Volkswagen AG (VOW3) Earnings Call Transcript & Summary

Good day, and welcome to the Brand Positioning Within the Volkswagen Group Live Audio Webcast and Conference Call. Today's conference is being recorded. At this time, I would like to hand the call over to Helen Beckermann, Head of Group Investor Relations for Volkswagen AG. Please go ahead, ma'am.

Hello. Good afternoon, and welcome to all the participants in today's call. You've flagged to us in many occasions that you need more quality and clarity on the positioning of our brands. We're a little bit overdue on this session. So we're delighted to have Dr. Christian Dahlheim here today, who will update you on the brand positioning within the group as part of our strategy, Together 2025+. We have reviewed and sharpened our brand positioning within the whole group. This involves clarifying what our individual brands stand for and how the brands as well as their product portfolio will position themselves more effectively to achieve a stronger differentiation in front of the customers. Ultimately, clear brand positioning plays a significant role in exploiting profit pools and achieving the highest margins possible for each individual brand without eroding the performance of another group brand. I'd now like to pass over to Christian, who will update you and, of course, take questions once his presentation is finished.

Thank you, Helen. Yes, warm welcome from my side. Thank you for taking the time. Let me start with managing expectations a little bit. We're here today to talk about the positioning of the brands out of Volkswagen Group. We're here to talk about how to leverage our multi-brand setup to maximize our share of current and future profit pools and how to position ourselves against the competition. We are also here to discuss how to use our multi-brand approach to manage the transition from ICE vehicles to BEV vehicles. We're not here to talk about portfolio optimization. That's a topic we leave to Frank and Herbert. Before we dig into the topic, I'd like to take 2 minutes to discuss our CO2 compliance. I know that there was a bit of confusion due to some statements that have been made last week, so let me maybe clarify the situation. It is exactly as we have communicated during the planning on call for 2020. We expect a slight miss, which will be below 1 gram for the Volkswagen Group as a whole for the European markets. For 2021, we can confirm that we're extremely confident that we will be fully compliant, and that also holds true for the years after 2021. As we always said, this is based on our strong BEV performance which should leave us comfortable in the compliance zone in 2021. With that, I'd like to dig into what we call best brand equity. I'm not sure if you guys can see the slides, that's why I'm waiting for 2 minutes. So best brand equity is the internal project name we gave ourselves for the better brand positioning, which we started in mid-2019. It's a core element of our strategy 2025. And when you look at the chart that you see on the screen or on your screens, hopefully, which summarizes what we believe that Volkswagen is a strong investment proposition. The first sentence reads strong brands with clear positioning and great products that inspire customers. I'm not going to read through the other topics, which we've commented in multiple forms. But I'd like to focus on that first topic and maybe give you a bit more clarity on what we do on these topics. Let's maybe start to take a look at our brand positioning within the industry. What you see is a readout from the recent Interbrand study. What you see here is the most valuable brands, so the top 100 brands, not all of them. No surprise that our brands are not as valuable on an Interbrand clarity than, for example, brand Apple. So still some room to grow. But -- and I'd like to point that out, the Volkswagen Group is the only OEM. It's actually the only company next to LVMH that has 3 brands in the top 100. So we believe that is a great starting point. And this, of course, tells us that Volkswagen, Audi and Porsche are out by far most important brands and other core brands of this group and other brands, which we're not going to exclusively focus on, but we'll certainly focus our investments on in the future. Because they are the brands that have global reach and relevance. Let me show you a short overview on the methodology we're trying to apply. We're effectively applying. What we start with is a customer segment and the future profit pools. Might sound self-evident, but I think it's extremely important to understand where the profit pools lie on a global level today and in the future and which customers are we designing our cars for. We then looked at our optimal brand portfolio, meaning what is the role of the different brands, in which road should they play in the different global regions. And correspondingly, of course, which cars should they get. Third, vision, mission, brand Values. This is homework of good marketing. What does the brand stand for? Of course, we had this in the past, but it was different in the different brands in terms of methodology. So very difficult to compare. We now have a unified methodology to also enable our group Board to have a clear view on what the brands stand for. And then point four is where it effectively hits the market. Based on that brand positioning, based on these profit pools, what is the product design which is customer oriented. I'm going to comment on all of these points. And last point five is the governance model. So in a group function, which actually lies in my area and the area of our Head of Strategy, , will govern the brand positioning, and it's our job to ensure that the brands "behave according to their role in the strategy." The methodology I'm presenting to you is a methodology that we have rolled out to the complete European markets, the U.S. and China. We are in the process to rolling them out to the other world regions. So it's a unified methodology, which, of course, different customer segments, vastly different, but the methodology is the same. If you see it on the left side, we have it for all our brands. If in the coming charts, I will not necessarily present all brands in all charts. This is only to focus the discussion, and you should not draw any conclusions if one brand is missing. So let's dig into the methodology. We actually look at customer segments in 2 different ways. The one is the demographic characteristics on your right, where we use a well-established tool, which is SIGMA Milieus, which is established for more than 25 years, which has a vast analytics behind it in all global regions. And the second is the customer vehicle demand. So the question is which cars do these customers ask for? We can connect both methodologies through the new car buyer study, which provides us an analytic basis and the analytic tools to actually identify what our customer is buying, are the brands selling their cars in the segments they're supposed to sell them, and are we targeting right customer groups. Let's move on and let's take a look at the first tool, which is SIGMA Milieus. I'm sure a lot of you are familiar with marketing tools, have seen that. It's a globally established tool. On the Y-axis, you see social status or income or wealth. And on the Y-axis, you see sort of the affinity for new things, if I may simplify that access. What you see here is the picture for Europe, and this not only is a car-related topic, but SIGMA provides us the basis to understand what do these customer groups like, how do they live, what are their preferences, what are the attitudes toward new technologies, et cetera, et cetera. Of course, the same picture with different segments exists for the U.S. and China, just to name our top 3 global regions. As you can, of course, see, these are comparable, but of course, the Chinese customers have different segments. And of course, a Chinese customer in a different segment have different attitudes. Although it's fair to say, especially in the premium segments, if you compare the SIGMA answers over years, we see a clear approach. So if you want a premium Chinese customer gets a lot more similar to a premium U.S. or European customer over the last years. Less true for the "volume customers." But on the premium segments, global brands are able to address global attitudes that we find in these premium customers if you want the upper right corner, which is, of course, where if you look at margins, the biggest profit pools lie. Now let's take a look at the chart that you're probably interested in, which is the position of our brand. I'll pick Europe because it's the most complicated area first because, obviously, we have more than 3 brands. You see right in the middle, and this is the Volkswagen brand. You see no big surprise, Audi to the upper right. Porsche, a little bit above, and Bentley, even a little bit above, but in a more conservative attitude. So if you look at the difference between Bentley and Porsche, of course, Porsche is addressing a wide range of high-income customers, but Bentley is more focused towards the more traditional segments. This picture is necessarily a simplified version of what you see. But I think it should give you a glimpse of where we stand. And let me quickly comment on ŠKODA because I know there's always a lot of interesting discussions. If we position ŠKODA to become a "cheaper budget brands." Yes, of course, based on its cost position, ŠKODA is the brand that is ideally positioned within the Volkswagen Group to also tackle segments where people are not able to afford high-priced cars. That does not mean you find a lot of high net worth individual that actually purchases ŠKODA because they are great cars, and ŠKODA will sell in these segments as well. But within the group, ŠKODA clearly has the task to tap into the profit pools, and I will show you that in a minute that lie within these lower income or more traditional segments. We see the same picture, again, a slightly simplified version now here to the left for the U.S. and to the right for China. For the U.S., obviously, you see a heavy impact or heavy weight in premium. We're very successful in the premium market in the U.S. market. We're at least in terms of market share a bit less successful in volume. And of course, Volkswagen is not tapping all segments because Volkswagen in the U.S. is still a relatively high-priced car, but that's the target positioning we're in and we believe we can certainly achieve our market share targets with this positioning. Noteworthy on the China side is the Jetta brand that we have very successfully launched in the lower price segments, but based on a much lower cost structure. We can sell profitable cars there. And so we have a nice positioning between the Volkswagen Brand and, let's say, the Chinese brands that are even less expensive. And the success of Jetta of this year speaks for itself. Let us take a look. This chart might seem busy, but let us take a look. We really only have to look at the colors. And I think these are very insightful charts once you dig into them. Because this is if you ask the general population, if you want, example Europe, how do you perceive the brand Audi. And if you remember the pictures I've shown you, of course, the redder it gets, the more answers you have; and the bluer it gets, the less answers you have. So what you see on the one hand is that Audi, not surprisingly, is more perceived as a premium brand with a slight lean towards a pretty wide range across very modern, sophisticated and very more traditional segments. It becomes interesting if you look at what Audi e-tron does to Audi. So if we ask people, how do you perceive Audi e-tron as a sub-brand or as a separate brand, you see that it moves the Audi brand to the upper right. So Audi e-tron enables us to do next to selling great battery electric vehicle cars, but it also changes the perception for the brand. It moves Audi much closer to, for example, where you would see a Tesla, if we ask a Tesla, of course, on higher volumes, if I might point that out. So the electric -- the transition to BEV, not only is a transition of drivetrains, it also moves the brand into even more attractive segments. Similar picture for Porsche. Of course, Porsche also is in the wealthy individuals that can afford a Porsche, also has some strong impacts on all the way to the right for very sophisticated and modern customers. If you look at Porsche E-Performance, so the Taycan for that matter, it also moved the brand further to the right. Again, all these customers are equally liked by us. But of course, the more brand is perceived as a modern sophisticated brand, traditionally, the more customer demand you have and the more price premium you can demand. So E-Performance also does the trick for Porsche. And last but not least, a bit early days, but we've also done the same for the Volkswagen ID, and we're happy to follow up on that in one of our next calls. Next chart, please. Also on the ID -- and we inserted the different countries here. Also in the ID, you see that the ID brand for Volkswagen moves the brand to the right, which is a great movement for the brand. And which puts Volkswagen, as you know, that, of course, have -- didn't have the brand perception that we'd like it to have over the last years is now the ID -- the Volkswagen ID is not only reshaping the drivetrain portfolio, it's also reshaping the brand Volkswagen and the perception, and we're very confident that it will do the same trick for us in the U.S. Now to look at something that U.S. investors, of course, care about, which is profit pools, we don't give you the internal data, forgive us for that. On the left side, but it should give you an indication. We can actually allocate profit pools to these SIGMA segments. And no big surprise, the biggest profit pools here indicated as a profit index in the upper segments; wealthy customers provide bigger profits. So a C SUV segment or a D SUV segment is more profitable than A0 segment. But if you go to the left, and then what we call the traditional mainstream, also that segment, roughly speaking, is a profit pool of roughly EUR 3 billion for Europe. If you then go to the right, you see maybe the untapped potential because what you see in these index numbers, the way to read it, if the number is 100, we sell exactly as many cars proportionately as there are customers in this segment. So you see we have an over-proportional rate in the post-modern and the progressive-modern mainstream segments, with 124% or 126% weight. But we are underweighted in the traditional mainstream segment with 72%. Again, this is a significant large profit pool where you, of course, have to have a competitive cost base to compete. But with our ŠKODA brand, we definitely have that cost base. And this is not a cheap segment to use a word that sometimes is misleadingly used. It's a great segment to make money in, and it's something that the Volkswagen Group is underrepresented in. So if you've positioned some ŠKODA cars clearly to tap into that segment will tap into profit pools that are new profit pools to us, which we take away from our competition and not from our other brands. We now move to the other tool. Again, it might be a bit misleading that we look at 2 charts, but it's -- it allows us to clearly position the car. So the one is to understand the customers and the second is then to say, okay, which cars are we now giving to the individual brands. The picture, generally speaking, is comparable because the Y-axis is income or wealth, so you can compare the 2 tools. And what you can, of course, see is that ŠKODA, no surprise, is a bit more positioned in the functionality-seeking Volkswagen is what we call the self-rewarding. And let's say, if you take a Porsche, for example, or CUPRA, it's more an image-seeking car. So if you take a car on the same platform that a ŠKODA or Volkswagen or CUPRA sales, then we should differentiate it in such a way that a customer that looks for functional working car, typically maybe a larger car or a car that has a variant or a combi shape, should be a ŠKODA customer. Volkswagen should be a bit more emotional, but less shiny, if you want, and the CUPRA customer, of course, something that expects expressive design in something that is something specific and special. The same picture for China, very comparable picture, with, of course, now the Jetta brand included. The Jetta brand, obviously, is also in all segments, even in the status-driven segment because the Jetta brand is still compared to a Chinese brand, more status. But of course, it taps into much lower income segments than the Volkswagen or the ŠKODA brand. Let's maybe take a look at how do we use that tool to make it practically for you. I mean, as you might imagine, we have multiple meetings with Board members, salespeople and technical people and then we look at new car designs. I think what is new -- before we look at any car designs, we actually look at which customers are we building this car for. So before anyone sees a design study, everybody sees a typical "customer," which you see in these very small pictures. That's the first chart. And of course, we look into much more detail than we can show you here. So saying, okay, this is the customer we're building this car for. You will probably assume that the average social distribution of board members is not representative of the general population. So obviously, it makes sense to reposition our brains before we look into design. It's not a question if we like the car, it's the question what is the customer segments that we're designing and building this car for. Is it rightly priced, is it rightly designed. So next chart, and that's what we then do. We say, okay, is this the right price segment, is this the right design for that customer, does it have the right equipment. And you can actually -- with different equipments that might have the same cost base but have different perception by different customer groups, you can design a car with exactly the same cost base or even sometimes a lower cost base that has more attractiveness to a specific customer, which, of course, makes sense from an investment point of view. And of course, we try to differentiate the cars such that they don't compete with each other in the market but compete with the relevant competitors. When we come to pricing, simplified pictures of the chart we traditionally look at for each car. First is -- and here, there's an example, B Estate. So you look at the price distribution. What you see here is a typical bell-shaped curve. Of course, there's a wide price range. If you take, for example, Passat from 60,000 to 30,000, and then in that same segment, for example, you have an A4, which goes even higher. And of course, ends a bit lower. That's why you see volume and premium. And then to the right side, if we now design the new Passat and Superb that will come in a few years, we position the cars and calculate the investments based on an assumed volume distribution. And of course, it's the job of the ŠKODA, in that case, to tap into some of the lower price segments, which does not mean, as you see here, that the Superb becomes a cheap car. Also, the Superb, of course, will have a wider price range. But the general weight of the car compared to the Passat should be slightly geared towards the lower end in order to then compete with the relevant competitors in that segment, .the same for the Passat. And if we include the A4 in that chart, of course, you would see a lot of bars to the upper side. So hopefully, give you a glimpse of that what we're trying to do is position a brand in such a way that they compete with the relevant competition and tap into the profit pools that we believe we can steal or take away from competition and not from ourselves. Let's now in closing, maybe come to a little bit of a less analytical exercise. Obviously, brand positioning and checking where our brands compete is one side, but it's, of course, also about emotions and about the way we position the brand. So we'd like to show you what we call the Brand ID cards. What we do with these Brand ID cards and I'm going to show you a few examples in a minute is to say what does the brand stand for, what is their ID, what is their DNA, if you want, and then how does that translate into the design criteria. You cannot design a Porsche each one from scratch, but you know that Porsche have certain criteria that then is also not copied by other brands, and they can uniquely identify the car as a Porsche versus Volkswagen versus ŠKODA, so they translate into the design guidelines. And this is, of course, all based on the way customers in current and future segments want to buy the car. So if you take Porsche as an example. I think everybody knows the famous words by Ferry Porsche, "In the beginning I looked around and could not find the car I dreamed off, so I decided to build it myself," which is sort of icon that Porsche is still driven by. And then you see on the brand concept, I think what is unique for Porsche, something like performance and sustainability, design and function, Porsche is a unique performance brand that it also has functionality and has that perception between exclusiveness and equally likability. That translates into design guideline. You will see an old-fashioned booklet. Yes, most of that is digital, of course, but sometimes it helps to print these things. So every Porsche is designed on these guidelines. And all brands now have a distinct design guideline that is then also differentiated between the different brands. And -- Klaus Bischoff is our group design godfather who'll then make sure that the brands are clearly differentiated. Pictures are sometimes more powerful than words. That's why every brand has a mood board, where you not only see certain cars, but it's actually an easy picture, if you want, what does the brand stand for. In terms of the customer perception, as you can see, it's not only cars, but it's also the tone of voice in the space, and this is what we also give us a briefing to our agencies and we design new advertising material, et cetera. So this is nothing fundamentally new. What is new is that we have that now consistently for all brands and in a comparable methodology. So now we tap into a few other examples. Let's start with Audi. We believe in all fairness that Audi probably has the biggest upside potential because while Audi is a great brand, it certainly has lost relative to its premium competitors over the past, but it's now on a great way also with Markus Duesmann at the leadership to bring back that Vorsprung durch Technik, and clearly it becomes the most desirable premium brand. It's no surprise that our Artemis project in terms of the spearheading of technology is led by Audi and by Markus Duesmann in person. So let's take a look at the 2 volume brands, ŠKODA and CUPRA. And the reason I'm not showing Volkswagen because it's not -- it's actually going to be approved in the next 4 weeks. So forgive me for not showing it here. But of course, there will be a clear chart for Volkswagen. ŠKODA is actually probably summarized by the simply clever that everybody knows. ŠKODA, as you can see from this chart, does not stand for any budget approach or anything, but for a simply clever approach, meaning giving the customer what the customer asked for, not additional [ chee-cheev ], if I may call it, so a clear distinction to brand Volkswagen. And then last but not least, our newest kid on the block, the CUPRA brand. And our early indicators actually saw that the CUPRA brand is moving both CUPRA and Fiat in the right direction. We need Fiat and CUPRA to be much more emotional, much more appealing. And I think with the launch of the Formentor as a CUPRA-only brand -- as a CUPRA-only model, forgive me, we have a clear role model for what the brand CUPRA stands for and will stand for in the future of every intention to also price position the brand CUPRA. And if you look at the current prices, it's already there at a level that is slightly at or even above Volkswagen's levels given where the brand can stand for. Still some work to be done. But based on the new models, we also launched electric el-Born as a CUPRA-only model. We believe we have the opportunity to really shape a new brand here. Last picture, the dream of the group head of sales and marketing. In a perfect world, of course, all brands are perfect individuals with high performance, and they're playing in a perfect orchestra delivering maximum value, not only to us but also to you as investors. Thank you very much.

Thank you very much, Christian. As I'm sure you can imagine, with today's presentation, it was a little bit tricky to gauge which level of detail we should go to, what the background of you as our community is, but I hope we've touched on the key points and covered your needs and selected slides will be available on the website. I'd like now to hand over to the operator for Q&A, but maybe I can just make known to you that we also have some of our key journalists in the call today. And of course, you're also very welcome to give us questions through the operator. So operator, we'll hand over to you to start the Q&A session, please.

[Operator Instructions] The first question comes from George Galliers from Goldman Sachs.

So the first question just on the brands. If I look at Slide 16, in the upper conservative, you have 4.2 as the second largest profit pool. And you're also index 99. So the question I have is, given that this is where Bentley sits on all of the preceding matrix, why does Bentley not make better margins than what you have reported in recent years? Or to put it alternatively, do you think Bentley should be making more money given the brand positioning and the size of this profit pool?

George, absolutely. I mean, second part of your question, absolutely. Bentley, based on its brand perception and brand power, should make double-digit margins. The reason Bentley didn't make money in the past or sometimes didn't make money is clearly an overinvestment in technology and lack of using group platforms. So I think especially with combining Bentley with Porsche, that has changed. Bentley will be a profitable brand in the future. And we're very confident that Bentley, absolutely, as they should, first, make more money with a limited volume. You always build 1 Bentley less than the customers' desire, hopefully. But I think we should get double-digit margins out of a brand like this. Maybe a quick comment because I know that's typically a question that's related to Bentley is the Brexit. We feel comfortable that we're well prepared also for potential Brexit, although we don't hope for it. We're still confident that there might be an agreement reached. But as Bentley has already communicated, we took the necessary steps to also ensure profitability in a Brexit scenario. But I think the ambition you're phrasing, we would absolutely agree with that.

Great. And then if I might just slip in a second question, which is slightly unrelated, but while we have the opportunity to talk to you. Over the weekend, there were several press articles that were reporting comments from Volkswagen that from 2022, you should have no problems achieving the CO2 targets. I think in the prior communication to investors, it has been that in 2021, there should also be no problem. Could you just clarify that you don't now see a risk to 2021 CO2 compliance?

Yes. The short answer to your question, George, yes, I can confirm that. In 2021, we will be compliant, very clearly. And we will be compliant then throughout the Planning Round. So starting with 2021, we will be compliant and that will continue through the Planning Round. Even if after 2025 the limitations will be more severe, we're still very confident that even after that, we can hit compliance.

Stephen Reitman from Societe Generale.

My question is then -- is the extent that this is now is overlaid with profitability in terms of the stated desire to reduce the number of variants, variability to concentrate on the most profitable vehicles. How are these tools being used to identify those and actually delete those vehicles, which in times past, could have been seen as vanity projects driven by the ambitions of previous leaders of the company?

Yes, Stephen. First of all, maybe you will still build some icons that are brand shaping but only if they are brand shaping. So there will still be some maybe small-scale cars that, for example, Audi will build, but then it has to pay into really reshaping the brands and allowing the premium for the general public. But to your question, how do we use the tool, I mean, obviously, especially now in the transition, it is an extremely powerful tool because we are facing, of course, on almost daily basis the question which I e-cars will be continue to build, which will be not continue to build. And for that, we need to look at the profit pools. And then also sometimes the question, if we only build one of the cars on a platform, which brand should get that car. And that, of course, should be the brand that has the chance to make the most money with it. On the other side of the tool, we, for example, for very profitable segments, take a C-SUV or D-SUV or something else, there might be room for multiple brands to actually tap into these pools. And then, of course, you can also look at -- can you use one car or type of car and leverage global relevance? So every car that, of course, you can sell like the ID.4, for example, that you can sell as the same car in all global regions, a much preferable to a car that is only specific for one market, especially now in the transition.

So I mean, if I could just take one example. We'll take a simple example then, take the Volkswagen Arteon, I mean how does that figure? Because again, does Volkswagen brand really need above the Passat or the Toureg? I know, obviously, in China, it has a slightly higher brand image, but you have so many other bands that can fill those spaces.

Yes. I think that is a fair question, of course. And again, if it's -- a car either has to deliver significant volume times contribution margin, like, for example, Golf does or new ID.4 does. Or if you do a car like the Arteon, it has to pay into moving the brands upwards. If -- upwards, meaning we have to then get a larger price premium. Otherwise, it doesn't make sense. And of course, a car like this should have a global footprint. So as much as I like the Arteon that's probably an example of a car that you won't see in the future in terms of an ICE segment. So we clearly have to look into these types of cars. Once the car is invested, you, of course, should leverage the cash flows coming out of the car.

Patrick Hummel from UBS.

Patrick from UBS. Christian, one question that's a little bit out of the box. With this metrics chart, it's been very clear that there is some overlap between some of the mass market brands in the ICE world. And I wonder whether the transition to electric would have been an opportunity to clean that up even more aggressively. So where I'm coming from is, have you ever considered just creating a new mass market EV brand that would just capture the whole spectrum instead of relying on the traditional brands? You have multi-brand plans anyway, right? And maybe it would have even given you more financial flexibility. You might have followed the debate other OEMs that are publicly thinking out loud, whether they should IPO an EV arm of their business or something. I'm just wondering if that was ever a consideration to establish a fuel play BEV brand in the group for the mass segment?

Yes. Patrick, thanks for your question. I mean, for sure, there were some early indications when we discussed the ID brand, should that be a separate brand or not, but I wouldn't say there was anything that, that got very far. And the reason is relatively simply and maybe I might return to the beginning. The Volkswagen Group enjoys -- and I'm just focusing on the 3 brands for now, enjoys a fantastic range of brands, especially with Porsche, Audi and Volkswagen. So we fundamentally believe that these brands should also commercialize the transition to battery electric vehicles. Otherwise, we would "throw away the value of these brands," which would be a stupid business decision. And second, as you see, also, the BEV provides a fantastic opportunity to even enrich these brands and make them more attractive. So we fundamentally believe we have the brands that are in using these brands to make -- if you look at the Volkswagen to make battery electric vehicles available for everyone as the Porsche brand with a Taycan, a great example to leverage the emotional appeal of that brand to build an electric car. And if you look at the market, I mean, an Audi e-tron and a Porsche Taycan have not been the first cars to the market, but they're clearly outselling the Tesla very clearly in our core European markets while not yet in the U.S. So I see no reason why we should separate a BEV brand and if you want throw away the fantastic value we have. If you just look at the value of Porsche brand, if you just look at Interbrand challenge would have compared to a Ferrari brand or something. So we believe everyone else would probably envy us for the brands we have. So we'd like to leverage them also and bring them into the new world.

Yes. I mean, my question was more a math only, but I totally appreciate that. The other question I have, bringing an electric portfolio into the budget segment. I think Volkswagen Group in the past has been struggling from a cost structure perspective to really go into the budget segment. And I'm just wondering now with the MEB entry or however it's then going to be called basically EVs below the MEB, below the ID.3 coming to the market from maybe '23, '24 onwards, how should we think about the brand positioning here whilst keeping the quality and value for money promise that Volkswagen Group always has to offer? Will we see these budget EV models coming under different brands? Is that going to be ŠKODA-only? Or yes, any visibility you can share here, how you want to roll out the lower-end EVs in the medium term.

Yes. You will probably forgive me for not going to every detail of our future product strategy. But I think as much as I can say, I mean, obviously, the small BEV, let's put it this way, the A0 segment in Europe alone is a segment of 3.5 million cars. So it's a very attractive segment that probably can use multiple brands that need to be clearly differentiated. And on the cost base side, I mean, obviously, like every electric car, you have to bring down battery costs. That's probably the biggest challenge. In terms of production cost, which is typically some of our disadvantages we produce them in Germany, that is relatively speaking, at least, less relevant for an MEB. But of course, it's also something we look at where to produce the car. So we absolutely believe we can deliver a competitive small BEV. And having said that, if you look at the development, not only for us but for everyone else, I mean, the mobility on these A0 segment is becoming more expensive also on the ICE side. So we believe there is an opportunity also to do something on the price side to make that a profitable segment for us.

Next question comes from Tim Rokossa from Deutsche Bank.

My question is on -- I can hear myself. I hope you cannot hear the echo. My question is on really way to market. How we should think about if there is a difference between the individual brands in your potential online share going forward and also when you think about the agency model that you were pretty vocal about over the last couple of quarters?

Yes, Tim. I mean, it's certainly also the, let's say, the way we market our cars is a way to differentiate the brand. So let's take it, for example, the CUPRA brand, as we have communicated, will be launched an agency model, which provides an opportunity for a newcomer to do that in an agency. You know that we pilot the agency with the Volkswagen brand. So also here a slightly differentiated way. The ŠKODA Aniak, for example, will be sold "in the traditional way." All brands, of course, will use modern digital and online tools. But the propensity of our customers to use online is probably also different by brand, and that's something we look into. From a technology point of view, you enable all brands to use the group technology because this maybe the beauty of the group. If you build an online shop, you just build it for everyone, and then it can be leveraged in a different way or form. But maybe one noteworthy differentiation is, for example, the CUPRA brand in starting in an agency, enabling us to take price control right from the start. But certainly something to look at. And maybe a quick comment if we talk about sales channel is, of course, the dealer side. On the dealer side, very clearly, we need our customers to perceive the brands also in brick-and-mortar in a different way or form. But that doesn't mean we won't have group investors. So from an investor point of view, we, of course, will make our brands as much as it makes sense available to an investor that is willing to invest into multiple brands, in order to also make it profitable and attractive for them. That's also the beauty of maybe having multiple brands, especially in the transition that you can give an entrepreneurial investor an attractive set of brands, but still keep them within the group.

And just to follow up on your answer to Patrick's question, do you think that all of your brands are similarly BEV ready? Or do you believe that on the premium side of things, when you mentioned Porsche and when you mentioned Audi, you will at least for the next 5 to 10 years have a much higher share of BEV cars compared to the mass market?

No. We don't actually see a fundamental difference between BEV adoption rate on the premium and the mass market. It's relatively comparable across the world regions. Again, it's all a bit of a glass ball, of course. What you do, of course, see is let's take a Porsche, for example, Porsche sells car globally. So we believe that Europe will probably transition the fastest. So when we look at individual models, you, of course, will prioritize those models, those ICE models that are remaining that you can sell across all world regions, where typically an Audi or Porsche, of course, because they typically sell the same car across all world regions have a certain preference. But generally speaking, we do not see a fundamental customer difference in terms of adoption rates.

The next question comes from Henning Cosman from HSBC.

Christian, thanks for showing the SIGMA charts with the mentions. I find that very interesting across the brands, but especially also for the VW brand how few mentions you get for economy. And I think that's interesting, especially from a total cost of ownership point of view, considering how much better your cars retain their residual values compared to maybe some French competitors, for example. So I'm always wondering if there isn't an opportunity to position in the perception of the consumer, the brands also a little bit more with respect to the economy when it comes to the resale value of their cars and the total cost of ownership essentially being lower than cars with a lower entry price.

And it's funny that you asked that question. It almost looks like you've seen our internal VW papers, but that's pretty much without betraying too much here that, of course, that is one thing we actively look at saying the Volkswagen brand, while it has a higher price point, if you look at TCO and value retention is maybe the best choice for our customers if they look at these elements. So I think absolutely, that is very much something we currently look into when we position the Volkswagen brand and sharpen its identity. But stay tuned a little bit. I don't want to steal Ralf Brandstatter's thunder here.

The next question comes from Horst Schneider from Bank of America.

Sorry, I was on mute, sorry. I hope you hear me. now. So I have got 2 questions, please. The first one relates to the impact of COVID-19 on the growth of the various segments that you also identify here. So when we look especially at the aspect of affordability of cars, do you have the impression that essentially this middle segment where the Volkswagen brand is in, that, that maybe gets the kind of positioning problem in the long run because it's kind of in the same page of the market? I remember, 15 years back, we had the discussion that the Volkswagen brand was not clearly enough positioned, not low and not high and somewhere in the middle, and that could basically lead to some -- to some problems in the future. And maybe we are now in an environment, again, that basically, the price will matter a little bit more in the future just because the rich gets richer, the poor get poorer. Would you see that trend as well? And do you think that creates also the need for ŠKODA, therefore, to move more down scale in the market and be more competitive, for example, as Dacia? That is my first question.

Yes. I mean, your general observation is right. That's what we also see that the premium segment has certainly been more resilient in the COVID-19 crisis, and we think that trend will continue. And we also agree with you that as a general observation, the income difference in most global regions increases. So that fair provides an opportunity for the premium brands and backs the question on how do you position yourself on the volume side. That's, I think, where the variety of our brands come into play. We believe that the brand Volkswagen always should be a brand that is top of volume and that commands a price premium versus the average volume competitor. Back to Henning's remark or question since that's also the fundamental foundation for that, that it needs to hold its value better. Most people, about 85% of people, finance or lease their cars. So there the question of pure list price is less relevant than the question of residual value because even financing typically in these days is a balloon credit financing. So it actually depends on what's the car worth in 3 years. So the basis for success for the Volkswagen brand is command a price premium and nevertheless be very attractive on a lease and finance rate because the RVs are higher. That's something we very strongly look at. And yes, you're right that, of course, the ŠKODA brand as I have showed, while it's selling in all segments, has the competitive cost situation to significantly grow in their segments, which is the ones I alluded. You asked for the Dacia competition. We're always a bit -- we don't really like that comparison because we do not want to reduce ŠKODA to tapping into that competitor. ŠKODA has fabulous competitor with the French manufacturers, et cetera, what we have and, of course, Ford, which are key segments that ŠKODA should target and is targeting. And there's still tremendous growth potential. But on the volume side, relatively speaking, percentage terms, yes, the ŠKODA brand has the biggest growth potential.

All right. Then I ask another question that is -- that relates as to the brand positioning, relates more to the currency situation. Since you're ahead of sales, I want to make use here ahead of Christmas to ask how you get prepared at the moment for these upcoming hard lockdowns in Germany? And so far what has been the impact of the lockdowns light but also lockdowns in other European countries in the fourth quarter?

Yes. Look, certainly, I won't deny the challenge. We -- I think we're in very close contact through our organization with our dealers. We're in very close contact with registration offices to make sure we can register the cars that we need to register and deliver the cars logistically to our customers. But having said that, maybe on the positive side, our dealers are much better prepared in a lockdown than they have been in April. To give you an example, of course, if you take France, for example, to make it comparable, similar lockdown in April versus now in November, a vast difference in terms of order entries in AKs. So we're pretty much down to virtually 0 back in April. We lost maybe 20% of order entries and about 10% of AK in November in France. So a huge difference because customers are more used to take a contactless delivery of a car, and our dealers are much better prepared logistically to actually do this. So we want to downplay the challenge. It's a daily operational issue. But thanks to also agile dealer partners, we've been much better prepared for the Christmas really.

That also means that since you have sales order book, it's less a Q4 impact, and in fact it's more Q1 impact, probably. Is that right? Or...

Yes. Again, it depends how your order entries come in. On all fairness, of course, a lot of order entries these days, 50% of them as you know are essentially fleet customers who typically don't go deal to a dealer to place an order. They do that electronically. And even our private customers can now more and more place orders online. But yes, you will probably see, as you've seen in November, a slight decrease also in December. But given the weight of the fleet segment in Germany, we don't expect a major impact in Q1, especially if markets reopened in, let's say, the second week of January.

Christoph Rauwald from Bloomberg.

I would have 2 questions, please. One refers to the SEAT brand. Since -- and it sort of follows up on your remarks earlier on ŠKODA. Could you maybe elaborate a bit more on the future positioning and the specifics of the SEAT brand, excluding CUPRA? Because also asking on the backdrop of a sort of limited regional presence of the SEAT brand as such, so what is to be frank, the sort of point of the SEAT brand going forward, given that they seem to be stuck between CUPRA, ŠKODA in the upper price market, the Volkswagen brand? The second question relates to Bentley. How do you see the brand positioning changing given that Bentley has announced to shift away from this, yes, traditional heritage that's build around 12 and 10 cylinder engines into an all-electric brand? Is this going to also change the sort of customer perspection of the brand? And if so, in which direction?

Yes. First question, Christoph, the -- so for the SEAT brand, I think, first of all, it's very important to point out that the SEAT brand has a very important thing for the Volkswagen group. The SEAT brand has, by far, the most -- the youngest customers we have in the group, which has always been the target of the SEAT brand in all key markets, essentially which is the EU5, as you rightfully point out, plus Mexico, what the SEAT brand does what it should and brings younger customers to the group. But of course, we wouldn't have launched CUPRA if we didn't proceed some challenges with the brand. So clearly, the purpose of CUPRA is to also pull the SEAT brand up and allow us for higher price premiums. I can't share the current contribution margins with you. But I can tell you, and you can look at the price points. If you look at the price development of SEAT together with CUPRA, we've actually been very successful with that for the first 1.5 years. So look at [ EMEA , who launched the CUPRA, any of the CUPRA if you want pulls the SEAT brand upwards. And yes, we will then closely monitor the development of both brands and take our decisions on how we launch the different cars. CUPRA certainly provides the opportunity for the SEAT organization to potentially tap into also overseas markets, which we consider much more difficult with the SEAT brand. We will introduce the CUPRA brand together with Volkswagen in China. And we're looking into other markets where an expansion of the SEAT brand is probably more difficult. So it provides the whole SEAT organization a fantastic opportunity to maybe with a sharper positioned brand, with more sustainable price premiums to also be relevant on a global or at least cross-regional level. Second question on Bentley, yes, you're right. I would put it this way. I think the Bentley brand to a certain extent will change with their customer base. So again, a very simplified picture. So the time where the English Lords drives the Bentley, of course, is over and that customer segment is relatively limited. So the modern Bentley customers are high net worth individuals, especially if you look in the Asian markets, actually very young customers. So you're talking the mid-30s. And especially for these customers, we believe the reshaping of the brands, as you describe it, is the right approach because their customer segment has the financial means to afford a Bentley in the future, but they, of course, expect a top-notch car with the most modern drivetrains.

The next question comes from Gautam Narayan from RBC.

Gautam Narayan, RBC. Two on Tesla, if I may. Tesla has 3 basic models, right, and wants to reach 20 million sales per year at some point. We'll see if they ever will ever get there. But I think it is very telling. You have far less brands, obviously, in model diversity. The big reason for this, obviously, is they only sell full electrics, you guys sell ICEs and plug-in hybrids. So just wondering, longer term, as you increase your BEV penetration further, especially in Europe and China, do you see a situation of lessening brand diversification need taking from that model from Tesla? And then the second question I have, just from a brand standpoint, how worried are you about Tesla? You have a $600 million-plus market capitalization that can effectively use its equity currency to dramatically ramp production anywhere theoretically and make a whole lot of cars, assuming they get battery capacity, especially in Europe and China. Does it make sense to compete head-on with this behemoth potentially? Or does it make sense to focus kind of below where they are and maybe above like you are with VW brand below and maybe Porsche above? How do you think about this 800-pound gorilla that nobody really wants to talk about?

Gautam, as you know, we talk about Tesla all the time, at least my boss does, but that's a side remark. So to your first point, yes, I heard the ambitions from Elon to sell 20 million cars. It's great to hear. We believe we certainly would like to prevent that and have a higher share than he does. But nevertheless, I think, Tesla shows interestingly that old world of -- we clearly segment cars into whatever easier or hatchback, et cetera, is maybe something we should challenge and we are challenging, and that's why we look at customer needs and say -- looking at the customer needs, it's much more relevant than looking at these classic established segments that we all are stuck in the OEM world. So that's certainly something to learn from Tesla. But we believe and I come to -- that ties into your second question, we have the technology. We have the brands, and we have the regional footprint. And last but not least, we have the breadth of a distribution network to absolutely compete head-on with Tesla. So that's -- just one example. That's where we launched Artemis and others that we believe on autonomous driving. On the electric drivetrains, we can and we will compete with Tesla head-on. You're right. The market capitalization, of course, provides a wonderful tool for Tesla, and we look at that with a certain envy, and we believe that certainly makes Tesla an even stronger competitor. But we believe the Volkswagen group is probably the one that can take on the challenge. [ Side remark , we, of course, believe our stock is severely undervalued. So maybe that's something we can change as well. Last point, because you asked specifically for diversification, as we said, we're pretty happy with our brand portfolio, but it's not God-given that the Volkswagen group sits with the same brands in 10 to 12 years. So that's something we have been vocal in different meetings that, of course, we continuously look at our brand portfolio, together with our owners and see which brands bring us into the future and which brands might have a different owner. If you look at our core brands, that's probably not something we're discussing.

Excuse me, Christian and participants, we've got some mails in that there are some technical issues in registering your question. So please feel free to send an e-mail to Alexander Hunger. I think all of you know, Alex, and we're keeping pace of that as well. So yes, if you can't get through to us through the operator, you can really send a mail, and we're going through it as quickly as we can. Thank you.

[Operator Instructions] The next question comes from Dorothee Cresswell from Exane.

It's Dorothee from Exane. I just wanted to come back to your comments, the transition to BEVs actually shift the brands into more attractive profit pools. Does that also apply to the higher-end brands, so those that are above Porsche? And I wondered, is that dynamic more or less extreme in those super-premium segments? And then also, could you just comment on the success of Jetta in China? Exactly why is it outperforming ŠKODA so much, although their positioning seems relatively close together?

Yes, Dorothee, thanks for your question. So on the super-premium, in all fairness, of course, that's -- if you ask me on a pure analytical base, of course, the numbers are limited. We would say also in the super-premium segment, if you want to survive going into the future, you will have to offer super-premium electric sport cars that might have some specifics in the drivetrain, but that is certainly something we're closely watching. And we believe if you look at our Bugattis or Lamborghini brands, eventually, they also need to be -- they need to maintain their super performance, but they need to take that into a more sustainable future going forward. Of course, e-fuels might be a way for these "smaller volume brands," but it needs to be sustainable, combined with performance. We also see the customers of these super sports cars that are willing to spend between EUR 0.5 million for a car will ask more and more also in China, also in -- especially in Europe, but of course, also in China for sustainable cars. So clearly, something we need to look at bringing these brands into the future.

Sorry, just another brief comment because I forgot to mention. Of course, journalists, if you are having any issues, feel free to send an e-mail to Christoph Oemisch. Of course, you know him well, your key contact in our corporate communication department. Thank you.

Thanks, Helen. Yes, Dorothee, the second part of your question, the Jetta brand. So first of all, look, we're very happy with the success of the Jetta brand so far. As the Volkswagen Group, we always struggle to launch the famous budget car or budget brand. And I think we found a fantastic tool with the Jetta brand, leveraging product brand at the end and making it a brand with multiple products going forward and really competing in a segment that we never competed in, in China, still above that most of the Chinese competitors but with healthy margins and a very, very competitive price. Yes, of course, how the Jetta brands between Volkswagen and Jetta now, of course, it squeezes the ŠKODA brand a bit, and it's no secret that the ŠKODA brand, if you look at the volume development, is struggling in China. That is something we look at with our southern joint venture partners. And we look at how to reposition the ŠKODA brand to be successful again. But of course, if you look at the numbers, the Jetta brand is currently outcompeting. But I'd, of course, like to reemphasize the success of our Jetta brand and maybe some need for action on the ŠKODA side.

Our next question comes from Daniel Schwarz from Stifel.

One question about used car prices. German government just prolonged or extended the government incentive program for electric cars until 2025. And if you lease an ID.3 now, it comes back to the used car market in, let's say, '23, and it's going to compete with the new ID.3 with EUR 9,000 subsidies. What do you think what kind of impact that will have on the used car prices? And how are you managing that?

Yes. Daniel, it's certainly something to watch. I mean, as you rightfully point out, used car prices are extremely crucial. We believe that, look, I mean, first of all, we do take into account the development of supply and demand and the projected, let's say, government incentive schemes when we set our used car prices going forward. So if for example, if you take the e-Golf as an extreme example, we knew that was "older technology." So when the car comes back to us selling today, it gets a much lower residual value in a lease contract than, for example, a new ID.3 would get. The same holds true, all other things being equal, for certain ICE cars that then have to compete with the BEV offers. So it's something we take into account. If you look at the current development and also the projection of independent agency, it's not a major issue. And let's not forget, it's maybe one of the only positive sides of the COVID crisis like all depressed markets, they provide for good used car markets in a few years' time. So that's maybe on the positive side, if you may take something out of the COVID crisis. But generally speaking, so no major concern, but something we watch very closely. And you have to take it really market-by-market because there are different incentive schemes out in the markets. And maybe last point, that's one of the reasons why we're investing currently into increasing our capabilities to remarket cars across Europe. There's no reason why you can't do this. And that provides you a nice hedge depending on how government incentive schemes on the new car side work because, of course, you can sell a German used car in Spain or vice versa across the different segments. So investing into European remarketing capabilities is absolutely key. It's one of our key projects in order to enable us to then also stabilize used car prices in 3 years from now.

Okay. As far as we can see from our side, we don't have any active questions left in the queue. So I'd now move over to those questions that have arrived to us per e-mail. So the first area where a little bit more color would be required, Christian, is around the potential, of course, of the U.S. passenger car market and our decades of not a very strong success. And where exactly we see the VW brand going?

Yes. Look, I mean, whenever I talk about the U.S. market, I always like to point out first that we're actually successful in the U.S. market with all our premium brands because we sometimes tend to forget that in the overemphasis. But of course, you're right, the Volkswagen brand has had good years and then struggling years. We believe that the transition to battery electric vehicles provide a fantastic opportunity to reposition the brands. Also, with the new administration coming in, we believe that transition will actually maybe happen faster than maybe it would have happened under the Trump administration. And you know that, of course, the markets we are particularly strong in, California, Northeast are the markets that are independent of the President are transitioning faster. So battery electric vehicles, the arrival of the new ID.4, we believe, can position the brand. Also in the U.S., as I've shown you, the Volkswagen brand will never compete on a pure price. The Volkswagen brand has to compete on a top of volume segment. It is more difficult in U.S. than it is in Europe. But the battery electric vehicles the ID.4. and then, of course, the ID buzz coming in, we believe, provides a fantastic opportunity to reposition the brand.

Okay. Thanks, Christian. The next question we've received is about ŠKODA. We've talked a lot about the role of ŠKODA today. And particularly looking at India, where customers would, I think, it's a fact, have a lower disposable income, what our strategy for India is?

Yes. Look, the Volkswagen group historically hasn't been fantastically successful in India, but the ŠKODA brand was actually there as probably the first brand. And as you know, the ŠKODA brand will be selling both ŠKODA and Volkswagen and, of course, in a much smaller scale, the premium brands. The ŠKODA brand has taken the leadership over for the India region. And I think they're exactly the right brand to do this because sometimes more agile, faster and more cost-conscious and nimble than maybe some of the larger brands. So India is a marathon. India is a long-term game. We believe we will have the products in 2, 3 years to really compete with the local production and with a locally designed product on a competitive cost base. But again, this is going to be a marathon over the next 10 years to really get a sustainable footprint in India. And ŠKODA has both rolled. One as a key brand for the markets, but -- and also at designing the cars that are being sold in the market and potentially under the ŠKODA of Volkswagen label. But especially ŠKODA has also the leadership role to really develop that market.

Great. Then we're looking then at the area of BEV and ICE. And a valid question about substitution. So when we win a new customer with the BEV, are we losing one on the ICE side? And a little bit about conquest experience yet with the ID family, please?

Yes. Look, initially, of course, we actually have a relatively high conquest rate. I mean if you look, for example, the e-tron, of course, a large amount of existing e-tron customers roughly 40% come of existing Audi customers, but we actually tap with the e-tron, of course, as you might not be surprised to hear into our premium competitors and also in a Tesla to name one example. So BEVs have a slightly higher conquest rate than "normal cars." And very early days, but also the idea on the pre-book as we had a significant conquest rate on the more normal business now is still to be seen, but we clearly expect that conquest rate to be higher and also customers to be younger than our traditional Volkswagen customers. Eventually, in the transition, of course, we tap into the same customer segments because we intend to transform the whole industry. But the initial -- and we expect that to continue for the next 2, 3 years, BEVs will provide an opportunity to conquer customers once you have a relevant offering in the relevant segments. And we see that right now with the Taycan, with the e-tron but also with the ID. Probably ask the question again in 3 months, and I can give you more sustainable data for the ID.

Okay. We're sticking with the ID.3 for the next question. Yes, it's a constructive criticism, I would say. For a car, for EUR 40,000, it feels very plasticy. So a bit of a tricky one. Nevertheless, do we see a risk that we are losing our price premium position, if that's really how the customer feels about the car?

The answer is probably twofold. One is, if you look at the success of the car in the preorders and the customer segments buying the car, I think, we made a lot of things -- we made a lot of right choices into making the car more modern more maybe sometimes more puristic. But it's right to say going into the future, and you already see that with the ID.4 and with some of revamped ID.3 models that we're going to -- model ranges that we're going to launch, we will if you want to provide some more choice in some more, let's say, more traditionally perceived value in the car to address that topic. So half of the criticism we can understand, and we will correct some of the topics where -- let's put it this way, provide a wider range for those customers that want a more typical, let's call it, Golf interior because that's what it's often compared to. You will already see that if you look into the new ID.4.

Okay. The next question is related to product offering. We did mention that the A0 segment is a segment we are moving slightly out of or trending out of and have priced increased pricing in that segment. So a similar question, what about phase-out or the offering of sedans and multipurpose vehicles?

First of all, Helen, we're not moving out of the A0 segment. It would be not a good business decision, given the size of that segment and the profits to be gained in that segment, if done right. What is correct is that we have priced the A0 segment because the technology investment is necessary in that segment are significant, and we wanted to and have increased our margins in that segment. And we also saw some of the competitors following us. You can see that in -- if you look into our price/mix effects. In our bottom line, you can also see that if you look at the [ UPEs ] from our competitors in key markets. And of course, we maybe have to differentiate. So we increased some of the Volkswagen. So the Polo probably a bit more positioned, the Fabia a bit more in the more affordable segments, given that the production cost of a Fabia, of course, much lower that is a profitable move. Of course, now with the transition going forward, yes, we look at all segments. And as I said, in principle, of course, we look at those segments that are globally relevant, which stay more attractive because you can sell them also across the globe. And segments that are traditionally in the ICE world only relevant for Europe. We probably need to and will streamline our portfolio to then find one model that has significant volume. As I said before, one learning from Tesla is maybe that this traditional segment thinking is maybe not always the right way to think about it, but look more into customer segments and more crossover cars that in between segments could tap into certain profit pools without sacrificing volume, but then reducing model complexity.

Okay. Thank you. The next area of interest is more on body style and especially looking at SUVs. And actually, it's something I wasn't aware of, but probably you are Christian, that in France, there is a lot of noise about taxing vehicles more on the basis of weight. And whether we see that as a trend that could also come and apply more to other EU5 states.

Yes. Certainly, the new taxation scheme discussed in France is -- provides certain challenges for us because it, of course, penalizes heavier cars, so typically the premium manufacturers look, and it's a normal way in the European Union that the individual countries typically look at incentive schemes that they consider appropriate, but to a certain extent, of course, consider their relevant footprint and the models that the industry is building. So yes, certainly something we look at, and we will strive for fair competition across the markets, and that's something we're fundamentally concerned of because also in France, we, of course, have in all segments, a relevant offer. And France is a very relevant and, if I might say that, also a very profitable market for us. So even if we lose some heavier car sales, we believe we have the model range to then compete in the segments that you need to compete in.

Okay. The next one is in relation to the increased complexity or digitalization depending on your generation. So if an aging baby boomer has to try and get used to keyless and only an iPad or -- sorry, better not make -- say a brand, but some kind of pads in their vehicle, yes, how are we going to keep those customers? And how do we differentiate for those who might have difficulty with the level of digitalization?

Yes. Actually, I don't really think that digitalization is so much a question of age. I mean if you look at the -- without mentioning brands, if you look at smartphones, then obviously, I think across all age groups, they're heavily used, and that's maybe one of the magic of these products, and that's one of the challenges we need to tackle to saying make it easy to use. A fantastic technology doesn't have to be complicated. On the contrary, that's what some of the very successful technology brands have shown that it's actually easy to use. So a keyless entry, by definition, is not complicated. You just have your phone in your pocket and you open your car that is easy independent of age. So I don't see that trade-off. It provides our ambition to provide a similar user experience than people are used from their pets, sticking with you example.

Great. Sounds like good news for the older people in the call, including myself, over 40. Okay. We're moving now on to quite a specific question in relation to differentiation of customers, whether that is done through ASP, through average sales price, please?

Yes. In principle, yes, of course. I mean, all other things being equal, if you stick with the example I gave in the presentation, if you look at an A4 versus a Passat versus Superb so 3 cars that compete in the same principal segment, but of course, different customer segments. The one car is more expensive. But as I said, I mean, a typical car doesn't have one price range. If you look at A4 today, the price range varies by EUR 20,000 to EUR 25,000, depending on options you're taking. If you take a Porsche, it varies by much more than that. So pricing provides a differentiation, but it also is an opportunity to tap into different segments and price for what the customer really values. The functional-seeking customer might value other things like a like then an image-seeking customer that maybe is willing to pay for more expressive design.

Okay. The next question is in relation to our ordering systems and configuration of the individual vehicles. With the ID.3, we have the example of 10 clicks and small or, we'll say, customer orientated limitation on color. So if we're looking at this adapting a new ordering system, taking complexity out, making it more individual, how do we see this on -- the effect on pricing, upsides or downsides?

Yes. I think what the question is probably alluding to is that we, of course, do make like all OEMs do make some of our money to selling options, which typically have a higher margin than the base car itself. We do not see that trade-off. We think online sales can be managed as well as off-line sales in terms of propensity for certain willingness to take certain options. It's, of course, a tool set that we increasingly need to learn and master. Once we do, I think it provides an opportunity to even more tailor-made target certain options to the customers because you typically online, as we all know, know more about the customer coming in, than you actually know about the customer walking into dealership. Because we're all much more transparent if we go to the web. So I think longer term, it actually provides an opportunity for more customer-made offers.

Okay. Now we have a specific reference to one of our competitors. And the view that Mercedes S-Class, in particular, will have a stronger model cycle than us with effects on 2021. And maybe if we could do some peer comparison to how we counteract this perceived strength, especially in Europe and China.

Yes. Look, I mean, I think it's no secret that if you look at the global profits in the D sedan segments, I don't know the exact number, but it's probably fair that 95% of that goes to Mercedes with the S-Class, which is a fantastic success. And well, we believe we have a great car with the A8, and BMW certainly has a great car. The S-Class certainly taken the majority share. We believe, especially with the Audi brands, we look into these segments. We discussed the A8 competitor -- not competitor, A8 successor. Should that be the same Sedan type car or should it be something new? That's also where the Artemis project comes into play. So I will leave a bit of secrecy around that question, but we're certainly looking at it. We think it's more of a longer-term question, how do we compete in that segment. And the answer is probably not to try to copy the S-Class again and try to win the game, but maybe try something new and more appealing to the modern customer base. We believe we have some great ideas there.

Yes. Thank you. The next area is in relation to fleet business, especially in Europe. And the statement that there is a high level of intercompany competition between the brands Audi, VW and ŠKODA, which could lead or is leading to margin dilutions? And yes, how do we want to solve that? Or what's our strategy on the fleet business between the brands?

Yes, probably 2 answers. One is also most fleet customers at the end of the day, to a certain extent, are private customers because they are typically, especially on the premium segment, user-chooser customers that order a car based on a certain fleet policy. So you have to be in the game. But once you're in the game, these customers order the car like a private customers and they order the card that they prefer. And then, of course, you have the functional cars. So also clear brand differentiation helps here. Second, we do increasingly monitor lease rates and compare incentive schemes across our customers, across our brands. So it's something we definitely look at. But on the positive side, let's not forget, we're probably the only group that can actually give a fleet customer everything the customer needs within our group. That doesn't necessarily mean that all fleet customers only buy our group, but there's no other competitor that's able to deliver the range we do and also do overall more profitable offer, while on an individual car, maybe there might be a higher discount, but the overall package is better, also better for us than a competitor where the customer, of course, then always have to take other competing brands. So it's a bit of a mixed bag. The Volkswagen group has certainly a dense offering in that area, but that's also a huge opportunity. And you see that, of course, if you look into our market share in the fleet segment, that is clearly best-in-class.

Then we have a follow-up question related to fleet, Christian. How we see the fleet business developing with a stronger best lineup, for example, ID.3, 4 or e-tron from Audi?

Yes. I mean, most of our large fleet customers, and of course, increasingly, a number of very large companies have their own sustainability and CO2 targets. So they're increasingly asking for BEVs, of course, they're also asking for PHEVs, given that with a typical larger amount of kilometers driven, a PHEV more satisfied the demand initially. That will change once the BEV reach with the new models reach a level of range where that won't be a problem anymore. So we see actually an increasing demand in BEVs a new technology because not only because their customers the user-choosers want the car, but also because most of these larger companies want to fulfill their own sustainability targets in their fleets.

Okay. Then coming to what seems to be our final question for today. We do hope that we have covered all the topics that were necessary. And for those who felt or had the experience that you didn't get covered, just contact either the IR team or our Corporate Communications team. The last question then is on our dealer strategy, whether we plan to have multi-brand dealers or whether we will continue with single-branded dealerships.

Yes. I think in order to properly answer that question, you have to differentiate what you mean with single or multi-brand. So let me explain, I think you do have to differentiate between dealerships, so outlets and investors. It's clearly our strategy to more and more have investors that have multiple or ideally all brands of our group. And we have that in a large amount, of course, in a lot of markets. Because in the new world, you have to be larger dealers, all other things being equal, are more profitable dealers. And we need profitable successful dealers that are willing and able to invest. So on an investor base, we believe in a further consolidation, and we believe in a more multi-brand approach. That doesn't -- but in a custom perception in terms of outlets position, that, of course, needs to be brand differentiated because each brand also on the dealer side needs to position themselves distinctively from each other. But that's no contradiction. The customer doesn't see if your HR department, your T-Systems are joint, which a multi-brand investor can do. The customer sees the outlets. And we need our dealers to invest also into new models. As I said, outlets separate the aftersales area from the showrooms, bring showrooms more to the inner city areas, et cetera. That's why we believe in strong entrepreneurs, which would then also be willing to give "most of our brands if they desire to have them."

Sorry, I forgot to go live, excuse me. Just thank you to Christian. We're about to wrap up for today. We'd like to thank you for your participation. Thank you to our internal colleagues, sub departments, who've helped us with today's event. As I said, feel free to contact us in the afternoon or tomorrow. It seems for us anyway, in Wolfsburg, we're winding down slowly for our Christmas, our holiday season. And this is actually our more or less our last IR event. So if we don't speak in the next few days, we'd like to wish everybody a peaceful and healthy holiday season. And yes, we'll look forward to catching up soon. Thank you.

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.