more than challenging environment. Major markets face weak consumer confidence, subdued demand and intense competition. In China, the market declined by 20% in half year 1, further increasing excess capacity. Everything in spite of over 500 new models arrived in half year 1 in the market. As a result, Chinese OEMs have sharply increased exports, adding pressure in Europe. U.S. tariffs create a significant burden and restrict international trade in our home market, regulatory requirements and high energy costs add further pressure. This affects not only Volkswagen but the European auto industry as a whole. We at Volkswagen are acting early on and decisively. Before I take you through our group target picture 2030, let me start where we stand after the first 6 months of 2026. In the environment described, group deliveries came in 6% lower at 4.1 million vehicles, but underlying demand for Volkswagen is stronger than the headline figures suggest. Europe remained positive, with deliveries up 3% in our home market. We thus retained the clear #1 position. North America returned to growth with volumes increasing 8% despite continued BEV weakness and spotted by the new models. South America also delivered solid growth of 9%. In China, deliveries declined 37% in quarter 2 and 26% in half year 1 reflecting very weak consumer sentiment, the end of subsidies and the ongoing model transition. In light of a weak NAV market in quarter 1, we started the year as #1 in China. After 6 months in 2026, we continue to be strongly positioned in the top 3. Excluding our China JVs, deliveries increased 2% year-on-year, the first 6 months; and by 3% in the second quarter stand-alone. Our renewed SUV portfolio is creating momentum across key markets. In North America, Tiguan and Atlas supported growth, while T-Cross and Audi Q3 continue to drive volumes in Europe. Even in China, new customer response to locally developed models such as Audi, E7X and Volkswagen ID.ERA 9X is encouraging, strengthening our confidence in the In China, for China strategy. We are not standing still. The ID.Cross is complementing the electric urban car family in Europe. The vehicle was just introduced to the market. Order intake remains strong and increased 4% year-on-year to 2.1 million vehicles in half year 1. As a result, the order book grew to around 1.1 million vehicles at the end of June, providing visibility of more than 3 months of sales. We are especially encouraged by the strong momentum in our BEV order book, which increased by 57% year-on-year to 330,000 vehicles. BEV now account for 31% of the European order book, up from 22% at year-end 2025. A major contributor is our new electric urban car fleet. For the first time, Volkswagen Group has a comprehensive and highly competitive offering in the entry-level BEV segment opening up a large customer group that we were previously unable to address effectively. The Volkswagen ID.Polo, Skoda Epiq and CUPRA Raval have already generated more than 70,000 orders within weeks of launch even before entry level variants become available. Together with the recently launched ID.Cross, this provides a strong foundation for future BEV growth and market share gains in Europe. This shows how our platform strategy is working. One platform shared among 3 brands across 4 models, unique cars and highly differentiated, yet about 80% shared parts produced together in 2 factories in Spain, overall, realizing synergies of more than EUR 600 million. Importantly, this will also put us in a better position to use the remaining gap to the CO2 targets in Europe. And in such demand environment, Volkswagen Group held up also financially. The group generated stable sales revenue of EUR 158 billion. Operating profit amounted to EUR 5.9 billion, corresponding to a 3.8% margin. Excluding restructuring costs and the ID.4 related write-off in the U.S., the margin reached 4.3%. The consistent implementation of our performance programs is increasingly visible in our results. Over the past years, these measures have enabled us to weather substantial market-related headwinds with a cumulative headwind in a double-digit billion euro range to date. At the same time, cash generation remained strong with EUR 3.2 billion automotive net cash flow in half year 1, up EUR 4.5 billion year-over-year. Net industrial liquidity amounted to EUR 32.7 billion. This is providing us with a solid base to stay successful in the market environment and to decisively push ahead with our group target picture. Looking at the results of our passenger car business, the operating profit increased from EUR 4.4 billion to EUR 4.8 billion in half year 1. This Brand Group Core, Volkswagen brand stayed firmly on the path of improved efficiency while simultaneously advancing the largest product campaign in its history. Brand Group Core margin, excluding special effects, improved to 5.9% in half year 1 2026. Brand Group Core Progressive increased results with improved performance in Europe, overweighting the headwinds in China and the U.S. In half year 2, the operating margin is expected to accelerate to 6% to 8%. Brand Group Progressive should benefit from product launches such as the new Q7, Q9 and RS5 models as well as continued cost work. At Porsche, we undertook a comprehensive restructuring and repositioning in 2025, including a sharper focus on our core business and expanded cost program. As forecast, the restructuring measures are beginning to gain traction with operating profit increasing to more than EUR 1 billion in the first half year 2026. On reported basis, results were up by 45% to a corresponding margin of 8%. With that, I hand over to Arno for a more detailed presentation of our financial results.
Arno Antlitz : Yes. Thank you, Oliver, and good morning, everyone. Ladies and gentlemen, the market environment has remained challenging in recent months, and pressure has intensified. The ongoing conflict in the Middle East continues to create volatility. In China, the overall market is down by 20%. Chinese competitors not only export their vehicles to Europe, but they also export competitive pressure. . In this environment, we continue to manage the situation with discipline while consistently advancing the implementation of our strategic initiatives. We continue ramping up our active new vehicle portfolio, both electric and combustion engine models. We continue to reduce investment spending and overhead costs while workforce reduction is progressing as planned. Automotive net cash flow was strong at EUR 3.2 billion in the first half of the year, EUR 4.5 billion above the first 6 months of 2025 and the announced sale of 51% of Everllence with expected proceeds of around EUR 7.4 billion is further evidence of our active portfolio management. But despite this progress, our operating margin is still not at the sustainable level at 3.8% after 6 months or 4.3% before special effects. Results clearly reflect the environment we are operating in and the challenges in our business model and an overly high cost structure. The 4% margin shows that the cost reductions currently agreed under the existing programs are not efficient in today's economic and competitive environment. In short, the half year results are another wake-up call for action. We must accelerate and broaden our efforts to lower our cost base structurally, generate adequate returns and safeguard the delivery on our financial ambitions. This requires structural and sustainable improvements across group improving vehicle cost structures without compromising product substance, reducing overhead costs, increasing plant efficiency and accelerating technology development and decision-making. Requisites are clear. It's gifts, we need substantially lower complexity and faster execution across our product build and technology platforms, our portfolio of participations and our leadership and decision-making structures. These are the areas addressed by the group target picture 2030 Oliver will present later. What matters now is swift and disciplined and consistent implementation. With that, let us dive straight into the rating and financial performance of the first half of the year. Vehicle sales totaled 4 million units in the first 6 months, 8% below the prior year level or 1% higher excluding the China joint ventures. Group sales revenue remained broadly stable on EUR 158 billion as growth in Financial Services offset lower revenue in passenger cars. The operating result came in to EUR 5.9 billion, 12% below half 1, 2025, corresponding to a margin of 3.8%. In Q2 alone, the margin stood at 4.2%. H1 results were burdened by special effects of around EUR 0.9 billion, equivalent to approximately 50 basis points of margin. Excluding these effects, operating profit reached EUR 6.9 billion and the operating margin was 4.3%, slightly below the midpoint of our full year outlook range. Profit before tax declined by 26% to EUR 4.8 billion in the first half of 2026, and this was driven by the lower operating result and a negative swing in our other financial results, mainly due to valuation effects and impairments on participations and shareholdings. Profit after tax decreased to EUR 3.1 billion. Automotive net cash flow increased to a solid EUR 3.2 billion compared with an outflow of EUR 1.4 billion in the prior year period. Excluding M&A, clean net cash flow increased to EUR 3.7 billion, and cash out for M&A amounted to EUR 0.4 billion. This includes EUR 0.9 billion for the instrument in Rivian, partially offset by EUR 0.5 billion cash inflow from trade disposal of stake in SINOTRUK. This development underlines our continued M&A discipline. Automotive net liquidity at the end of the quarter came in at EUR 1.8 billion -- came in at EUR 2.7 billion. Net cash flow of EUR 3.2 billion more than offset dividends to shareholders and hybrid bonds, interest payments totaling EUR 3.1 billion. Overall, automotive net liquidity remained very solid at EUR 32.7 billion at the end of June. Moving on to the performance of the divisions in the first 6 months of 2026. Passenger cars recorded an operating profit of EUR 4.8 billion, some 8% up on H1 2025 and corresponding to a margin of 4.1%. Commercial vehicles were impacted by costs related to restructuring and alignment measures booked in the first quarter. Supported by a stronger Q2, the operating result came in 24% lower year-on-year at EUR 0.9 billion. Financial Services delivered a robust performance with EUR 0.9 billion in operating profit roughly on par with prior year period. Looking at the profit bridge of the passenger car business area, volume and other had a negative impact of minus EUR 0.7 billion compared with the same period last year. Price mix had a negative impact of around minus EUR 1.6 billion. This was mainly due to higher incentive levels for electric vehicles and an unregulable regional and product mix. Product costs were slightly down by EUR 0.3 billion due to higher raw material costs and increased memory chips and logistics prices. Fixed cost and others had a positive effect of EUR 2 billion supported by improved overhead costs and significantly lower restructuring compared to last year. Fixed costs continue to be supported by further improvements of automotive overhead costs. Overhead costs were reduced by EUR 0.7 billion, supported by strict cost discipline across the organization. The overhead cost ratio improved by 20 basis points. The development of overhead costs was supported by the continued reduction of workforce which is progressing according to plan and is delivering tangible results across the group. Under the current agreement we cited in 2024 to reduce head count at Volkswagen AG by 35,000, including Audi, Porsche and carrier, we are planning to reduce head count by 50,000 in the German entities by 2030. Reduction refers to the manufacturing as well as the administrative part of our business in Germany. So far, roughly 21,000 employees have already left the company in Germany for the most part in the context of early retirement schemes. But despite all the progress made so far, SG&A costs remain a major central gap versus automotive peers and this gap amounts to roughly 30%. It's largely driven by the complexity of the group structure across all levels, creating a clear cost disadvantage. And sustainably closing this gap is essential to strengthen our financial robustness. Under the group target picture 2030, we aim to reduce overhead costs globally by around EUR 11 billion. Consistent execution would bring the overhead cost ratio in the Automotive division down to around 12% by 2030 from roughly 16% today. That 4 percentage point improvement would translate directly into a 4 percentage point margin uplift. Since personnel cost account roughly 60% of total overhead cost, closing the gap to competition would imply a further workforce reduction of around 50,000 employees in addition to the current program mostly in the administrative areas of the group worldwide. Turning to the development of the brand groups, the platforms as well as the financial services. Brand Group Core delivered a performance on last year's level in the first 6 months of 2026. Vehicle sales and sales revenue were up by 3% and 1%, respectively. Operating result came in broadly stable at EUR 3.6 billion and a margin of 4.9%. Brand Group Progressive reported market decline in sales by 8% and sales revenue by 10%, reflecting weaker volumes in China and the U.S. Nevertheless, operating result came in broadly stable compared to prior year period at EUR 1.1 billion. This corresponds to a margin of 3.8%, up by 50 basis points. Results in H1 2025 had been impacted by restructuring charges and higher costs related to U.S. tariffs which posted a smaller headwind results in the first half 2026. Despite the pronounced decline in vehicle sales, Porsche Automotive business delivered strongly improved financial results. Operating profit came in 45% higher year-on-year at EUR 1.2 billion, corresponding to a margin of 8%. Porsche will report half year results on July 29. Let's have a closer look at the brands in the Brand Group Core. Volkswagen got an operating margin of 32.4%, broadly on par with the prior year level. If adjusting for nonrecurring effects, operating margin stood at 3.8%. Skoda continues to show impressively what can be achieved in a highly competitive environment based on strong product and a competitive cost base. The operating margin of 8.5% in the first 6 months of 2026 give us confidence that we are on the right track. CARIAD sales revenue increased by 44% to EUR 0.8 billion, backed by increased volume of the 1.1 and 1.2 software stacks. Operating results improved by EUR 0.3 billion to minus EUR 0.9 million. PowerCo kept the operating results broadly stable despite the ongoing production ramp-up at the Salzgitter plant and continued construction works at the Valencia and St. Thomas sites. After a slow start to the year, industrial operations of Traton caught up in the second quarter. Overall sales revenue in H1 was slightly down on lower unit sales and operating result came in at EUR 0.9 billion, 24% below the prior year level and operating margin stood at 1.5%. Lower volumes, costs related to U.S. tariffs and special effects negatively impacted the results. The Financial Services business delivered a robust performance. Contract volumes increased by around 3% in the first half of the year. At the same time, residual value risk slightly increased. The credit loss ratio was broadly stable on a solid level and operating profit at EUR 0.9 billion was slightly down compared to the prior year period. Investments CapEx and R&D in the Automotive division were further reduced by EUR 1.5 billion to EUR 14.8 billion in the first half of the year. This corresponds to an investment ratio of 10.6%, 80 basis points below the level recorded in H1 2025. Going forward, we will focus our resources more consistently on the areas that matter most for the future competitiveness and value creation. At the same time, we will lose complexity in our product portfolio and variance, leverage group synergies more systematically and provide an asset-light approach, where appropriate, aiming for an investment ratio of around 9% in 2030. China's automotive market has come under increasingly stronger measures since the beginning of the year. Factors including charge changes in subsidy and tax policies, rising fuel price and ongoing price competition have impacted consumer confidence. In this weak market environment, our unit sales were 7% lower year-on-year at 0.9 million vehicles. At the same time, Volkswagen Group China continues its model offensive under the In China, for China strategy. To counter this, Volkswagen Group China intensifies its cost work and was able to compensate for parts of the pressure. As a result, the proportionate operating profit of our joint venture activities in China amounting to EUR 184 million in the first half of 2026. Before moving on to the outlook, let me briefly comment on the agreed sales of 51% in Everllence. The agreement with Bain Capital is a result of a highly competitive and transparent in process based on clearly defined criteria. The winning bid prevailed in a compelling combination of ambitious growth committed future investment in Everllence and an attractive valuation. The transaction is expected to generate proceeds of around EUR 7.4 billion for the Volkswagen Group. Beyond the financial benefits, this step further sharpened our focus on the automotive core business and support a more efficient allocation of capital. This brings me to the financial outlook for the full year 2026. Against the backdrop of development in the first half year, we now expect sales revenue to be up minus 3% below the previous year. At the same time, we continue to expect operating return on sales in the range between 4% and 5.5%. And building on a strong show in the first half year, we continue to expect automotive net cash flow to range between EUR 3 billion and EUR 6 billion and net liquidity in a bandwidth of EUR 32 billion to EUR 34 billion. Ladies and gentlemen, since the launch of Volkswagen 2.0 program, the world has changed fundamentally. In this environment, it's not enough to just incrementally step up cost measures. We need a fundamental change in our business model with a pronounced step-up of structural and lasting improvements of cost competitiveness of our products in terms of overhead cost reduction and efficiency improvement in our plants and in terms of speed. And to achieve this, we must significantly reduce the complexity of our business or better of this company. Did we convince if we are able to simplify our business, we will become more agile in adapting to the world around us. These are the priorities we will list with determination over the coming months to achieve our long-term targets for 2030, group operating margin of 8% to 10%; automotive cash conversion of above 60%; and overhead cost ratio of 12%; and an investment ratio of around 9%. Together, these targets from a comprehensive framework to lead the Volkswagen Group for the successful future. With that, I hand back to Oliver.
Oliver Blume : Yes. Thank you very much, Arno. 3 years ago, we set out an ambitious transformation agenda. Until today, we have demonstrated tangible progress across all key pillars of our strategy. In short, progress delivered, major operational targets achieved, promises kept. Products, software and technologies in the regions and with our performance programs. But reality is that the automotive industry is faced with fundamental challenges, geopolitics, trade barriers, regulatory pressure, adverse demand trends technological disruption and precedented competitive intensity. These factors are reshaping our industry across all major regions. And they are not cyclical, they are increasingly structural. The measures that were adequate in the past are no longer allowing us to achieve our goals. Therefore, the group target picture 2030 represents the next phase of our transformation. This is not just a cost reduction program. It is a comprehensive plan with a holistic approach to make folks who are faster, more resilient, more competitive and even more innovative. The program compromises 12 fields of action clustered into 3 main areas: technology, performance, group steering. Let me highlight some of the initiatives that we have decided and started to implement. Covering key vehicle segments with fewer models thereby creating significant value for our customers. That is what we want to achieve. To that end, we will streamline our model lineup by up to 50%. This allows us to consolidate our development and production resources, focus our expenditure on even higher level innovation, equipment and quality of our cars, to reduce segment overlaps and substitution. By doing so, reduce complexity and cost and ultimately increase the volume and profit per model. Every remaining model shall lead its segment in driving and technology experience. At the same time, we have looked through all parts and supplies and found that we could reduce the number of available equipment options by up to 75% without compromising product substance. Implementation has already started, depending on the component complexity that will be reduced by up to 90%, for example, in seats, orions, windscreens and similar parts. Customers will continue to have a meaningful choice. We are cutting what is not ordered and we scaled for customer demand. A key element of our technology strategy is the consolidation of platforms. Electric electronic architectures and software stacks into 2 regional technology ecosystems, one for the Western Hemisphere and one for the Eastern Hemisphere. This allows us to tailor solutions to local customer requirements while reducing completely, eliminating duplicate developments and improving investment efficiency. At the same time, we maintain our ambition of technology leadership by focusing resources on scalable technologies and selective partnerships such as Rivian and CARIZON. And we are fully on track in all these activities. The goal is not to create more technology ecosystems but fewer and stronger ones. The objective is simple, maximize synergies globally by localizing where it creates customer value. In the West, we built on Rivian partnership in the RV Tech joint venture; in the East on China electric electronic architecture and CARIZON ecosystem. We, therefore, intend to make full use of our presence to fill market gaps, for example, serving the global south from our China hub. As the only international player, we are able to act like a Chinese OEM in terms of technology and cost base, going global from China. By further streamlining our technical capacities, we are aligning our production network to the changed market environment. Our cost base will be aligned with production volume of 9 million units per year. Prior to COVID pandemic, the company was invested for production capacity of approximately 12 million vehicles per year. During the past year, we have already made significant progress with a reduction of 2 million units. We are currently discussing a further reduction of technical capacities by more than 500,000 vehicles in each China and Europe. Our target is to lower the breakeven point to a production level of less than 8 million units. Operational excellence is about tackling the structural cost and complexity embedded across the group. We are focusing on 6 key levers: R&D, procurement, production, quality, sales and overhead. Through greater standardization, increased scale effects, simpler processes and higher productivity, we aim to reduce structural costs while improving speed and competitiveness. Sometimes, the simple things have the greatest impact, simplifying chemical specifications and purchasing processes, consequently use AI to support the development process or in product testing, implement use of shared services across the group and eliminate consequently dual work within the organization. And we need to consequently look for growth opportunities in parallel. First, in regions, for example, in North America, India and the global South are tomorrow's growth for us. Second, market instruments. Fleet business, used cars, after sales and the insurance business offer growth opportunities we want to further exploit for Volkswagen. And third, technologies. We are moving this icily into future-oriented fields, including circular economy, SoCs, energy storage or robotics. This is how we are turning our engineering strength into new sources of value creation and competitiveness. With constant implementation across all action fields of our group target picture, we are safeguarding achievement of our 2030 ambition and operating return on sales of 8% to 20% by 2030. And over the past months, the program has been developed and detailed. The setup is in place. Objectives are defined and initial milestones have been established. In the months ahead, measures will be further specified across all 12 initiatives with implementing already -- implementation already started in parallel. The entire process is supported by close tracking at group and brand level complemented by regular reporting to the Board. You will have noted that while the announced initiatives are already far reaching, not all potential fields of action are finally agreed. We are in constructive dialogue and plan to obtain outstanding approvals as fast as possible. Let me conclude the presentation with 3 main messages. First, the underlying demand picture is stronger than headline deliveries suggest as we continue our model offensive. Excluding China, vehicle deliveries increased by 2%. Our enhanced model lineup is resonating well with customers. The European order book rose to more than 1 million vehicles with particular strength in battery electric vehicles. It's a strong early momentum of the electric urban car family and customer response to our newly launched China models like ID.ERA 9X or E7X from Audi are encouraging. Second, despite a highly challenging environment, particularly in China, the group held well with regards to financial performance in the first half year. We continue to act from a position of strength with a very solid net liquidity position and strong net cash generation, and we confirm the full year outlook for operating margin, net cash flow and net liquidity. Third, we have launched a truly unparalleled far-reaching corporate program, our group target picture of 2030. And we have got our foot on the gas pedal. We are aligning our products, technologies and structures to succeed in the new market realities. We are reducing complexity, accelerating execution, improving competitiveness and allocating capital more selectively, and we are sizing growth opportunities in key future fields. In short, while market positions remain extremely tough, we act early on and we see encouraging progress in the areas that matter most. This gives us conviction to successfully master the next phase of Volkswagen's transformation. With that, I hand back to Rolf.
Rolf Woller : Thank you, Oli. Thank you, Arno. And with this, we conclude the prepared remarks, and let us now move to the Q&A session. Looking here at the queue, I have the first question coming from Tim Rokossa from Deutsche Bank. Tim, please go ahead.
Tim Rokossa : Yes. Thank you very much. So first of all, Oli, Arno, Rolf, I think I speak for the capital markets in general, when I say that we appreciate that you, again, of this pressure start the 2030 program despite having just announced the other one. It would be nice if it wasn't needed, but in this world, it clearly is. To my questions. The first 1 is the discussions in the press often focus on plant closures when we discussed about the 2030 plan. I agree that a plant closure would obviously be a pretty powerful message. But at the same time, I don't think it's fell to assume that, that would be possible post or pre-2030 and we are discussing about a 2030 plan here. So could you just confirm that plant closures are not needed to achieve the 2030 targets that you also just spoke about? And secondly, not easy with you guys, given all of the complexity, but I think drilling it down to the key issues, one of the key issue for the group is Audi right now. And I had the question again this morning from a lot of investors, if Audi with this model initiative isn't working, will it ever? And what do you say to people when you think about this? When should we get it hooked up again for Audi?
Oliver Blume : Yes, Tim, thanks for your remarks and your questions. And first of all, I think we have built during the last 3 years, a foundation for everything to come. And now we are a more stable situation in terms of product, technology also in regions and especially the performance programs which helps us to compensate the major parts of the headwinds we have faced. And now we are entering in the next phase of our transformation with our target picture 2030. We have the need because of the risk scenario, and we are acting early. And to say it very clear, this is not only a cost reduction program. It's a comprehensive program which touches all fields of our company. It's the deepest and the most innovative program we have ever implemented in the history of Volkswagen Group. And so for us, it's very motivating that we have already started with a lot of fields. One part, of course, is to adapting furthermore our capacities. And we were able to reduce already during the last 2 years to reduce EUR 2 million of capacities with around 7 plant closures we have done. And now we have a work to do of over 500,000 clients also in Europe. And on the one hand side, in our existing plants, especially in Germany, we have models in production and we need these models. And so it's not realistic to talk about plant closures up to the end of this decade on the one hand side. On the other side, to close a plant is also the last solution. First, we will focus on competitiveness and this in a European context. And there, we have opportunities. And when I talk about intelligent solutions, we also can consider, for example, for a different industrial usage or opportunities also more in the future to pick some of our Volkswagen Group products from China to bring them in plants in Europe. But step by step, First focus is on competitiveness. And at the end, the last option would be to close a plant. We have done this during the last 2 years, in some cases. And this is always the consideration we have to take. Coming to Audi. The response from the market is very positive on the new product, especially RS5, Q7 or then the Q9 and this will bring momentum. We started 3 years ago, a deep restructuring in Audi. And so now we can see step-by-step that Audi will recover. And now with the new product momentum and everything to come, it's quite promising, and we think that will be possible.
Rolf Woller : Thank you, Tim. And we have the next question coming from Horst Schneider from Bank of America.
Horst Schneider : Yes. I hope you can hear me. The first question that I have relates to the guidance for this year. So you kept the operating margin guidance unchanged and that implies that H2 needs to be stronger than H1. So maybe a question for Arno. Arno, maybe you can explain us what is getting better exactly in H2? It doesn't seem to be volume. So it should be maybe price mix or it should be other line of costs. So maybe you can provide more details on that. Then maybe for Oli. Since you say you aim to reduce complexity of the group, do I get it right that this means also they want to accelerate disposals. So maybe you can provide here more details also on the time line, how quick they're going to come. And if they come, we want to do then with the liquidity that you increase by that? And the last one, of course, on restructuring. I know it's for you difficult to talk about that because in the end, you need the approval maybe also from the Works Council, and they probably also listen to this call. But maybe you can at least tell us what's the ambition on the time line. So by when can you basically, you think you can make an agreement? Or does it require, in the end, if it comes from bad to worse an AGM and that could basically extend the agreement to, I don't know, maybe even H1 '27.
Arno Antlitz : Yes. Horst, I'll take the first question. Yes, obviously, it implies a better second half of the year, but there are some factors that gives us tailwind. First and foremost, quickly Audi. There, we expect a strong improvement in margin in the second half based on the product momentum, both in terms of model mix, they just launched their RS models and S models, which are really well received by the customers with good margins. And last but not least, we will launch a new Q7 and then at the end of the year, also Q9, which will -- in some of the markets. So that should give momentum at Audi. And second, cost program, you saw the reduction on head count we achieved so far. I think we have 20,000 and we expect at least to end up with reduction 25,000, 26,000 at the end of the year. So this should give also continuous tailwind. Last but not least, I'll take the third question as well. From today's perspective, we don't expect major restructuring in the second half of the year so far. And we had some -- quite some restructuring in the first half, for example, discontinuing of the ID.4 in the U.S. And so these are the effects we -- based on that, we're confident that we achieve a margin in the corridor.
Horst Schneider : But in the end, Arno, you expect Q3 is always weak, you expect now a very strong Q4, right?
Arno Antlitz : Yes, exactly, as you know very well. Q3 is typically the quarter when we have the summer holidays in major German plants. So yes, as last year. And Audi expect a strong Q4.
Oliver Blume : And Horst, Oli speaking, coming to your second and third question. First of all, complexity. We are working on reducing complexity in terms of products, technologies, but also investment portfolio as we have done in the last weeks, which was Everllence. This was a very positive result. And all of this, and then we have further opportunities, as you know. First of all, safeguarding our liquidity position and having the stability but also safeguarding an attractive dividend on the one hand side. And further on, it depends a bit on the steps we will do with our investment portfolio. We will consider how we will deal with some other liquidity options. But early -- too early to predict. First of all, work has to be done. And then -- and the stability and offering opportunities also for our investors. And when you look to our cash flow situation, first half of this year, already a 5-point -- EUR 4.5 billion better than last year. That shows a stable situation. Also after the strong cash flow we have shown last year. And so we keep on working on safeguarding our stable situation on cash flow liquidity then step-by-step to decide. Restructuring, the major part of our program is not part of being to agree of the Supervisory Board. And that is already in an execution and in all cost positions. To the main deeper restructuring, there, we are executing the agreement we have done in '24 already. It's a 50,000- reduction of head count where 37,000 we have agreed contracts by our employees. It's well received. We are well on track. And in terms of the adoption of our production capacity, we are making good progress already EUR 2 million per year, we have already reduced. And there, you can see the speed only in 2 years, what we have done in the past, it wouldn't have been thinkable to come to this direction. And now we are entering in the next period of transformation. I think we will come to a conclusion agreement during this year. We started 2 weeks ago with the first overall predation in the Supervisory Board, and it's clear that there are some points to be discussed. In terms of plant utilization, what competitiveness means for our plants, especially in the European context and also for the overhead costs. There, we have set a clear benchmark where we want to go. And now we are working this out with all our brands, our organizations and region. What's possible in terms of head count adaption and on the other side, in terms of labor costs, and at the end the product in between both of them will be the adaption of our costs. So summing up, the major part of our target picture is already in execution, especially in terms of all the technologies, products and costs. and the part of the restructuring has to be discussed furthermore, especially with workers union and our Supervisory Board, and then we will take decisions during this year.
Rolf Woller : Thank you, Horst. And we are moving on in the queue to Jose Asumendi from JPMorgan. Jose, please go ahead. .
Jose Asumendi : A couple of questions, please. Oli, can you talk a little bit about the business model in China. I mean it's a difficult first half of the year. But obviously, you don't know what we have there to take down capacity, launch new vehicles, launch new products. Are you seeing signals of stabilization in the business model in China. Is this not a vote of confidence also when you're discussing with the unions that you're able to restructure the business and stabilize the business model in China, and this will have also -- as you bring these best practices into Europe or some of them at least, it will also help to improve the business in Europe, if you go about this, please? And second, Arno, when we think about the different cost measures, what do you think is the biggest cost bucket? You see a big difference in terms of the competitiveness. I think you mentioned several of them, but the biggest one for you stands out. And when you think about the restructuring cash outflow we should be expecting over the next years. Can you give us any signals, any guidance? Or maybe talk about liquidity and the sale of Everllence, how that is going to be helping to potentially fund outflows on a 3-year view.
Oliver Blume : Hose, let me start with your first question. The environment in China is clear. First half of this year, the market overall went down of more than 20%. We have over 150 competitors in the market, and there have been over 500 new model launches in the first half year, yes. And that shows the attention in terms of competitiveness in the market. In spite of this, we started in first quarter as a market leader and second quarter or half year under top 3. And this underlines the strong position of Volkswagen Group in China. We have done a huge restructuring during the last 3 years with our In China, for China business, with the engineering center the biggest one outside of Germany. We have brought to life our new electric electronic architecture and all the new products to start now on the market. Our intention is to launch over 30 models up to the end of next year. And the first market response is very positive. But this opens us other opportunities. I'm often asked, is it worth to invest in China? And my clear answer is, yes, It's, on the one hand side, China, it brings us on this technology level, and this cost level, we can see also our Chinese competition. But on the other side, it opens the same opportunities Chinese competitors are executing right now in other regions of the world. And for us, especially export opportunities to Southern Hemisphere, in Southeast Asia, Australia, India, South America and Africa, but also in Europe, where we are not present in some segments with products from Europe. We consider to bring our own products from China to Europe. And now this shows that we are the only international player who is in conditions to use all these low opportunities. What we have done in China our strength in core business in Europe. And on the other side, our corporations and businesses we are doing in the U.S. Combining this, this is a unique offer to the markets for the future.
Arno Antlitz : Yes, Jose, thanks for the question. From -- if I look at our business, the biggest advantage is clearly reducing overhead cost so far. And if you look at our business and Oliver mentioned it. We are rather complex in front of the customer with a lot of models, a lot of offers, but we are also very complex internally. A lot of layers, a lot of entities and this weighs on our costs and also makes us slow in decision-making. So I'm deeply convinced in simplifying our business. This is one of the biggest advantages and chances we have as a Volkswagen Group, become more leaner and more agile in adapting to the world around us. And also in terms of cost, we did an in-depth benchmark versus competition about SG&A and applied that to our overhead costs. And as you know, they are roughly EUR 45 billion today. And if we close the gap to competition, this is a chance of -- or an improvement of about EUR 10 billion to EUR 11 billion. And then we aim for overhead cost ratio from today 16% to 12%, which is a 4 percentage point improvement in an industry that makes only 4% to 5% to 6% to 7% margin. So this is a magnitude we see there. But don'get me wrong. We need to improve our other costs as well. We need to improve our material costs without sacrificing product substance, as Oliver mentioned. And we also need to improve the efficiency and productivity in the plants. The competition coming to Europe. Chinese competitions are building plants in Southern and Eastern Europe, and it's hard to compete with underutilized plants. So it's a comprehensive program that -- which addresses all the levels in the company. But clearly, the biggest advantage is reducing complexity and overhead cost. And in terms of restructuring, it's obviously too early to tell -- to give specific numbers. we need to wait and we have the detailed decisions and then come up with detailed figures on that. But what is very clear, when we look on a company with a net liquidity of more than EUR 30 billion, EUR 33 billion to EUR 34 billion. And the proceeds of Everllence will give us a further positive effects on that topic. We have a very solid balance sheet still. And we increased that robustness with a good cash flow first quarter, more than EUR 3 billion and we increased our outlook. So this is a company that will clearly be able to manage also the restructuring -- the potential restructuring measures.
Rolf Woller : Thank you, Jose. And we are moving on to Patrick Hummel from UBS. Patrick, please go ahead. .
Patrick Hummel : My first question to you, Arno. Regarding the 50,000 head count reduction or at least target picture that you painted. In the first wave, you've been using early retirement, which was, let's say, relatively straightforward and relatively low cost, this time, it seems to get more expensive. So I understand you can't give us any details, but is it fair to say that at least a significant share of the Everllence proceeds will be required for that restraint. And you said, Oli, before actually that you expect a deal with them to be reached by the end of this year. But Arno, you said no restructuring you currently foresee for the second half. That sounds a little bit like contradicting. Should we expect that incremental restructuring to be booked this year or not? And what would be the impact, if I put it all together on the dividend. Is it fair to assume a flattish dividend trend? Is that what you're targeting? Could we see a cut in dividend? Any color you can give on that? And the second one just on the implementation of that restructuring. The Chinese are gaining share in Europe at the speed of light. It feels every 2 to 3 months, they're gaining 1 percentage point of market share in Europe. So if the implementation of what you're trying to do here is skewed towards the back end of the decade, it might not even be fast enough. So what can you actually do to get those headcount-related savings sooner rather than later. And Oli, do you actually expect any support on the political front. It feels all very half-hearted so far on the Industrial Accelerator Act. It's not really banning Chinese cars from entering Europe. The plug-in hybrid tariffs that's under discussion. Are these instruments that you think will change this market share shift trends? Or is it just fair to say for as long as China as a market is weak, the Chinese companies will push as much as they can into Europe?
Arno Antlitz : Patrick, I take your first question and then I hand over to Oliver. First and foremost, on the topic of restructuring. Yes, we embarked on that on the first strategy we agreed on 2024 with the restructuring of 50,000 head count mainly in Germany in the indirect and direct areas, so administrative and manufacturing part of our business and we use for the most of the time early retirement schemes and they're there in place, but let's not forget, they varied on our margins and our results with EUR 400 million to EUR 500 million a year so far already. It's just not in the bridge because we spend every year roughly EUR 0.5 billion. So if you take out this restructuring fees, our operating business is even stronger. So the second wave is, as I explained, is a benchmark on a worldwide basis. And so the second wave of up to 50,000 is more in administrative side and on a worldwide basis. And it's really part -- I think it's too early. We have -- first, we have to identify where we want to reduce. On the other hand, there are also other potential. We are not looking for top actions per se. We are looking for a much better cost base and the structural reduction of our cost base to be more creative. So there might be also elements in the labor costs that will help us there. And so this is where we stand. And let me be very precise. What I have to say is in the 4% to 5.5% margin guidance and outlook, obviously, in this guidance is no restructuring incurred. So if we had to decide on restructuring in the second half, this is clear that that's not...
Oliver Blume : Patrick, coming to the second part of your question, how could be the politics be supportive? Let me go to 3 approaches. First of all, we have to do our homework. We have done it already in terms of products. They are competitive. They are attractive for our customers. Order intakes show this in spite of the competition we have faced right now and the deliveries also in Europe. What we have done furthermore is cost work, now reducing more and more of our costs and bringing there in a better positioning, earning more money with our products. But that's our homework. Second, we benefit from our China opportunities, yes? You can see us also as a China player. And we can do the same like the Chinese do and having the same opportunities, being competitive in terms of products, technologies and also costs also for experts. Then the third aspect in terms of politics. We need a level playing field, not more, not less. And in some areas, it's already working. The regulations on BEV is working. There we are competitive. Also in terms of pricing, where it's still not working are the plugging hybrids, for example. And what has to be done is the Made in Europe. And I think this will adapt the market. And I hope during the next month, the European politic which is part of the German politics will bring the European automotive market to a level playing field, which today does not exist. At the end, with our homework, we are doing right now and benefiting from the China business, I think we have the opportunities in Germany. But political -- the politics have to accelerate the upcoming decisions in terms of plug-in hybrids, for example, and Made in Europe strategy.
Patrick Hummel : And Oli, maybe a quick word on the implementation time line of this upcoming program. Is that a savings target that will only hit by 2030? Or is there a chance that we could hit that already in 2028, let's say?
Oliver Blume : Well, not only 2028. So I expect that the politics will react this year, yes. We have no time to lose. And that's a clear expectation from an industry leader. The level playing field has to be built in Europe. That should be a European industry interest to do so. And then from 2017 on, we will benefit from the current product portfolio and everything to come already and then step-by-step also with our Chinese opportunities. We are well prepared for everything to come, but the politics has to do the work, which we talked about.
Rolf Woller : Thank you, Patrick, and we are moving on in the queue to Mike Tyndall from HSBC. Mike, please go ahead. .
Michael Tyndall : I've got a few, if I can. Can we just talk a little bit about China as an export base. I think that story is changing because back in '24, it was China for China, in April, it was China to the global South, but we're now talking about China into Europe. Am I reading that right? And when will we see this tangibly happening? So that's question number one. The second question is just around I know that when you were initially looking at plans for Rosner brook, you're looking for alternative uses. I'm curious whether or not some of the people that approach to at that time said Osner brook doesn't fit, but we like havo, we like Emden. What's the potential for finding alternative uses for some of those German plants? And then the last one, a very quick one, just in terms of disposals. I just wondered if you can talk at all about Traton. TRATON, clearly having a pretty good run at this point in time. And I know you've sort of said before that you would like to reduce your stake. I wonder if you could just give us sort of an update on that.
Oliver Blume : Yes, Mike, that's correct that we started In China, for China. Then 3 years ago, still with different market conditions. But the advantage now is that we brought ourselves in the same competitive situations where many Chinese competitors are. So Volkswagen Group is a China player. And so with the changed market conditions that the market is going down, the margins are under pressure. This opens us for us the same what Chinese OEM are doing in terms of export. And the more it opens us opportunities we have never had in the past because of our cost structure and not having the right product for the Southern Hemisphere. But also for Europe, we can benefit in terms of our fleet products we have there in China, but also in terms of technologies, I'm thinking about autonomous driving. This could be an option and maybe also for our existing combustion engine product portfolio. So we have many, many opportunities, now also benefiting from engineering, from parts, we are producing there in China with our own organizations, processes where we can acknowledge, many, many advantages. Talking about the time line, we are implementing right now our experiences from China to Europe. In terms of products, it's need a bit of time we need to ramp up the current product portfolio in China. And I think it would be realistic in '28 with complete products, technologies maybe, but we have to do it step by step. Now we already launched the first models in the last months in China, many attractive products on our own platforms, the CSP platform entering in the market in China in '27, but this offers opportunities up to, I would agree realistically from '28. Talking about Osnabruck, there we are in very advanced negotiations with defense industry. That's not a secret. But we can't deep dive any further there. It's confidential, but we expect a decision during this year. Talking about other plans. First of all, as I said before, is European competitiveness. That's a headline. Then second step is, do we have usage for -- with other products? And then also usage in an industrial context. And therefore, also, we will check each plant where we have need for action, what opportunities we would have. And every plant has got different conditions. And so we have to develop a specific plan and that's what we are kicking off right now. We have, I think, very hard and deep work during the last 2 years to reduce capacities to 2 million cars a year. This is not a small part of capacity reduction and also the 50,000 of head count reduction we are doing, which is well on track. And now we are entering in the next phase, which has to be done to be more competitive as we are today.
Arno Antlitz : Yes. And in terms of triple grading in our target picture, it's clearly what we continue to say in the past, we want to stay a responsible shareholder with 75% plus 1 share. And we are on the way to that, then we are aware of the current share price performance, which reflects very good performance at TRATON and the strategic positive outlook and also the good work of the management team, but this is where we stand today. And we can only announce the next steps once we have decided on them. .
Rolf Woller : Thank you, and we are moving on. And Stephen is the next one, Stephen Reitman from Bernstein.
Stephen Reitman : I have a question about China again. You made roughly about EUR 200 million or so in the first half of the year and your guidance for the full year is basically EUR 200 million to EUR 600 million, so basically from flat to EUR 400 million. I just want to look at your -- how you're judging your progress so far. You talk about your -- the new models you've launched with Audi, the UNYX models such like in the models from Audi. What would be -- how would you judge how successful they are? What kind of volume numbers are you looking at? Because obviously, the figures we're seeing when we look on a monthly basis, registration is still very low. And there's also quite a lot of volatility, where sometimes they appear to have initially 1 month, which is quite good and then kind of tailing off, I think, again, and we've seen that with Audi model, the S5, but also now we're seeing other ones pick up a bit, but where would you be in your criteria for success given the fact that the volume seems to be very low relative to some of the launches that are -- or the models that we're seeing from the Chinese brands? And secondly, more a philosophical question about the expectation of change within the Volkswagen Group. It seems to me that probably the most -- one of most successful periods of change in terms of cost reduction and reorientation of the company happened but that really occurred when the company basically went into a loss, and it seemed that really you've reached the end of the road and that caused a situation maybe where you could actually make the changes. At the moment, your numbers, you say are not satisfactory, and I think most people would agree with that, but this still you're generating reasonable free cash flow, margins are still -- your guidance is still quite positive as well. Do you feel there's sufficient urgency, it's fully appreciated by all the parties that they need to make the sacrifices that you're seeking?
Oliver Blume : Yes. Maybe I can start with our model launches in China. Maybe Arno can add some aspects in terms of the financials. And then I would talk about if there is sufficient urgency what we are playing right now. About the China models. What we can say that the first response we are getting, first of all, media tests, the Audi Q5 was voted as the car of the year in China is very, very positive. In concrete, talking about the ERA 9X, we have over 10,000 deliveries right now since the launch, that's very, very positive. And also, the UNYX O7 with around 6,000. And we see a very positive opportunity with the UNYX O8 which is a product which starts with around RMB 200,000 and offering already our new electric electronic architecture. And the response on the Audi E7X, its also positive. We delivered over 4,000 units in June. And we are ranked among the top 10 -- top 3 in the range of RMB 300,000 level. So you can see in between the competition, which is by far, very, very strong. We are very well positioned and many more to come. Expecting now our first premium platform with the CSP we will launch in '27. There are opportunities. But we have the market conditions I talked before. And so we will use these opportunities also for exports. And then they're coming to higher volumes with the help of the export. Maybe Arno?
Arno Antlitz : In terms of financials, obviously, the guidance for this year is EUR 200 million to EUR 600 million proportional operative result. And going forward, it will depend on our plan to catch up market share in the electric segment. We are still a clear market leader in combustion engine. And we bring, as Oliver said, 20 new models this year, very attractive, both in terms of features but also in terms of cost and technology to the market then next year, again, 20 new models. And based on that, the team wants to achieve towards 2030 a share between 10% and 12%. And based on that, we gave our outlook some months ago that we want to achieve EUR 1.6 billion to EUR 2 billion proportionate operative result in 2030. And this is the way we need to go.
Oliver Blume : Coming, Stephen, to second part of your question, is there sufficient urgency recognized by all the stakeholders. You brought the comparison to the '90s, where Volkswagen Group was in the losses. And you can't compare the situation of the -- of today with the '90s. That's correct. When you look on the one hand side to the profit margins, our long-term average profit margins since the '90s was exactly on 4%. This year, our expectation is to be better than the average profit margin. We have seen since 1990 up today. But on the other side, this is not a guarantee. And the environment has never been as heavy as we are faced today. As I said before, we are able to compensate a double-digit billion euro year-by-year by our cost work, we have implemented already during the last 3 years. And that's heavy work to do this. Now without this, we would have been in a completely different situation right now. But when we look to the future, we have more and more risk coming. You know the pressure in China and the more than 150 competitors and all are coming to the market with a low cost positioning, and we have to face this position. And this means that we have to reduce even furthermore, if we want or not our cost position. and all stakeholders. And I can confirm this because we have done also and a belief about it, are aware that we are in this risk scenario, not only Volkswagen Group, the whole industry. But we are reacting now. That's maybe the difference comparing to others. We are after the first period of transformation, looking back to the last 3 years, and now we are entering already in the next phase. And then we have now to negotiate all the cornerstones of our plan of the target picture 2030. And I can confirm the major part of the program is already in execution, especially in terms of all the technologies, products and costs. and the second step of the restructuring has to be done. That's clear, but the urgency is recognized by all stakeholders.
Rolf Woller : Thank you, Stephen. And we have to hurry up a little bit given the time line. We have 2 remaining questions in the queue. And the first 1 comes from Christian Frenes from Goldman Sachs. .
Christian Frenes : I'll try to keep it brief. First of all, in terms of China stabilization, it sounds like that question has already been answered. It's 2028, you expect stabilization. I'm wondering, as we think about Audi specifically, which you also referenced earlier and the second half, and also 2027, should we expect stabilization in Audi within China when you think about operating profitability to happen before '28 already? And how do we think about that for the second half, for example? Because in Audi, obviously, the implication is for margin improvement in the second half overall. I'm just wondering what role Audi China plays within that? That's my first question.
Oliver Blume : Yes, Christian, only one comment to China. When I talk about 2028, I talk more about to benefit from the Chinese developments in other regions of the world. And it will start for some regions in the Southern Hemisphere already in '27, but in '28, I think we will be in full swing with all the product launches we will have had, especially in this year and next year. That's what I mean when I'm talking about 2028. It's not a stabilization. I think the stabilization starts right now with all the new products to come. While we are still stable in terms of our combustion engine business as market leader with over 22% of market share. And maybe, Arno, you can elaborate a bit the Audi situation and the margin in the second half and maybe talking about the residual values.
Arno Antlitz : No. I think we addressed Audi already and the tailwind basically from the product momentum. As we said, Audi is ramping up Q7, Q9 brand new and then also the model launches on the S and RS model bring headwind, they should really help Audi for the second half of the year. Obviously, Audi also embarked on a strategy to significantly reduce costs, specifically overhead cost, which should also be part of the much longer second half of the year. And also overall Audi and specifically part of the group what we haven't talked about so far, the successful ramp-up of BEVs weighs on our margin so far, but it's also a chance in terms of CO2 fines from today's perspective over the 3-year period, there might be also a financial chance in the second half of the year, but we need not to book any provisions for CO2 fines in Europe anymore. So these are the major effects. .
Christian Frenes : Okay. And then my second question is on restructuring, broadly speaking. You have -- I think you talked -- mentioned the EUR 8 million capacity goal longer term. Could you elaborate if you export from the global South, the China model, just thinking maybe, for example, Latin America, should we -- is this implying then that you would close capacity, presumably in China? And because you have capacity, obviously, in Latin America or how do we think about that? And also on the topic of closing factories. Obviously, you've had the Supervisory Board meeting. Is this topic over now? Or should there be more to come? And maybe a third point here. We've seen also a different model that Stellantis has talked about with basically partnering up with Chinese OEMs to share capacity. Is this also an option for you? Or is this not really a strategy?
Oliver Blume : Yes. Giving you some figures. We will adapt our cost structure on around 9 million cars that we think will be realistic in the next years, especially looking to 2030, also with our opportunities, we have in Southern Hemisphere I talked about. The intention is, but to bring down our breakeven situation and lower than EUR 8 million, not to have a margin there and a robustness at the EUR 9 million cost structure, under EUR 8 million the breakeven situation. In terms of adapting capacities, we have still the needs coming from over EUR 12 million a year. And we want to bring it down to EUR 9 million. We are already working on EUR 10 million. We were able to reduce EUR 2 million during the last 2 years. We have closed around 7 factories already. And looking ahead, that's what I said before. We will adapt capacities, but we also think in improving competitiveness of our plants and also thinking about a different use in an industry context. And then the last part of your question was if we are considering something like Stellantis, we have different conditions. We have the opportunities of our own business. We have built in China, and we don't need to think about other competitors to bring them in our plants. We have our own products there in China. And then there are opportunities and on the other side, also the need for a plant, we could do it, yes. And that's a major difference to all the other international players that we are a Chinese -- like all the other Chinese OEMs, a China player. And this we could use for export on the one hand side, but also for plant utilization in Europe.
Arno Antlitz : Christian, still one remark in Audi transparency. Knowing that Audi has their own conference call, next week, and we don't want to take too much information here or give too much information already there. We want to leave it to Jurgen wisberger, but you should expect that Audi takes down their guidance from 6% to 8% to 5% to 7%, which is still significant uplift from the first half. So all the measures and all the tailwind topics that they are in place. And also, rest assured, this 5% to 7% margin, which would be an uplift in the second quarter is also included in our group outlook for the full year.
Rolf Woller : Okay. In light of the time, I'm super sorry, Daniel and Philippe, I see you still in the queue, but we have to make a cut here on the analyst side and will without doing a break directly hand over to the media question session. Thank you for your understanding. And Daniel and Philippe, please reach out to the IR team, and we will make sure that all your questions will get answered.
Sebastian Rudolph : Okay. Thanks, Rolf, and we go right away in the media call as we have some English-speaking colleagues. We stick to English. Happy to get your questions and the first goes to Christina from Reuters. You could also speak in German though, but vice versa.
Christina Amann : Thanks for the first question. I was wondering on your elaboration, Oliver Blume, on Chinese cars for German plants. I understand the first step would be to import the cars. The second could be to produce them here. What does that mean for your development operations in Europe? And on the margin outlook, I'm a little bit wondering because the margin was so bad or the income was worse in the first half of the year. What is driving the optimism for the second half? What should really uplift the margin towards the end of the year? And do you have first visibility towards next year?
Oliver Blume : Okay. May I start with your first question in terms of China, China products. Of course, what I explained in the analyst call is that we are now in a very great situation as an international player benefiting from our Chinese achievements having products like Chinese competitors in terms of technology and cost, which brings us in a situation to the exports. Now first of all, to the Southern Hemisphere, where already Chinese OEMs are winning market shares. And this brings us in the same situation. In Europe, we would bring and would bring only products and segments, which are not invested with the European products. And so these exports won't inflate or won't have an impact on our European development, completely different cars. And this is in single segments. And you are right, we will do the step. First, export, then checking how's the response in the market. And we have already a good feeling what works looking to the Chinese competitors. But we will carefully plan in which segments we will enter. Then this might open also a opportunity to build 1 or 2 products there in European plants. Yes. And to elaborate more, the margin situation, Arno, I would like to hand over to you.
Arno Antlitz : Thank you very much for this question, Christina. I said, first and foremost, every business starts with the products. We see some product momentum at Audi also on the whole group. We talked about a very successful new urban electric car family, which I will elaborate on in a minute. The product momentum in Audi should drive margins there and see improved margins in the second half of the year. As I said before, the updated margin guidance would be 5% to 7%, which is significantly stronger than in the first half of the year, cost work. We will continue our cost work specifically on overhead costs, also on productivity in the plant. And hopefully, we see even first effects on the transformation program in 2026 already. As Oliver said, we don't wait. We started working already. And so there are 2 technical effects. Let me call them technical effects. One effect is we had restructuring burden of about EUR 1 billion in the first half of the year, which we, from today's perspective, don't foresee. And last but not least, we also booked CO2 provisions for not meeting the CO2 guidance, but with a very encouraging order intake of the new urban electric car family, we have already 70,000 orders on hand. Our renewed outlook for the 3-year period, it seems that we do not need to book this restructuring, this CO2 provisions in the second half of the year or even can we see some of the reversals. In all fairness, as you know, we -- the margin dilution effect of the electric cars ramping up will also be a headwind. But at least we see a compensation on the relief on the CO2 burdens.
Oliver Blume : And given you are adding 3 examples of the restructuring work we have implemented already during the last years. On the one hand side, you can see the progress in terms of overhead cost. You can see the progress of the restructuring we have done in Brand Group Core, not only on the products, but also on the results and especially at Porsche, where we have done a huge restructuring last year. And there you can see all the results. We have promised already last year on a profit margin level on 8% half year 1. And operating profit of 45% better than last year, yes. And there, you can mention already all the effects we have implemented last year or in the other years before for the other aspects. There are some arguments which will pay off now step by step.
Sebastian Rudolph : The next question goes to the Financial Times, Sebastian Ash, please. .
Sebastien Ash : I just had a couple of questions. The first one was about Chinese competition. I think you both mentioned the idea that Chinese manufacturers are exporting competitive pressures increasingly to Europe. I'm wondering whether you can elaborate on that point a little bit. How are you seeing that at this point in time? And how do you expect that to affect your exports in future? Is it going to be through prices? Or will it be harder to kind of sustain market share going forward? And yes, then secondly, I wanted to ask you a question about U.S. tariffs. In your forecast, you said it's based on the current tariff situation in international markets, I mean, overnight, we've had what seems like potentially significant change. I'm wondering whether that was factored into the forecast and then whether you have any thoughts on, yes, what the most recent announcements, what effect they could have on Volkswagen.
Oliver Blume : Sebastian, may I start with your first question and then I hand over to Arno to elaborate a bit adjacent on tariffs. Chinese competition in Europe, yes? And it's heavy, heavier than we expected some years before. The market share already is over 8% of Chinese OEMs in Europe and in some segments like the plug-in hybrids, which are not protected with tariffs right now, which has to be done. But hasn't been done in the past. There the market shares is already over 30%, yes? And so first of all, there has to be built a level playing field. That is a task for the European Union to establish quickly. And then the Chinese competitors are there because they have the pressure in their home market in China and export is the only opportunity to be successful. And therefore, we think even if we have a level playing field in Europe, we have faced this strong competition there. So that's the need for us to enter now in the second period of our transformation plan to reduce even more our costs beside of this, and that is the positive aspect is that our products are so attractive. We are by far market leader, for combustion engines. We are by far, a market leader for the electric cars. We have the strong order intake for our urban car family with over 70,000 orders only in the few weeks. We are the strongest position player in the BEV model, for example, the ŠKODA Elroq is #2 top model in Europe. And now with the promising new models to come, we have opportunities. Now on the 1 hand side, level playing field, politics, costs, our homework. And then to continue with our strong momentum we need. And then I think we could face a Chinese competition, but they are there. And that's the biggest risk for the whole European automotive industry now. And then I hand over to Arno for the tariffs.
Arno Antlitz : Yes. Sebastian, on the tariff side, as we communicated several times, so the tariff situation is really one of the factors besides the competition in China for premium OEMs and also the competitive pressure in Europe, Oliver elaborated on that we have to step up our restructuring efforts in order to stay competitive. And we still continue to calculate with a burden of EUR 4 billion to EUR 5 billion on a yearly basis, and that burden consists of basically the tariffs we pay. But let's not forget we also have a significant impact on the volume. First and foremost, we had to take out some of the entry-level models from Mexico that we export from Mexico to U.S. like tata or towers, which are not profitable anymore and also from Europe, we had to increase prices to at least partially offset the tariffs. Look, we are in an industry with 4% to 5% margin and we talk about 50% tariffs from Europe. So we increased prices. And so we have also lower exports from Europe to U.S., which also in turn puts pressure on plant utilization and the volumes in Europe. So -- and from today's perspective, we expect this burden to continue. And this is why it's so important that we make progress on the restructuring program we just discussed, both in terms of cost and in terms of capacity utilization and efficiency in our plants.
Sebastian Rudolph : Now we go to the -- Christian wuestner. .
Christian Wuestner : Two questions, if I may. The first would be on cash agreement on cost reduction that we saw this week. There was an agreement regarding the cost-cutting program even as talks will continue until Monday, it seems like they've reach an agreement, and there's been a lot of talk about this agreement being difficult for VW because it entails like I know significant concessions for the labor representatives in Stuttgart. And the question is to Oliver Blume, do you foresee any impact on VW and on the negotiations that you are having in Wolfsburg with cost-cutting program for the Volkswagen concern? And maybe is it an option for you to extend an employment guarantee to Audi and VW as well. I don't know, I'm just speculating. Could you elaborate a little bit on the Porsche effect? And the second would be just could you give some examples of which models -- concrete models you want to cut out of the portfolio in the group. Are there any models from fiat or CUPRA that you are cutting? Can you give some specific examples.
Oliver Blume : Yes. May I start with the Porsche situation. First of all, what is important from our group U.S. that we have agreed the profit margins we want to achieve in each brand and brand group in 2030. This is our guideline. And at the end, the situation of each brand is a bit specific. In terms of restructuring, there's a major restructuring at Porsche we have done last year. And in terms of overhead adaption, Porsche is doing a 2-step approach. The first step we have implemented already last year. And now they are entering in the second step. This is work in progress. They have presented this in the Supervisory Board this week, but there are still work to do. And so I can't go into any details. But from the group view, it's important at the end to achieve the margin corridor, which leads at the end to the margin we have as a target for the group published in between 8% and 10% profit margin in 2030. Talking about products, concrete products, first of all, to say what we want to do. We want to focus our expenditures on clear focus products to improve innovations, to improve technologies, to improve equipment and to improve quality for the single product. Then to achieve higher volume with a more focused product and with this, at the end, to achieve a higher profit margin per product. That's the intention there. And we know from today that we have substitutions in some segments in between the brands. We have a high number of derivatives. And there, we will cut at first with the derivatives. And then we will come to a number of products, which still will be by far higher than what we see at the competition. But for us, it will be major reduction of up to 50% of our product. But where we will start are the derivatives. And there, we have the plan up to 2035. That's a longer progress because our current portfolio currently in production and in the market. And then step-by-step, we will clean it up and reduce complexity. And there, it's too early to predict. We have clear ideas where we want to tackle, where we have substitution between the bread -- but today, I want to address some concrete products. But at the end, the customer spend will benefit. We will benefit in terms of profit margin. And then at the end, also the investors will benefit from higher profit margins.
Sebastian Rudolph : Then we go to the Handelsblatt and Lazar Backovic, please. .
Lazar Backovic : I have 2 questions. First to Oliver Blume and the second one to Arno Antlitz. Oliver, following up on the question of Christiaan Miskin. I mean, could you imagine offering extending employment guarantees at Volkswagen AG. Or would that be uncomfortable with your group restructuring plans. That would be interesting to know not only in the light of Porsche, but yes, if you just imagine, doing so. And the second question would be to Arno, it's a question on the proceeds from the Everllence transaction. How should investors think about the use of those funds? Should they primarily expect a stronger automotive cash flow? Or will be a significant portion of that needed for finance restructuring measures such as, I don't know, programs for upsilon program, I would say, and transformation costs. That would be also interesting to know the share of how you use the money from the Everllence transaction.
Oliver Blume : Yes, let me start with the first question. It's too early to talk about employment guarantee. We know the situation we are faced with a huge risk scenario, especially in Europe being faced with the Chinese competitors. And so we will do it step by step. 2 weeks ago, we have been, for the first time in the Supervisory Board to present the overall transformation plan and with our group target picture. There are some points to elaborate and to discuss furthermore. And this -- one of these points are the adaption of overheads. And there, we are deep diving now into brands in our subsidiaries, blocks in the regions. And at the end, it will be a combination in terms of overhead adaption and labor costs. And at the end, we have to talk about how to deal. And what you have seen in '24 already where we came to a very positive agreement at the end, which we are executing right now, making good progress. And so we will enter in the next phase of transformation, having done all the analysis and then to talk about the conditions. And there, it's too early to talk about employment guarantees. And Arno, maybe you can pick the second part of the question.
Arno Antlitz : Yes. Lazar, in principle, it's also I have to say it's too early to talk about the restructuring -- potential restructuring book because we have to decide on the measures first. But in terms of situation of the group, I mentioned before, we have a net liquidity end of EUR 32 billion, which is a solid balance sheet and process from Everllence will further increase this net liquidity. Obviously, depending on when we close the deal. Currently, we have signing -- so-called signing and the proceeds we get when we close the deal. And then we really need to decide on restructuring measures, but we also look at minimizing restructuring measures for obvious reasons because it's also money that is outflowing, and so we try to optimize that as well. But what we can say from today's perspective, there will be restructuring efforts and measures incurred, and we can finance this restructuring, which is also a strong message to the market.
Sebastian Rudolph : The next question goes to Burkin William, please. .
Burkin William : I just had a question on asset disposals. There was a statement -- there's a line in your statement after the Supervisory Board meeting about focusing on automobiles. Does that mean that Ducati is up for sale and when you might start a sales process for that company, which is hugely successful in Wolfsburg and would be attractive assets for many people, I think.
Oliver Blume : Okay. We do not enter right now in the details of the plan. We haven't reached an overall agreement to our restructuring plan. What we are checking, of course, is our investment portfolio. As we talked about right now about Everllence, and also, we always think about how we will develop our brands. Do we need an investor or something like this. But right now, we do not enter in any details because we haven't done right now an external information on this internally. . We are doing information frequently for our management, for our employees, but also for our labor representatives. But in details, we are still not in conditions. Two weeks ago, we started our first overall presentation and then step by step up to the moment when we have an overall agreement we will do an external communication of the whole group target picture 2030.
Sebastian Rudolph : Then we have Christophe Kapczynski from Welt.
Christophe Kapczynski : Regarding politics, you didn't mention the phasing out of ICEs, the plan of the European Union. You just said that you are optimistic that there will be no fines in the years to come. Isn't it that high on your mind anymore that there needs to be a change in this relation concerning phasing out ICEs by 2030.
Oliver Blume : Yes. On the one hand side, we are well prepared with our product portfolio, which I already mentioned in terms of deliveries. We can see this year and also the order intakes, which are very promising, which brings us to a situation to being able to manage the current CO2 regulations. But looking further to 2030, I think there is still need for reaction. And there, we are aiming for a more flexible averaging what they implemented in between '25 and '27. If not the whole industry would be affected. And we have to achieve at the end, a regulation, which is linked to the real market development. Also, we are very successful right now. We have a best market share of around 20% or a bit more than 20% in Europe, but by far, not what is now in the regulations in 2030. And this has to be worked out. Now we have some brands which are on a higher level like Porsche, for example, who's very successful in terms of electrification, which is higher than 30%. And when you add the plug-in hybrids is over 50% in Europe already, but this is linked towards to the successful Porsche electrification strategy. But overall, in average, we are still only on a level of around 20%, and we are by far market leader. Therefore, when you're a market leader, you should expect that you have no problem with CO2. And with the current regulations in 2030, we have still problems. And so we need the averaging, which has to be done by the European Union.
Arno Antlitz : Christophe, I would like to confirm what all you just said when I was referring to the CO2 topic, as Oliver said, it's '25 to '27 this period, the significant step down in 2030 and beyond will put burden on our balance sheet because from that perspective, we need to sell more electric cars than the customers will accept or would like to buy naturally. So this would be still a burden, and we need to discuss this 2030 step, as Oliver mentioned.
Sebastian Rudolph : We have time for 3 more questions, starting with Paulina Vuminghausen from zutshi.
Paulina Vuminghausen : Mr. Blume, first, regarding to the group target picture. You have said that you expect to hit significant progress on this by the end of the year. Could you elaborate and overrate on that? And isn't that an overly optimistic assumption given the resistance you are facing. .
Oliver Blume : Yes. We elaborated a complete group target picture during the last months with our management Board and with very clear positions, clear answers what has to be done in Volkswagen Group. Now you know about the foundation we have led during the last year, which brought us in a stable situation. And our financial figures show in terms, especially comparing the competition that we are still in a stable situation, but this is not a guarantee for the future in the overall environment. And once again, this is not a Volkswagen crisis. It is an industry crisis where we are faced because of China. The market went down and the Chinese competitors in Europe, the shrink market in Europe, the tariffs, the regulations we talked about, and that's the industry crisis. And Volkswagen is doing quite well in this industry, but only because we laid the foundation during the last years. And now working from this foundation, we are entering into the next period of transformation, our target picture 2030. And we are already executing. The major part of the program, we do not need any agreement from our Supervisory Board, especially in terms of what we are we doing in product in technologies, what we are doing in engineering costs, what we are doing in material costs, sales costs and so on. Now there are many files -- we are already working. But there are some points which has to be agreed in the Supervisory Board. And that's my expectation that we will come to a conclusion during next year as soon as possible. What we do not have is time. And we want to accelerate also these open topics, but the major part is already in a ramping-up period. And you can see our activities already and our expectation for the end of this year that we announced that our results will be over last year. And this is a result of our efforts we implemented during the last years.
Sebastian Rudolph : The second last question goes to Wall Street Journal and Stephen Wilmot, please. .
Stephen Wilmot : Firstly, I also ask about the 8% to 10% margin target. Where does this come from, given that it's a number that Volkswagen hasn't achieved in decades. Is it as a result of your benchmarking exercise? It seems more in line with targets that you get from premium players, whereas Volkswagen is 75% or so volume, more mass market brands. So just if you could talk through how you think about that target, which is obviously underpinning a lot of what's going on at the moment. And the second thing was in terms of your China product push, the results so far, I think you said 6,000 or so sales so far, the UNYX 7, typically, the Chinese brands are reporting sort of 10,000-plus sales in their first sales month when they do these launches, there's a huge emphasis on the initial sales push. We haven't really seen that at Volkswagen halfway. Can you just talk through how your seeing in those initial results. Are you targeting a more greater ramp-up than your Chinese peers would normally do? Or can you just speak to the kind of, I guess, slightly low figures that we're seeing from Volkswagen halfway of the initial push.
Arno Antlitz : Stephen, I'll take the first question on the margin target. Technically, yes, I could say it's derived from benchmarks where typically other OEMs in this industry want to be at the end of the decade. But more importantly, it's -- if you look at ourselves, we need a robust level of earnings and a robust level of productivity in this uncertain environment. If you shoot only for 4%, then something goes wrong or there's tariffs included here or there are some decisions there, you're under pressure. And we want to achieve and we are motivated and committed to achieve a margin target of 8% in order to much -- be much more robust to be able to invest also in innovation in the future. And it's also possible. We talk not only about a program that reduces costs or reduce some of the models is a fundamental change of our business where we invent technology, we streamlined the model range, but we take out significant level of complexity out of our company and we want to streamline our company not only in terms of cost, but also in terms of also on speed of decision-making. So it's derived from competitive benchmarks. It's necessary in order to be -- to move robustly into the future, and it's achievable if we implement our transformation program, consequently and with speed.
Oliver Blume : Coming to the sales figures in China. You always have to look at the market and the competition. Starting with the ERA, the ERA I talked about that we have delivered already over 10,000 units and the ERA is #1 in the market of mid-range full-size SUVs, number one. Are the figures as high as we used to see them years ago in China? No, but that's about that we have over 150 competitors there in the market. And for us, the orientation is to be on the top of the market. A second example is the Audi E7X, which is above the top 3 in the market. And when you look to the UNYX O7, that's correct that we have delivered or -- orders placed because we entered in the market by the end of May of 6,000 units. It's successful. But there we have the situation, we have still only a small number of dealerships and dealer network. And we have to expend to come to higher numbers, but it was a very positive start also to compare with the competition. And there always to differentiate between the situation we've seen with low competition in the last decades in China and now with a very high competition. And there, we have to be successful. That's 1 part. And the other part then benefiting from these models also for other regions of the world. It's now the new China thinking where we have unique opportunities as an international player being -- or having a big footprint in China.
Sebastian Rudolph : Then we take the last one for today as an over time question from Capital.
Unidentified Analyst : Two questions. In fact, first, you were talking a lot about China, but I still don't fully get where your confidence comes from. So is it still the perspective to get back to EUR 1.5 billion of profit in the forthcoming years. And will that only come from this next part perspective, you cited. And you also mentioned the condition and the situation in the Chinese market overall I heard eavesdropping on weekend. And also, he was speaking about the market as being root. So is that realistic to compare yourself with the Chinese players as the Chinese players are saying themselves that they are in a difficult situation in the moment. So then you come back to this perspective of EUR 1.5 billion to EUR 2 billion profits from China in the coming years? And the second question, you also made the comparison to the situation in the '90s of the Volkswagen Group then and said it's not comparable at all because on the one hand, you are at now in terms of profitability. And in the other hand, the market conditions are less than they were. But nevertheless, can you learn something from how the situation was solved back then?
Arno Antlitz : I'll take the first question. Look, when I said about the target or the ambition we just communicated some weeks ago in China. They obviously depend on the successful ramp-up of our new energy vehicles, which some of them we mentioned already like the ERA, others, they have to still being ramped up throughout this year and next year. We bring in total 20 new models this year, next year. Obviously, it depends on the recovery of the overall market. And then our potential market that we want to achieve at the end of the decade of 10% to 12% because then we -- obviously, we want to keep the -- our market share in the combustion engine, but the combustion engine market will go down and with these 20 new models this year and 20 new models next year in the new energy vehicle segment, we want to regain share to 10% to 12%, and this then all factors into the roughly EUR 1.5 billion to EUR 2 billion. . And obviously, depending on overall situation and hopefully depending on the overall market, but this is basically factored in this plan. So the key element is the successful ramp-up of our -- In China, for China to develop new energy vehicles with very good product substance and a much better cost base, which gives us then this contributions towards the end of 2030.
Oliver Blume : And coming to your second part of the question, always, you can learn from the past and what our colleagues have done in the '90s was a great, great work. The conditions were different, but they focused on cost reductions, for example, material cost reductions initiated with senior Lopez. And Mr. Pierce focused on the right product. And the main deficit had been on products and costs. . And on the other side, there was a regular competition in the market, not as tough as today, and you have been in growing markets in this period. The situation today is different. The business is more complex, technologies are more complex. Our group is much bigger than it used to be in the '90s. And we are in an environment where we, on the one hand side, have a lot of financial headwinds, double-digit billion euros we have to compensate what we are doing already. We wouldn't have this headwind, we would have been in a completely different situation right now. We have a very tough competition only from China, over 150 new companies entering into the market, what we can mention already in Europe also. Then we have the trade barriers. We have the regulation and so on, but we have to face them. And what we have done in the last years, we built a foundation for Volkswagen Group with all the restructurings we have done. We brought ourselves now in a strong position in terms of products, technologies and also the software strategy will help us in the future. We have the battery business. We need to manage the transformation. And then we can link also to some achievements from the '90s, especially when I look to the material cost. There's a huge need for us to prove. And there, for example, we can pick some effects they have done in the '90s, but you can't compare the situation because the environment is completely different and complex and even more and more challenging.
Sebastian Rudolph : And with this, I say thank you to Oliver Blume and Arno Antlitz for all the answers and all the information. Also to my colleague, Rolf. We're at the end of this call. I wish you a good day, a good weekend, and see you soon. Bye-bye. .
Operator : This concludes today's conference call. Thank you for participating. You may now disconnect.