Volkswagen AG (VOW3) Earnings Call Transcript & Summary

Good day, and welcome to the Volkswagen Brand Half Yearly Financial Results Live Audio Webcast and Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Thomas Küter. Please go ahead, sir.

Thank you, operator. Hello, everyone, and welcome to our Volkswagen Brand conference call on the results for the period January to June 2020. I know it has been a very busy week for you guys. And our apologies that this call clashes with FCA actually. We ask you for your understanding here. We had very little choice in the time slots available since we are facing into the holiday period. I guess everyone is looking forward to that. For today's conference call, I'm joined by Alexander Seitz, since March of this year, member of the Volkswagen Brand Board of Management for Controlling and Accounting; and Jürgen Stackmann, member of the Board of Management of the Volkswagen Passenger Cars Brand with responsibility for sales, marketing and after sales. As usual, we will start with a short presentation followed by a Q&A session, where we will take your questions. You can follow today's webcast via the Investor Relations website of the group, where you will also find the charts available for you to download. Let me now hand you over to Alexander.

Yes. Thank you, Thomas. Ladies and gentlemen, dear investors and analysts, the global corona pandemic had severe impacts on the operating performance of the Volkswagen Brand in the first half of 2020. Our sales volume, as you can see, dropped by as much as 40% versus the prior year. As a result, sales revenues decreased by around 35% to EUR 28.6 billion. Please note that revenues from our components and after sales business also declined substantially. And also, the reduced production of vehicles for other group brands had a negative impact, of course. Consequently, the operating result declined significantly to minus EUR 1.5 billion. I would like to remind you at this stage that the sales of our Chinese JVs are not included in the figures I have just mentioned as we account their results at equity. Before I will take you through some more details of our financial performance, my colleague, Jürgen Stackmann, will explain to you our sales performance for the first half of the year, and will give you an update on our product lineup. Jürgen, please go ahead.

Thanks, Alexander, and welcome from my side as well. Thanks for listening in today. Let's move to the next slide, please. This gives you an overview of the passenger car market around the world in the first 6 months of the year. On the graph to the left, you see an overall decline of total markets by 28.4%. And in the blue bars, you see the Volkswagen numbers, always compared to the same period last year. Again, this is the total world, including our Chinese sales. So what you see here, we actually declined not as much as the total world, so subsequently gained share. And you see where we gained share. North America, we actually went with the market, around 25% down; Europe as well, 38% down. Total market and we as well stable, in both regions, market share in both regions stable. Share growth comes from South America, where the overall decline was steepest and probably will remain the deepest impact of all sales regions we are in. But market share is up substantially due to our very fresh and young product portfolio and new launches actually happened in the first 6 months. And in China as well, the region that went into COVID-19 first actually came out first. And overall trend is that customers move to trusted brands, known brands and obviously, brands with strong portfolios like Volkswagen, so our share is up in China at the same time. The next slide gives you an overview of the expected recovery of the 4 regions. Again, knowledge is, I would say, not 100%, but this is our latest expectation for recovery to the -- in these regions. Fastest recovery, and what we call V-shape recovery is in China, so a deep sort of plunge in February sales already back up in March, and it may basically hitting last year's level. June was an exceptional month. I'll come to that later due to sort of a next emission-related change in 2019, which actually increased registrations a lot last year. But again, underlying performance in June, very strong, and I will show you later on how we expect to close July as we're very close to this first month of the second half of the year. Sales in Europe, slightly longer recovery and expected 2 speeds, probably a speed driven by Central Northern Europe, around Germany, Austria, Switzerland, Netherlands and the Nordics with fast recovery and then expected slower recoveries in many countries centered around the Mediterranean belt as the impact on economy has been overall deeper. And the lockdown longer and more substantial. North America, again, sort of a -- sort of longer journey back to a normality expected for North American region. Again, main market U.S., I'll come to that later, actually with a quite surprising sort of a slower rate of decline in the first half of the year as many countries in the U.S.A., states in the U.S.A., Midwest states relatively, let's say, open and unaffected by COVID for a long while. Actually, overall sales decline was lower, but is expected longer to come to a full recovery. And South America, very hard to say whether we will see actually a full recovery this year, 2020, as the markets have been affected not only by COVID and still are affected by COVID, but there are several impacts on exchange rates and deeper impacts on the economy with still, I would say, relatively unforeseeable sort of results for future sales. Let's have a look at the last 4 months of the year. I think they show easiest how we look at the sort of performance in the first half and how we look at the expected sort of sales in July. And you see always sort of results in April, May and June compared to prior year by region. And I think you simply see here in the graph that we are actually reapproaching the 0 line, 0 actually in this case means same level as prior year. So North America remains, I would say, it's minus 20% even in the month of July; South America at minus 20%; Europe almost coming back to July 2019 level in July. Again, the last sort of day of the month is just going on today, so final results will be shared later on. And China is back or above sort of prior year's level, so back in growth modes. And again, as long as we don't see a huge sort of second wave of COVID going through the world, we expect strong results from China, stable and good results from Europe and North America. So on the world side, for the first time since COVID started, our result this month will be sort of -- will be only a small loss, in the single-digit arena. So that actually gives us, obviously, confidence for the second half of the year, which Alexander will later on report to actually in his sort of outlook for the brand and financial performance for the brand. So next slide shows you one -- what the more, let's say, more immediate sort of stories that we are telling in the market. We've just had the first 2 weeks of media launches, media event for the ID.3, obviously, a car which signifies what we say, the third chapter in our brand development after [ key fob ], Buggy, Golf and now ID.3 into an all-electric sort of space, fulfilling our mission to become a zero-balance neutral company by 2050. It's obviously a key step for us to launch this car effectively. The first result and the media has been very, very positive. People are sort of surprised how much Volkswagen is in that car in terms of driving comfort, sort of quality of build, quality of drive, controls and software performance in the car which obviously actually makes us, I think, very, very happy. And I think it's an inspirational start not only for ID.3, but for the family of IDs to come in near future. Very important as we are now actually approaching rapidly the launch phase of that car, which is shown on the next page, please. And we've just picked a few numbers for you here. What you're seeing here is that -- and you might have sort of might remember that number. We had 37,000 prebooking orders from customers since last May. So we started this journey in May 2019. 37,000 retail and some fee customers have placed their orders and reserved the cars with EUR 1,000. Of those, only in the first 4 weeks of ordering capabilities, 41% have converted to final firm orders. Again, most of these customers, I would say, the majority, have neither seen the car, touched the car or driven the car. It's quite an outstanding result sort of in our recent history, unheard of that people who have never actually seen, driven a new concept actually are really placing final orders so early. So very, very happy with the conversion. And we are actually fully on track when it comes on final incoming orders to hit our targets for the year. I think one number which is not in the slide here, but I think might be of interest, is that of those 15,000 customers, more than 80% are so-called first mover customers. So those customers who actually want to have the car as soon as possible. So not waiting, I would say, for final, final software update in sort of after Christmas, which shows the high interest of those customers. And obviously they are now inspired by the press test drives as the press drives contained exactly the software status that they will get. So it's going to be a great car and great experience for these customers. First handovers of the ID.3s will be done in calendar week 38, which is just after the sort of halfway through September. And the media introduction, so the big introduction date at dealerships is in calendar week 39. So we are now really rapidly approaching sort of the go-live in front of our customers for this, I think, very important key cars for us in the brand and obviously, for the group as well. Very much looking forward to September, us seeing this car actually coming to customers' hands and seeing their reaction. One slide I prepared to dig just one level deeper under the skin of sales and marketing. You might have picked up in the last 3 years that we've worked intensively with our European dealer partners. On a new dealer contract and a new dealer, I would say, dealer and retailing vision, which allows us in future to connect the online and the off-line space to what we think will be a seamless customer journey going forward. The contracts themselves deliver the base for data exchange and actually a more mutual partnership agreement between us and our dealers going forward. And the 2 countries have gone even further. Germany and Austria have moved to an agency sales system with their dealers, which means that the final contractual base of the ID.3, may it be in sort of in a sales position or in a leading position or a financial position, is between the customer and the brand itself. So the dealer becomes agent for the brand, similar to how we have structured our fleet business in many countries around Europe. So for the first time now, this is for all segments and all customer types in an agency system which will enable price stability, full price transparency and, I would say, a much more stable forward original value position for our cars than ever before. Very much looking forward for bringing this in place. And I was just amazed by the speed of acceptance of the system from our dealers who actually turned back this agency contract with only sort of with very short notice in only 8 weeks in Germany. So more than 800 dealers actually were very much -- are very much behind and convinced of this new idea of retailing together in a partner -- more partnership style position. But that's not all. We're looking forward to the second half because our portfolio sees some very important addition. Next slide shows you the extension and the enlargement of our portfolio when it comes to electrification. So obviously, the overall focus is very much on the MEB platform and the first model is ID.3, and then at the back end of the ID.4. But we are enlarging our portfolio of plug-in hybrids, which we call eHybrids in the Volkswagen Brand, starting with Golf GTE sort of in the third quarter. And in fourth quarter, there's a whole array of new plug-in hybrids coming to the market in the form of Arteon, Arteon Shooting Brake, Tiguan PA and Touareg PA as well. And the ID.4 gets launched only sort of a week later than the public introduction of the ID.3. So in the calendar week 39, we will show the world the ID.4 and start the preordering of that car already, which shows that there's a lot of momentum now going on in Volkswagen, in Volkswagen's electrification efforts, which obviously are key to fulfill our mission to become a net zero-based company and zero-based CO2 footprint company by 2050. We are starting with that journey now. But it is not only about electrification. We have some fantastic other products coming at us in the second half on the next slide, please. We're still in the launch modus of our Golf, which actually came into an unfortunate period of launch as it was launched directly in most markets into COVID-19 lockdown periods. So we will -- we have started to give Golf especially a second launch phase in June and July in most markets. So it's now really coming on stream in most markets as the lockdown is over. Very soon, we'll see this portfolio added by the Golf GT portfolio, GTE, GTI, our classic model, GTD. Then we'll see Tiguan PA already lifting off in the fourth quarter this year, including Arteon Shooting Brake, which we've -- both -- or both of them which we've already introduced to the international media groups. And then at the very tail end of the year, we will launch Golf 8 Variant, a great addition to our portfolio, much more larger than its predecessor and the very competent Kombi version in our hands going forward. So again, after a difficult first half of the year, and you've seen the financial impact of that happening. We are actually quite optimistic to see much improved second half, product driven, but actually very much, I would say, driven and fueled by natural demand in many of our key regions around the planet. With that, I would like to hand over back to Alexander.

Yes. Thank you very much, Jürgen. Coming back now to our financial performance in more detail as I said before. COVID-19 led to significant production shutdowns and closed dealerships in the first half of 2020. We felt the first impacts in Q1 already when profit almost halved versus the prior year. From the second half of March until the end of April, the business came basically to a standstill. Countermeasures were implemented quickly. But mainly due to our substantial fixed cost base, the shutdown resulted in a negative result of EUR 1.9 billion in Q2. Thankfully, we saw a gradual recovery from May onwards. Lockdown conditions were eased step by step, our dealerships reopened again and our production facilities around the globe were ramped up again cautiously. All this happened, obviously, under strict health protection measures, which we developed and implemented with huge efforts throughout the company. In June, we came with our monthly operating result already close to breakeven again due to the effective implementation of our cost reduction measures. This development was very encouraging as volumes were still 25% to 30% behind last year's numbers in most of the regions. The main reason for the earnings decline of EUR 3.8 billion was the corona-induced volume loss of more than 750,000 units. This negative volume impact in the first half of 2020 was alone, in total, almost EUR 5 billion burden on the operating result compared with the previous year. On the positive side, we were able to compensate this burden partially via pricing. Less sales incentives in absolute terms and price increases in high-inflation countries contributed positively with EUR 1.3 billion year-on-year. Currencies [ hit ] was around minus EUR 150 million, just a minimal impact on earnings. Small headwinds came from Argentinian peso and Russian ruble. Broader costs were slightly negative as we could not fully compensate headwinds from costs arising from measures to reduce CO2 and emissions. A clear positive message is that we were able to react quickly on the unforeseeable challenge COVID-19 has brought to us. From January to July, we reduced the fixed costs of the brand by a strong EUR 0.5 billion. Additional positive effects came from the structural readjustment of the Car.Software org. As you might know, people and budgets were moved from the brand into the new organization, which will strengthen our software capabilities of the group in the future. However, the cost benefit from this restructuring was absorbed by other negative cost items. For example, we topped up the compensation for the basic enumeration of our workforce in short-time work to 100% as part of our tariff agreement. Overall, the earnings impact from fixed costs and others was still a strong positive EUR 0.4 billion compared to last year. We finished the first half at an operating result of minus EUR 1.5 billion before special items. After special items, the operating profit stood at minus EUR 2.1 billion as we had to book diesel-related provisions in the magnitude of EUR 0.6 billion in the second quarter. The R&D quarter is the 4.5% after the first 6 months, obviously, above our strategic target of 4%. However, the simple reason for this is a big drop of our top line, minus 35%. Looking at the numbers, the absolute numbers tells you much better what we have done during the first half of 2020. We reduced the R&D costs in the first half of 2020 by around EUR 300 million in comparison to last year. Around EUR 200 million can be explained by the restructuring related to the creation of the Car.Software org. The remaining EUR 100 million are a result of immediate actions to cut costs and spending and production and dealer shutdowns started. The actual impact by this action is even higher. We are still in the middle of a big transformation of our company, as you know. The R&D efforts for electrification, CO2 and emission compliance and the digitalization of our products are still increasing. To reduce the absolute spending on R&D costs in such a phase requires a lot of efforts and discipline, a task which we have managed quite successfully especially in the second quarter. Just to be clear, a part of the optimization is clearly coming from the crisis-related life cycle management of our portfolio. Certain projects are postponed, and we will continue with them as soon as the business environment allows us to do so. However, we are clearly committed to deliver on our strategic target for our R&D quota of 4% going forward. Therefore, we will continue to push our structural work on costs as much as we can. The digitalization of work and processes, for example, the use of bots, virtual testing facilities, et cetera, the use of intragroup synergies and the use of challenge boards and zero-based budgeting will enable us to do so. The same logic I just described for our R&D applies to our CapEx figures also. The 5.8% quota exceeds our strategic target corridor of 4% to 5%. This is again a function of the much lower sales revenue. The absolute investment has been cut by 5% compared to last year. When the shutdown started, we had no visibility how long the situation would last. Consequently, we had to drastically prioritize our investments without jeopardizing our future. We stopped or postponed all projects which were not categorized as business essential. Our plant strategy clearly defined the framework for our individual decisions. The global rollout of our MEB or the strengthening of our software competencies are 2 major examples for our current top priorities. As the corona crisis is far from over, and the pace of recovery differs from country to country, we will continue to manage our investment decisions with the highest focus on capital discipline. Our efforts to reduce complexity and the consequent harnessing of intragroup synergies, remains the basis for all future investment decisions. And we will continue to maximize the scale advantages we have through our dedicated modular platform and toolkit approach for our electric cars, our legacy cars and also our car software in the future. The clear target is to get back to our strategic target corridor of 4% to 5% as soon as possible. Moving now to our cash flow development of the first half of 2020. We finished the first half of 2020 with a negative clean net cash flow of minus EUR 3.7 billion. Taking into account special items like diesel-related outflows, the reported net cash flow was even worse with minus EUR 5.6 billion. The sudden stop of production and the unexpected decline in demand created the maximum level of stress on the liquidity situation of the brand. As you can imagine, it is a tremendous effort to stop a tanker like the Volkswagen Brand in such a dramatic way. We managed to react quickly and introduced a spending freeze. A good indicator for our efforts is the development of our net inventories, which we reduced successfully in the second quarter. In absolute terms, we reduced our net inventories even by more than EUR 1 billion compared to the end of Q2 2019. This development provided some important relief on the cash flow situation and helped us to finish the quarter in a better position than initially expected. Let me summarize some of the countermeasures which we have implemented throughout the organization to deal with the massive challenges. We had to quickly align the sales and production schedules to avoid any kind of inventory buildup. This task was quite a balancing act as the virus hit the different regions and markets at different times and intensity, and the governments reacted differently on lockdown regulations. Especially the ramp-up phase of our factories worldwide had to be managed in a very cautious manner as demand just recovered gradually. And we are still not back to precrisis levels with the utilization rates of our plants between 75% and 95% at the moment compared to the situation pre-corona. But let it make me crystal clear. After the vacation, our European plants will return to pre-corona production levels. We have put the focus from the beginning on, safeguarding our liquidity and made the management of our working capital, especially our inventories, the top priority. We issued a spending freeze and made it mandatory to drastically reduce overhead costs in all the different departments of the brand. In April, we decided on an action plan to question the status quo of all investments which have been decided so far and stopped or postponed projects where necessary. The countermeasures had to be implemented in our regions as well, which has been hit hard by the corona crisis in a similar way. We are still working on the detailed plans for the regions to return as quickly as possible to the turnaround path. As soon as we have better visibility on the situation, we will let you know our new timeframes for the turnarounds. Let me summarize the key positives, which we can derive from the development over the last couple of months. We successfully managed one of the worst crises in recent history. We are seeing a significant recovery in the monthly development of our sales volumes and financial performance. We were able to clearly reduce fixed costs and lowered R&D spending and investments, and we significantly reduced our net inventories against prior year. All this makes us confident that we can expect a much better second half of 2020 compared to the first 6 months. Considering the negative result of the first half, it is obvious that the full year operating result will be severely below the prior year. However, with our implemented countermeasures, we are prepared to push ourselves to the limit in order to get the operating profit of the Volkswagen Brand into the positive territory for the full year 2020.

Thank you, Alexander, and thank you, Jürgen, for your remarks. Operator, we can now start with the questions from the audience. Please describe just the procedure for the participants.

[Operator Instructions]

Okay. Thank you. I guess we have the first questioner, Tim Rokossa from Deutsche Bank.

I would have 2 or maybe 3 questions. The first one is on BEVs. How many BEVs will the brand sell this year, considering that the ID.3 now seems to be on track? How many have you sold in H1? And is the availability of battery cells limiting your potential to sell more than what you currently see and is apparently very nicely developing order intake? And then secondly, Mr. Seitz, when we think about inventory levels' pricing and demand, you seem to indicate that demand is also improving for the brand. We have heard yesterday from Mr. Dahlheim that inventory levels are ideal and that pricing is positive. Can you confirm both of those things also for the VW brand? And if that is the case, how should we think about the cadence this year on your way towards profitability for the full year? Is Q3 already somewhat profitable? Or will this just simply be a super record Q4? And then finally, I'm not sure who of you to address with this, but probably Mr. Stackmann. In the past, the VW brand has done a lot of prework for other sub-daughter companies of the VW Group. How does that work with the MEB? For example, in the Ford Corporation, will the money flow to the VW brand? Or does it go somewhere else?

Okay. I think Alexander, I'll take the first question. Is that okay? The BEVs and the numbers?

Yes. That's fine with me, Jürgen.

Okay. And then you can take the rest. Maybe we can split the last one. I think just to put sort of the BEV performance sort of a bit of into perspective for the Volkswagen, Volkswagen Brand. In the -- if you compare the battery electric performance globally in last year, we sold 82,000 battery electric cars, plug-ins or full-battery electric cars in 2019. First of all this year, despite corona, we are already now at 52,000 obviously now, so before ramp-up of the ID.3. So we will see a much improved -- a much stronger volume performance when it comes to battery electric cars at the back end of the year. In our planning, we don't believe we have sort of a big sort of problem with battery cell supply. Obviously, there is some supply on the older cars, supply restraints on the older cars like the e-up! or the e-Golf, which are both, I would say, virtually sold out for the year 2020. The order intake is still going on for the year 2021 in some countries. We've now even reached midyear 2021 supplies for the e-up!. But obviously, on the new cars like the ID.3, where we're starting a new plant and a new lifeline for the brand, we do not believe that we will have actually battery cell constraints sort of in the near term. The volume ramp-up which I've just described, 15,000 sort of cars have now been allocated firmly to our pre-bookers in forms of first additions is in line with fulfilling our sort of volume ambition for the year, which is around 60,000 ID.3s until the year-end which is deliveries, not order bank. I think the order bank will be much bigger when we approach year-end. So this is around -- 60,000 is the sales plan for the remaining months of the year. We are now actually working intensively with logistics and the plans to arrange these handovers to our customers. But we believe we can actually sort of, I think, deliver that volume to our customers this year, plus a quantity of X not quantifiable fully yet on ID.4s because the ID.4 again will go on sale after the first ID.3s have been delivered in calendar week 39. And again, we will see impacts of ID.4s even going into the market this year. So our focus is not on restrictions, but on actually, logistics and getting the cars in quality and in time to our customers. Again, the vast majority of our customers want the car as it is now. Don't want to wait, which I think makes things, I think, much, much more doable for us. But again, it's -- we're not focused on restrictions. We are focusing on, I would say, implementation excellence for the last 4 months of this year. That should hopefully cover the first question that you had. I think Alexander, if you can take the second one, which is about demand and pricing.

Yes. Demand and pricing and also inventory, so let's start with inventory levels. So I can confirm clearly what Christian Dahlheim stated yesterday. As I mentioned in the presentation, we improved our inventory levels in the first half year compared to the last half year 2019 by more than EUR 1.1 billion. And as we are ramping up now, again, our plans, we have good demand. We see a positive development of inventories during the second half of the year 2020 as well. So this is clearly going in the right direction. We also see through the normalization of receivables and liabilities a good working capital performance in that context. So this is going and heading in the right direction. As far as pricing is concerned, clearly, I can say we had a positive pricing impact. I mentioned here in the presentation around EUR 1.3 billion. And in context, that was a positive impact for the operating profit. Due to these developments, we expect already in the third quarter, good performance, positive performance and then, as you mentioned, an outstanding fourth quarter. But already, the third quarter will be in a positive level. As it comes to Ford and MEB, here, I can clearly say that Volkswagen Brand and the component division, we are acting as a supplier to Ford. Due to that, we have advanced commercial contracts with commercial conditions. I do not -- but I cannot relate to. And in that way, we and the component division will receive the revenues and also profits as it relates to that business.

It reconfirms the statement that the Volkswagen Brand has obviously done, I think, as usual, in sort of bigger platform sort of prework actually some tremendous work, not only for the brands in the Volkswagen Group, but actually in this time, for the first time actually in big brand outside the group.

Probably the clearest answer that we got on some questions for a very long time in conference calls by management, so thank you. Really appreciate it.

Thank you, Tim, for that. And yes, we are taking now the next question from Horst Schneider from Bank of America.

My question would have been as well on Q3 and Q4, but you elaborated already on that. So maybe you can, again, give some more details on this volume price/mix effect and also the leverage that you have seen in the second quarter. I mean the volumes were already down in Q1. Of course, they were down a lot also in Q2, but I think the reaction to the volumes was much larger in Q2. I calculate something like 30% drop-through to EBIT. So can you maybe provide a little more color between the [ tepid ] in volume price/mix, especially mix since the revenues per unit have been also pretty strong in Q2? And my follow-up question on that would be, if that trend should continue also Q3, Q4, that you continue to see such a strong mix as in Q2, for example.

Alexander, do you want to start? Or shall I give you a bit of sort of start on the sales side for this?

Yes. Maybe to start on the sales side.

Okay. I think if you look into mix movements in the first half of the year, I think there's a few things to notice. First of all, some of the mixes that we've seen actually are not natural as the markets have actually gone into lockdown, semi lockdown, shorter or longer lockdowns, actually market-by-market with independent speeds and depth. So obviously, as many of the Central Northern European countries like Germany, some of the Nordic countries, Netherlands didn't fully lock down but actually kept selling, and they're actually in the higher-revenue bands and richer mixes that has helped mix performance in Europe second half. And obviously, the sales mix in Southern Europe which went into much deeper crisis is more small car-based, lower revenue base. So that obviously has skewed second quarter mix. The good news is that the underlying stronger SUV trend has continued. Actually, in most regions around the world, sort of even in COVID crisis, we've seen strengthening of the SUV demand in our sales. Obviously, that leading to higher net revenues and gross revenues for the countries and our dealers. But it's -- again, we need to wait until we get into a little more normal, I think, sales situation in Q3, Q4 to see whether that's an indicator for full year already. But obviously, actually it has been extremely helpful in second quarter to actually give us positive mix effects on the business. Alexander, do you want to sort of jump in on that?

Yes. Perhaps I can cluster it once again to make clear what happened in the corona pandemic situation. So from the volume side, we lost EUR 4.7 billion in revenue clearly. The pricing, I can confirm, and I stated in my speech, we improved by EUR 1.3 billion not only in high-inflation countries, also for pricing measures here in other regions. As it comes to the mix itself, and Jürgen stated it before, we lost over-proportionally in Europe and also in Germany. This will change now in the second half of the year, so that will be a positive effect. We had also, from a type mix, a change from -- the change from Golf to Golf 8, so in the ramp-up phase. But on the positive side, and that is in conjunction also with the pricing, we were able to sell higher up! lines. So in the Tiguan, in the Polo and so on. So this really helped in the financial performance, and we see that currently continuing. So for example, the participation of a high line in the Tiguan increased from 43% to 52%. And these are things where I say that helps our bottom line. And as we see that volumes are increasing now in the second half of the year, this is definitely a tailwind for our profit situation as I mentioned in Q3 and Q4 being positive. So these circumstances will really drive our business. If there doesn't show up a second wave of corona, this remark I have to make.

Can I maybe do a follow-up, and that you expect this strong mix to continue now for a longer period of time? Or it's basically also for you a black box, and you can't say when it basically normalizes? And on unit sales again, is there maybe any chance that we see then also positive growth in the month after July, for example? Or you will draw that out categorically at the moment that this is possible, in Europe specifically?

In U.S.?

No. In Europe.

Sorry, can -- in Europe? No, I think the -- July signifies that so we will -- will capacity come close to a sort of almost like a net 0 loss compared to last year in July, obviously, in August because we have shut down some of the soft companies have it later. The situation will be, I would say, slightly more negative in August. Our peak months in terms of deliveries will be September through year-end. That's why we expect to really catch up fast. As I think, obviously, we have this entire battery electric car volume to come on top, which we didn't have last year. And if you look into the customer base buying our electric cars now as they did the first mover there, most of them are new to brand, sort of not substituting other cars in our portfolio. So that will be a big boost of incremental volume going into fourth quarter.

So it can be positive growth, right, in terms of unit sales in Europe?