Bayerische Motoren Werke Aktiengesellschaft (BMW) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I would like to welcome you all to our Telephone Conference for the Second Quarter Results. With us today are Oliver Zipse, Chairman of the Board of Management; and Nicolas Peter, our CFO. First, Nicolas Peter will take you through our financial results; Oliver Zipse will then give you a general business update for the BMW Group. Afterwards, we will have time for our Q&A session. So we start with our CFO, Nicolas.

Well, thanks, Max. Good afternoon, ladies and gentlemen. The BMW Group successfully managed the second quarter of 2022 and delivered good results despite difficult business conditions. Overall, the first half of the year was characterized by continuing semiconductor bottlenecks and supply chain disruptions. This meant the BMW Group was not fully able to meet demand. As a result, vehicle sales were down 13.4% from the previous year's all-time high. Despite this, we sold a total of 1.16 million vehicles and we are still able to expand our leading position in the global premium segment in the first half of the year. Here, electromobility remains an important growth factor. As of June 30, the BMW Group had delivered almost 76,000 fully electric vehicles to customers in 2022, more than double the figure for the same period of last year. For the second half of this year, we expect solid growth in deliveries compared to the second half year of 2021. Deliveries declined in the first half of the year due to supply bottlenecks, the war in Ukraine, and disruption in supply chain. We, therefore, expect a slight decrease in deliveries for the full year. However, we intend to at least double BEVs deliveries for the full year 2022 compared to last year. Ladies and gentlemen, let's take a look at the BMW Group's key financial figures. Compared to the previous year, group revenues climbed 21.6% in the second quarter and 19.1% in the first half year, reaching around EUR 65.9 billion at the end of the first 6 months. This significant growth primarily came from the full consolidation of our Chinese joint venture BBA in the group financial statements. Group earnings before tax for the second quarter totaled just over EUR 3.9 billion. The deviation compared to the previous year is due to technical effects. On the one hand, the prior year quarter included income of EUR 1 billion from the partial release of the provision in connection with the EU antitrust proceedings. On the other hand, the second quarter of 2022 was also negatively impacted by effects from the full consolidation of BBA of approximately EUR 1.1 billion. In the first half year, group earnings before tax climbed 65.9% to almost EUR 16.2 billion. The onetime effect of around EUR 7.7 billion from the revaluation of previously held equity interest in BBA at fair market value was a major driver. Accordingly, the group EBT margin was at 11.3% for the second quarter and 24.5% for the first half of 2022. Our research and development expenses in accordance with IFRS rose by 14.3 year-on-year in the first 6 months to just over EUR 3.1 billion. Our R&D activities remain focused on electrification and digitalization of our vehicle fleet. The R&D ratio according to the German Commercial Code of 4.5% at the end of June was on par with the previous year. We expect the figure for the full year to be within our target range of 5% to 5.5%. We are constantly working on the future of sustainable individual mobility. To this end, we are continually investing in new products, in our production network and in a comprehensive digitalization of our sales network. With the recent plant expansion in Shenyang, we have further expanded our production capacity. Our cutting-edge plant Lydia, is already setting new standards for vehicle construction with its consistent focus on e-mobility and groundbreaking digital applications. Capital expenditure in the first half of 2022 totaled more than EUR 2.9 billion, an increase of EUR 1.2 billion over the same period of 2021. The year-on-year increase is primarily due to upfront expenditure for the ramp-up of e-mobility and investment at BBA. The CapEx ratio for the year to the end of June 30 was 4.4%. Ladies and gentlemen, let's move on to the individual segments. I will begin with the Automotive Segment. Segment revenues for the first 6 months climbed 18.8% year-on-year to just over EUR 56.7 billion. In the second quarter, they were up 20.1%. This increase in revenues largely stems from the full consolidation of BBA. We were able to offset volume effect from the decrease in sales through good price realization for our premium products. Sustained momentum from the strong model mix contributed to this, as well as continuing positive conditions in the preowned car markets. Revenues were also lifted by currency translation effects. The cost of sales in the Automotive Segment amounted to EUR 48.1 billion in the first half year, an increase of 23.1%. Effects from the consolidation of BBA amounting to around EUR 2.3 billion contributed to the increase in the cost of sales as planned. This included depreciation from the purchase price allocation amounting to about EUR 1 billion at the first half year, as well as an elimination of around EUR 1.3 billion in intercompany profits from intra-group deliveries. Segment EBIT stood at just under EUR 2.5 billion for the second quarter and just over EUR 4.8 billion for the first 6 months. This is a decrease of around EUR 1.3 billion compared with the same period of last year. However, as already mentioned, this is due to some technical effects. On the one hand, the previous year had benefited from the partial release of the provision for the EU antitrust proceedings. On the other hand, the EBIT for the current year has also been impacted by the BBA consolidation effects mentioned above. EBIT margin of 8.2% for the second quarter was within our target range. At the end of June, it stood at 8.5%. Excluding the consolidation effects mentioned above, the EBIT margin would be 12% for the second quarter and 12.6% for half year. This reflects the strength of our core segment in the second quarter, particularly given the difficult business conditions. The financial results for the segment totaled around EUR 8.1 billion at the end of June compared to a figure of approximately EUR 1.3 billion for the previous year. On the one hand, this reflects a onetime effect of around EUR 7.7 billion from the revaluation of the previously held BBA shares. On the other hand, with BBA's contribution no longer included, the equity result decreased significantly by EUR 800 million. Thanks to a strong operating performance. The segment's free cash flow for the second quarter totaled almost EUR 3 billion. At the end of June, it had reached around EUR 7.8 billion. This figure includes an inflow of EUR 5 billion from the acquisition of BBA's liquid fund less the purchase price paid in the first quarter. Temporary closures of Chinese dealerships due to the coronavirus pandemic dampened the cash inflow from operating activities in the first half of the year. As a result, liabilities for advance payments from retailers and bonus payments to dealers decreased significantly. Due to strong demand for all electric vehicles, the BMW Group will increase its investment in electromobility. In addition, we expect a slight decline in deliveries for the full year. This will only partially be offset in our results by positive price and mix effects and the development of the preowned car markets. For this reason, we are now aiming for a free cash flow of at least EUR 10 billion in the automotive segment for the full year. In the first half of 2022, the Financial Services segment concluded just over 815,000 new contracts with retail customers, down 20.8% from the previous year. The decrease in vehicle sales is also reflected in the number of financing and leasing contracts concluded. In addition, the financial services sector continues to be highly competitive. With a strong product mix, we were able to partially offset the reduction in volume of new contracts. The volume of new business from all financing and leasing contracts with retail customers were therefore only 12.3% lower than for the same period last year. Our financial services portfolio generates consistently robust and stable income. Combined with continued high income from the resale of end-of-lease vehicles, this lifted segment earnings before tax to almost EUR 2 billion for the first half year. This represents an increase of 2.3% compared to the strong prior year. Despite difficult external conditions, sales in the Motorcycle segment were on par with the previous year. In the first half of the year, we sold just under 108,000 motorcycles from our attractive model lineup. The segment's operating earnings for the first 6 months of the year totaled EUR 235 million with an EBIT margin of 14.1%. Ladies and gentlemen, let's move on now to the guidance for our key performance indicators. Despite the challenges in its business environment, the BMW Group is on track to bring the financial year 2022 to a successful conclusion. Thanks to the full consolidation of BBA, we expect group pretax earnings to be significantly higher. In the Automotive segment, we expect solid sales growth in the second half of the year compared to the same period of the previous year. In the first half of the year, the ongoing supply bottlenecks, the war in Ukraine and interruptions in supply chain have led to a decline in deliveries. As a result, we no longer expect vehicle sales to reach the same level as in 2021 for the full year. We are, therefore, currently forecasting a slight decrease in vehicle sales. Regardless of this, we still expect the EBIT margin in the Automotive segment to be within the range of 7% to 9%. The percentage of electrified vehicles should also increase significantly and the number of all-electric vehicles should be more than double. We are targeting a slight reduction in CO2 emissions in the new vehicle fleet and CO2 emissions per vehicle produced. For the Financial Services segment, the consistently good development on preowned car market led to a rising segment result. For this reason, we are raising our target range for return on equity by 3 percentage points. It should now be within the range of 17% to 20%. In the Motorcycles segment, we anticipate a slight increase in deliveries with an EBIT margin within our target range of 8% to 10%. Ongoing inflation and interest rate hikes, we continue to shape the macroeconomic environment in the coming months and impact demand. Accordingly, the above-average order bank, particularly in Europe, is expected to normalize towards the end of the year. Our guidance assumes that political and economic conditions will not deteriorate significantly. It does not include any significant tightening of sanctions against Russia or countermeasures by Russia, including an interruption in gas deliveries. An expansion of the conflict situation spreading outside of Ukraine, as well as further significant and prolonged lockdowns in response to the pandemic, are also not factored in to our guidance assumptions. Ladies and gentlemen, the BMW Group is capable of delivering consistently good results even under challenging conditions. Our robust operating performance gives us a high degree of financial strength and earning power. Our priority is a long-term growth of the BMW Group. To achieve this, we are investing in the transformation of our company in a targeted and sustainable manner. The BMW Group is ideally positioned for the future. Despite the increasing challenges, we are looking ahead with confidence. Thank you.

Thank you very much, Nicolas Peter. And now our Chairman, Oliver. Please go ahead.

Good afternoon, ladies and gentlemen. For the current year, we see both positive trends and risks for our business development. Without supply bottlenecks, we would have sold more vehicles in all 3 main markets in the first half of the year. In the second half of 2022, despite uncertainties in the supply situation, we now expect a solid increase in our deliveries to customers than in the same period of last year. Our order books are well filled several months out. The BMW Group remains #1 in the global premium segment. We offer customers an attractive range of products with a large number of new models and a great variety of drivetrains. As previously announced, we intend to more than double our sales of all-electric vehicles for the full year 2022 compared to last year. And after the first 6 months, we are on track to do this. Our product and drivetrain strategy is now realizing its full dynamic potential. But we wouldn't be BMW if we weren't already gearing up our company for the next big leap forward. Our NEUE KLASSE will be coming in 2025 at exactly the right time when the e-mobility ramp-up will be reaching new levels. The NEUE KLASSE will speed up market penetration of electric vehicles even further. For the launch of the NEUE KLASSE, we are planning a compact sedan in the 3-series segment and the sporty UV. By the end of the decade, the NEUE KLASSE should already account for more than half of our global segments. We could also imagine a hydrogen drivetrain for this new vehicle generation. But the NEUE KLASSE is so much more than a comprehensive new product portfolio with the core characteristics electric, digital and circular. It defines what the BMW Group will stand for in the future, and we will make us an entirely new company. Because BMW was found 1916. In the 1960s, the company reinvented itself with the old NEUE KLASSE. And now in 2025, we will totally reinvent ourselves for the second time with the NEUE KLASSE. We see the NEUE KLASSE as a complete reset for the car and our understanding of mobility. Over the next 3 years, our preparations will be intense encompassing all areas of the company. At the same time, we are systematically transforming our production network for e-mobility as these 3 examples show. First, at our oldest plant in Munich, every second vehicle coming off the production line will be fully electric by the end of next year already. And there, we will also be producing the NEUE KLASSE there from 2026. Secondly, in China, we have expanded the Dadong site in Shenyang, where we are localizing the Long Wheelbase version of the X5 for our Chinese customers. We've also brought a comprehensive plant expansion on stream at the Tiexi location. This is where we are producing a Long Wheelbase version of the new 3 Series BEV for the Chinese market. By the way, we planned and simulated this plant in an entirely virtual environment. It is fully geared towards e-mobility. And thirdly, -- the same applies to our new plant in Hungary for which we rate the foundation stone in June. Debrecen will be the site for the initial launch of the NEUE KLASSE from 2025. For the first time in BMW history, we will be launching a new plant with a new vehicle architecture and a new generation of electric drivetrain. Nothing else that is unique. Debrecen will be our first vehicle plant to operate completely carbon-free and without natural gas. We'll be using heat transducers that can run on electricity or even geothermal energy. This message has been extremely well received around the world. Each and every one of our production locations worldwide will become an iFACTORY. That means lean, green and digital. Our plant already performed very well in the latest customer study by U.S. market research company, J.D. Power. All BMW plants in Europe took top spots or made it into the top 10. The BMW Group won 8 awards in total, the best performance ever. Ladies and gentlemen, we remain optimistic. In a complex environment dominated by macroeconomic developments, we are deliberately playing to our strength, rising raw material and energy prices, energy insecurity in Europe, high inflation interest rate hikes and worsening financing conditions, all these things affect our business as well as our consumer behavior. Semiconductor supply difficulties remain a dominant and decisive issue for our sales performance. Against this background, we've updated our sales guidance for 2022. We now expect deliveries for the whole year to be slightly lower than the previous year's level. Our EBIT margin in the Automotive segment should stay the range of 79%, as Nicolas already mentioned. The crucial factor will be how the supply situation develops, not just for semiconductors, but also energy supplies in Europe. Our natural gas competence team is actively preparing for potential gas shortage together with our suppliers. Extensive reviews are currently underway at our locations in Germany and Austria. We're looking at all areas and all fuels to see where we can reduce our gas usage. We could potentially envisage making up the electricity from gas-powered cogeneration plants by purchasing external power. We are evaluating whether this is feasible and what the possible implications might be. We've shared tips with our employees on how to save gas and electricity at work and at home. Resource efficiency has been a key issue for production at the BMW Group for many years. We are the leader in many areas, including lowering CO2 emissions and water consumption per vehicle produced. Over 99% of the waste from our production is recycled or recovered. At the present time, no one can reliably predict how the situation will develop in the coming months and years. But we at BMW, believe in seizing opportunities wherever they arise. The flexibility of our vehicle architectures and our global production network are proving extremely valuable. As are our strong partnerships with our suppliers, we are able to serve diverse markets efficiently. And at the same time, our electric models are winning important comparative tests. There can be no question for us about whether to stand by our sustainability goals. This is more important than ever in the current volatile environment. We take the long view, and we know where we are headed. The Vision vehicle, we unveiled at IAA 2021, the BMW i Vision Circular showed exactly how entrepreneurial thinking can work in a circular economy. And now in January 2023, we will take things to the next level when we present Digital Vision Vehicle at the CES as well as our next gen in Las Vegas. It will showcase our digital expertise, both in our vehicles and as a company, and partner for tech players around the world. And for the IAA 2023, I can already promise you glimpse of the NEUE KLASSE with a spectacular digital experience for our customers. As you can see, we are right on the track. And we have efficient plans for the future. Thank you very much.

Thank you very much, Oliver. Ladies and gentlemen, the line will shortly be open for your questions. Please wait for some technical advice.

[Operator Instructions] And the first question is from George Galliers, Goldman Sachs.

The first question I had was just on the electric vehicle development. You're clearly seeing very good traction of your battery electric vehicles. When I look at last year, your plug-in hybrids outsold the battery electric vehicles by more than 2:1. But with your objective to double BEV sales this year, there seems to be a high probability that in the second half, your battery electric vehicle sales will be at the same level as your plug-in hybrid electric vehicles. Is this correct? Do you expect the BEV volumes to be equal to or maybe even exceed the plug-in hybrid volumes in the second half and on a forward basis? And if this is correct, would you describe us as being a peak plug-in hybrid today? The second question I had was on hydrogen. I don't know if you could give any insight into what percent of industry passenger car sales could hydrogen account for in 2030. And at Q3 last year, BMW did reference the fact that the EV infrastructure had not kept up with EV sales. With this in mind, who does BMW think will pay for the hydrogen infrastructure? Will it be public investment or private investment, or is this even an area that BMW itself might support?

Your question will be answered by Oliver.

Yes, George, this is Oliver speaking. Well, both questions are very much lined up right in the heart of our strategy. The first one, we always said there will be a long period where combustion engines, PHEVs and BEVs will run alongside. And we always said, beginning in 2022 and then progressive all the way up to 2030. The amount of BEVs will have the strongest growth push. This year, overall, we will have about 10% of our all -- of our retail volume will be best. And we are right on track in achieving this. The PHEVs, they will end up at about a little more than 200,000 units. And that has been the same last year and we expect that to remain at that level for the next 3 or 4 years. And then we will see. And that is pretty independent of new car sales support from different countries because the PHEV is a very unique product offering for the time being, especially when charging infrastructure, as you said, is lagging substantially behind market increase on the BEV side. So you will see a parallel work at the same time, and we are very happy that we can fulfill with really superior product, both market demands. But of course, that will be -- will have the stronger sales push than PHEVs. Then I go to hydrogen. The reasoning behind hydrogen is if you want to become more -- first, if you want to become more independent on raw materials, which you need in abundance for a BEV and you will see what we foresee that on a global scale, there will not be enough charging infrastructure. The Nordic states, Germany, France, U.K., Belgium, they might have enough charging infrastructure. But the other half of the globe, also inside of Europe, is extremely unlikely that we will have enough charging infrastructure until 2030 or 2035. And if we run into an emission-free world, you have to have an offering of hydrogen. Otherwise, you will lose market share. We are heavily convinced that we have a fuel on the future on a global scale, which requires an offering of hydrogen. And your last point was also the H2 infrastructure, No, you're not depending so much on solidly installed infrastructure like which -- with electric charging infrastructure is very mobile and hydrogen can store energy. So there will be a parallel world. Of course, the hydrogen segment will come at a much later time than the BEV development segment.

The next question is from Charles Coldicott, Redburn.

First one on the auto margin guidance, if I look at the consolidation effects from BBA, it had a negative EUR 2.3 billion impact in H1. But your guidance is for only EUR 700 million of one-off costs related to BBA in the second half of the year. Nevertheless, your overall auto margin guidance implies total earnings in H2 will be similar to H1. So my question is, what are the additional costs that are fully offsetting those lower BBA consolidation effects in H2 versus H1? And then my second question, you referenced in your prepared remarks the BMW iX test that showed the real-life range is significantly longer than the official range and also uses less energy per mile than all of its competitors, including the Tesla Model X. Obviously, you model -- you design and manufacture your own powertrain components for that model. So I wondered if you could talk a little bit about the technology that has helped the iX deliver market-leading efficiency.

Charles, we start with Nicolas and then Oliver.

Charles, first of all, I would like to restate that the first time here, our EBIT performance in the Automotive segment, I believe, was a very strong one in such a volatile environment. And if adjust by the [ BBA ] consolidation effect, we are at 12.4% after 6 months. And now you're absolutely right, we will see some positive effects coming from less BBA consolidation effects in the second half of the year. However, as always, in the second half of the year, we have higher costs in particular in the fourth quarter. We have some higher burden from logistics and supplier price in inflation, as well as slightly more negative coming from raw material costs in the second half. Overall, we are confident that we are well within our guidance of 7% to 9%, which again is taking into account this very volatile market environment, I believe, and strong performance.

Okay. Thank you very much. So the second part of the question was the iX technology efficiency. Oliver.

Yes. Charles, that is a very good question. Efficient dynamics is part of our DNA. It has always been -- even in the old world of combustion engines, we were able to prove that we always have the product offering which is more efficient in its fuel consumption. And the same DNA, we kind of translate now into the new world of electric vehicles. In the case of the iX, we use every possibility to reduce driving resistance by lightweight bodies, for example. The iX also includes carbon fiber elements like we had in the iX3. We look at battery efficiency where the main ingredient is temperature control. We have the extra drivetrain [ server ], the so-called heat. It's the actual electric engine is fully 100% developed and manufactured in-house. And we think we have a substantial competitive advantage with the technology we developed in its fifth generation now. Aerodynamics of the car, a big player in reducing the efficiency and also the whole mechanical performance of the car in terms of [indiscernible] that plays into driving that efficient dynamics approach. And therefore, we think the best complete system leads to the results, which you have mentioned. And we are also rather conservative in measuring it in a formal way if now an independent institute measures that and sees the real efficiency, of course, that helps us to improve even further.

The next question is from Daniel Schwarz.

First one would be on the cash flow guidance. Is it possible to split the EUR 2 billion shortfall into an earnings effect, CapEx or working capital effects? And then on the market outlook, the cut from plus 1% to minus 6%, the 7 percentage points, could you approximately say how that is split into weaker demand and what is supply bottlenecks. And just a follow-up question on the earlier question on the guidance, so could you confirm that all of the weaker earnings in the second half that's higher cost and none of that is really a price effect or deteriorating pricing from the first half into the second half?

This will be answered by Nicolas.

Well, Daniel, maybe let's start with pricing. Pricing continues to be strong in all 3 regions. If you look at for example, at very recent auto data report, which was published early this week, and if you look at all models, comparison to our brands, we are in an extremely strong position despite the fact that we have outsold most of our competitors in the first half of the year. Very similar situation in Asian markets, and we've seen an improvement in terms of price realization in many, many European markets if we talk about because that's, of course, linked to it. Residual values, we continue to see strong pricing with regard to -- of these vehicles in the U.S., in U.K. and in Germany. So that's positive. Second element is your question regarding, well, what -- we have not adjusted our guidance by 7%. We have adjusted our guidance in terms of sales volume from flat to slightly below, which is now in our wording between minus 1% and minus 5%. So let's see where we exactly end up. And your third topic was cash flow guidance. It's a mixture and we've said -- to be very precise, we've said minimum EUR 10 billion. So let's see whether it will be exactly EUR 2 billion or less. But the shortfall is on one hand side, related to the high demand in our electric portfolio in particular i4, iX. And we anticipate strong demand for i7 and iX1. And this motivated us to a further increase in the investment in particular of battery module production. To give you one example, we have just, as we speak, opening a second line of battery production -- battery module production, at our Leipzig plant.

Your next question is from Jose Asumendi, JPMorgan.

Jose, JPMorgan, 3 questions. The first one, when do you expect to see a balance between supply and demand on semiconductors? Do you think this is something that could be achieved for BMW in 2023, or should we think this is a post-2023 discussion? Second, Oliver and Nicolas, I'm sure you have -- you're seeing an opportunity to keep lower inventories or lower level of inventories across regions and protect pricing power? Do you have in mind the level of inventories you want to keep in different regions to protect this pricing power? And then three, if possible, could you please quantify how many gigawatt hour of battery capacity, not building modules, but producing cells, you would like to target maybe by 2025 or 2030?

I think this can be answered by Oliver altogether, yes, semiconductors -- yes, we'll start with the semiconductors.

Jose, to your first question, the semiconductor supplies, it's a 2-sided view, the first that we don't have any supply difficulties with the so-called advanced nodes, which are used also in the consumer industry. We don't have any supply problems. There's enough capacity. What we see in the consumer market, the orders are coming down. So there is some relief in there anyway. So that is not the problem. It's more on the mature side. So it's the power control semiconductors. It's CMOS technology and so on. And in the past, the whole industry, I think, is overwhelmed by the continued supply by the automotive industry, by the machine suppliers, by everything that has to do with sustainable energy, wind turbines. They all need these mature nodes. And mature does not mean old. That means they will continue for 20, 30, 40 years of having that demand. And there, we have don't have enough technology -- capacity. Now the way they look forward. I think we have peaked as we speak. In June, July, maybe August, we have peaked where we have a supply bottleneck. It will become better. But I think the capacity increase by some of the suppliers takes time. They have started to invest some 18 months ago. You need between 2 and 3 years until that becomes effective. So we see a gap between supply and demand for at least for the next 6 to 12 months. But again, there is bettering of the situation inside. I don't think it will become worse than it is today, I'm pretty sure. And we have very, very close connections. I myself with the semiconductors. So I think that's a description of today's situation. Your second question was about our inventories. The inventories on the car side, of course, we perfectionized our inventories to demand. And that is independent of the region in the world. We try to lower our inventories to a level where we can supply the demand, but that we definitely do not have overcapacities. Of course, that means that we have a more stringent control of the inventories. The good thing is all of our cars at BMW are connected. With that connectivity, we know exactly where the cars are, and so we can have a very distinct steering of our inventories. On the part side, we increased our inventories for critical parts. So we become more and more independent of the actual supply situation. And that's specifically on the semiconductor side, but also on the critical electric mobility part side. And the third question was how many gigawatts hours of capacity in 2025 and 2030 planned. As you can see, we will fivefold our capacities here. This year, we will have about 10% of BEVs in our product portfolio. My latest, maybe even earlier by latest 2030, will be 50%. That means we fivefold our capacities here. And we remain in our opinion that the direct production of battery cells is not the route we take because we currently have more than 5 suppliers of it. That means if you start doing that, you would have to reason it, you would have to supply all cells out of your own realm. And I think to play the market, which is very big, by the way, and very competitive, would be at least from the year -- from the perspective of the year 2022 would be a mistake. Where we invest heavily by ourselves, is the complete battery pack, especially for the current situation, but even more so for the next generation of NEUE KLASSE in 2025. That will be done almost exclusively in-house very close in proximity to our plans. So that has been our strategy. And I think for us, it's exactly the right strategy.

The next question is from Daniel Roeska, Bernstein Research.

Maybe under your '22 outlook, it sounds a little bit more cautious than some of your peers possibly. And I wonder, if you're a little bit more pessimistic on the rest of the year, where does that leave us for '23. So may I ask which developments in the upcoming months would make you more optimistic on next year? And which developments neglecting, let's say, big black swan events, but which developments would make you less optimistic? And then during the press call also earlier, you highlighted the importance of battery efficiency and the improvement process here on. Could you put some numbers around that? So where do you -- where is the efficiency in your view on the iX now? And how much in numbers do you think you can improve that into your next platform? And maybe just a short follow-up to clarify if I misunderstood, but did I hear correctly that NEUE KLASSE potentially would accommodate a hydrogen drivetrain later in the decade? It's again the question around BEV only or BEV first on NEUE KLASSE?

We start with Nicolas and then NEUE KLASSE and iX Oliver, Nicolas, please.

Daniel, my perspective is slightly different. If you reflect on the sales results in the first half, minus 13.4%. And we are guiding for the full year, a slight decrease compared to '21, which means on one hand side, we have to accelerate, and we will accelerate versus the first half year of '22, and we will be above the second half of 2021. We will be -- compared to the second half year of '21, we will see a solid growth of our global sales between 5% and 10%. So I believe that it's not -- it's a very realistic plan we have in place, taking into account the situation in the different geo regions, taking into account what Oliver just outlined, the development on the semiconductor supply side and on the one hand side our strong order bank and in particular, the development of incoming orders, in particular in Europe. So I believe it's an optimistic and well-balanced growth scenario. And what will happen in '23, we will discuss in a couple of months from now.