Earnings call transcript: Volkswagen Q4 2024 sees profit dip, steady revenue

Volkswagen AG’s fourth-quarter 2024 earnings call revealed a mixed financial performance, with the company reporting a slight increase in revenue but a significant drop in profit. Despite these results, the company’s stock showed a moderate decline in the immediate aftermath of the earnings release. According to InvestingPro data, the company maintains a strong financial health score of 2.71 (rated as GOOD), suggesting resilience despite current challenges. The company continues to navigate challenges in key markets while maintaining its leadership in Europe.

Key Takeaways

• Volkswagen’s revenue increased by 1% year-over-year to €325 billion.
• Operating profit fell by 15% to €19.1 billion, with a 31% decline in profit after tax.
• The company delivered 745,000 battery electric vehicles in 2024, a 3% decrease from the previous year.
• Volkswagen maintained its market leadership in Europe, despite a challenging market in China.
• The company announced a proposed dividend of €6.36 per preference share.

Company Performance

Volkswagen AG reported a slight increase in revenue for the fourth quarter of 2024, reaching €325 billion, up 1% compared to the previous year. Despite this growth, the company’s operating profit decreased by 15% to €19.1 billion, and profit after tax fell by 31% to €12.4 billion. The decline in profitability was attributed to restructuring expenses and challenges in key markets, particularly China, where sales dropped by 10%.

Financial Highlights

• Revenue: €325 billion (+1% YoY)
• Operating profit: €19.1 billion (-15% YoY)
• Profit after tax: €12.4 billion (-31% YoY)
• Operating margin: 5.9%
• Proposed dividend: €6.36 per preference share

Earnings vs. Forecast

Volkswagen’s earnings per share (EPS) for the fourth quarter came in at 0.3145, slightly above the forecast of 0.31. The revenue matched the forecast at €476.53 million. The minor EPS beat suggests the company met market expectations without significant surprises.

Market Reaction

Following the earnings release, Volkswagen’s stock experienced a 1.32% decline, with the price dropping from €1.51 to €1.49. This movement reflects a cautious market sentiment, likely influenced by the decline in profit and challenges in the Chinese market. InvestingPro analysis indicates the stock is currently trading near its 52-week low, with RSI suggesting oversold territory. The company appears undervalued based on InvestingPro’s Fair Value analysis, trading at an attractive P/E ratio of 4.67. Discover more insights and 12 additional ProTips with an InvestingPro subscription.

Outlook & Guidance

Looking ahead, Volkswagen projects revenue growth of up to 5% in 2025, with an operating return on sales between 5.5% and 6.5%. This outlook aligns with the company’s recent revenue growth of 4.24% and positive analyst expectations. InvestingPro forecasts suggest net income growth this year, supporting the company’s strategic initiatives. The company plans to focus on cost reductions and productivity improvements, aiming for €4 billion in net cost savings in the medium term. Access the comprehensive Pro Research Report for detailed analysis of Volkswagen’s growth strategy and market position. Volkswagen expects improvements in the Chinese market starting in 2026.

Executive Commentary

CEO Oliver Blumer emphasized the company’s focus on cost and investment discipline, stating, "We are placing a specific focus on cost and investment discipline to ensure sustainable profitability, growth, and competitiveness." CFO Arnaud Anzitz acknowledged the financial outlook’s challenges, remarking, "We cannot be entirely satisfied with this financial outlook."

Risks and Challenges

• Continued sales decline in the Chinese market, impacting overall performance.
• Restructuring expenses and workforce reductions could affect operations and morale.
• Competitive pressures in the electric vehicle market from both established and new entrants.
• Potential regulatory changes in key markets, particularly concerning emissions.
• Macroeconomic uncertainties, including supply chain disruptions and inflationary pressures.

Q&A

During the earnings call, analysts inquired about Volkswagen’s strategy for addressing the sales decline in China and its plans for expanding electric vehicle offerings. Executives highlighted ongoing discussions with European regulators on CO2 regulations and reiterated their commitment to electrification and cost reduction initiatives.

Full transcript - Vow ASA (VOW) Q4 2024:

Conference Moderator, Volkswagen AG: Hello, ladies and gentlemen, and welcome to the Investor and Analyst Conference Call of Volkswagen AG. At this time, all participants have been placed on a listen only mode. Let me now turn the floor over to Roy Waller.

Roy Waller, Investor Relations, Volkswagen AG: Thank you very much. Good morning, good afternoon or good evening, everyone, from where you have dialed in. And a warm welcome to the Volkswagen Group Investor Relations and Analyst Call twenty twenty four. With me today, we have Oliver Blumer, our CEO and Arnaud Anzitz, our CFO, COO. The presentation is structured in three parts.

First, Ollie will provide a brief overview and highlight the key strategic milestones achieved in 2024. He will be followed by Arno, who will guide us through the financials of 2024 and provides us with the financial outlook for 2025. Finally, Ollie will provide us with a strategic outlook for 2025 before we enter the Q and A session. Before we start, let me provide a few remarks. You should have received the press release, the annual report and other related materials, all of which were published early this morning.

If you haven’t received them, you can find all related documents on our website. In case of any issues, give us a call or drop us an email and we will send them straight to you. As a reminder, and as always, the safe harbor language and other cautionary statements on Page two of our presentation, which will govern today’s presentation. I would like to encourage you to read the disclaimer carefully and in full, since all forward looking statements are qualified by this language. In order to maximize the time we have for the presentation and the Q and A, I will not read it loud to you.

And with that and any further ado, I hand over to Ollie. Ollie, the floor is yours.

Oliver Blumer, CEO, Volkswagen AG: Thank you, Rolf. And also from my side, Ewan, welcome to everyone on the call. After our annual media conference. We have held in Wroosburg, our headquarter. 2024 was the year of a major strategic decisions for Volkswagen Group and all this in a rapidly changing environment.

We have faced weak demand in Europe, rising trade barriers, challenging industrial framework conditions in our domestic market, fierce price competition, especially in China and at the same time, the need to invest powerfully in the future. Volkswagen Group has not allowed those to slow it down. On the contrary, we have set a decisive course for 2024, and we drove change forward sustainably along our group wide top 10 program and even gone further. In 2024, we have achieved the goals we set ourselves. Let us have a look on some of our key achievements in the last year.

2024 marked a year with a comprehensive model offensive. We have been renewing our main volume models from Volkswagen, Skoda, Cupra and many highlights from Audi and Porsche. In total, we launched more than 30 new models to the markets across our group. We have sharpened the designs, once again emphasized our brand identities and measurably improved the quality of our products and services well received in the markets. And we are rewarded with the great feedback beside of our customers also from the trade press.

This proves we are right on track. In China, our new strategy makes us fit for the opportunities and the challenges in the world’s largest car market and much more competitive. With new strong regional tech partners along with key differentiating technologies, the launch of our innovation hub in Hefe accelerating development time to China speed, reverse cost structures allowing us to match local competition and new product strategy fully tailored to our Chinese customers. Unlike many other manufacturers, we continue to earn money in China, thanks to our strong position in the combustion engine business, an important factor in the most competitive and agile market. This allows us to continue to invest in new models and technologies and enhance our competitiveness.

North America remains key to the Volkswagen Group’s growth strategy. With our investments in the region and in strategic partnerships, we are sending a clear signal for our ambition to grow in new market segments in this region. The revival of heritage brand Scout allows us to enter the attractive pickup and rugged SUV business with highly flexible drivetrain options. Meanwhile, we have received almost 80,000 orders with prepayments. In 2024, we reached major milestones for a global software strategy.

We have realigned our software activities and strengthened the team with new partners. Together with Xiaoping for China and our new OS partner Rivian for the other regions of the world, we are developing the electronic architectures and software solutions of the automotive future. Carriers will focus on the further developed and central digital services, autonomous driving, infotainment, cloud services and data processing and backend solutions. In collaboration with Carrier, we are also putting the responsibility and control over the software where it belongs with our brands. Last but not definitely not least, the future Volkswagen agreement is a foundation for an economically success future of our German operations and Volkswagen AG in particular, a milestone in rebuilding competitive and future proof structures in the long term.

Reducing over capacities in Germany, lowering labor costs, enhancing productivity and achieving competitive plant costs, these are the cornerstones of the agreement. Adherence to the agreed productivity targets is reviewed quarterly. This is how we ensure that the agreements made are met. Negotiations were tough, but we achieved a fair result and effective for our medium term strategic targets. Anno will provide more details later in the presentation.

Despite considerable challenges and restructuring work, we were able to achieve almost EUR $325,000,000,000 in group revenue and EUR 19,500,000,000.0 in operating profits. These are solid results in a challenging global environment. The fact that we have achieved them in a phase of restructuring with considerable cost headwinds proves our resilience and our will to shape the future. With our robust balance sheet and net liquidity, we are well prepared for the New Year. This financial stability gives us a necessary leeway to continue investing in the future and pursue our strategic goals.

Based on these results, we propose a dividend of EUR 6.36 per preference share to the annual general meeting in May. This corresponds to a payout of 30% of net profit. Our product renewal is starting to pay off with a relaunch of more than 30 models across all brands. We closed 2024 with a strong 2,500,000 deliveries in the fourth quarter. ’9 million vehicles delivered means that we kept our global market share.

Incoming orders in Western Europe increased in the fourth quarter by around 128,000 units and stood at around 800,000 units. Incoming orders in December once again accelerated significantly compared to the previous year and increased by almost 90,000 vehicles. Incoming orders from ’24 as a whole were therefore a good 16% up to the previous year, mainly because of our attractive new product range, which is becoming increasingly available to the markets. At the December, the order backlog in Europe stood at a very healthy level of around 850,000 units. Deliveries in Europe were stable and Volkswagen Group remains the market leader for both combustion engines and electric vehicles.

The increase in deliveries of electric vehicles in particular had a positive impact in the final quarter, which were almost 20% higher than in the same quarter of the previous year. Our activities in North America recorded strong growth of 6% with the Volkswagen brand even growing by 18% in the region. This is an important first step towards a more robust global presence and an excellent result from our team there. All in, we almost compensated for the communicated and anticipated decline of sales in China in an intense competitive environment. Despite the weakness of the German electric vehicle market, we kept our share of battery electric vehicles stable in 2024.

In total, we delivered 745,000 battery electric vehicles to customers worldwide in 2024, about 3% less than ’23. In addition, plug in hybrid sales were up by 5% to 270,000 units. And we expect strong growth in 2025 to a battery electric vehicle share of 10% to 14% globally. Key drivers will be the latest successful product launches, including the ID. Seven Tourer, the entry level of Skoda Aerog as well as the premium and luxury segment vehicles, Porsche Ima Khan and Audi Q6 e tron.

Not to forget the all new Audi A6 e tron. Our upgraded model line is very well received in the markets as evidenced by the latest order intake in Western Europe, which is up by almost 50% year to date. Battery electric vehicles represent more than 20% of our European order book. All over, we got off to a promising start towards a full year target. And after the first two months, our battery electric vehicle share in Western Europe has been increasing to more than 18%, strongly up from 9% in quarter one in 2024.

It has doubled. I would now like to hand over to Anno for a detailed analysis of our financial performance.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes. Thank you, Oliver, and a good morning to everyone from my side too. Ladies and gentlemen, in 2024, we took important strategic decisions and achieved important strategic milestones. With the progress we have made, we have consistently driven forward the transformation of our company and laid the foundations for making the Volkswagen Group even more competitive and financially robust. I would like to thank all employees who have contributed to the success.

The market environment in 2024 was truly challenging. Against that backdrop, we delivered a decent overall result. Vehicle sales in 2024 totaled 9,000,000 units, 3% below the previous year’s figure. Excluding our joint venture activities in China, sales were on par with the previous year at 6,300,000 vehicles. Sales revenue rose by 1% to around EUR $325,000,000,000.

Operating profit fell by 15% to EUR 19,100,000,000.0. The corresponding operating margin was 5.9%. Operating result was burdened by costs for the ongoing renewal of our product range in an increase of fixed cost and considerable restructuring expenses totaling about EUR 3,000,000,000. Non operating items in total, including positives, had a negative impact of EUR 2,600,000,000.0 on earnings. Before these one offs, we achieved an operating result of EUR 21,700,000,000.0 and a margin of 6.7%.

Profit after tax was 31% lower and came in at EUR 12,400,000,000.0. This was due to a significant decline in the financial result, which was driven by a lower equity result of our Chinese joint ventures. In addition, we wrote down the remaining net carrying amounts of the equity investment and the loan receivables from Northwold after the opening of the creditor protection proceedings. In this basis, we propose a dividend of per preferred share and per ordinary share to the annual general meeting. The dividend proposal is 30% lower year on year and corresponds to a payout ratio of around 30%.

This is in line with our communicated dividend policy and a clear sign that our shareholders can rely on what we promise also in demanding times. At EUR 5,000,000,000, the net cash flow in the Automotive division exceeded our updated forecast of around EUR 2,000,000,000 in September and was in line with our original expectation of EUR 4,500,000,000.0 to EUR 6,500,000,000.0. This was to a large extent to another strong working capital management at the end of the year and the subsequently strong fourth quarter with a net cash flow of around EUR 1,700,000,000.0. Excluding M and A effects and diesel related payments, the clean net cash flow totaled EUR 7,100,000,000.0. This net cash flow includes payments totaling EUR 2,300,000,000.0 in connection with the acquisition of the stake in and the establishment of the joint venture with Rivian.

Net liquidity in the Automotive division continues to stay on a solid level at the end of twenty twenty four. At billion, it remained solidly above our target of 10% of group sales revenue. Let’s have a look at our reporting segments. Passenger Cars achieved an operating result of EUR 11,400,000,000.0. The operating margin stood at 5.3%, one point four percentage points below the previous year’s level.

The Heavy Commercial Vehicles continued its strong trend. They were able to further increase their operating results to EUR 4,200,000,000.0. The return on sales stood at 9.1%. Financial Services division achieved an operating result of EUR 3,100,000,000.0, which corresponds to a decline of 18% compared to the previous year. Looking at the bridge for our Passenger Car segment, volume price and mix effect had a slightly positive impact of EUR 300,000,000.0.

A positive EUR 1,400,000,000.0 is related to volume effects. The negative mix effect is due to the decline in vehicle sales at Porsche and Audi in the full year and the limited availability of V six, V eight engines at Audi in Q1 and H1. Price effects were slightly negative in 2024 with EUR 500,000,000.0. We achieved sustained positive effects from list price increases, but these effects could not fully compensate for higher discounts, particularly for electric vehicles in Europe and U. S.

The pricing trend stabilized throughout the year, helped by great new model launches by all brands in the second half. The non recurrence of the negative valuation effects in 2023, primarily from the valuation of commodity contracts, led to a significant positive effect. Product costs had a slightly positive impact of EUR 200,000,000.0 on earnings. The main negative driver of the Passenger Car segment’s earnings performance was a significant increase in fixed costs over EUR 8,000,000,000. Drivers were higher amortization of research and development of about EUR 2,000,000,000, around EUR 2,000,000,000 resulting from higher depreciation from CapEx spend in previous years, certain increase in indirect personnel costs resulting from a tariff agreement in 2022, And finally, the aforementioned expenses for restructuring measures had a negative impact on earnings of about EUR 2,000,000,000 in the Automotive EBIT bridge.

The trend towards an increase in overhead costs in the Automotive division continued in 2024 with a further increase of EUR 2,700,000,000.0. Either personnel costs as a result of collective wage increases from 2022 contributed significantly to the increase over the last two years. In addition, the expansion of our activities in the battery business, the establishment of Scout in The U. S. And the ramp up of the fully consolidated operating units in China led to an increase of EUR 700,000,000.0.

1 thing is clear, in order to ensure the robustness of Volkswagen in a difficult market environment, we must counteract this development decisively. We have therefore launched extensive initiatives across all brand groups and brands to increase efficiency and productivity and to establish competitive cost structures, which I will discuss later. Within the Passenger Car segment, the Brand Group core recorded a slight sales growth of 2% to EUR 140,000,000,000. The operating result came in at EUR 7,000,000,000, 4 percent below the previous year. The margin of BrandCo cost stood at 5%.

Margin of Brandfolkswagen came in at 2.9, again underlying the urgent need for restructuring. Skoda achieved an impressive 8.3%, showing what can be achieved based on Volkswagen Group platforms at a competitive cost base. Sales revenue for Brand Group Progressive was 8% below the previous year’s level. Operating profit fell to EUR 3,900,000,000.0, corresponding to a margin of 6%. This was largely to the announced phasing out of production at the plant in Brussels and residual value effects of minus EUR 700,000,000.0.

Adjusted for these two effects, the margin would have been at a solid level of over 9%. The Brand Group Sports Luxury closed the financial year with an operating margin of 14.5%, four point one percentage points below the previous year’s figure. We made significant progress in restructuring the Volkswagen brand with future Volkswagen agreement, which consists of three components: a new wage agreement structural measures to reduce overcapacity in Germany and the reduction of the workforce at the German sites. An important component is the new collective wage agreement for the Volkswagen AG companies with the following core elements. The collective agreed wage increase of more than 5% over 2025 and 2026 will be suspended until 02/1930 with effect from 2027 onwards and new renumeration system with an overall 6% reduction in the collectively agreed salary will come into force.

Overall, it means that the increase in personnel expenses set out in our planning will be curbed by a total of around EUR 1,500,000,000.0. The agreement also provides for an adjustment of technical production capacity in Germany. Overall, technical capacity will be reduced by around 730,000 units by 2029. Initial effects are expected from the discontinuation of production in Dresden in 2026 and Osnabruck in mid-twenty twenty seven, as well as the relocation of The Gulf to Beauvola. With the reduction from four to two lines in Wolfsburg and one line in Zwicker, major steps will follow until 2028.

Clear targets and milestone have been set for each plant to improve productivity and factory costs, and these are reviewed on a quarterly basis. The bundle of measures in complemented by the necessary reduction of workforce at Volkswagen’s German sites by 35,000 until 2,030, of which around 30,000 will be at Volkswagen AG. Around two thirds of these are expected to be achieved by utilizing a demographic curve, which is through retirement and early retirement schemes. The reduction of more than half of these jobs has already been contractually agreed. The hiring freeze remains in place.

Ladies and gentlemen, the Buter Volkswagen agreement provides a decisive prerequisite for making Volkswagen AG and its businesses in Germany competitive and profitable on a sustainable basis. However, the agreement we reached just before Christmas marks not the end of this process. It’s just the beginning of it. The real work starts now. Only by consistently implementing the agreed bundles of measures over the course of the next five years, Volkswagen AG will realize the necessary net cost effects of over EUR 4,000,000,000 in the medium term.

Carrier recorded a significant increase in license income to its business model and the successful launch of the 1.2 software. Sales rose accordingly by 23% to around EUR 1,300,000,000.0. At EUR 2,400,000,000.0, the operating loss was nevertheless roughly on par with previous year. The reported net cash flow was minus EUR 2,500,000,000.0, and as in the previous year, carried benefited from an intra group tax refund totaling EUR 1,100,000,000.0. The earnings performance of our battery business was characterized by the ongoing ramp up of production capacities, particularly in Salzqueta and Valencia.

This together with some restructuring burden led to a significant increase in the operating loss to minus EUR 1,100,000,000.0. In conjunction with the increased investment volume, this resulted in a negative net cash flow of EUR 1,900,000,000.0. Treson continued its positive momentum. Sales revenue were up 1% and benefited from positive market and product mix as well as better unit price realization despite a slight decrease in unit sales. Drayton again delivered a strong profitability of 9.1%, driven by increased ARPU and an improved cost structure.

Net cash flow at EUR 2,500,000,000.0 reflects this improved operating performance and has helped to delever further. Overall, we are very pleased with the trading performance. We are fully aware that the low free float of the trading share is an obstacle for many investors to invest, and we continue to be open for our next step to increase the free float at the right time. It goes without saying that Volkswagen will remain a responsible and committed shareholder and will continue to hold 25% plus one share over the medium term. OX1 Group Mobility recorded a slight increase in contract volume of 3% in the financial year.

As expected, the operating result in the Financial Service division fell to around EUR 3,100,000,000.0 despite higher volumes in 2024. The continued normalization of used car prices and inverted yield curve and an increase in risk costs had a negative impact on earnings. In addition, the division recorded a negative valuation effect of around EUR 200,000,000 from the deconsolidation of Fovey Bank Russia. Expenditures on CapEx and R and D in the Automotive division increased by around 5% overall to EUR 37,900,000,000.0 in 2024. This corresponds to 14.3% of the division sales revenue and is at the upper end of the forecasted range.

The upfront investments remain at a high level due to the considerable upfront expenditures in the Battery and Software divisions and the implementation of our regional strategies. We continue to assume that capital expenditure will have peaked in 2024. We expect a decline in 2025 financial year, which would continue in subsequent years. In the twenty twenty five to twenty twenty nine planning round, we expect investment spend to total EUR 165,000,000,000, EUR 15 billion less than the prior year twenty twenty four to twenty twenty eight planning round. We aim to achieve this by consistently utilizing synergies in the group and within the Brand Group’s more efficient R and D processes and structures, as well as facts from the joint venture with Rivian.

Adjustments to the reporting logic from January 2025 onwards will lead among other things to a more precise closure of the Automotive division sales revenue. In mathematical terms, this will lead to a lower investment ratio, namely by 130 basis points to 30% in the financial year 2024. Based on the adjusted reporting logic, we expect the investment ratio in the Automotive division to reduce to between 1213% in 2025 and around to 10% in 2027. As expected, the proportionate operating result of our joint ventures activities in China came in at EUR 1,700,000,000.0 in the 2024 financial year. In a highly competitive market environment, we found a healthy compromise between profitability and volume.

As a result, deliveries in China fell by 10% and market share by two percentage points. Earnings were also negatively impacted by high expenses in connection with the expansion of our local development activities and upfront expenditures for the upcoming renewal of the model portfolio. Over the next two years, we will be focusing on the development and market launch of new local models that we expect to be absolutely competitive in terms of design, technology and cost. Against this backdrop, we expect earnings in China to decline this year again between EUR 500,000,000.0 and EUR 1,000,000,000 before stabilizing from the end of twenty twenty five onwards and showing a clearly positive trend in the coming years. This brings me to the financial outlook for 2025 financial year.

We expect a significant tailwind from our revamped model portfolio of fascinating cars and a slightly positive volume trend in the markets outside China. We expect the implementation of future Volkswagen and continued cost discipline to have a significant positive impact on the cost side. On the other hand, the expansion of PV volumes, particularly in Europe, as well as the ramp up cost of the new models and our battery activities will have a negative impact on our earnings in 2025. Overall, we expect the Volkswagen Group sales revenue to increase by up to 5%. The operating return on sales is expected to be in the range between 5.56.5% with a clearly weaker Q1 in terms of margin and subsequently cash flow.

This outlook does not include possible effects from introduction of or adjustment of tariffs, trade tariffs, any relaxation in the CO2 regulation in Europe or additional provisions in connection with further restructuring measures in the group. The investment ratio in the Automotive division is expected to be in the range of 12% to 13%. Automotive net cash flow should be in the range of EUR 2,000,000,000 to EUR 5,000,000,000. This includes cash outs of around EUR 2,000,000,000 in connection with the implementation of restructuring measures. And we expect net liquidity to be in the range of EUR 34,000,000,000 to EUR 37,000,000,000.

Ladies and gentlemen, we cannot be entirely satisfied with this financial outlook. It reflects the current challenges in the global economy and the industry that it’s in the midst of a fundamental transformation. We need to keep up our combustion vehicles technology technologically competitive, while investing in exciting electric models and software solutions. In order to be able to achieve this, it’s crucial to continue to offer highly attractive vehicles to our customers and at the same time, consistently reduce costs and increase profitability. This is exactly what we are focusing on in the coming months and years.

Thank you very much so far. And with that, I hand it back to Oliver.

Oliver Blumer, CEO, Volkswagen AG: Yes. Thank you very much, Anur. Then I will take over once again for a quick outlook. This solid results from a strong basis for our year 2025. ’20 ’20 ’5 will be the year in which the new power Volkswagen Group becomes tangible.

Because we have brought our company back into competitive shape in 2023 and 2024, we can now play our strengths again. For the year 2025, we have once again set ourselves an ambitious top 10 program with clear responsibilities and full transparency. ’25 is all about consistent cost management, attractive products and strengthening our presence in China and North America. We will make attractive offers over the entire life cycle of our cars. We will make our software strategy and our vehicle architecture even more resilient and continue to drive forward digitalization.

We are focusing on the implementation of a holistic battery strategy. And most importantly, we will do all this with a strong team and that will make especially the difference. Our product offensive continues in 2025, around 30 new models will be launched worldwide across all brands in all segments. We will be playing to our strengths, our products, fascinating vehicles with which we want to position ourselves at the forefront of the competition. Our customers can look forward to the new T Roc from Volkswagen, the new Audi Q3, the Lamborghini Temerario, high emotional nine eleven derivatives from Porsche and many more inspiring vehicles.

And we very much look forward to this year’s IAA in Munich, where we will present our new urban electric car family, our entry BEV models from Volkswagen, Skoda and Cupra. We are convinced that the future of mobility is electric, but we recognize that regions are adapting at different speeds, and we respect these wishes of our customers. Our brand portfolio across all drive variants has an answer to every customer demand and vision all regions. This flexibility is key to our success. Where it makes sense, we supplement our combustion engines with plug in hybrids.

It can also be an option to combine electric cars as a range extender. In China, we are already seeing that vehicles with this technology are in high demand. Another proof point is a strong demand for the range extender version of Scout in The U. S. We will enter the market with range extenders in Volkswagen Group models from 2026.

This gives us strategic leeway. In April, we will once again be a central part of the Shanghai Auto Show. At the group media night, our brands will present their strong local product innovation for the world’s largest automotive market. Important proof points for the stringent execution of our in China for China strategy is catching up in decisive technology fields like automated driving, enhancing speed and reducing cost and most importantly, launch our new product offensive, which will reach its full force in 2026 and 2027. All crucial milestones on our way to achieve a leading position in the era of intelligent connected vehicles.

Ladies and gentlemen, let me wrap it up at the end. In a demanding environment, we have delivered solid financial results even as we navigate significant restructuring costs. We have taken key decisions with our software strategy, our in China for China approach and with the future Volkswagen agreement. Further, we achieved important strategic milestones that will shape our future success. Our unparalleled model offensive in 2024 will continue into 2025 showcasing the new power of the Volkswagen Group.

We are placing a specific focus on cost and investment discipline to ensure sustainable profitability, growth and competitiveness. For the full year, we expect a robust financial performance underpinned by our competitive product portfolio and improved supply situation. With that, let’s start to the Q and A session and over to Rolf again.

Roy Waller, Investor Relations, Volkswagen AG: Thank you, Ollie. Thank you, Anil, for this comprehensive overview. And we will proceed now with the Q and A. And I should remind everyone who would like to ask a question to press 9. And also to withdraw his question or her question, it would be the same combination star nine.

And we start right away with the first question. Nine star. Nine star. Okay. So the other way around, I’m sorry.

It’s 9 to ask a question and to withdraw a question. With that, we start with Tim Rokossa from Deutsche Bank. Tim, please go ahead.

Tim Rokossa, Analyst, Deutsche Bank: Thank you very much, Ross. I seem to have hit the right combination of on the keyboard. Very good one. I have two questions. One probably to you, Ollie.

You are now in your third full year as a CEO. You addressed your priorities very strategically. You did products, partners, costs. Is it fair to assume that execution is next? Or are there other main priorities that you have to work through?

And if it is execution, traditional on the cost side rather weakness of VW, how do you make sure this time that it’s actually working beyond just a strong team that I know you care very much about, Ollie, but rather thinking about progress updates and consequences if those progress updates are not really fulfilling what you had expected them to do? And secondly, probably to you, Anno, I think if I want to pick out two aspects that stood out of a very strong result this morning, it would, A, be the free cash flow guide for 25%, can get some thoughts on why that is not improving earlier already. I know you’re very much focused on that. And B, the fact that you’re seeing a stronger start into the year in Q1. Why is that?

And will this require a very strong H2 bound? Or would Q2 already be something that is perhaps within the margin corridor? Thank you.

Oliver Blumer, CEO, Volkswagen AG: Yes, Tim, may I start with your question and take the opportunity for quick review. I’m looking back now to 2.5 very challenging years in the Volkswagen Group. And I think we have closed many construction sites. We have driven a huge restructuring process during the last two years. And now I think it’s up to accelerate on this basis.

We are full in plan with our programs and in many cases quicker than expected. And as you know, we have a lot of achievements during the last two years, having sharpened our structures, organizations and management teams, for example, the products in terms of product strategy, improved design, the concepts of our cars and the quality was very positive feedback from our customers and also from Flumu Media winning awards. Then with the product offensive bringing more discipline to the brands and fulfilling the timing of our start of production, Then the restructuring prices in carriers, which led to the new software platforms we were able to deliver last year with Porsche and Audi. We have built a software strategy also with our partners in China, Xiaoping and Rivian in The U. S.

Then our new China strategy, which is paying off step by step. And I’m very happy about the progress there. Also with our partnerships, Chaoping, Horizon Robotics, Thundersoft in terms of infotainment. The North American strategy was called well accepted. The new platforms we have designed and also a further advanced hybrid strategy.

And then last but not least, for example, the performance programs we have implemented. And the performance programs we are driving now since two years, we will continue to do so, led us to a profit margin of 5.9% before restructuring costs. And after, as Anno mentioned, we would have been in 6.7%. I think that’s solid. I think we can improve furthermore with our base we do have.

But looking at the headwinds we do have in China, pricing competition or the investments in the transformation and hedging in between the drivetrains, I think that tells the truth about our profit margin. I think looking to the future now, it’s all about to have a clear plan and you know how I am working and for me consequences is core. And we do it short term, mid term, long term. And we continue with the top 10 plan and having now connected the top 10 plan with a long term strategy. The top 10 yearly programs will be to execute the long term strategy, which is carefully worked out with all entities of the group.

What brings us what are we expecting in 2025? Overall, further improve our products, bringing over 30 new products again to our customers and overall costs. Now what we are mentioning right now is that we are perfectly prepared on the product side. And when we would be able to reduce our costs, I think we won’t be unbeatable. That’s up to us now.

We have it in our hands. And to your last part of the question is we do continuously reviewing our status, a reality check, and we have the opportunity to readjust and that’s part of the contract we have closed in Volkswagen and Audi and also in Porsche. And so I’m very, very confident. And as you know, it was just a consequence. We are driving our programs.

This will be the main part in this year bringing us in a better cost positioning, and then we are counting on our product momentum.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes, Tim. A question from for me. Free cash flow guidance, not improving yet. There are some technical effects. We expected EUR 2,000,000,000 restructuring outflow of cash flow in 2025 from the measures decided on in 2024.

We expect the investment to have peaked in 2024, but still on a high level in 2025. I come to that in a minute. And also the as you know, the proportion operative result of today is a Chinese dividend then of tomorrow and this is part of the cash flow. So also less about $1,000,000,000 what we saw on less Chinese proportion operative result and that obviously will help also an effect on 2025 on the cash flow. But the main effect is really, as you said, we are really focused on cash flow, on working capital management.

We achieved quite a good fourth quarter. As you can see, the teams did really a great job there. And the cash flow should improve towards 2027 as guided before. Why is that the case? Because we continue to guide for a reduction in anti CapEx combined 2027, ’10 percent.

And this should then drive our cash conversion rate and eventually also cash flow for 2027. So we are basically online on that path. And weaker Q1, yes, the main effect is really, I would say, overall a positive one. We expect a significant step up in the BEV mix. We looked at first quarter twenty twenty four was about, I think, 8% or 9%, nine % and we expect an 18% BEV mix in Q1 and that bev mix is already shown also in our order intake.

We need that to achieve our overall improvement on the bev mix worldwide and the figures I just gave you were Europe, Western Europe and they weigh heavily on our margin. As you know, the BVs are still margin dilutive. They improve over the time. First car with margin parity might be the ID2 in 2026, but for the time being, the best mix is margin dilutive. And so that has a significant effect.

And there are smaller effects like significant ramp up costs. I think Oliver mentioned 30 new models coming up in 2025. And there’s also a muted start in China for the one or the other brands. But the real reason for muted start is really a step up in the best mix quarter over quarter by basically doubling it.

Roy Waller, Investor Relations, Volkswagen AG: Thank you, Arnaud. And we continue with Mike Tyndall from HSBC. Mike?

Mike Tyndall, Analyst, HSBC: Yes. Hi, Mike Tyndall. Just a couple of questions, if I can. Anu, if I look at the guide, basically the midpoint is $20,000,000,000 of operating profit, which is up $500,000,000 year on year. But there were $2,600,000,000 of one offs in last year, which in theory don’t repeat.

I know that bev mix is going to be a headwind, but I think previously you’d said it was about $1,500,000,000 So I guess the question to me is, what are the other headwinds there that kind of holding things back? And then the second question just around pricing development in Q4 that was positive. It’s certainly a surprise to me. I assume that’s related to the new model cadence. How sustainable is that going through 2025 in terms of should we be expecting continued positive price in 2025?

Thanks.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes. Looking into 2025, I mean, if you want to go through a virtual EBIT bridge, I don’t want to be too precise there. But basically, we expect volume price mix more or less to be stable, but that means that we have to fully compensate in this bucket volume price mix for the basically, yes, 50 percent increase in BV share, in BV mix in 2025, which I said they have been margin dilutive and the step up in Europe is even higher. We come from 13% something. We have to significantly step up more towards 2020 or beyond.

And so this we have to compensate with the great new models, which are much better in pricing. Obviously, for example, look at Audi, they had a run out of some models, which were nearly eight, nine years in the market and they bring great new models. So this is one effect. We shouldn’t expect too much from ForEx because we are basically hedged. We increased the hedge accounting.

So most of the commodity hedges on the hedge accounting, we shouldn’t expect too much on the product cost side. And on the fixed cost side, there were several effects. First and foremost, we significantly want to drive down fixed cost, but there since we did had quite some amortization in the last years, we should expect some higher depreciation on that bucket. And so on that basically explains the EBIT bridge and the expectation of the EUR 20,000,000,000 you just mentioned for 2025.

Stephen Reitman, Analyst, Bernstein: Got it.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Thank you.

Tim Rokossa, Analyst, Deutsche Bank: In terms of

Arnaud Anzitz, CFO/COO, Volkswagen AG: brands, look, the one thing is EBITDA, the other one is brands. I think you’re aware of the guidance of Porsche. So this is obviously also included in this discussion.

Roy Waller, Investor Relations, Volkswagen AG: Thanks, Mike. And we move on to the next question, which comes from George from Goldman Sachs. Please go ahead.

George, Analyst, Goldman Sachs: Yes, good morning and thank you for taking my question. The first question I wanted to start with was just with respect to the European CO2 regulations. Oliver, obviously, you had the meetings last week and there was a proposed amendment to take the average performance over three years. Do you believe this will be passed and adopted given you haven’t assumed any change to regulations in your guidance? And then when it comes to the regulation review with respect to 02/1930 and 02/1935, would Volkswagen support greater technology flexibility with respect to 02/1935 requirements?

And if yes, what’s the principal reason for wanting increased fleet flexibility from your perspective? Then the second one, just to follow-up on Mike’s questions with respect to 2025. In your outlook, Arnaud, you do mention several items, which I think perhaps will be more 2025 phenomenon than long term phenomenon, including new model launch costs, battery ramp up costs, costs related to execution of scales and expansion of the consolidated Chinese activities. Are you able to give us any rough numbers around these various items in order to help us perhaps understand what’s going on with the underlying profitability in the business? Thank you.

Oliver Blumer, CEO, Volkswagen AG: Yes. Hi, George. Oli speaking. To your first question about the EU regulations, I feel very positive after our last meeting Monday two weeks ago. And we have had several bilateral meetings before with Mrs.

Van der Lijen, but also with the commissioners. And now positive is that they are open to make a reality check how the ramp up of electromobility went during the last years. And it’s slower than expected when they have taken the decision for the CO2 regulations. And so the proposal of was from the line to make a phase in for 2025 It’s positive. It gives us more flexibility in 2025.

Our expectation was around EUR 1,500,000,000.0 of penalties. Behind this, we have had a program with incentives and so on to drop it down. But we think that we wouldn’t have been able to achieve the target. And now we have a three year perspective for the phase in. We will continue to push electromobility, that’s very clear.

But now there’s the opportunity to hit the expectations. So this is positive. We also agreed a continued discussion on how to enter in 02/1930 and 02/1935. And there, from my point of view, it’s also possible that we will achieve at the end a kind of more flexibility and the phase in also for this Meyer Stove and continuously viewing on checkpoints, how electromobility will develop. Beside of this, there is also a program announced to support the framework conditions for electromobility means, charging infrastructure, energy pricing, but also support for entry cars like social leasing or tax models in the different states of the EU.

So that’s positive. Adapting our mix, I think there’s a need to adapt our mix in between combustion, hybrids and fully electric cars, giving us more flexibility. We know we have hedging costs, but at the end, that’s more robustness. And in the result of 2024, they are already included a part of the hedging costs and compensated in between the margin. But I think it’s important to prepare ourselves for different speeds in different regions of the world.

And it’s not only Europe, we have all the other regions of the world. And so it’s obvious to do so. Yes, and so I think we will stay very close in the discussions with the EU, but also with other regions of the world. And then I hand over to Anno.

Arnaud Anzitz, CFO/COO, Volkswagen AG: To give you a rough idea, I talked about the step up of all wet costs 2023 to 2024. So the full year effect of 2024 for Battery, Scout and China, One Hundred Percent in our results, basically, Anhui and the VCTC. So the local R and D operation in China was about 600,000,000 to 800,000,000. I referred to these specific three because we are ramping up here three, I would say, business elements or businesses, BatteryScout and Anhui China, which don’t have sales and turnover so far. So they really weigh on our operational style in terms of ramp up of cost.

And this effect will continue for a certain extent also in 2025. We will see the first, I would say, ramp up of battery in Salzkita in 2025, but obviously, no significant sales and also Scout will kick in later in 2027 with sales. This is an example how we are how the ramp up of this new business weigh on our results going forward.

Roy Waller, Investor Relations, Volkswagen AG: Thank you very much. Thanks, George. And we move on to the next question, which comes from Patrick Hommel from UBS. Patrick?

Patrick Hommel, Analyst, UBS: Yes. Thanks, Ralph. Good morning, Oli. Good morning, Arnaud. Two questions, please.

First one, it’s very encouraging to see five year plan cut by EUR 15,000,000,000. And I’m just wondering if and when you start delivering on the actual reduction in investments, the 30% dividend target payout is not going to be enough to avoid a further accumulation of cash on your balance sheet. And I’m just wondering if you can share your thoughts what you intend to do here in the medium term. Will that result in a higher payout ratio? Or are you looking at other ways to return cash to shareholders?

And my second question, in regards to the 25 guidance point taken that you exclude the C2 relaxation and potential U. S. Terrorism, potential restructuring, I guess we’re talking about Audi here and their negotiations. Could you just give us a feel for the magnitude of those items? Maybe Audi is difficult to quantify, but, I guess you do have an idea and other companies do so too, what potential U.

S. Tariffs would mean in terms of OP impact and also the CO2 relaxation to which extent that changes the 1,500,000,000 headwinds that you guided in the pre close call? Thank you.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes, Patrick, two interesting questions. First and foremost, if we discuss going forward, first and foremost, I would say, let’s achieve what we promised. The reduction of R and D CapEx combined to 10% that obviously will then drive cash conversion rate and hopefully accumulate then over time than net liquidity, which is a very important measure for us, both in terms of stability, but also in terms of rating. So and we have a clear target there as well. And obviously, it’s early to discuss what’s happening then with that hopefully then by then accumulated net liquidity.

But for the time being, we really concentrate on delivering on our plan in order to achieve what we promised before. Payout ratio of 30% is something what we promised. And so and yes, this is where we stand today. And I would say, let’s have this discussion in one or two years’ time, and we can revisit that. 2025 guidance, we don’t explicitly don’t want to guide on the potential impact of tariffs much too early to say.

So it’s also too early to expect what our competitors will react, whether tariffs will come at all. So this is really too early. And on the CO2, we gave you an indication of the burden of about EUR 1,500,000,000.0 in 2025. And now with that new regime, it’s obviously we have three years’ time. So we work first and foremost, bringing towards bringing down this 1,500,000,000.0.

In 2025, we have really an excellent order intake of electric cars, great, great cars hitting the showroom. ID7 order intake ID7 on par with Passat. So these are some very encouraging news. And then obviously, you’re aware that we have three years’ time to balance. And what we then try to achieve is basically bring it down in 2025, then neutralize it in 2026 and have a positive balance in 2027.

But although this is too early to give you an indication of where we will end up in 2025, it also depends on how 2025 will work out. But again, we are very pleased with the order intake on BV specifically in January and February so far. So this is where we stand.

Patrick Hommel, Analyst, UBS: Great. Thank you. Can I just clarify one little thing when you referred to the investments in 2027? And by the way, also for the Volkswagen brand margin goal, what is the underlying top line assumption for 2027 here? Is that roughly on par with 2025?

Or do you factor in some additional revenue growth just to square the numbers? Thank you.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Patrick, we’ve guided for 0% to 5% in 2025, and we don’t rule out a small growth until 2027, but again, this is also too early. We give you an we want to give you an update, Patrick, on the EI in Frankfurt, where we revisit this 2027 and 02/1930 targets. And so perhaps we can wait until then and we’ve given more specific guidance. Sounds good. Thanks.

Roy Waller, Investor Relations, Volkswagen AG: Thank you, Patrick. And we move on to the next question, which comes from Stuart Pearson from BNP. Stuart?

Stephen Reitman, Analyst, Bernstein: Yes. Thanks, Rob. Good morning. So just following up on the European Action Plan, aside from the CO2 reprieve, one of the other things a couple of the other things spoken about in there was a potential pathway to European wide subsidies and then also a potential requirement for a JV structure for foreign direct investment in Europe. I just wanted to get your thoughts on that in terms of the discussions going on in Europe, potential subsidies across Europe.

Is that even vaguely feasible in your mind for 2026? Just some thoughts on that. And also that potential SDI point on joint ventures, obviously, Saik have not put any capacity into Europe yet. I think you spoke a little bit about it on the media call that you haven’t had any talks with Chinese partners yet. But just in theory, would it be possible still at this stage to perhaps entertain, constructing or producing the ID one with a Chinese partner in Europe, just hypothetically, I guess?

And then just second point on European pricing overall. Just noticing the bridge looks like pricing flipped positive in Q4. I’m just trying to get a sense how much of that is down to your product improving and then how much is that just maybe the European market stabilizing or not, maybe wishful thinking, but we love to get your views on just what’s happening in the overall European pricing situation given your comments as well that 25% has started a bit better than expected. Thank you.

Oliver Blumer, CEO, Volkswagen AG: Yes, Stuart. I would like to take your first question in terms of subsidies. And what we discussed two weeks ago in Brussels was not only about the phase in 2025. It was more a holistic approach, what has to be done in Europe to support engineering and industry. And beside of 2025, we will continue during the next weeks and months for the phase in 02/3035.

For the ramp up, it is important to have the right framework. And there, the EU is very open for subsidies in terms of charging infrastructure, financing model for the different states. And there’s a big need to improve the charging infrastructure on the highways. In some countries, it’s right well, But especially in cities or in the regions, we have to improve and that was already discussed in Brussels. Beside of this, industry supports, also thinking about how to support to switch from combustion engine plants to battery electric vehicle plants that is on the table.

And then also to support battery production in Europe to make Europe more independent from other regions of the world is one important topic of the battery boost. And beside of this, also considered what support models for electromobility could be the right approach. What is successfully played in France is a social leasing and could be one model, but also specific tax models in the different countries of the EU could be supportive. We will get in contact with the new German government very soon, making their proposals, but also in the EU. So it’s a very, very holistic plan.

And I have a positive view on this and also how the EU with the new commissioners and Mrs. Line and Mrs. On the line speed up the process with concrete decisions. Quickly to China point of the questions. For the ID1, we have decided already the plant where we produce ID1 and that’s in Portugal with a big advantage on the plant cost structure.

But in terms of modules, we have on the one hand side a further advanced supplier network in the Iberian Peninsula with Spain and Portugal, having decided also that the ID2 family will be produced in Spain. We have the battery plant in Valencia. But in terms of single modules for this car, we are including also Chinese suppliers because costs is the main important point being able to achieve the region of a pricing of EUR 20,000. Our business plan is now very well further advanced and that we have a good feeling to take the costs there. Then I hand over to Anu.

Arnaud Anzitz, CFO/COO, Volkswagen AG: I would like to add on the ID1 because it’s often like also addressed by you. Why are you bringing this product? Are you supporting this product? Will it have a great margin? And I want to really build on what Oliver said.

Look, first and foremost, we are Volkswagen, we have a certain responsibility, but this is not Opel is not the only reason that we want to offer a €20,000 car. There are two other effects first. It will be very difficult to get it positive, but we have to fight that through and we expect that the learning from that process will significantly benefit also in other projects. As Oliver said, so that will help us achieve cost advantages in higher margin electric cars. And second, there’s always pressure on the lowest car.

Look, today the pricing pressures on the ID. Three, then we bring an ID. Two, which is from today’s perspective will be a margin will be a car with a good margin, but then the pressure will be on the ID. Two. And what’s also that it’s important for the ID.

One, it will take pressure from the ID. Two, it will be the entry car and it will also help that ID. Two and other electric cars will significantly improve their profitability. And this is why also our CFO absolutely support the ID. One.

Oliver Blumer, CEO, Volkswagen AG: And it’s also trading one point, an entry model to bring new customers to the group. I personally started with the beetle and I’m a lifetime customer for Volkswagen Group. And so it’s for the younger generation as well, and they’re having the opportunity starting with the ID1 and then further in lifetime to jumping to other segments.

Arnaud Anzitz, CFO/COO, Volkswagen AG: So you realize Oliver and myself are both enthusiastic about ID1, but don’t worry, we have absolutely also the margins inside, not only for the ID. One, but for the whole electric models we have we are running in the group. In terms of pricing, there are really several effects. First and foremost, we see now the positive list price increases from the past months coming through in Q4. Second, you mentioned already, great new models, specifically also in the volume brand, but also premium, Passat, Tiguan, Golf.

So these new models have better margins. But obviously and it’s not a secret if you look into the market, there’s a negative effect on the BV side. So we had to increase our BV incentives in order to get to a better order intake. And but still, if you take these three elements together, we were still positive in Q4. And as I said before, we are confident that overall pricevolume mix, we can keep stable in 2025, although we doubled the market share we doubled the share of BVs in Europe, which will be a challenge.

Roy Waller, Investor Relations, Volkswagen AG: Thank you. Encouraging to see that you have the margin inside. I have to have the time inside. And we have another twenty minutes to go and still five questionnaires here in the line. So one ask please to the gentleman on the line, you have to limit yourself to one question or maximum two.

And then Oli and Arnaud will give a brief and crisp answer. And Stephen, please continue. Stephen Reitman from Bernstein.

Stuart Pearson, Analyst, BNP: Yes, good morning. Thank you very much. I have two questions. One shorter term, one maybe longer term. Shorter term, you mentioned that you had been obviously putting more incentives on BEV and indeed you did extend the 3.5 roughly 3,500.0 extra bonus into Q1 from the end of last year.

How would you assess the health of the market and how the reliance of this and do you think you’re going to have to continue this into the second and third quarters? My second question is about development times. You often talk about China speed, particularly as a theme of last year with your presentations in Beijing. But can you tell me what is your best idea of how much you can reduce development times across the world, particularly in Europe, to get times down and obviously that would have a significant impact on the R and D and therefore particularly you make much bigger impact on that $165,000,000,000 of five year spending that you’ve just laid out? Thank you.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes, Stephen, I think some of the part of the question already answered. And yes, we increased we continued that special offer, specifically on the ID3. As I said, there’s a lot of pressure always in the entry models. But let’s not forget, we have other great models. ID.

Seven is doing very well. It’s much better margin than the ID. Three. ID. Four is doing well.

Audi is ramping up. Q6, e tron, E6, Imakhan. So there are a lot of other models in the group, but help drive our BV share in Europe. And as said before, we want to double the share and still keep volume price mix flat. So this is our task for 2025.

And the great model, the models which hit the showroom are already in the showroom will help us there.

Oliver Blumer, CEO, Volkswagen AG: Yes. Stephen, may I come to your second question about China and how we are benefiting from the China speed. What we are mentioning already is that the cooperation with our partners is very fruitful, not talking about Xiaoping and Horizon Robotics or Thundersoft and then others there. And our target is to reduce the engineering time of 30% and the cost of 30%. And for me, I’m convinced that we will achieve this and also having positive experience now from the progress from our product.

And our Chinese partners and only to say this, they don’t ask how to fulfill the timing, they ask how to speed speed up. And that is very, very useful. And in the Chaoping project, we were already able to speed up three months more in an very, very tough timing. And that’s also for the whole organization, great, to transfer this to European engineering. And then some projects we are already implementing this reduced engineering times.

For example, the ID1 has got a very ambitious engineering time, but as a product, we have decided already in the group will join this direction. And besides of the reduction we will have in engineering time and engineering cost, The material cost, we are working out there and that’s a different aspect, is a reduction of 40%. And the whole organization for OX Lung worldwide is benefiting from these corporations.

Patrick Hommel, Analyst, UBS: Thank you.

Roy Waller, Investor Relations, Volkswagen AG: Thank you, Stephen. And we move on to Henning Cosman from Barclays. Henning?

Roy Waller, Investor Relations, Volkswagen AG0: Yes. Thank you, Oliver, for taking the question. Maybe continuing on the China point. I wanted to ask a bit more about the consolidated China so much the JD result. Obviously, as you’re localizing more, my understanding is that there’s less room for parts and services, sales, royalties, licenses.

So if you could just give us a feeling how that’s developing in your plans. You’ve obviously shared now mid term BW and margin targets. So it would be great to get a feel for the consolidated China business within that. And then second question, similar to the other gentleman trying to reconcile that Slide 30 with the put to operating margin. I don’t know if it’s too early and you don’t want to come before Audi’s, but I would find the Audi margin for ’25 and VW brand margin for 25 implied in your guidance if it’s not too early?

Thank you so much.

Roy Waller, Investor Relations, Volkswagen AG: It’s very difficult to understand, Henning. But the second question was, if we could disclose the Volkswagen brand margin target for 2025 and the margin target for Brand Group Progressive, which we’ll report in a couple of days from now. I think that would be one for Arnaud. And the first one was on the China consolidated results. So not the proportionate operating results, but the China consolidated results.

If we could give you a glimpse actually how much how essential they still are for the group success?

Roy Waller, Investor Relations, Volkswagen AG0: That’s right. Thank you, Orest.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes. You’re quite right. We don’t want to disclose too much because all the brand group core and brand group core principles will have their respective calls. But included in our guidance is a margin of greater four percent of more than 4% for Brandfolkswagen and 7% to 9% for Audi for Brand Group Progressive, I must say, specifically.

Roy Waller, Investor Relations, Volkswagen AG: And with regards to the consolidated results, yes, we have been always very shy actually in order to disclose the full number. I think when you look at what we have achieved in 2024, yes, and what we are targeting in 2025, I think it’s very fair to say that we are more and more successfully diversifying from the dependence of China earnings as a whole group.

Stuart Pearson, Analyst, BNP: Okay. Thank you.

Roy Waller, Investor Relations, Volkswagen AG: Thanks, Henning. Next question comes from Jose, Azamendi from JPMorgan. Jose, please go ahead.

Roy Waller, Investor Relations, Volkswagen AG1: Thank you, Rolf. A couple of questions please. Oli, can you comment on your partners, Xiaoping and Rivian? What are the 2025 targets you have the teams working on? A little bit more short term, what should we expect from this partnership with Xiaoping and Rivian?

And then, Arnaud, can you comment on the dividend? We’re looking to book in ’25 from the Chinese operations? And you mentioned the fixed cost buckets, Anhui, Battery and Scout, these three sort of categories within fixed costs. How do we think about that incremental headwind year on year in 2025? If you have a number for that, that will be great.

Thank you.

Oliver Blumer, CEO, Volkswagen AG: Jose, let me start with your first one more technical question. With Xiaoping, we are very further advanced. We are planning to bring two Volkswagen models in ’26 to the market. And on the other side, we are developing our own platform together with Xiaoping, but it will be a own Volkswagen China platform with China electronic architecture. And there, we are on the final phase in 2025, having ready the products in the first half year of 2026.

Progress is very positive. We are reviewing also business trips in China, the progress and I was very surprised how fast they are moving and also the technical results we are seeing there already. With Rivian, we have built the organization and the team. We are full in plan with ramping up the joint venture. This year is focused on concept work.

We have clear proof points this year, and the first important milestone is to making ready the CAS for winter test for the winter twenty twenty five, ’20 ’20 ’6. And so everything runs in plan. And it’s also, like I mentioned before, with our Chinese partners, they are very inspiring what we can pick from the corporation from Rivian, also in terms of

Stephen Reitman, Analyst, Bernstein: speed

Oliver Blumer, CEO, Volkswagen AG: and clever, clever pragmatic solutions?

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes, Jose, sorry, we had a small discussion here. No, we talked about dividend and the headwind. Dividend, we received $2,400,000,000 in obviously in 2024. And looking out to 2025, as you know, we don’t guide that exactly. But if you take the reduction on proportion operative side from 2023 to 2024, that will be a good estimate for the Chinese dividends we expect than in 2025, which is be paid out in 2025.

As always. So it’s the effect you receive one year later. And in terms of headwind, yes, the headwind will continue on Scout Battery and also on Hoei. But we are not standing still. Look, we had the agreement Volkswagen TUKUNF, we work on reduction on our headcount and we want to compensate for that as much as possible.

And just to give you 1 figure, Volkswagen AG, we achieved in 2024 already a headcount reduction of 4,000 people due to our hiring freeze. We said before, we yes, these three units, they will increase their overhead costs and fixed costs, but we want to compensate for that as much as possible in the areas where we have started ambitious fixed cost reduction programs and overhead cost reduction programs.

Roy Waller, Investor Relations, Volkswagen AG1: Very helpful. Thank you.

Roy Waller, Investor Relations, Volkswagen AG: Thank you, Jose. And we go on to Daniel Schwarz from Stifel. Daniel?

Roy Waller, Investor Relations, Volkswagen AG2: Yes. Thank you for taking my question. The first would be on the net liquidity. Just a technical question. The lower end of the cash flow guidance is SEK 2,000,000,000.

And I think the dividend outflow SEK 3,200,000,000.0 in 2025. Does the net cash guidance of SEK 34,000,000,000 plus include any other inflows, for example, from asset sales or from more hybrid bonds? And the second question would be on the EU regulation process. When the Commission proposes more flexible targets, does the European Council need to approve such? And is Mrs.

Von der Leyen very confident to get this through the council and the parliament? Or do you think there is a risk that countries like, for instance, Sweden might not support that because Volvo Cars could have

Patrick Hommel, Analyst, UBS: a disadvantage from more flexible targets? Thank you.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes, Mr. Schwab, you’re quite right. There are some minor inflows, but I mean, as you know, we can’t really discuss that in public. So it’s too early to mention details. But in line what we promised in Hockenheim, looking at our portfolio, there are some chances and this is where we stand today.

Roy Waller, Investor Relations, Volkswagen AG: The risk of CO2 really flexible targets not taken over all by all member states. Yes.

Oliver Blumer, CEO, Volkswagen AG: The CO2 targets are for all member states and the discussions before were diverse. But I think now there is a point for five commitments with this all member states. The approach should go to the European Parliament, that’s clear. But the mindset in the discussion we’ve had two weeks ago was positive. So there is a good opportunity that at the end of Parliament will decide positively on this phase in.

Patrick Hommel, Analyst, UBS: Okay. Thank you. Thank

Roy Waller, Investor Relations, Volkswagen AG: you, Daniel. And we are moving on to Franck Biller from LVPW.

Roy Waller, Investor Relations, Volkswagen AG3: Yes, hello. Thanks for taking my question. The one is on China sales. So you’re expecting EUR 500,000,000.0 to EUR 1,000,000,000 operating result. What is your assumption in deliveries here after a 10% minus in 24%?

Is it again going down in that range? And what are you doing with the capacities here in China? Are you adjusting the capacities? Second question about SEAT margin was very, very good here and solid in the fourth quarter, north of 5%. Was it a special item or what can we expect for the time to come here?

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes. I mentioned earlier already, we make deliberate decisions between margin and cash flow on the one side and market share and volume on the other side. And you should expect another year of potential market share decline. We will give up some more share before reengaging in 2026 when we have all the stuff in place, a much better cost base on our platforms, technology, in car infotainment, all the things Oliver mentioned. From 2026 onwards, we want to reengage, but 2025, you should expect another decline in market share.

Roy Waller, Investor Relations, Volkswagen AG3: And the CF margin?

Roy Waller, Investor Relations, Volkswagen AG: With the CF margin, yes. Were there any one offs included in the fourth quarter in sales?

Arnaud Anzitz, CFO/COO, Volkswagen AG: No, we had the tariff,

Roy Waller, Investor Relations, Volkswagen AG: but not one offs. No positive one offs.

Patrick Hommel, Analyst, UBS: Okay. Thanks.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Thank you, Frank.

Roy Waller, Investor Relations, Volkswagen AG: And the last one here on the line before we move over to another question, which came by email because the participant couldn’t actually dial in Horst Schneider from Bank of America.

Conference Moderator, Volkswagen AG: The last one, but not the only one. My question, please. It’s first one is on software. Oliver, you said that Rivian is in line with plan at the moment. Can you remind us what the plan on Rivian is right now?

My understanding is that the SSP platform gets launched just in 2029. So my question is, how can you avoid that the PPE platform, but also MAB platform gets basically uncompetitive and for example, peers such as BMW, Mercedes launched their platforms in 2026. So ultimately, will you have before 2029 already some, let’s say, face lift where you put the Rivian software already in? And in that context also, when Volkswagen has level two plus driving available. And the other one that I have is for Arnold that is on disposal since you have not mentioned a lot about that.

You said that trade on the stake is just 75% plus one share in the long run. So that implies you could sell down Traton. What does it depend on? And next to Traton, what are other disposals that we may, should have on the agenda already for 2025? So I’m thinking, for example, about power engineering.

Thank you.

Oliver Blumer, CEO, Volkswagen AG: Yes, Horst. Let me start with software. On the one hand side, the progress we are doing on the existing platforms from carrier one point one and one point two, they’re very promising and we are working currently on updates. Yesterday, for example, I’ve had the opportunity to drive the new Cayenne electric, which is based on the further advanced one, one point two, that’s very exciting and what we will be able to offer there. And it’s completely competitive.

We have a complex architecture behind, but what we can offer to our customers is very positive. For the Rivian joint venture, we have a timing that we want to start with ID1 already in the Rivian joint venture in 2027. And in 2028, their platform is joined by products in a higher segment, for example, scouts, other products from Volkswagen Group. And in terms of the SSP, There we have different levels of SSP. And some of them are starting earlier, others in 2029.

But that depends, of course, the ramp up of Elector Mobility to having the right timing when we will come with the products. So in the midterm, we have the updated 1.1, one point two for the electric vehicles and then starting in 2027 with the first Rivian solution.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes. Also, I really don’t want to disappoint you, but I think you understand that I can’t go into further details on what I just mentioned on this topic. What I can say is in nine with what we promised on the Capital Markets Day, we look on all the non automotive assets. The team is in place on Powercore. We have their investor readiness project started and we look also in other opportunities.

George, Analyst, Goldman Sachs: So it’s

Conference Moderator, Volkswagen AG: not part of the guidance, but it’s possible. That’s the right reading, right?

Roy Waller, Investor Relations, Volkswagen AG: Correct.

Arnaud Anzitz, CFO/COO, Volkswagen AG: Yes. That’s the right reading.

Roy Waller, Investor Relations, Volkswagen AG: Thank you, Horst. And I read the last question, which comes from Marad Hendriksen. He said he was not able to dial in. And the first part is outlook for Karyat and PowerCo losses. When will they breakeven?

That would be for Arnaud. And the second part of the question, congrats on these results. For the first time in a long time, it feels like for VPLAN is working. Management controlling cost, tech product plan, what are the key assumptionsrisks that Volkswagen has not yet addressed that could pose further risk to the group earnings outlook in 2025 and 2027?

Arnaud Anzitz, CFO/COO, Volkswagen AG: Again, I don’t want to disappoint anybody, but look, obviously, we look into that current scenarios and ramp up of battery. And so what we said is we want to give you a more detailed longer term outlook at the IAA and we’ll promise that we will include breakeven, both EBIT and cash flow breakeven for Carrier and Powercore also in this communication we want to start at the IAA Frankfurt in Munich.

Roy Waller, Investor Relations, Volkswagen AG: And Oli, the question what can go wrong in 2025 to 2027, what is not in the plan?

Oliver Blumer, CEO, Volkswagen AG: First of all, when we will be able to further reduce our costs, That will be the main driver for a more robust business for Volkswagen. All the other fields in terms of products, technology, we have a very positive feeling. So what isn’t included, that’s The U. S. We don’t know how they will approach with tariffs on different levels, Mexico, Canada, but also Europe.

I have the hope that they will come to a fair agreement in between Europe and The U. S. Because the trade volume is not only about goods, it’s about digital trade where The U. S. Has got a big part exploring to Europe.

And so that’s a lever for a fair deal at the end. In terms of Mexico, Canada, is deeply integrated in the supply chain in Mexico and in Canada. And that could lead at the end also to a bit different agreement between Mexico, Canada and The U. S. That isn’t included completely.

Then I think the main important point is cost and the milestones we have taken. And when we will deliver there, I think we are prepared for the future. And I think you could mention also from our presentation that the plan is paying off step by step. What we introduced, we will further work hard and consequent on all these issues. And so there is a big opportunity for Volkswagen Group for the future with all these points we have addressed in our performance programs.

Roy Waller, Investor Relations, Volkswagen AG: Super. Thank you for all these questions and also Arnaud and Ollie for the comprehensive answers. We are now at the end of the investor and analyst call. If anything was left unanswered, please contact the IRR team in Walsburg and on their behalf, thanks for keeping us employed. Next time to meet with us is at a virtual and physical roadshows, for example, in London, Paris in the coming weeks.

Q1 results will be released on April 30. But before we look forward to the Auto Shanghai in 2025, which takes place at the April, where we look we’ll host an investor event on April 23 to provide an update on our progress along our strategic initiatives in the markets. Thank you very much for your numerous participation. We had, in part 400 participants in the call and take care and speak soon. Thank you.

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