Bayerische Motoren Werke Aktiengesellschaft (BMW.DE) Q3 FY2025 Earnings Call Transcript & Summary

So ladies and gentlemen, welcome back to our quarterly earnings call. Oliver Zipse and Walter Mertl are also back in the room with me. The line will be open shortly for your questions. The operator will first give you some technical instructions.

[Operator Instructions] Our first question is from José Asumendi from JPMorgan.

Oliver and Walter, I wanted to ask just a few questions, please, and they mainly revolve around China. And obviously, too early to give '26 guidance. But I was wondering with the upcoming product launches that you have and particularly Neue Klasse, do you think you can stabilize the business model and deliveries in China sequentially or even deliver higher sales growth in '26 versus '25? Second, can you give us an update, please, where you stand on dealer restructuring in China? How far in the process are you in terms of, yes, reducing the number of dealerships and consolidating the dealer network?

Thank you, José. We start about China with Oliver and then Walter. Oliver?

José, this is Oliver speaking. Regarding China, I think what we see in China is a continued intense competition, and that has been influencing our sales volume also in 2025. But now we -- I think since September, we're kind of stabilizing on the current volume. It's about 50,000 units per month that is stabilizing. Also prices are stabilizing. But we see continued intense competition, of course, there. I think Walter will talk in a minute about the dealer restructuring. But overall, I think the Neue Klasse will stabilize the business there. It will not come to the market early the year. It will be rather at the end of the year. So we will see next year about the volume of 2025. But looking at the product portfolio we have there from MINI over all segments of BMW and then Rolls-Royce, I think that will give us some form of resilience. And of course, the Neue Klasse, we will have a car there, which is adapted to Chinese needs. It's a longer version. There's a lot of Chinese for China content in there. So I think we are ready to give good responses to a continued dynamic market. And -- but we will not see rapid growth in China next year, no, not in 2026; and 2027, we will have to see there. What is important that we are entering into targeted collaboration with Chinese partners. And I mentioned a couple of them. It's Alibaba, it's DeepSeek integration. It's Huawei, it's Tencent, it's Momenta. So what we see there that you will see specifically on the digital side, a lot more cooperation with our Chinese partners in China.

Thank you, Oliver. And Walter?

José, yes, as we mentioned, we stabilize on this roughly 50,000 units a month in China and the dealer restructuring network is part of it because we have to stabilize that one first, and we are well on track. We are more than halfway through. We will finish this restructuring by mid next year. And with every dealer restructured, we come in a more stable phase on the dealer profitability side, which is supporting and straight away our sales performance in the market. We have even established new locations with the dealers. We closed some of those. We switched some from sales and service to service-only in order to maintain even our service setup and footprint. So I think we are doing everything in order to stabilize China. And like Oliver mentioned, we wouldn't expect growth next year and then the rest is coming then with the Neue Klasse from '27 onwards, and we shall see that one about the market dynamics.

Our next question is from Patrick Hummel from UBS.

I hope you can hear me. It's Patrick from UBS. A couple of questions. First of all, Oliver, I think you ended up with your prepared remarks saying you're looking into the future with optimism. And I'd like to pick up on that in terms of what that means for next year. We currently have a run rate in the auto EBIT margin in the second half of, let's say, around 5%, I guess, Q4, maybe even a little bit below. If you think qualitatively about the key puts and takes going into next year, I appreciate today is not guidance day, but can you just elaborate a little bit where that optimism comes from and whether that's also optimism as far as the EBIT margin expansion year-over-year is concerned? Because I think we do have some headwinds year-over-year. Obviously, China had weakened during this year. We have some further tariff headwinds, I would assume we have some FX headwinds. So just to better understand where that optimism comes from. And the second question is more capital allocation-related one. Your free cash flow guide for the year is now more than EUR 2.5 billion because of that almost EUR 1 billion of delayed refund of the overpaid tariff. I'm just wondering how that affects your thinking about future share buyback activity? Are you just going to smoothen and sort of allocate the EUR 1 billion that's missing this year to this year so that you can still continue your share buyback with EUR 1 billion plus next year? How do you think about that timing difference we have because of the overpaid tariff this year in the context of share buyback in the future?

Good. Yes, we understand. Thank you, Patrick. We start with Oliver.

Patrick, I would like to start philosophically a little bit. Karl Popper once said, optimism is an entrepreneurial duty. Just imagine you are not optimistic about the future of your company. What would that mean? I leave that -- the answer of that question to you. But for BMW now, that optimism is not naive optimism. It's the result of a year-long strategy process, which gives us a lot of resilience. First of all, there's, of course, the Neue Klasse where we have all technology clusters on benchmark level. And the investment for that is mainly already behind us. So that is what we have already done. And now we talk about the rollout of many new cars based on these technology clusters. If we wouldn't be optimistic after these high investments, which are already behind us, we would have done something completely wrong. Then, of course, on the cost side, we are continuously improving. We are below the 2024 levels already now substantially. So we take advantage of application of AI in all processes, becoming more efficient at the same time, having efficiency as a core element of our entrepreneurial duty on top of technological competence. So that gives us all optimism. And don't forget, let's look at 2025. Europe was growing by more than 8%, United States by more than 9%, the Rest of the World by more than 10%. And if you only look at crisis or more difficult markets like China or supply chain issues, then this is not the whole story. The whole story is -- we have a global footprint. We have a technology-neutral approach. We have a premium multi-brand strategy across all relevant customer segments. And we play the global market, which is growing, by the way, also all forecasts for the next 5 years, and you can read whatever source you want, there is a growing worldwide market on individual mobility. And that is where we think we are resilient for the future. And that gives us, of course, also some realistic optimism into the future.

Yes, Patrick, I can understand your arguments. And of course, China second half year was different than in the first half year, but we are still running and doing efficiencies against it. There will be a first half year impact and straight away, of course, I can understand this one. The same is with FX. It's also the impact in the second half year. Translation is different in the second half year than in the first half year. You know that all across the companies. On the other side, tariff will be different as well in the first half year compared with the first half year of last year. And efficiencies, we just elaborated today that we also did a good work on that on all cost categories, having positive impacts between '25 and '24. So year-to-date, I even mentioned today around EUR 2 billion cost efficiencies across all cost elements, not just some fixed costs, but across everything, material costs, logistic costs, fixed costs in any kind. So these ones are also running positively on the other side. And with respect to your free cash flow, of course, I can understand the discussions and your points with respect to CapEx and depreciation, this will be, of course, directionally positive. As we just stated, our CapEx is down. Depreciation will grow next year with the start of the production of our Neue Klasse, of course, depreciation is kicking in. On the other side, don't forget the efficiencies. But that will be also then, of course, positively for the free cash flow, not to forget, you mentioned refund of tariffs next year. But this is a time gap between EBIT and cash. And of course, there is sometimes an effect positively as you just have provisions for, but at one stage, as we see on the warranty side on us, there is a cash out. So in principle, that is okay. On the other side, with regards to capital allocation, of course, we can't mention anything with respect to the capital allocation at this stage. So we will provide you, of course, with the annual conference and update. But more importantly, I think, we stress that we have a strong balance sheet, and this gives us the ability to honor our capital allocation commitments in this dynamic year '25. And I think we underpinned that we said for this year '25, free cash flow automobile is not a cap, but we took this cap away, and we stressed in the ad hoc as well as in the speech today that we still stick to the 30% to 40% dividend rule we have. Even we are not having a policy, but we stick to our own rules. Thank you, Patrick.

Our next question is from Tim Rokossa from Deutsche Bank.

Max, Oliver and Walter. I'd like to follow up very quickly to that, Walter. So if I take the EUR 2.7 billion or so starting point this year, you have the U.S. tariff repayments, you have less IBS cash out, you have CapEx down. We are in the vicinity of something like EUR 4 billion to EUR 5 billion for next year, just knowing the building blocks that we know today. Maybe there's something you want to say on that. And then to my 2 questions, please. On China, I think what was most surprising with the latest profit warning is actually how profitable you are still in China. So, so much about that validated optimism, Oliver. I fully agree with that. You have to be optimistic on that market. Some would say that your assumption about a flat '26 market is now again too optimistic. How can you give us some reassurance that we don't stand here and post the summer break '26 and have the same revelation that we had over the last 2 years, i.e., you still being too optimistic, assuming a flat market when in reality, it was probably trending down. Is there anything you changed with respect to your quarterly assessments, monthly assessments, anything else, adjusting capacity and so on and so forth? And thirdly, probably to you, Oliver, as well or maybe Walter, we all talk about the German OEMs all the time. Every newspaper seems to sell better saying BMW has a problem. Mercedes has a problem, BMW is terrible and so on and so forth. When in reality, you guys have very globally diversified business models, you make money from all sorts of things. And the real issue is on the supplier side in Europe and Germany, arguably. That also means more support from you guys for these suppliers. Is that something that we should preemptively put in our models every year now? Is there something that you see, Oliver, in your discussions with politicians is actually understood? How urgent the situation there is? Or is this just being totally ignored and everyone just focuses on the OEMs?

Thank you very much, Tim, for your question. I think we start with the first and the second one with Walter and then about the German OEMs, the answer will come from Oliver. Walter, please.

Tim, yes, I can see all the points, which I tried to elaborate with Patrick's answers on the free cash flow statement, yes. But of course, I can't give you any numbers. That is not the time to do so. But the topics, of course, I think I elaborated already answering Patrick's question. With respect to China and profitability thing and optimism, well, we do our homework. We differentiate our tasks and measures on the production side, but also on the sales side. And I think we stressed it already today. We mentioned on the production side that we are utilizing our capacity flexibility -- flexible in all aspects. I can just underpin that the cost metric is a total different one in China than outside China. I mentioned that also permanent. And on the sales side, we are just in the middle of the consolidation, the restructuring and resizing these things. As I mentioned, we closed some locations. We opened even new locations. We downgraded some fully fledged dealerships to service-only in order to cover the customer support fields. So we are doing all that stuff. And we are more than halfway through already now, and we will finish it by midyear '26. And with every dealership set up freshly and restructured, we will contribute to the profitability of dealers and hence, also to make it more attractive to sell fantastic BMW Group cars. So with that respect, I think we are still on a good track. You do know that we have been performing well in the first half year. And at the Capital Market Day, we had the discussion about groups, which impact is it all about with this commission statement changed. But we shall see that even we have to consider some subsidies, which are differently now since October than in previous quarters coming from provinces and cities, and that will also come into effect one way or the other. So we're observing the whole market, and we cope with the dynamics with all instruments we have. And I think that should underpin our optimism. Thank you.

Thank you, Walter. Oliver?

Tim, I think, the industry -- and I don't like, as you know, the word crisis, but we are on the crossroads of something. And the crossroads means that the rules for competitiveness for OEMs as for suppliers alike are very similar. First rule is you have to have a global approach to be able to profit from technological advance from global supply chains and also from global markets. I'm adamant that this is one of the secrets of the future of suppliers and OEMs. The second is that you have to have some form of technology-neutral capability. That means you have to be able to manage complexity to stay efficient despite the complexities, efficient in all your processes. And that means you have to be very close to your markets, which are super diverse. There is no one size fits all in market demand. So technology-neutral means you have to embrace complexity and at the same time, stay efficiently. And the third one is -- and that is very much linked to the global approach, you have to be on the verge of technological and innovation development. And a lot of technology, they are not born inside Germany or inside Europe, they're born in a global context. Look at batteries, look at AI applications, look at digital capabilities like assistant or autonomous driving. And if you don't have a global approach to have connectivity into these technologies, you might run into competitive problems. And that -- to see that and discover that resilience means that you have to stay globally connected despite the fact that you might have disruptions in your global supply chain. And you have to read it correctly. If you think you become resilient to cut your global supply chains, I think, you're on the wrong path.

Our next question is for Stephen Reitman from Bernstein.

Yes. My question is also about China. You mentioned that, obviously, the cost base you have in China is very, very different from what you have in Europe, and I guess, even in your German plants and even in Hungary, I guess. What I was thinking what that means implications for pricing in China of your new products. We've seen your German neighbor Mercedes price their CLA based on their new electric platform at a very aggressive level at RMB 259,000, so very much like-for-like with the Tesla Model 3 Long Range. Obviously, it's not a vehicle that directly correlates to the iX3 or the i3, but it maybe is a signal that there is a realization that one has to price at these kind of levels, which are quite different from where we've seen historically in the German autos price their cars. Do you have any kind of observations on that without necessarily revealing what your pricing strategy is in absolute detail is going to be?

Thank you very much, Stephen. Walter?

Stephen, well, we always have to differentiate the price and the volume, not just per se, but also which price we are talking about. We have MSRPs and we have transaction prices of the market. And the transaction prices are usually with the dealers because they're independent. And we have our net sales revenue, ultimately, how we are selling our cars and products to the dealers. And with respect to the transaction price deterioration since '23, especially since '24, Q2, we have given here and there more support to them in order to adjust the profitability. That's crystal clear. And the whole transaction prices collapsed, in fact, in '24 for the whole industry, everyone across all segments, whether we have high pay or low pay cars. But still, the dominant growth in the market comes from cars up to RMB 150,000, that is the dominant growth year-on-year. Now with respect to our competitors' pricing, of course, we are having a look on which transaction price levels our cars are priced transactional price-wise currently. And we have our understanding how we utilize this one for us, how we set our MSRP or recommended price. And you can see that also if you compare the predecessor of the current X3 in China and the successor, the current X3. So you see transaction prices slightly elevated, but not much. And I think based on that one, we consider all the dynamics, even our competitors trying to utilize whatever best. We learn from all of that, once we set the prices properly. And parallel, of course, with respect to our profitability, we are working very hard on all the cost levers with respect to material costs, but also with respect to production costs. And don't forget, we fully consolidate our joint venture, BBA, whilst other competitors don't have this fully consolidated effects like we do. So we have a different revenue base. We have different costs in our balance sheet and P&L. So we can't compare straight away the P&L effects between us consolidating fully our joint venture partner in China and others just having them like they have shares in other companies and getting that as financial result. That is, of course, also to be considered. Thank you, Stephen.

Our next question is from Philippe Houchois from Jefferies.

I've got 2 questions, if possible. And I'll take your point, Oliver, about optimism and looking into 2026. I look at all the changes we've seen on tariff. And more recently, we've had no new proclamation from Trump on the 3.75. We're going to get tariff from the U.S. into the EU to 0. The CO2 pullback in the U.S. is a mix opportunity for you, I assume. And I'm just wondering, is there a reason why if we look at Western world, U.S., Europe, if there should be any incremental negative in 2026 versus '25 or if those changes kind of balance out into a more optimistic outlook? And then my second question, then I'll be a pessimist. And it seems like the 10th of December is when we're going to hear from the EU about adapting their strategy. I look at this industry and everybody has a different view, a different agenda on CO2, on local content, et cetera, and -- rather than a unified approach that might give the industry a bit more weight in discussing with Brussels. So I'm just wondering, do you think that on the 10, we get a changed auto policy and then everyone will have to adapt or there will be a little bit of everything for everyone? So do we have a piecemeal approach, you'll be happy and -- or do we have a view that will favor you or the French or the Germans, the usual dividing in the industry?

Thank you very much, Philippe. Oliver?

Philippe, thank you for your question. On the tariff side, I would like to underline what we have said before. If you have a global business model, that is kind of a natural hedge you have. Take the example of BMW. Just for the sake of the argument, just assume that we're importing and exporting into the United States and into Europe about the same amount of cars. So from Germany into United States and from Spartanburg into Europe. Just for the sake of the argument, if that would be -- and that is about the case, it's the equal value of cars. Then of course, before we paid the sum of 12.5%, 10% into Europe and 2.5% into the United States. Now after the conclusion of the deal with the United States, with 15%. So it's an increase of 12.5% to 15%. This does not destroy any business model. And this effect that it almost doesn't change despite the fact that locally, we have different taxes means that a global business model kind of protects you against these changes. And that is even more true when both markets grow. As I said before, Europe grows by more than 8% in the first 9 months and the United States grew by more than 9% in the first 9 months. So it's kind of even a stabilizing element. But I think what is even more important that a global business model and international corporation is at the core of everything industry must do. And they must do everything to get also political support for global trade and to tell what the guiding principles of this trade is. And we have to reduce trade barriers instead of increasing them. And if you look, for example, at what we see in the semiconductor industry, at the core of it is not an industrial problem. It's the inability to talk to each other on an eye-hide level. And that is why we said we have to reduce trade barriers, not increase them. I come to your second question. What we really fight for is a new regime in the CO2 regime for 2030 and 2035, away from tailpipe only all the way to life cycle assessment that we take all CO2 effects we see in our industry into account. And that we are confident that we also achieve currently the 2025. And I can also tell you '26 and '27 will not be different that we will achieve our targets despite the fact that they are more strict now in 2025. And I think technological neutrality is very crucial. And I think a piecemeal approach is exactly the wrong way. As long as you stay tailpipe only, it doesn't help you if you allow some e-fuels in it and also allow plug-in hybrids. That is not enough. That is not enough to give an industrial valid proposal for CO2 reduction, which keeps the industry in its size, which doesn't shrink markets. I think it's very important. And all we achieved so far gives us credibility in our position. And we think we have to get away from tail-pipe only measurements. This is the most important request we have from policymakers. Thank you.

Thank you very much, Philippe. Now we know Oliver is responsible for optimism. So thank you.

Our next question is from Horst Schneider from Bank of America.

Yes. And I hope you can hear me. On this optimism, just I remember to one of the BMW meetings that was, I think it was 10 years ago. There was a joke made. What does a German who sees light at the end of the tunnel, he extends the tunnel. But that is not my question. And I think you have got clearly a different stance, Oliver. My questions are more related to Europe, a region where you performed strong, which is a good region for you at the moment. Maybe you can talk a little bit about the order trends and price trends that you are seeing. The background of my question, as I said, we see at the moment that one of your peers is running this significant model launch of [indiscernible] and, of course, tries to take market share. That's also what the company targets suggest of this peer. So I want to know if there's any impact that you see in the market from that, which could hurt you. And then the second question also related to that is you said that iX3 got off to a very good start in terms of orders. Do you see some cannibalization that people switch, let's say, from the iX1 to the iX3. In general, do you see that competitors also react to your very competitive pricing that you have said, the pricing that you can afford because of the Neue Klasse concept. But do you feel also in that context that maybe in 2026, there's very strong competition in the European EV market just because every peer tries to sell the model at the same time?

Thank you very much, Horst. Oliver?

Horst, it's not new in the last 10 years that there's competition and everyone tries to fetch market share from the other competitors. This is -- I mean, this is the essence of this industry for many, many years. And as I said, in Europe, we grow in Europe together with BMW and many faster than the market. So we are one of the peers who are taking market share. And by the way, I don't have any problem if the iX3 cannibalizes the iX1, it's okay. It's completely okay. I mean, it's a more expensive product. And if that is happening, it's fine. And the iX1 is currently completely sold out. It's produced in our Regensburg plant. The Regensburg plant operates absolute on its limits on a 6-day week, 3 shifts per day. It's completely sold out. So I wouldn't have any problem with that kind of cannibalization when a higher-value product cannibalize the lower value product. That's okay with me. And of course, there's a very strong competition in the EU market, EV market. We know exactly the point where we stay in the market and when we leave the competition. We know exactly the point where we do that. And of course, you can adjust your prices, but you must know in what kind of business model we are working on. And if you look at our results, especially on the group side, I think we do that in that competitive market quite well. And at the end of the day, we still have a very, very solid business model. And I think with our full lineup of combustion engines, plug-in hybrids, BEVs and diesels, we are perfectly set up for the European market also for 2026.

And that means that you expect an increase of sales, especially on EVs clearly in 2026 also in Europe. You made the statement on China, but for Europe, clearly, you should aim for an increase and higher than the market growth, right?

You hear me silent because we are not at the time of the year to make any prognosis.

Yes, that's fair.

But I remain optimistic, yes. Yes. Yes. Overall, yes, I do remain optimistic.

So optimism is the word of the day. Yes.

Our next question is Anthony Dick from ODDO BHF.

Yes. My question was around the costs. So firstly, regarding the comment you made about costs being lower in Q4. I was just wondering if that should affect the usual seasonality we usually see with Q4 being a weaker quarter from a margin perspective. And then -- so we've seen some important labor force reduction programs at your peers, especially in Germany. So I know this is not really usually the BMW way, but I was just wondering if you were also considering such measures in light of the circumstances. And just more generally, also, could you elaborate a little bit in terms of what you're doing on the cost side of things and how that will carry through 2026?

Good. Thank you very much, Anthony. We start with Walter about the costs in Q4.

Anthony, it's about the costs. I didn't mention anything about Q4. So of course, not. But I elaborated on in the quarter and year-to-date and optimistically, as this is the time for, we cut our costs in the quarter year-on-year by more or less EUR 1 billion. And year-to-date, I mentioned more or less EUR 2 billion. So year-on-year, Q4 will be also lower. That is a lower aspect year-on-year. But in the quarter 4, there is usually seasonality that the highest fixed cost we have in the quarter 4, but not year-on-year, that is still the lower aspect. I hope that makes it more clear. So seasonality is still there. The labor force reduction, I thought we explicitly mentioned that. So we have this impact that we reduce it in total, but I have to stress again, we utilize the flexibility also in China where we have fixed-term contracts in our joint venture. And once they expired, they haven't been renewed. And that brought it down to a slightly below previous year. If we have a look outside China, we would still guide this previous year's level. But we are just utilizing the flexibility all over the place. And as we had to adjust with our prediction, the Chinese numbers, that's automatically the consequence. And with respect to costs, I'm happy to repeat myself thousand times. We just utilize our costs and organize that they are coming down, whether we speak about material costs, CapEx or any of these fixed costs, but we have no program. We have no cost program like other ones mentioning. At one stage, I mentioned even should you need a program, eventually, you need external help. And we are not utilizing external help because we just do our homework on all cost elements. Thank you.

Our next question is from Stuart Pearson, Oxcap Analytics.

Just a couple left. I mean just noticing your, I guess, silence or reluctance to answer Horst on the xEV mix in Europe next year. I just wonder, given your -- I mean, you're not just on track to meet your CO2 targets this year, you actually might beat them a little bit. Do you really need to increase xEV mix in the next couple of years? You're already around 40% year-to-date in Europe, market is around 30%. So I wonder, is that really a goal to keep pushing that mix higher? Or could we see you rather take the benefit of fresh EV product pricing and margin? And conversely, if you were to increase your xEV mix and hence improve your CO2 significantly in the next couple of years, could we even see you think about selling your services in a pool to another carmaker and monetizing it that way? So just a question on xEV in Europe. And the second one is also xEV, but over in the U.S., where xEVs were around 25% of your Q3 sales. I wonder if you can share what proportion of those were benefiting from the subsidy via the leasing loophole that's now being removed and how you see the U.S. market post that? And Mercedes was talking about U.S. still being a growth market. Obviously, it was tough in October on the overhang -- but so -- hangover, but I just wonder how you expect to see that in the coming months and into next year.

Okay. Thank you very much, Stuart. We start about the xEV in Europe with Oliver and then the U.S. with Walter. Oliver?

Stuart, we have this very strange regulation in Europe that you only have a stepping function every 5 years. So between 2025 and 2029, the targets remain the same. So our mix in 2025, where we increased the BEV sales by more than 10%, almost automatically gives us the leeway to reach the CO2 targets. And now with the new product lineup, also the Neue Klasse, the ramp-up of MINI and so we will almost automatically reach our targets in 2026 because the target stays the same as in 2025. And by the way, that's also part of our proposal to the European Union to do a continuous improvement process that the CO2 targets are [ adapted ] every year and not only every 5 years. So we are kind of quite relaxed about the 2026 targets on the BEV side. Will it increase? The market will show, Stuart. I don't make any prognosis on the BEV market in 2026. We follow the markets. We look for market share. And if that is with EVs, we follow it. It's very simple.

Thank you, Oliver. Walter?

Stuart, with respect to the -- yes, we have a lower EV share than we utilized in Europe, and we all understand why. But we're still running on roughly 14%, 1-4. So the other way around in Europe xEV. With respect to the benefit of the support up to end of September, we utilized the IRA aspect in all relevant numbers. And with this respect, we see also if you have a look for auto data, for example, that even incentives came down. Don't forget Auto-Data includes the IRA impact like tactically support despite the fact the government paid for in the past up to end of September. And our share was always higher than traditional competitors of us. So it automatically, you see incentives coming down even month-on-month or quarter-on-quarter. You can see that in Auto-Data. And with respect to the coming months, well, we saw that in the month of October, the whole BEV market was a bit lower than previous months, especially September, where the run on off was more or less coming in. And then we shall see. I guess it's too early to speak about trends or whatever, that will be seen in November and December, but we are still selling good EVs in the U.S. Thank you.

So we come to our last question.

Our last question is from Michael Tyndall from HSBC.

Mike from HSBC. Just a couple, if I can. Walter, can you help me with a little bit of math here? So if I look at your EBIT walk, the other bucket was EUR 1.2 billion. I think you said that tariff was in there, so that's roughly EUR 500 million. So we've got other at EUR 1.7 billion. If I'm not wrong, IBS cost about EUR 800 million last year. So we've got the reversal of that. And there were some other issues in 2023, again, if I'm not wrong, on airbags and such. How much was warranty of that EUR 1.7 billion? Because I'm trying to understand when I think about Q4, how much of that continues on into Q4? And then the second question for Oliver. You've very kindly done a lot of work explaining Neue Klasse to all of us. And I just wonder how does that translate to consumer awareness? Very strong orders for the iX3. Are customers aware of what a big change this is? Or are they buying it because they like the way it looks, the way it drives? I guess the answer is all of those things. But I'm curious to know how you can actually raise consumer awareness about this big change that you're making?

Good. Thank you very much. Walter?

Michael. Well, I hoped that my speech was quite clear. But again, happy to speak about. It was not about '23, it was about '24, first of all. And in '24, in the quarter 3, we had a high 3-digit million provision for the warranty cases, a high 3-digit million. Then with respect to this 1 and 3 quarter EBIT hit year-on-year based on additional tariffs, that is a mid-digit level. So that altogether, that's what I mentioned on the one hand and on the other side, that is still positive. But the majority of our improvements were then running on material costs and manufacturing costs and direct costs like logistics, for example. So altogether in the quarter that all came in. That was this EUR 1.2 billion bucket.

Michael, concerning the Neue Klasse, I think during the IAA here in Munich, we created a huge media awareness of the car, what it is, how it looks, how it's used, what the innovative features are in it. And on top of that, in the coming days, journalists and other key opinion leaders will experience and test the series vehicle. And I think the core of the car is how it drives. And we -- whoever drove the car said, well, I've never experienced anything like how it drives, how synergetic the assistant functions of the car, interact with the driver and the physical properties of the car. I think that is new. And of course, we're going to pinpoint it. And at the end of the day, people buy on design. And we think with the new design language we created for BMW, we hit it right on spot that people love what they see. It's a new, sleek, very modern language we have here, and that will attract more customers.

Thank you, Oliver. Ladies and gentlemen, now we have reached the end of the telephone conference. Thank you for your optimism to us and for your questions. All the best to you. Bye-bye and [Foreign Language] from Munich.