Volkswagen AG (VOW3) Earnings Call Transcript & Summary

Hello, good afternoon, again, and welcome back to those who have rejoined us and those who may have just joined us now. I will quickly go through our agenda. The focus today is proof points on our electro strategy. We are very pleased to have Thomas Schmall, who you all got to know yesterday during the Power Day. He will give us a brief presentation on the component strategy and a little more input around the Power Day. And he will be also available for Q&A. We follow-up with BEV in China. And we will do Christian Dahlheim as the last portion to give you an insight into our product firework in -- especially with a focus on BEV. So I'll actually hand over now to Thomas Schmall, who has a short presentation.

Yes. Thank you, Helen. Welcome, everybody. As you have learned yesterday, we are the powerhouse of Volkswagen. So what means that? We found in Volkswagen sites, a new technology division with main pillars, as you have seen yesterday, cell and battery system and charging energy. The point -- or the story as yesterday is how we came to that. So that's additional new information for you I will present. In comparison to yesterday, we included today the transforming group components about it. Let me start with an interesting point. Now you see what is our strategic target, in similar direction, as Arno Antlitz told us. We like to bundle cross-functional content as charging energy, as battery cell, as pricing platform. Necessarily like to put in one hand all over the world in one division. That's a powerhouse, that's technology. You can see our road map, how we achieved that to ground technology division. We started in 2015 first, with a portfolio analysis study insight to looking which kind of products have a strategic chance to be profitable where we don't have any strategic impact. And that was our starting point in 2015. After that, we had a full picture or we created a full picture for every business unit, business area, plant side and signed a contract with the unions to achieve long-term content. I think this was one of the breaking points in the story of the Volkswagen Group Component. Because the first time in -- after founding Group Components, we had a clear future picture in 2016. And even strongly oriented on operational profit, we are not talking about -- I mean, I'm not talking only about -- only cost and cost-plus, we are talking about operational profit. And that was the reason why we have also founded then 2019 Group Components as an independent unit inside the Volkswagen brand. In 2021, the big step in January to take over the switch with Group Components in the Technology Division. So what are our 4 pillars to bring the Volkswagen Group Components to transform the Volkswagen Components to an asset inside the group? First, on the left side, we have really, really worked strongly to reduce complexity, took out variances. And focus, focus, focus, is the right word, on the left side for the ICI products. The combustion engine, the gearboxes, we are bundling worldwide. We have a last man standing strategy. So it's really clear volume counts, unit. This was our first point to take out complexity in the ICI products. The second way we took is we are looking for partnerships where we are not able alone, and we don't have know-how or resources sufficient to be a success with this kind of business. One example is the seat business. I think it's not a secret. Until the end of the month, you can see in the market that we are -- we will sign a joint venture agreement with one of the biggest seat suppliers that we make a joint venture out of that to bring it in a win-win position and bring it operational for a long time, sustainable and profitable. This is what we're doing on the second block. The third block was phasing out what -- where we don't see any chance to be profitable. Now if it's plastic parts in Brunswick or something like as only for an example, we did it more or less every plant. In every plant, we had single steps to phase out products we haven't seen any chance to be compatible in the future or what is not strategically relevant for us. And the last point is, for sure, the biggest part what you have seen yesterday, we created a huge new business. We are taking care about cells, cell development, cell production. We are taking care of charge and infrastructure and now energy and charging also. These are the 3 blocks, how we transformed -- how we transform the Group Components to an asset inside the group. Everybody is talking that the new business will kill jobs. What you can see here, we have perfect examples, as an example, for the plastic parts from Brunswick. On the left side, started in the red curve, we are phasing out that until 2022, and the entity is gone, and we are facing in the battery system. And as you can see, it's more or less equal on the job side, what is the really main success story if you compare that with other suppliers externally or internally. So we have -- there's only one example. I can give you examples for every plant where we did that. Our biggest task is that we will face a demographic effect that we will have a decrease of employees. What is perfect metrics on the new strategy implementation of EV world inside the Group, because the transformation will be below the demographic curve. This is really important. And we are not making in parallel, maintaining what we have and putting the new business on top. We are decreasing the headcount as we can in the last days. We are decreasing the headcount and transforming below the demographic curve. That's a major point. What brought us, as a result, was the transformation map only for -- a small example here, only to see for Germany, we have involved a strong focus on the chassis side. We doubled more or less the volume coming out of steel within other issues what we did inside Wolfsburg to focus, focus, focus. In Brunswick, we implemented as a transforming story is a battery system. We have the capacity of around about 500,000 units per year. Salzgitter is, for me, the biggest story, the biggest story of transformation of Volkswagen. If you know or if you have a small idea about Salzgitter, Salzgitter was a symbol over years for combustion engines. And it will be a symbol in the future for battery cells. As you have seen yesterday, we will make there one of the biggest -- bigger factories in Europe. And this is a story -- I think it's a unique story, and it's a perfect story for Volkswagen. In Kassel, we have the electric power drive. It's one of the biggest powertrain -- power try -- sorry, electric engine plants in the future with more or less around about 1 million electric engines we will produce until 2025 there. Hanover, we are producing actually the power bank for the charging structure as our joint venture with BP we announced yesterday. There, we are fusing the charging structure. Hanover, the red bullet is showing that in some regions, in some locations, where we don't have any possibility to be competitive, we shutted it down last year. So this is an issue what we are not really proud about. But if it's necessary, we can do it also at Wolfsburg. Finally, on the bottom line, this brought us as Group Components to value of more or less 40 -- between 40% and 50% of an EV car inside the group, 40% to 50% in value of an EV car is coming from the Group Components. We are the major in-channel supplier. We are a major supplier for EV cars in the group. And a lot of you guys are always saying it's a burden that we have so strong Group Components, so high vertical integration. But I think this was fantastic moment to speed up EV business because it was all in our hands, and it was only up to us to speed it up. And what kind of -- how perfect our cars are, you can read, you can see in all studies last days have been published. But that's not the end. We like to be competitive also for third market. We are obviously hoping, okay, since we are really competitive, and the funding proof is if you are supplying for third-party. We're starting now with Ford, and it's not the last one. Our idea is to have an industry standard with our parts and platforms. We will be much stronger also outside Volkswagen Group in the future. It's a starting tipping point in all these part, and you will see in the next years, how we will increase that. Additional new businesses, what we presented also yesterday, the charging infrastructure. This is compensating a little bit the value and the content side, what we are losing to transforming NEV business. That's more or less the transformation story in the short, short, short term. What we did in the last 5 years, I think it was really, really strong work, perfect work by the whole team to transform in, really, radical movements. And in some ways, which will be really -- what have been really unique for Volkswagen. The second point is building Powerhouse. Now we have the baseline transform Group Components, an asset inside the group, and now we can use this as ground at baseline to building up the powerhouse. The powerhouse for the Group Components will be a closed loop with battery cells, battery systems, first use in cars, 40%, 50% of value chain, I told you, second use in the recycling. We have a fundamental mindset change. And we are not more coming only out of our cars, defining the batteries and the variants. We're making the new unified cell concept as the heart, as the center of our development. And this is a major important cost point, so we are really clear that it must be in the heart, in the middle, in the center of our development actions. Finally, this all may come to a competitive cost base. What we have shown yesterday will bring us in the volume segment to 30% less cost in comparison the actual stages and 50% in the entry segment starting point. If you will ask me now what is this in average, it depends on the customer behavior. It depends which requirements a customer will have in the future. In the beginning of the EV rollout, we are flexible with unified cell concept. You can use the cell in every car, 80% of the cars can carry -- will have inside a unified cell concept. So this will give us a big flexibility. And then it's up to the customer if you like to have a low-range car, a middle-range or high-performance car. We're working inside the cell, intelligence inside with the chemistry and keeping the format. Some of you guys said -- only after the Power Day and tomorrow ask what about the raw material side. We are taking care because now with unified cell, we have a really clear picture about the amount of which kind of raw material we need. And for sure, that's why Mr. Jörg Hofmann yesterday presented. This will be our major task to, out of the capacity of the cell, secure the volume in the raw material side. What is the major cost driver in cell business, 2/3 of cell cost is raw material. You can see what I told, we will have utilization until 2030 of 80%. We start 23% with unified cell, and then we have the rollout. 1/3 is production process and others and 2/3 is the chemistry or raw material inside the cell. That's the major reason why we need to take more care about that. Finally, to close the loop, close the circle, we started the recycling business with a possibility of 95% recycling everything more or less out of the separator we can reuse, we can put again in the beginning of the cell process. And in the future, we will make, for sure, in some years, only -- starting out of the recycling process, the raw material to start again the cell production, what gives us a really sustainable story and even a better cost point. Coming to the charging infrastructure, the charging infrastructure and energy business, charging infrastructure is a small point inside the whole business of Ms. Elke Temme, who was also yesterday on stage. We like also to take care about the full chain. We will take care about charging. We care about energy. We care about house charging. We will have a grid storage system to offer in the future and everything based on digital cloud. This will bring us a car as a power bank or power pack insider the ecosystem of customer. The key takeaway piece from yesterday, in a short summary, we have a clear technology road map with utilization of our unified cell concept of 80%, high flexibility, high standard, high volume, high economies of scale. We can achieve on top of these, the cost targets with this concept. We will have a closed-loop process to be sustainable. And as you have seen yesterday, with announcement of gigafactories, a solid localization strategy. From the charging energy side, the key takeaways are the global boost plan for charging infrastructure. We announced yesterday a China stayed 0, Europe will be 5x higher than the actual base in the next 4 years. We will have 18,000 high-power charging stations in until '25. What means that Volkswagen will be 1/3 of the total demand of charging stations. The car maybe part of the energy ecosystem. We will invest in storage systems. This is also important for a second life of battery after the car. And we think that energy business will be a new business opportunity for Volkswagen also. That's more or less the short summary, a little bit more than yesterday, but I think it was interesting also to see the transformation process from the Volkswagen Group Components. Thank you.

Many thanks, Thomas. And before we start our Q&A round, I would briefly like to welcome 3 experts from Thomas' team, which you actually saw yesterday as part of the Power Day as well. So we have -- I'll start ladies first. We have Elke Temme, who is the head for Charging and Energy. Then we have Frank Blome. Frank, you know from last year who took part in our conference call. He's Head of Battery. And then we also have Jörg Teichmann, who is the Chief Procurement Officer for the components. So operator, we can start with the Q&A, please.

[Operator Instructions] We'll begin with Philippe Houchois.

Philippe Houchois, Jefferies. Thanks for your presentation today and yesterday. The question I had was what drove you to the optimal plant size of 40 gigawatt hour production, the choice do 6x at 40 gigs? It must be a reason that in terms of logistics or in terms of industrial efficiency that took you to that optimum size. And I'm just wondering also if you could clarify that that capacity is linked to today's material density where you take into account what you think material density will be in a few years, obviously, the capacity grows as material density improves.

Okay. Starting with the first point. We invested a lot of time to looking what is the ideal, most efficient size of a cell factory. I mean no more or less from the car side, that we have idle points or breaking points. We are talking about 1,000 units per day for a normal car plant. And that was our driver where we saw a lot -- what is the ideal size of a cell plant. In reality, it's not 40, in reality, it's 10. And you can put it together. So that means we start with 20. 20 means 2 segments as 10. This is the cycle time of a lot of operations. We define that to either mix between investment and cycle times and speed inside. And the second segment will be additional 20. So it's 20 with 2 segments as 10, what is in our point of view, the ideal point of cell production. To add a little bit on information. If a lot of you guys are estimating the investments, you need to assume that is not the investment we see today. The investment we are talking about will be dramatically decreased because we have technical -- huge technical improvement. The dry coating process yesterday, we announced that will bring you a 50% less of area occupation. That means you will have this actual today existing 40 gigawatt or 20 gigawatt hour plant, you can double it, can double the capacity of a plant, this is processed. And you have a 30% investment decrease. So these do not estimate the actual number calculated with 6 and, say, in 2030. It's a new technology, and you will see strong improvements after 2, 3 years, but bring you to much better efficient financing and resource business. That's aside from the size, volume and to battery density and cell density. Frank can tell us something, please.

Yes. Thank you, Thomas. So the density we are driving on a cell level right now is around 650, 670 watt hours per liter. With traditional technology, you can get up to 720, 750 and then that's it. If you go with advanced production technology, it's probably even a bit less. And the next big step will be solid-state. And solid-state gets up to 900 or even 1,000, 900. We see already in the samples of our partner QuantumScape 1,000 is possible, but that needs a bit more tuning. If we can go with 900 somewhere after '26, we will be happy to do so.

The next question comes from Tom Narayan.

I'm Narayan, RBC. In the past, you guys have given us a figure of, I think, close to $100 per kilowatt hour battery pricing per vehicle, I think, at the cell level. With this 50% cut that you guys talked about yesterday imply something like going to the $50 per kilowatt hour level at the cell level. And if so, if I were to just assume like a 50-kilowatt hour battery, would that mean like the battery cost could drop to $3,000 per vehicle versus the prior, maybe $6,000? Or are there other things that I'm missing in this logic?

Okay. The major point to reduce the cell cost is the chemistry, as I told, 2/3, it's depending on that. We will, to the actual level, decrease by 50% for the entry and 30% would bring you in a range between EUR 50 and EUR 60 per kilowatt and 70 to 80 in the volume segment. The problem is it's not -- this will not be the average of the Volkswagen Group, because this depends and belongs to the mix of the product portfolio. There, it's not the only cost driver because we need take out of the cell because if you talk about full battery system, I've shown yesterday the chart that also the production system, the concept to make out of cells battery system have a major influence. So this is also what we are talking always in a little bit confusing information situation outside. Somebody is talking about cells, the other one is talking about modules and the third one is talking about the battery system. I'm talking about the cell costs. And here you can see what I call yesterday, 15% it's [ performance ]; 10% is the process, production process; 20% will be the chemistry and 5% is the battery system concept. And you need to put all together, then you -- if you come then to 3,000 that we see in the future, the circle is -- the center of gravity is the cell cost, euro per kilowatt. And I think this is okay now what I explained.

Can I just ask a quick follow-up? There's some press about suggesting that you may be shifting to prismatic architecture as opposed to pouch. Just curious if that is accurate and, if so, what this could mean to your battery cell suppliers, especially ones that are doing pouch.

Yes. Perfect done. It's exactly what you told. Our preferred cell sign will be prismatic, but we are talking about the generation after '25. We are not talking about tomorrow. So what we are doing, we have a small phase-in and phase-out scenario. Phase-out means we are talking to all actual suppliers. We are staying and keeping our contracts we have. And for every supplier, not a big deal to change after '26 also in a possible prismatic cell format.

Then we'll hear from Arndt Ellinghorst with Bernstein.

I just want to be very, very clear on your 240 gigabit plan, 6x40, will you manufacture cell yourself without a partner in that scenario? Or is it the plan that for each of those gigafactories, you will have the traditional cell manufacturer as a partner? Or will Volkswagen manufacture cells themselves without a partner?

Okay, I think Herbert answered that perfectly in the session before. We'll have different mainstreams. We have today, in joint venture with our partner Northvolt, it's a mixture between us, okay. We have 20% share. We have also one with GuoXuan, where we have a share of participation and power. We will have Salzgitter as our own plant, where we will control it 100%. And we will have the future plants. We will see what is the best mix. It's with a mix between controlled by Volkswagen, a licensing model or a traditional model working together with technology suppliers. But we have sufficient capacity, and we have different models. This will not be 1 group meant for all. So we will have different strategies. As you know, we need also stay to our financial figures and targets. That means this cannot be the way for Volkswagen to do everything 100% alone, that's not intelligent.

[Technical Difficulty] But you need to be mindful of your existing cell partners, right? I mean you need to carry them over into the mid-end second half of the 2020s here in Europe.

Sorry, I couldn't get it, it was a little bit -- can you repeat that, please, sorry?

Yes, of course. You need to be just very mindful of your relationship with your existing sales suppliers. You need their help to scale into the mid-2020s and how you then carry them over into the second half of the 2020s. So how will you manage that with your plans to potentially even go solo and manufacture cells purely yourself?

Yes. The point is I think we have sufficient volume to split it going by our own, going by our own and mix it up business. Look we have today, not the full story inside. We have an increase, a huge increase in volume of cell demand. What will give us 2 different processes with the cell suppliers. We are not in the need to say to somebody okay you're fine until '25, and then you are gone. So we maintain them. And then it's the question if they like our way to -- how we roll it out and if the technology method fitting in our technology road map. And if not, we go alone, if he is a green supply, we can keep them, it's no need to take them out. It's okay for you, hopefully?

No, no, that's fine. I just wanted to properly understand. But you are prepared to manufacture cell completely solo.

Yes, we will do as much that is necessary to control price, cost, timing, technology. We are prepared and are really clear in our strategy what is necessary to come to our targets. It will be a little bit more independent, what means not that we are totally independent to do everything by our own, okay?

We will hear from Patrick Hummel with UBS.

First of all, Thomas, can you elaborate a little bit more on the volume cell, that manganese-rich chemistry that obviously will cover a big chunk of the unified cell volumes in the years after 2025. To the best of my knowledge, there is no volume manufacturing of that manganese-rich chemistry. So what is sort of your in-house know-how on that? And what makes you so confident that this is the right choice in a post-2025 environment? The second question I have is regarding the parts of the EV powertrain that you think are mission-critical to in-source. Obviously, in the ID.3, you've done the e-axle motor and gearbox, the electronics are coming from the outside. Also thinking about what's coming next on PPE and then project Artemis and Trinity. What are you planning to in-source as far as the EV powertrain componentry is concerned? And very last question, the workforce. Can you help us -- and maybe give us a number how much or what kind of share of your Volkswagen component the workforce is directly working on ICE powertrain? And how easy is that to shift people into these future areas? I mean you've shown that chart showing plastic parts and battery assembly, that sounds like it's a total walk in the park for you to match that transition, but it sounds a little bit too simplistic. So can you just help us to better understand how that transition of your workforce is going to work out?

Yes. Thank you. And you can be sure it's not a walk in the park. It was a really, really strong work from everybody here because it looks easy on the page, on the chart from one side to another one, from red to green. But to move on employee or to requalify him, over average, what we are seeing today is you need touch 4 to 5 employees to have 1 transformed. This is a huge transformation work inside the plant. What is really, really, really strong work inside the production areas. What we see is that we will lose during the next years to the aging of the people, there will be -- maybe retired, what is the normal aging issue. We are fully able to fill this up, this content in our production. It's not only cells or battery systems. It's all the other points you pointed out. And if we need the classic parts, we have [ excels ] and so on. So we are perfectly set it up with a little bit of comfort that we have the opportunity in the next years to fill the demographic curve, shows a decrease. I will not open it by areas and plants today, but to fill it up with content. In to the chemistry side, I'd like to hand over to our chemistry expert, Frank. And again, maybe not too complicated, Frank.

Thank you, Thomas. Still will never go away. The high manganese chemistry is something we are using in development. Now we have also 1 cathode material supplier who is quite far on this. It will not go in production probably in '25. It's planned for later. And a very similar system was cathode system was in production some years ago, with almost -- I think 30% of nickel, no cobalt, but high manganese. This had an issue with high temperatures. This came out of electrolyte. And now it's getting too complicated, I think. But with better electrolytes later on with solid state, no liquid electrolyte, this will work. And we are on the way now to bring it into a qualification with liquid electrolyte somewhere after '25. That -- we have built up a strong team. We have a good partnership with our cell suppliers also with the cathode material suppliers. And we are working on this quite heavily. This would be the best value to performance ratio. And to what Thomas just said, the team of cell developers and Salzgitter is 1/3 came from the external market we hired and 2/3 came out of Volkswagen. We requalified people. We have an Volkswagen Academy where we set up trainings, and all that supports the transition.

Okay. Can I maybe -- sorry, just one follow-up on that cell chemistry. And also how you want to collaborate with future partners? Is it going to be the case that, basically, you think you have all this know-how in-house and you will give the exact specifications? And then really, you're just looking for maybe a manufacturing partner that is not even allowed to bring its own know-how into the equation? Or are you sort of technology opens still and say, "Okay, we need the capacity. We give you the form factor and what's inside the cell. If you can do it better than we can, please do it," as you believe it's the better way of doing it. So how flexible are you or how dominating are you going to be as far as the actual chemistry of the cell and the manufacturing process is concerned?

Yes. This is already very much done, the cathode material between the different suppliers is very similar. We do work with our suppliers together. We do not tell them this is it and you have to use it, and this is a supplier. But we have clear targets in performance in lifetime. And of course, also in cost. We developed in-house competence. We developed connections to the cathode material suppliers. Our partners like Northvolt and GuoXuan also are in production of cathode material supply, and all that helps to boost the industry and make sure finally everybody, all the cars will benefit from that development.

We will move to our next caller, José Asumendi.

José, if I could also ask, in the interest of time, maybe we could just have one question. And operator, that would be our last question for this session. Thank you.

Thomas, I just have one question and maybe one larger topic. But I'm interested in understanding how do you look at the process of retooling plants, okay. We saw the BEV investment plans for Zwickau. As we think about the rollout of the toolkit, you transform the plants to produce heavy vehicles. And just to give you examples, you go to Pamplona, you're going to Martorell, you're going to be -- plans in Hungary. How is this going to work out? Should we see similar figures in terms of the investments in Zwickau to be reflected across the other plants? I put the question in the context of when you look at all the car manufacturers out there, they are talking about a few hundred million investments or less than that across each of the plants. It looks like you are spending more, but you also have a different vision. Now you have the architecture vision. You have the MEV architecture. So can you [ specify ] about how do you see that rollout, plant-by-plant in Europe? And should we assume similar investment that you did in Zwickau across the other plants as well?

The bottom is that isn't my turf. I'm going for the component as a supplier. If I understood your question well, you're asking if we are transforming additional car plants to the new world. Is this okay? Then I hand over the question.

José, maybe we can take a look at topics like retooling. It's more a production question, and we will get back to you on that. I think that's the best method now. Okay. Thank you, very much. Okay. Last follow-up, please, José.

[Technical Difficulty] capacity and electric motors.

Okay. Capacity and electric motors is the question.

Yes. What is this the capacity in the electric engines we have? Today, CASA has a major production volume for the MEV. We have, in Hungary, our Györ plant where we do that closely, as you know. And we have then in China, that means localization also on electric engine is not a major issue for us. We have a transform -- and I showed in the transformation road map of the components that we have every plant on our watch list, it's not like we're doing it and then have a result in some months to say, okay, we have remnants or we have plants where we don't have any content for. So we have a clear plan. And the actual sales is that we're transforming every plant in different ways. It's not always that we put an engine plant, electric engine that will not happen, it will also not happen that we make in every engine plant cell factory, as Salzgitter, this will also not happen. But we have a clear value concept for the plants, how we transform them and bring it into the future business.

Thank you very much. Thomas, we'd like to thank you for a very interesting and very well-received event yesterday. Thank you for the team of experts for joining us. We'd now like to move to a different location in the world. We're going to have a live chat with Mr. Wollenstein, so with Stephan, who is our CEO of Volkswagen Group China. He's joined by his colleague, Thomas Müller, who is the Executive Vice President of R&D in China. So over to China, please.

Hi, Helen. Good evening from Beijing, and good afternoon to Germany. I hope the telephone line is stable, and you can hear us clearly over there in Germany, just as a final test before we go ahead.

Yes, Stephan, we're very lucky. It's a very, very good line. So feel free to start.

Good. So ladies and gentlemen, yes. Thanks, Helen. So ladies and gentlemen, talking about China, from China. You know that China is driving the global passenger car market in many ways. And today, it's already the largest single car market by far. And we believe and we are clear that we will only continue to grow in importance in the coming decade. And as you hopefully can see on the slides that we are showing over there, the NEVs are becoming an increasingly important sector within the total market. And depending on different scenarios, the share of NEVs in the total market will grow to 20% to 25% by 2025 reaching between 45% to 65%, really depending on the scenario by the end of the decade. And by then, China's NEV market alone will be larger than the entire European car market as such. And I can tell you, the Volkswagen Group is already catering for this massive transformation in China. So as you see, in order to expand our NEV footprint in China, we are proceeding with electrification of our different platform across each of our entities here in the People's Republic. And this has already started with our plug-in hybrid and battery electric vehicles on the MQB platform. So now, it's mainly the Volkswagen models. And certainly, with the MLB from Audi, where we currently have a plug-in hybrid conversions, but also some battery electric ones. And our NAV [ offering ] is now entering a new stage as Volkswagen's ID family soon hits the market. So end of the week, we will put the first journalist into the 2 ID forecasts that we have introduced recently. The cars are shipped to the dealers. And in a few days, we'll hand over the first ID.4s to our Chinese customer. And they are both coming. You know that we have it in both of our traditional joint ventures installed, both are coming from MEB factories, one in Foshan in the south of China and one in nearby Shanghai, which started already the production assembly back in 2020. And both together mark an NAV production capacity of up to 600,000 units annually. What's more that's starting in 2 years from 2023, the MEB platform will also, let's say, make its way into our newly launched Volkswagen Anhui Company who has an incremental capacity of also an additional 300,000 units per year. And adding to this, not to forget, with our newly founded joint venture, Audi FAW NAV Company Limited, which is just recently being announced. Audi brand will also strengthen its local NAV portfolio with an SOP of this joint venture by 2024. So coming this year, 2024, the Volkswagen Group will have a pure battery electric vehicle production capacity of around 1.2 million units per annum in China. This is substantial we know, and this substantial production capacity is backed by what we believe is an impressive product offensive. From now where we are about to offer 13 NAV models this year, including, not to forget, 5 ID models from the Volkswagen brand, we will expand our group NAV product portfolio to more than 30 models come 2030, so the end of the decade. And those cars are currently designed for an electric range, somewhere between 400 kilometers up to 700 kilometers, certainly depending on, let's say, the body style, the price segment that we are going to put these cars into. And to realize this NAV offensive, we are investing up to EUR 15 billion until 2025 in products, in capacities and also into the corresponding component business. Thomas has just also referred a bit to what we do in China. We have our wholly-owned component entity, ATJ in Tianjin, near Beijing, which is already producing the e-motor for our ID models today. And we are also on the way, Thomas, to further expand our business scope in this 100% entity towards battery systems. And talking about batteries, this was also one of the key areas that also your question circled around talking about batteries in China. We, of course, have to also ensure that a fast ramp-up of NEV sales, as I just stated with the Board figures, a stable battery cell supply is pivotal. And currently, we are cooperating with very competent Chinese battery cell suppliers, which are also now world known such as CATL who are supplying us with the batteries for the first, let's say, ID models that we are putting into the market. We have just recently also qualified and closed an agreement with A123. Both have successfully passed our supplier qualification process and more are to come. And for sure, as also Thomas has just mentioned, it includes GuoXuan High-Tech, which is already, today, one of China's leading battery cell manufacturers in which we are well on the way to acquiring a 26% stake. It's a public-listed company, as you know. So we are waiting for the final, let's say, supervisor approval in order to really conclude this, let's say, this transaction. And through this engagement in GuoXuan, we aim for a strategic partnership, really, across the whole value chain of battery cell production, including also the raw materials. And with this mixed approach of having independent and associated suppliers, we are confident we'll secure our demand of about 150 gigawatt hours in battery cell capacity by 2025. However, and this has also been said even if you have talked about a lot against the background of the Power Day yesterday about developing, producing, selling NAV products, this is only a part of the successful electrification strategy as we see it in China. And as you can imagine, we do intense customer and market research. And this has shown that Chinese customers are still very, very anxious about charging. Probably it's not Chinese customers alone, but certainly also in China, this is a hot topic, for some good reasons because many of our customers yet are not able to install a private wall book. You know that because of this higher organization in China, even the affluent middle class in China often lives in high-rise apartment buildings. We're not like in the German typical and familial house situation. You can easily mount a Wallbox and nearby your own property. So mounting a Wallbox, a private Wallbox is only given for about 40% of our customers. And we also know that the public charging infrastructure is not as reliable yet as it needs to be to make charging as convenient as refueling of an ICV car. So again as background, we have also given you a bit of an insight yesterday at the Power Day. We would like to quickly recap what we said, and this will be done by my dear colleague, Thomas Müller. Helen, you introduced him already. He's heading our R&D and also our charging activities here in China. Thomas, the floor is yours.

Yes, thank you, Stephan, and ladies and gentlemen, also good evening from Beijing, and good afternoon to Germany from my side. Well in the future, as already said, charging and [ ranging ] society, these are definitely 2 things which we have to address when we want to lower the degree for the barrier for Chinese customers to buy EV cars. So we see besides the figures, which Stephan already mentioned, like the installation possibility of Wallboxes, also in the infrastructure, quite some difficulties at the moment. There are some effective charging poles in public charging areas. We've also blocked parking lots when it comes to ICV cars parking and blocking the charging stations and so on. So all of these, we have now addressed our private joint venture which we have founded in 2019, which is called CAMS. It stands for Charging as a Mobile Service. And we have founded this joint venture with our long-standing joint venture partner, FAW Group, which you know from our cars business, with JAC and with Star Charge, which is China's currently #2 charging provider. By the end of 2020, we had already installed over 190 charging stations with 700 charging polls roundabout in key city areas around China. And we have a self-developed app, which offers our customers first-class services to make the charging most convenient. The charging service network will be massively expanded from this year onwards, and we are aiming for 500 charging stations and 6,000 charging points in place at the year's end and up to 17,000 charging points by 2025, all equipped with high-power charging and also with the possibility of prohibiting, for instance, ICV cars to park on them, having a clear maintenance concept behind them and so on. So this would be a charging network which, is there for the customers to work perfectly and to be reliable, which is a very important point here in China for our Chinese customers. Having said this, I would like to focus a little bit more on what else we are doing here in China when it comes to R&D. Because if you look into the future car market, it will also be characterized by a second trend besides the electrification, which is China's road map towards the ICV, which is standing for the Intelligent and Connected Vehicle. So the future car in China will not only be electrical, but also fully connected, offering many digital services as a part of a bigger ecosystem and will be equipped with highly automated driving systems up to Level 4 and 5 and connected to the Smart City, where there is a lot of massive infrastructure investments going on here in the different big cities in China. So this trend requires much greater R&D capability, particularly here in China, and we are, therefore, strengthening our R&D capabilities here in order to respond to the local requirements. We will carry out the development, what we call in China for China to provide local solutions for the China-specific functions. And they are driven by regulations on the one side and also different infrastructure and also different customer demands on the other side. The group already in China will act as essential hub steering all R&D activities in China, and we will connect our development partners here in the region and bridge it with our German headquarters to realize the development synergies across all the brands. Our R&D network consists of engineers and software developers located in several places. The main areas are in Beijing, Changchun, Shanghai and Hefei where we have also our -- part of our joint venture partners located. To date, we already have over 5,000 people working in R&D in China, and they are all here best placed because they understand the local customer needs, they understand the local infrastructure situation and the local requirements, and they work on new technology areas such as Android-based connectivity solutions, which best matches the local services and local contributors. They work on customer-friendly HMI and voice control to realize intelligent cockpits, and they also work on autonomous driving functions, which are tailor-made to correspond to the local traffic conditions and also to the driving behavior because, of course, road geometry and driving state are quite different here in China from what you know from Europe or from the U.S. So with that snapshot, I would like to hand over back to Stephan.

Yes. And for me, only to quickly summarize before we leave the floor to your questions. We have already invested more than EUR 3.5 billion. And as I said earlier, we will continue to invest more than EUR 15 billion in NAV CD mobility and in the intelligent connected vehicle between now and 2025. And with our newly established majority-controlled Volkswagen Group entities, certainly, together with our existing and new strategic partnerships, we will lay the foundations to develop, to produce, to sell and to service over 2 million battery electric vehicles annually by the end of the decade by 2030. And to support and serve a car park by then, if we really, let's say, hit all the numbers that we have in our books, by then, we will have on our group customers, a car park of 12 million NAV customers from across all brands. And therefore, also, you probably understand why we have to emphasize on topics like digital ecosystems, let's say, as Thomas has also said, a charging ecosystem because it's not only to sell those cars, but also to serve customers when they have the NAVs in operation. So as you see, ladies and gentlemen, the Volkswagen group will actively drive the transformation of our industry in what is our biggest single market in China. So in only a few years from now, we believe that our future mobility solutions for Chinese customers will be electric ones. They will be certainly connected. They will be as intelligent as possible, and they will be more and more autonomous in their driving habits. I'll leave it with these few remarks on what we intend to do and what we are executing here in China, and the floor is your Helen. And we are open to all your questions. Thanks a lot.

Many thanks, Stephan. Many thanks, Thomas. Operator, we can take our first question, please. Thank you.

[Operator Instructions] And we'll hear from Henning Cosman with HSBC.

I think I was actually still registered from the session before. But I'll make it about this one, obviously, now. Can I just try and understand again the split between the JAC and the SAIC joint venture? And does it plays any role or if you have any preference with which joint venture to rather make more NEVs, if that makes sense? Because obviously, with the JAC one, you're going to be able to consolidate that in your own accounts. If you could just elaborate how much of a role that plays in your considerations, please?

Yes. Interesting question, probably going back a bit in time, we have started the first initial context with JAC back in 2016, 2017. At this time, we were granted, let's say, as one of the first international manufacturers as a possibility to start with the third joint venture. Of course, with the so-lest focus at on battery electric or NEVs at that point of time, you know that the joint venture law in China back those days would only allow us to work with 2 joint ventures in the traditional ICE field. And let's say, as China, we're opening up where we're also indicating that even more engagement would be possible, but tailored into what they believe is the future with NEVs. So the journey is already a bit of a longer one. We are very grateful that last year, we would be able to also, let's say, as a part of the opening up initiative in China, we were really able to take majority shares on a producing entity. And to confirm even, let's say, a state-owned one in this respect. When I talked about the production capacity that we have in mind for Volkswagen, and we are talking about the standard factory size of Volkswagen, which is in the order of 300,000 to 350,000 units. When this comes into play by '24, '25, probably the Volkswagen Group sales is somewhere in the order, let's say, between 4.5 million to 5 million units. So you see that given the scale of the business that we are doing, but then in China, it starts to play a substantial role, but it's by far not the dominating force. And even on the electric vehicles, what I stated, where we have today, as I mentioned earlier, the 1.2 million production capacity by the middle of this decade to about 600,000 units of them will be to majority shareholdings, which is also the Volkswagen PPE -- the Audi PPE company as well as Volkswagen Anhui, but still, there is about 600,000 units with our 2 long-lasting joint venture partners, FAW Volkswagen and SAIC Volkswagen. And if you take into consideration that, of course, they have substantial capacities installed for the ICEs. When the transformation is going to kick in, in the next 10 years and so on, also part of this capacity needs to be transformed into, let's say, battery electric one. So yes, our majority entities will play a growing role, but there will not be the dominant role, at least in the foreseeable, let's say, future, if you talk about 10, 15 years from now.

And sorry, if I may just follow-up. Also beyond 2025, there's no intention to reattribute more of the future volume beyond 2025 to the majority on JVs and just to take that redundant ICE capacity away from the minority-owned JV partners.

Yes. Of course, this is a bit of a speculation what would come. We are currently planning for an organic growth with all the products that we have planned for both majority controlled once, the Audi one, the PPE company as well as Volkswagen Anhui. And also from a business perspective, not only that we have a very fruitful lasting partnership with FAW and SAIC, we will -- we are celebrating 30 years with FAW just now. We are very soon celebrating 40 years with SAIC, which brought us where we are today in China. And besides probably also the partnership approach, we have made over the past 30 to 40 years massive investments. And even if we have, in some cases, only 50% or 40% of the shares, but the investment is also down to us. And it would be also from a financial perspective, let's say, not the wise decision to underutilize this capacity. This doesn't mean that we will discuss with the partners how we shape the future mutually, but it's certainly not that by 2025, we start to shift business massively away from our current established partners into the new ventures. We let them simply grow into the booming NEV market as we foresee it.

Okay. Can we please move to the next participant, operator?

We'll hear from Kai Mueller with Barclays.

The first one would really be, if I started like this, it was quite interesting, maybe following up from the previous presentation on the battery chemistry side to talk about LFP really for the entry segment globally. Is this something that is particularly focused also on the Chinese market because that's something that we've been seeing more there? And is really got you on the investment, the key partner for that? That's the first question.

I mean it's clear if you observe what is currently happening in the Chinese market and also what is discussed in public events is that certainly there is a kind of a spring season now for LFP technology. It offers some advantages, which are not so much on the range and on the energy density side. But in terms of thermal propagation, they have some built-in advantages. And they certainly also have a lower cost point as the NCM cells today. If you really see what also the vast majority of local suppliers are doing, they are using this technology, for instance, for more, let's say, entry price point models. Also with cars that are going often into heavy fleet usage, also as the load cycle on LFP is a better one than on the NCM. It is certainly a tailored chemistry that serves the cars in heavy fleet usage. So we believe that also, as we are with Volkswagen, a brand that is covering from, let's say, a kind of an entry price point, not the lowest possible one, but where a substantial part of the Chinese market is going to happen. We believe in order to serve this price point in the market, we have to offer on the model that we have in mind also let's say, a car, an electric car, which has a decent range. Decent range in China nowadays means about 400 kilometers plus. And we are confident that with our MEB platform and the LFP's chemistry and given the battery packs that we have available that we can have both a range of 400 kilometers with LFP chemistry to reach attractive price points for customers who are into this. Nevertheless, we believe that still a bit of a majority of cars that we are selling goes with today's NCM chemistry, which allows us to go for higher ranges. So the ID.4, we assume, for instance, will massively sell in our 82 kilowatt hour package, which allows about 550 to 560 kilometers electric range. So we will see a mixture of both chemistries. And as Thomas has explained yesterday, with the unified cells that will also come to China, we will have in the same cell format, we also will able to do both chemistries. And certainly, when we are talking about our major suppliers in China, we will also make sure that both of them will be able to or that they will all be able to master both chemistries.

Okay. A follow-up question, please.

Okay.

Very briefly. We've had a great presentation earlier, seeing the VW component and how significant the share is within the ID.3 and the ID.4. And is that also the case in China? Is this a component business, the fully owned component business delivering to your JVs? Or is it a slightly different setup over there?

It's slightly different, but the strategic setting is similar. The vast majority of our APP 310, as it is called, which is our electric motor for the current ID models. It is mainly produced by 80-day which we've also mentioned in my short presentation, which is located in Tianjin. And so it serves already, let's say, with the e-motor our ID models from the Volkswagen brand. So we are certainly also discussing with the colleagues from Audi when they are building up PPE, what is about their drive train in localization strategy. And we have already very specific plans to also extend the scope of our component business towards the battery cell assembly and the battery cell manufacturing, which we certainly also have a chance to do, for instance, in our Volkswagen Anhui one, where we are -- have the immediate, let's say, need in the next 24 months in order to ramp up all the necessary facilities to be ready for production of our first car coming out of the assembly lines in Hefei.

So operator, can we take the next question, please.

Next, we'll hear from Patrick Hummel with UBS.

Two questions, please. First one regarding the competitive situation in China right now, I think you have a EV market share of less than 5% in China, which is well below the overall market share that Volkswagen Group has. And you have strong competition not only from Tesla there with their localized Model 3 and Y, but also from the emerging Chinese EV pure-play companies, which seem to make significant inroads. So my question is just is it not overly ambitious, at least for the next few years to assume that you can bring up your BEVs market share in China to what would be more in line with group average. It looks like a heroic task to get there from less than 5% today. And my second question relates to the software and the digital experience. I think it's fair to say that the Chinese consumers focus much more on that part than anywhere else in the world, at least compared to Europe. And I'm just wondering, from a hardware perspective, the electronics that you have on board with the MEB platform. Do you have all the possibilities content wise to meet this, I would say, higher-than-average demand of Chinese consumers on the software side? Or do we have to wait for the next-gen platforms coming with project Artemis or Trinity then with an upgrade also on the electronics hardware?

Thanks for the very balanced question because one is for Thomas, one is for me. I'll probably start with the first one about the competitive situation in the market share, yes, you're absolutely right that looking back into 2019, 2020 results, we have, in the NEV market, not gained the market share that we are known for in the entire one. If you more or less confess that we were able to become #7 in the NEV market, mainly by selling plug-in hybrids. Because our MQB BEVs for various reasons not to be discussed now had not been the ones that had been the chance to really hit the right button with our Chinese consumers. If you then further, let's say, extract from the Chinese NEV market, the so-called Mini BEV, so very cheap cars, which have mainly driven the growth of the NEV market in 2020 and really leaves the ones that are not going into big fleet because they are, let's say, provincial business that is, let's say, in order to support local manufacturers, but are really finding their way into retail customer hands. And then we are talking about a league of cars where, let's say, you could be easily in the top 3 or top 5 when you sell 30,000 or 40,000 units per year. And we are pretty confident that with the heritage of the Volkswagen brand, with the great design, with the technical features, and Thomas will elaborate talking about the software and digital question in the second part about what those cars are offering about the core components around, we are pretty confident that our plans yet are ambitious, but we are able to realize. And we had more or less similar questions back in history when people ask us, how could you assume that as you have, let's say, coming into the market very late with an SUV would be you would ever be able to get back what others already sold. Same was on the MPVs. If you look now in Europe, let's say, we have been with our Sharan and Tayron for many, many years now also segment leader. With the SUVs more or less around the world, we have been able to be #1 in China. We are already, even if our SUV share is below 30%, we are still the #1 SUV brand where the SUVs are 40% of the market, and we are introducing more SUVs, for instance, in Shanghai to come. So we are successful late comer sometimes. Because we take a bit more time to clearly study the market, the trend and the success factors, and we are pretty confident that on NEVs, the same will happen again because with NEV has also stated by Herbert Diess yesterday and today, we believe we have a superior platform that gives us both technical qualities as well as large scale. And both together, we believe we have, given the nature of the market as it is today, a fair chance to get our targets done. And Thomas about software and digital and what we have in the NEV, wonderful ICA 3, where we have a China specific version, do we?

Yes, we do have. So I was elaborating before in my presentation a bit on this in China for China development. And that's actually what we take very serious in what we are doing. So we have the philosophy to go, of course, for a global platform wherever possible and meaningful because this is giving scale, this is giving cost advantage. But wherever we need to adopt to Chinese local requirements and this could be, as I said before, regulations or also customer requirements. And in the digitalization, this is clearly the case because people here are fully connected. They spend much more hours per day on their mobile devices and also the digitalization of everyday life is much further in the society than it is in Europe. So it was for us very, very clear that we have in the connectivity and infotainment domain to go for an enhancement of our platform with the China specific variant which is actually having a bigger hardware with a much more powerful SoC, more memory in and which is using a hypervisor, where not only the regular car functions, which are placed on a Windows partition are used, but you have also an Android partition, which is then populated with the services apps and also content, which the Chinese customers are asking for. So we have a fully connected and powerful hardware in the car. We use local web radios like Himalaya for instance. We use local weather stations. We have our charging points and dynamic POIs in our maps and so on. So this is taken care of. And this is actually why it is so important for us and why we believe this is the right way to do so that we have here a big R&D capacity installed, which is taken care exactly about this. So to make the relevant changes, meaningful changes where necessary for the Chinese customers here in the market.

I think, operator, if we could please take our last question related to China.

That will come from Tom Narayan with RBC.

Tom Narayan, RBC. So you have the 240 gigawatt hour capacity for Europe, which I think is for something like 2.5 million full electric sales by 2030. And I calculate another 2.5 million full electrics for China by 2030 -- for 2030. I know you said you're securing 100 gigawatt hours capacity by 2025 in China from partners which would imply based on the Europe capacity needs that you need more capacity in China. So the question is, are you confident that you'll be able to secure all this extra capacity, especially given all the competition you're likely going to face from domestic EV makers in China that Patrick was talking about. And will China benefit from the same battery cost savings in chemistry from all the things that you guys presented yesterday as well?

Yes. Probably, I was not clear in my presentation. So for 2025, we have already 150 gigawatt hours capacity in mind. And certainly, you're right. If the market develops, as indicated, and we are further ranking up to 2 million units per year, the 150 gigawatt hours would not be sufficient. We would have to further ramp up. We have already secured, let's say, for the next 3 to 5 years, the demand that we do need according to our volume planning that we have stipulated. And as you can imagine also with our investment in Gotion, we are also discussing intensively with our partner, Gotion, over there, how we our ramp-up in capacity alongside Gotion could look like. So as I said, with this mixed approach of having a strong independent suppliers, on one hand, like SEAT el or A123 as well as a closer strategic partnership with Gotion, we are certain that with this mixed approach, we will be able to really cater for the growth. So until '25, it's anyway secured and beyond talks how and whom we are ramping up. And one thing has to also be clear, and this has been also, let's say, indicated by Thomas. Of course, also battery cell suppliers know that there are only very few manufacturers in the world that have the scale and the competence to really drive the NEV market. And we know it also from our talks to the battery cell manufacturers. That, of course, they are also keen to have a close cooperation with us. Because we are also driving their economies of scale. And of course, it's much easier if we are coming up, for instance, with the unified cell format to scale such a format within their facilities and also their production more efficient one than to go across, let's say, a dozen of smaller ones with different requirements.

Okay. Just to confirm, there's no intent to shift capacity from -- sorry, there's no intent to shift capacity from the European battery capacity to China, both are totally separate, right?

Yes. Maybe if you know the battery industry, it makes hardly any sense to ship battery sales in large numbers, let's say, 8,000 kilometers between continents. So you normally do battery cell production and battery cell assembly as close as possible to the manufacturing side of the vehicles. And yes, therefore, we are planning to do everything that we need in China with local suppliers.

So thank you very much, Tom, for your questions. A big thank you to our colleagues in China. Thank you, Stephan. Thank you, Thomas. We wish you a good evening. And we'd now like to pass over to Christian for probably the highlight today, which good vehicles, what's the firework coming in 2021 and beyond. Over to you, Christian.

Helen, thank you. Yes, we keep the best for last. Good afternoon, everyone. Thanks for bearing with us. Hopefully, the whole day. I'd like to maybe start very briefly with 2020. I promise very short, and then we'll move on to '21 and beyond. I think most has been said, our sales have been down by 15%, which we believe is a very solid result given the environment. We've gained market shares in Europe and South America. We've seen a very strong Chinese market. And obviously, we had a very strong demand for premium, as you can see, on our Porsche and Audi numbers. And we also slightly increased our global market share to 13%. Let's move on to 2021. You see net chart already. So yes, we intend to sell up to 1 million electrified cars. To be specific, this consists of battery electric vehicles and plug-in hybrid electric vehicles. So every electric car with a plug. All of this will be driven by very strong demand, especially in Western Europe. But obviously, we'll sell, to give you an indication, around 400,000 of these 1 million cars, and this is pure bet in Europe. Based on that substantial growth, we confirm that we expect to achieve our CO2 targets in Europe in 2021. So what is this based on? If you look at the volume pipeline, and I'd like to spend maybe a bit more time on this. You've seen the chart from Herbert Diess already. But maybe let me start with going into the year, we already have the Taycan, the e-tron and the ID.3. It's a very successful and strong lineup. We now believe that 2021 will be the year to scale up e-mobility in a proper way. We have obviously discontinued the first generation of less profitable models, for example, like the e-Golf in 2020. And I know that some of you have wondered why we are not selling at the same rate -- run rate in January than we have been selling in December of last year. I mean first of all, this is true for the entire industry. We sold about 1/3 of less cars in January than in December for probably obvious reasons. Second, just to note out, we're still the market leader in January, and I'm talking about Europe here as we have been in December. And thirdly, we've always said, we're not going to push our ID.3 and our premium models tied kind of each into unhealthy volumes because we feel we have a very strong lineup coming up. So no need to panic in any way or form. We're very confident to reach our sales targets. So if we look at the pipeline, the global delivery start for the ID.4, as you know, will be sold in China, the U.S. and Europe will be end of March. So in a few days, if you want, we launched the car with the new software. I will comment on that in a minute. Afterwards, we will launch the other key volume SUVs based on the MEB platform, that is the Aniak in April, the ID.6 CROZZ in China in Q3, the Born from CUPRA and the ID.5 from Volkswagen in Q4. On the premium side, we already launched the iconic e-tron GT with Audi. We will follow that in Q2 with the Taycan, CROZZ, Turismo and the Q4 e-tron from Audi, which will also be based on the MEB platform. So as you see, our maybe seemingly backloaded sales pipeline is based on a clear model launch plan that is consistent with sales planning. If we move on beyond '21, we always said that the transformation to e-mobility will happen in 3 phases. In 2021, we're now entering Phase 2, if you want the scale-up phase. We're scaling up and will cover all key segments in volume and in premium. We will do that based on an efficient model range and with globally relevant models. The green deal and maybe the political changes in the U.S. provide the basis for a faster transformation, leading obviously to more volume per model. As I will explain later, we're not planning to significantly increase the number of bed models, we're just planning to sell more per model. Let's go beyond '21. I mean, obviously, I can and will not give you our complete product pipeline, but well, give you the highlights here. Obviously, a big highlight coming up in 2022 with the ID Bus being launched in Europe, and we'll also launch a car later in the U.S. Certainly, an iconic model that will also change the perception of the brand, Volkswagen, especially in the North American market. Followed that by the electric Macan, an absolutely key model and certainly a very profitable one. The PPE based B SUV, we can't disclose the name yet. And then the ROB which will be key for the brand Volkswagen, both globally and in particular in Europe because it will obviously be a very important fleet car, if you want, in the Passat like segments. We close 2022 with a smaller CUV for the Chinese market. Obviously, as I said, not a complete list, but I think we'll hit most of the highlights. We would say, the 1 element of Phase 2 of the transformation is obviously a drivetrain on the platform. And I think Herbert Diess explained that we have delivered on that one. The other part is the software capability of our cars. And that has always been a source of certain criticism. So I'm glad to announce that, obviously, the ID.3 and the ID.4 will be able to be updated over-the-air on a regular basis with new functions. The new software version ID 2.1, which serves as a technical precondition for over-the-air updates, is available as of calendar week 8 with all newly produced IDs. All existing vehicles already on the road need to be flashed first, but then they will also be able to receive over-the-air updates. Starting this summer, Volkswagen will provide owners of ID vehicles with an update every 3 months. And in addition to optimizing software performance, we will also provide functions on demand. This might include features like adaptive cruise control or navigation on demand. Obviously, all functions that are based on the hardware that is already installed in the customer's car. Let's move on to even further into the future. Obviously, our glass ball is not perfect either, but we have been through a thorough analysis with a differentiated view by region and country, especially looking at the different developments in the different regions in Europe. We see e-mobility growing significantly in all markets, with Europe being the front runner. The numbers we show you on the chart are pure electric vehicles or it excludes PHED or HEDs. So we see the U.S. grow to 20% plus in 2030 to '30, '31. Obviously, with some opportunity if the political environment changes further. We see China growing to a number larger than 40%. Stephan has already alluded to that. And we see Europe growing to 60% in 2030 and 70% in '31. Europe here includes the U.K. Volkswagen Group and its brands strive to lead this transformation and we strive to have a higher BEVs share than the total market numbers that we're showing here. So this translates into our volume projections. You've already seen that chart. As been discussed earlier, we do not see a massive change until '25. We've already been relatively bullish. By the discussion previously on the 6% in '21 and the 20% in '25. Let's not forget, obviously, in the global market projections, we have a higher weight of the U.S. and China versus maybe the view on last year. So it's not a lack of BEVs performance, as Frank Witter has explained, it's more higher weight of the ICE markets that you see. As of 2025, we see a significant acceleration and we believe that roughly 50% of our sales in the 3 most important global markets will be fully electric. We intend to deliver these 50% of sales with roughly 50 battery electric models. So will be more efficient than today on the ICE side. Europe and China will obviously dominate in absolute volumes. We believe the transformation to e-mobility provides a big opportunity for the positioning of our brands, maybe in particular for Volkswagen in the United States and in North America. Allow me to close, taking a look at the not so much loved ICE business. The investment community, obviously, does not seem to assign great value to the existing ICE business. So I'd like to give a little comment in addition to what Herbert Diess has already said. I mean, first of all, let me reiterate, we're fully committed to CO2 neutrality in 2050 and to leading the transformation to full e-mobility deliveries. But we also acknowledge that we have to manage the transition and there has those challenges, and we certainly need 1 or 2 product cycles. But our ICE business also provides opportunities and especially provides needed cash flow to finance the transformation. Of course, the number of models will decrease significantly. And we will focus on development of new cars to globally relevant models. So it will be unlikely to develop a model purely for Europe if you start after 2025. But the next generation coming after 2025 as long as it's a globally relevant model and can be sold in all markets, we might still bring a new ICE. Additionally, we will manage a cash optimized run out of our existing ICE models. In the transformation, we'll certainly see a longer usage time of certain platforms in certain cars. There's no law that a Golf or some other car can only run for 7 years. We'll certainly look at cashing out these models longer as long as there's customer demand. And finally, you're all aware of the importance of our after sales business for our profitability. Let's not forget the car park will transform much slower than the new car sales. Even at our projected speed of increase of BEVs sales, our car park in 2030 will consist of "only 13% BEVs and 87% ICEs, including PHEDs." So this should provide ample opportunity for healthy cash flows to transform or to finance the transformation. Thank you very much.

Many thanks, Christian. Operator, I would like to pass over to you to start off our final Q&A session for today. Thank you.

And our first question in the final session will come from Horst Schneider with Bank of America.

Christian, I have got, first of all, a more short-term question. So can you maybe explain us how is the order book now looking on the ID models and how has it changed due to the lockdowns? Maybe you can also make a general statement on the order book, including the ICEs because the dealers, at least in Germany, they are still close. And then also maybe can you explain how the mix and pricing is developing? I know on pricing, we have got this agency model. So just want to know if that is still working if you have those incentives that are under control. And I would also now like to know what the competition is doing on that front? We still here see in Germany, you know that probably we still see some crazy leasing offers. For example, the smartest available for something like EUR 11 a month. So I'm sure there's a reason behind that and subsidies are baked into that. But of course, the impression, as you said, there are some price pressure on the EV side.

Yes, Horst, thank you for your question. Maybe I'll start with the order book. I mean, generally speaking, actually, we have a very, very healthy order book. We have orders in our books. And that's typically, Western Europe are measuring of around 900,000 orders, which is significantly higher than that run rate it was in 2019 or in 2020. At the same time, about 10% to 12% of that is pure battery electric vehicles, which corresponds roughly to the run rate we need to deliver our sales numbers. So we feel pretty confident with our order book. Obviously, the pandemic and the closed dealers provide some challenges. But I have to say we're probably surprised about the level of orders coming in. It more affects our deliveries than it affects our order run rate. Second part of your question regarding pricing, we actually have, as you might have seen in the market, have increased prices by between 1.5% and 2% early on this year as of first of March across the range for virtually all brands with some exceptions. We believe there is additional pricing potential. We believe, especially in the second half, once consumer demand comes back and maybe vaccinations even in Germany are underway. We believe there will be strong customer demand given the piles of cash that have been distributed. So I cannot really confirm what you're seeing. I mean to give you the example of some of our competitors, we actually see relatively healthy pricing levels. But certainly, the agency, which was the third part of your question, provides an opportunity maybe to put a lot more price discipline in the system. One of the challenges we have, obviously, in a pure wholesale system is that at the end of the day, the dealer body controls the pricing because they can decide individually the discount levels, which was one of the key reasons we decided to launch the ID.3 and the ID.4 and our subsequent ID models and the agency model. And we do see on the technical level, roughly between EUR 500 and EUR 800 less technicals on an ID.3 than comparable goals if you take like-for-like comparisons. So early on, as I said earlier, we see 1% to 2% opportunity -- 1 to 2 percentage points opportunity in terms of cost of sales.

Interesting. And can maybe elaborate on the split between ID.3, ID.4, the split between the retail customers [Technical Difficulty]

Horst, would you mind repeating your question? The line broke up a small bit at our side, please.

Yes. Sorry, there's always an echo. I'd try again. Can you maybe also elaborate on the mix between ID.3, ID.4? So what is the split between the 2? And at each model, basically, the customers rather order the lower end or upper end? And then what is the split between retail and fleet customers? I remember, in September, you said the retail share is higher-than-expected and fleet customer share is lower. So just want to know if that has maybe changed.

Yes, 2 parts of the question. I mean, first of all, obviously, the order intake for ID.3 and ID.4 is both healthy. The ID.4 probably even more attractive than the ID.3, which I think is no fundamental surprise given the SUV intensity of our customers. So for the ID.3, we have about 2.5 months in our books. And for the ID.4, it's stronger than that. If you look at the model mix, we still see a slightly higher retail share. That is correct for both models. We expect that probably to ease up as long as the or to normalize as soon as the models mature, we obviously see very low or almost 0 rental share in these models because we still have relatively strong customer demand and customer includes B2C and B2B. And obviously, last point, we, of course, have vastly differentiated order intake from, let's say, the Northern European countries. So we, of course, have relatively to population, a lot more order intake from Norway than from Spain, but I think that's relatively self-evident.

Great. Thank you, Horst, for your question. Operator, can we take the next person in the queue, please.

We will now hear from George Galliers with Goldman Sachs.

So the first question I just had, Christian, was on the software. Do you have any indication of whether customers have been holding off purchases or taking delivery as a result of the software issues that have been covered by the automotive press? And if yes, do you think there is an opportunity for a catch-up now that you're shipping the cars with the full software capability? And the second question was with respect to EV market share. I think earlier today, had Diess mentioned that you saw market share opportunities from EVs. And your Californian competitor has some very high-volume aspirations. Hence, I wanted to ask do you expect to see further industry consolidation over the next 10 years as a result of the transition to battery electric vehicles? And if you could hazard an estimate today, there are around 14 players producing more than 2 million units per annum. What number do you think there will be by the middle of next decade?

Yes, George, thank you for your question. I'll take the easier part first, the software. So I mean, certainly, there have been customers who have been waiting for, let's say, the fully vetted software, and you know with the ID.3, we deliberately decided to launch the first edition. So customers consciously took a lever phase and then waited for the flashing. One of the reasons also why we have held back a bit of the ID.4 and launch it properly now with the fully vetted software. Because customers are expecting that. So yes, that is also reflected in our sales numbers. So we expect to now see a faster ramp up, and we believe it made sense to wait for the software to be fully vetted, especially on the ID.4. Second part of your question, yes, we do intend to gain market share-based on EV. So we do not want to just switch BEVs models into ICE models. We believe that by being over proportionately successful in BEVs, we still have every intention to hold onto our market shares on ICE. So we will -- we intend to gain market share. And the third part of your question is probably one which I would leave to my boss, our dear CEO to speculate upon. But if you ask me personally, I'm sure there will be some consolidation but I wouldn't dare to make a guess on how many competitors there are, but I'm looking forward to reading your report on that.

Very good. Okay. Thank you, George. If we could please move to the next participant. I might just before that, I'd like to announce, we will put 10 minutes extra onto the call. Hopefully, that's okay for the participants since we have 5 left in the queue for questions. So can we take the next question please, operator?

Yes, we'll hear from Tim Rokossa with Deutsche Bank.

Christian, I have 2 questions, please. The first one is on the architecture that we're going to get from Hyundai and Kia, obviously, 800-volt being announced. Do you fear that, that will be the MEB less -- that will make the MEB less competitive? Or do you not really worry about this? And then secondly, just something that you said a couple of times and also Herbert Diess, again, reiterated this morning, EVs are cheaper to operate. Obviously, do you believe once incentives from the states are gone that you can still price this advantage to customers? And will EV cars ultimately remain more expensive than a comparable ICE?

I mean first part of your question, Tim, is on the 800-volt, no. I mean, I always worry in a positive sense in terms of watching the competition, and we take, obviously, the likes of Hyundai very seriously. But so far, no significant worry. And we will offer similar -- obviously, similar capabilities. So no particular worry, but we'll certainly take a deep look into it. Second, yes, I mean how much cheaper they are to operate, obviously, highly depends on electricity prices. If you go to France today, it's significantly cheaper. If you go to Norway, the same, Germany is maybe 10% to 15% cheaper. So we believe customers will increasingly locate total cost of operations, and we'll consider that. And we believe you can price that. Will that means that ICEs in terms of list price will be a bit more expensive in the future. Yes, that's probably a fair assumption. Will it be -- will customers be willing to pay more in total for their mobility needs and exclude software here deliberately? Probably not. Do we have the opportunity with the BEVs to gain more share? Take the simple example, do we have an opportunity to make money with the fuel put in the cars? Probably not or effectively not. Do we have the opportunity to make money with the electricity put into the cars? Absolutely. That's why we have founded the likes of LE, et cetera. So we believe BEVs provide an opportunity to gain more market share for OEMs from the total share of wallet.

Thank you. Can we please move to the next question, operator? And if it's possible, maybe 1 compact question per participant, since we still have a little queue waiting.

That next question will come from José Asumendi with JPMorgan.

Christian, it's José. Just I was hoping you could speak a bit more around the ADAS opportunity for Volkswagen? Do you have any specific plans to monetize ADAS over-the-air software updates. Can you do this specifically now across the ID.3 and ID.4? And so which features can you do the over-the-air update? And if you could provide any details around how much can you invoice the customer, if that is an option for you at the moment?

Yes. José, thanks for your question. Look, ADAS are automotive -- sorry, autonomous driving capabilities are obviously absolutely key and will transform our industry massively. Will that be relevant for the next -- for this generation over the next 12 to 18 months? Probably less so. But this is something where we're heavily investing into, and I think both Herbert Diess and Arno Antlitz talked about this. So going forward, I think this provides a tremendous profit pool and will certainly be something where Volkswagen tends to be at the forefront. We probably believe that, that will happen coming down from premium first. If you take, let's say, for example, automatic driving on highways, I think you will see that first on the premium models, where you, of course, also have the highest let's say, propensity to pay for these features. And then it will filter down into volume. Seeing even level 4s going to the Trinity Engineered Optimus as we have announced. There will be some level 2+ features, obviously, also coming for the existing models, but it's too early to announce any specific dates.

Okay. Operator, I think we have Patrick next in the queue, please.

Go ahead, Patrick.

Can you hear me? Yes. Can you hear me? Great.

Yes. We can you hear you fine.

Okay. Great. Actually Patrick from UBS. A quick one. Can you give us an update on conquest and cannibalization rates in the last couple of months for ID.3 and ID.4? You started off with a very high one, 70%, 80% with the first edition ID.3. I'm just curious how that goes, I would assume, naturally, it comes down, but any update would be appreciated.

Yes. Patrick, any specific number I would give you would be inventing it. So we're not at the analysis yet. We pulled that out of our regular studies, who does all competitors, which are typically updated every 6 months. We had that very high conquest rates based on the pre bookers. I would expect that to come down certainly significantly to more a 30%, 40% range, but it's too early to give you numbers. I'm afraid you have to ask me the question maybe at our quarterly call again.

Thank you, Patrick. I think now we can move to Henning, and we're coming near to a close. We have 2 people left in the line as far as we see it.

Yes. Hi, Christian. I had a very similar question to Tim about the Hyundai or IONITY. I just wanted to clarify if you said that you were looking into moving closer to their fast charging capability. I think they have 350 kilowatts compared to your 125. So I just wanted to clarify that. The acceleration is obviously also a bit lower, but I suspect you're not looking to move closer there. But if you could just clarify on the charging. And the other point was just on your very last point of the prepared remarks. You talked about generating cash from the existing fleet of ICE vehicles. So I was wondering if you could just give us a few hints as to how you were intending to do that.

Yes, Henning, first question, again, I think probably stick to, as you guys formulated, yes, we intend to move closer, but I don't want to steal the brand's thunder maybe for the next conferences. So -- but it's probably fair to leave it at that sentence. And second, maybe to elaborate a little bit more what I meant apart from the car park, which I think is self-evident how we generate cash there. I mean, obviously, if you -- typically, if you look at model runouts, they're actually very profitable. The last generations of the growth in the last year, while you spend a bit more technical, you obviously have installed capacity, you have depreciated assets and productions, et cetera. So if you continue to produce the car 1 year more, as long as you still have a healthy pricing in the market, if you actually can make some very nice contribution margins. And this is certainly something we need to look into. Of course, it needs to fit into the transition plan regarding factory shift over from ICE to e-mobility, but we believe it absolutely provides an opportunity.

Thanks, Chris. I think we still have Kai and Tom has sneaked in again. They could be our last 2 questions, please. So first, Kai Mueller.

I'll keep it at 1. Christian, I remember, I think it was last year a presentation highlighting really the performance of the ID.4 compared to the Tesla Model Y and the price points and where you believe you are better and how you priced it. Now I understand your pricing is actually quite comparable. Is there still that focus that you want to focus the ID.4 more on the key customer that someone like Tesla doesn't cover? Or is that -- has something changed since then?

Well, Kai, I mean, we certainly consider the Model Y as one of our key competitive models in Tesla, of course, is one of our key competitors. So while as the market leader, we look at our individual pricing, we feel we also can set some price points. We, obviously, look at -- look to absolutely gain customers that would otherwise consider Model Y. And you also see that in the cross considerations, the customer is looking at an ID.4, obviously also consider other SUV type offerings from electric vehicle manufacturers and obviously, including Tesla. Comparing the price point is, as you know, not trivial because Tesla, as you know, is in a direct sales model. So they apply a slightly different strategy, maybe moving list prices around a lot more than we do. But obviously, then working less was technical. So you really have to look at financing lease rates, which is how we look at it. But we have every intention to gain every Model Y customers and convince him or her to an ID.4.

Okay. Brilliant. My next question just as a follow-up on this. When you talk about the 1% to 2% price increases across all brands. Is this across ICE and battery electric vehicles? Or have you focused on than others in order to compensate for also higher emissions costs?

And generally speaking, it's across the range. In Germany, for example, we also looked at a more CO2 specific pricing, so we differentiate a little bit, but essentially, it's across the range.

Great. Can we take the very last question for today. Tom, you have the honor.

So it would appear from all the presentations we've had today that, I think, at least, it seems like BEVs could be cheaper to make than ICEs longer term. Given lower battering costs, obviously, fewer components, even excluding subsidies. So could this mean that VW could basically re-rate with higher margins long term versus the historical levels? Or do you think like this will just create a deflationary pressure on the market and simply result on lower prices to consumers?

I mean it's certainly true that as my previous speakers has alluded to that, they're cheaper to make, and that will proceed generate higher margins and a perfect competition that maybe depends a bit on how intensive the competition is that might erode. Nevertheless, I believe there's absolutely an opportunity for a higher profitability per car because, as I said earlier and as Herbert Diess said earlier, if you look at the total profit pools that are associated with the car and battery electric vehicles and even more so connected autonomous vehicle provides the OEM, the opportunity to gain a much higher share of these profit pools. And some of these profit pools, of course, including after sales, financial services, but also electric charging probably provide an even higher margin than, let's say, the classical car sales. So I would say the absolutely long term, would be our ambition to gain higher margins on BEVs that we gained today on ICEs.

So to wrap up for today. Thank you, everybody, for your participation. We hope you enjoyed us, even though it was quite a long day. And of course, we really hope it's beneficial looking forward to your reports and your input. I'd like to thank my team in the IR department and also all my internal colleagues who put a lot of work into today. So thank you very much. As always, if you have any questions, feel free to contact myself or one of the teams, if anything has been left open. We wish you a good afternoon or good day, and please stay healthy in the current COVID situation. Thank you very much. Bye-bye.