Volkswagen AG (VOW3) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Volkswagen AG Live Audio Webcast and Conference Call on the Half Yearly 2021 Financial Results. For your information, today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Helen Beckermann, Head of Group Investor Relations for Volkswagen AG. Please go ahead, madam.

Hello. Good afternoon, ladies and gentlemen. We welcome you to Volkswagen's conference call for investors and analysts on the results for the period January to July 2021, based on our half yearly report, which we published early this morning. For today's conference call, I'm delighted to be joined by Herbert Diess, our CEO; Arno Antlitz, our CFO; Christian Dahlheim, our Director of Sales; and Stephan Wollenstein, our Head of China, our CEO of China. We'll kick off with Herbert today who has a short presentation, followed by Dr. Antlitz and then both Christian and Stephan are available for specific questions either on sales or on China performance. Over to you, Herbert.

Thank you very much, Helen. Yes, good afternoon, everybody. Volkswagen had a very strong first half of the year. Best EBIT ever in the first half year, thanks to good mix. We did some pricing. We had a strong -- very strong premium brand business. We had good cost discipline on the fixed cost side and a strong financial services results. BEV sales more than doubled in the first half year compared to last year. And we have further momentum to expect in the second half, especially in China through additional product momentum. Semiconductor supply shortages, we managed quite successfully in the first half year. But we see now the first real impact in our production. So especially in China, we have lost already quite some market share because of semiconductor supply. And the impact is more likely to become visible in the second half of the year. Next quarter, we would see some production constraints. But we are working hard to recover in the fourth quarter. The combination of our strong base from first half year, the expected weaker Q3 but a catch-up in Q4 gives us enough confidence to raise our group guidance by a further 0.5 percentage point to the range of 6 to 7.5 percentage. The strategy. NEW AUTO is our plan for transforming Volkswagen into a software mobility company. We are well underway. We are organizing now the implementation and a few steps we already can communicate later today. All brand groups contribute to a strong first half year performance. The volume of brands under the leadership of Volkswagen showed a growth of around 28% compared to last year. Volkswagen grew its market share in Germany to around 20%, strongest market position since 2016. And Germany is a high contribution market. It helps also to improve Volkswagen's situation. The 4 top most sold products in Germany are all Volkswagen led by the Golf, Tiguan, Passat, T-Roc. So since many months, Volkswagen was never so strong, and that should then also give momentum in the second half year in the other markets. Premium and sport impressively strong, more than -- 30% more deliveries in the first half year. Audi with its most successful first half of the year in history. All premium brands, Audi, Porsche, Bentley with double-digit EBIT margins. Truck and bus with growth over 60% and 3% more than the pre-COVID first half of 2019. And incoming orders are -- with 170,000 units are a first half year record figure. So in many regions, Volkswagen group gained market share. In Europe, Volkswagen gained further market shares with deliveries growing significantly stronger than the overall market recovery. In Western Europe, deliveries in Q2 were significantly stronger than in Q1. So we are really making progress in Europe. Our product momentum, product cadence, product lineup is coming along very well, and we have good order intake still. North America is particularly strong. Volkswagen is back in the United States. Sales are up 30% year-on-year. Best Q2 results since 1973. Order books are full for the ID.4, Audi e-tron and for the Porsche Taycan. So we play an important role meanwhile in the electrification in the United States. And we aim there for a #2 position for electric vehicles, which we have -- I think currently, we have around 9% market share, which is already twice our market share in the -- on the -- compared to the ICE side. In China, Volkswagen passenger cars was particularly affected by semiconductor shortages in Q2. We expect chip supply to gradually improve from the third quarter onwards, while at the same time, BEV sales are expected to increase significantly. So we have positive news, and Stephan will later touch a little bit on what we are doing to even improve our dynamics in the EV sales in China, which is a critical success factor for our future success in China. e-mobility in general is gaining momentum and BEV sales will further accelerate in the second half of the year. In Q2, we -- deliveries more than doubled to around about 171,000 units. The major model offensive is having an effect. The Q4 e-tron now coming to market. Skoda Aniak both have very high order intake. So we have lead times of 3 to 4 to 5 months to get electric car delivered in Europe. In its first full quarter of delivery, our world car, the ID.4, has become our best-selling BEV, followed by the ID.3, the Audi e-tron and the Porsche Taycan. Bugatti has an electric future now. You are aware that Porsche has taken over the leadership and is pulling Bugatti's expertise in the hypercar business with the electrification competence of Rimac. Both companies are working together since many years. Porsche is relying on Rimac's expertise in electrification also in their lineup. So this combination now makes best use of the synergies between sports brands, Bugatti, when it comes to chassis building, engine technology and now also electrification. I think Bugatti never was really well positioned here in Wolfsburg because synergy -- because [ volume counts ] have been low. Now I think we are well organized and we found a nice future for them, probably one of the most prestigious brands in automotive history. We are a clear market leader in Europe, meanwhile, in the EV business with a market share of about 26% in BEV deliveries. And we appreciate the European Commission's Fit for 55 targets, and we think it's feasible. It will be tough. It's a demanding program for mostly investing in batteries, ramping up battery production and also upgrading the charging -- fast charging networks, but we think it can be done. And we are aiming at a 60% market share -- or, let's say, share on our deliveries of EVs in the year 2030, not market share but deliveries in our sales. In the U.S., our market share in the BEV market came to 9%, I already mentioned that, and it's significantly higher than in our overall market position. In China, initial sales figures for the ID.6 are promising. We aim to sell a total of 80,000 to 100,000 BEV from the ID family by the end of the year. Further product momentum to come. And we are just gearing up our dealership and our sales approaches. Stephan will touch briefly on that. PHEVs are also in high demand. The deliveries more than tripled to 171,000 units. And we plan to deliver -- we stick to our prediction. We plan to deliver up to 1 million electrified models for the first time in '21, combined electric vehicles and PHEVs combined. So that is why we are fully on track to reaching our CO2 targets in the European Union. We presented the NEW AUTO strategies through 2030, 2 weeks ago. And the transformation already is in full swing, and we achieved important milestones also in recent months. We are now really putting the measures into place. Our strategy is a combination of very successful brands, customer contacts, modernizing our brands and combining the brands with big platform approaches, hardware, software, battery and charging and mobility and services. Mechatronics and software is making good progress. We are building our new lineup based on the so-called SSP platform, our unified [ electric ] platform, which will be developed here in Wolfsburg mostly, a combination between Volkswagen and Audi. That is why we decided for an investment of EUR 800 million into our Wolfsburg R&D facilities. They have been a little bit outdated. And we really -- we have to bring that up to speed. That will increase efficiency, speed in the R&D work. And we will have a dedicated team for the SSP platform. Also, we are ramping up our capacities in China, in Anhui. Also there will be the main focus, the SSP, our new hardware platform. On the software side, we're also making progress. The first over-the-year updates for the ID are coming in place. Customers really like it because the car becomes -- gets certain upgrades, gets new skins. And people are getting acquainted to the continuous software updates, which they will receive in the future. All this was driven also already in a collaboration between our software unit, CARIAD, and the brands. So battery and charging, also a few things to mention. We partnered with Guoxuan High-tech, a battery manufacturer from China, where we have a major stake in. Guoxuan will help us to industrialize our battery cell production in Salzgitter. This is a competency we -- classic OEM wouldn't own. Now with the combination with Guoxuan, we think we are in good shape to ramp up this battery plant in Salzgitter and probably some more in other parts of Europe efficiently with the right skill base and the professional partnership. Volkswagen will invest or has invested another EUR 500 million in sustainable battery activities with our Northvolt investment. We are partnering with Enel, Enel X, for developing, owning and operating more than 3,000 high-power charging points in Italy of up to 350 kilowatts each. I think we have been talking several times about this. The fast-charging infrastructure in Southern Europe is not to the -- it's not as deployed as we would like to have it. It hinders our electric car sales. And that is why we are investing and partnering in Italy and in Spain to get fast charging as fast as possible and then help us also to get our EV sales up and running also in Southern Europe. Mobility and services. We are -- I think it's worthwhile mentioning that -- and you're all aware that we are taking over, in a consortium, the Europcar rental car business. Just to mention, I will explain that in a few slides, we are not buying a rental car business to own a rental car business, but we think that rental car business is the best starting point to build mobility platforms. I will try to explain to you this a little bit later. But you see, in our strategy overview that mobility and services is one of the big platform games we wanted to play with later on, then going to robotaxis and different mobility services. A big cornerstone of this strategy is a mobility platform. We think that the best starting point indeed is car rental. Why so? Because to run mobility platforms, you need a brand. It's basically to mitigate between mobility demand from the customer side and supply from the, let's say, different mobility provider side. On the next slide, we skip one, we can show you -- can we skip 1 slide, please? Next one, yes. On the next slide, we can explain. So we see a clear tendency, a trend that mobility demand is changing over time. We see people renting a car for the weekend using fleets within the week -- using company fleets, trying to swap cars, change cars. They don't like to lease cars for 3 years, 4 years anymore. They want a specific car for the week and another car for -- in week or the family. So this is -- the demand is gradually changing. So the question is who can provide the best service to the customer. We think the most important piece to own and relevant is the customer ID and the customer knowledge, which we think we can build a mobility platform, which is really worthwhile using for many customers in the world. The basis -- we think the best base is a car rental because car rental already has many of the capabilities and skills you will need for the mobility platform. We already have customer contact. We can provide cars in any airport, at the central main stations in many cities in the -- we have the capabilities to run big fleets, to maintain big fleets, to buy cars, to sell cars. And this is why we think a profitable rental car business is the best place to start for a mobility platform. We have to add that capabilities, more customer knowledge, pricing capabilities. Also, we have to add third-party offers. We can combine offers from our brands, so branded mobility offerings. But having that, let's say, key capabilities of a rental car business is the best place to grow. And if that's profitable, I think that's the best place to grow from a profitable business. And we think we are in good shape to even be competitive later with the big ride-hailing companies of this world or other mobility providers because we start from a profitable base, which we will grow fast on the new service side. So this is basically the rationale behind. On the next slide, once again, showing that there are synergies with already existing mobility offerings. We have been trying a lot, sharing activities. We have -- we share in Berlin. Many of our brands are trying sharing. We found it very complicated to get it profitable because of the usage of the cars. On this slide, you can see that makes a lot of sense to combine rental and sharing. It's complementary over the life cycle of a year. Sharing and rental are very complementary businesses, if you think into one spot, one location. Even within the week, sharing and rental could be very complementary. It depends a little bit on the city. So what does it mean? If you use the same car fleet, probably adding additional cars from our retail activities, which might be loaners or test cars, then you can make just better use of your car fleet. And make better use of your car fleet is the critical parameter to get sharing, rental and all those mobility services to profitability. And this is what we are going to do first. We will combine our businesses from the sharing activities. We will combine that with the rental business of Europcar and already find some additional growth potential. Some of our peers are already investing there. And we will -- we have reserved about EUR 300 million in our takeover bid to ramp up our IT competencies in the rental business fast to get Europcar from rental into mobility platform. This is what we are aiming to do. We do that and now please -- 2 slides back, if that's possible. We do that in a consortium we don't do it alone. We -- one of our most successful importers and retailers, Pon, is partnering with us, a very competent partner in mobility services already. He's in bicycle leases. He has many customer contacts, very successful in Holland, and he's partnering with us. And one of the initial investors Attestor Limited will help us to restructure and align the company for the new strategy. And we are very happy that Attestor stays with us for -- at least for the next 5 years to build up or rebuild Europcar and make it a big mobility platform. That also leads to a situation where we will not fully consolidate Europcar because we share the leadership, which also allows us to develop Europcar independently or quite independently from the -- our core business apart from our core business, make it a little bit more agile. And Attestor will help us for sure to restructure what's still necessary in the Europcar business. We think it can be profitable -- again, profitable very soon because rental car business is recovering fast in the United States, and there are certain delays. This will also come to Europe. And then we can build it or rebuild it on the basis of a profitable rental car business. That's what we are going to do. That's our aim with Europcar. Probably not easy to understand at first sight, but we will show you some evidence that this is the right way to go very soon. Arno Antlitz?

Yes. Herbert, thanks very much, and good afternoon, colleagues. Good to talk to you. With rising levels of vaccination, the COVID situation has somewhat normalized and we hope continues to do so. On the other hand, the whole industry is faced with a shortage in the supply of semiconductor. And against that backdrop, against the backdrop of this challenge, we were able to deliver an extraordinary solid half year result. Financial highlights. Sales came in at 4.7 million vehicles, well above 2020 but sales also well above -- below 2019 figures. Sales revenue, however, came in at close to EUR 130 billion, even above the level of 2019. Operating profit came in at EUR 11.4 billion. This corresponds to a very strong operating margin of 8.8% for the group, well above 2019. This result was mostly driven by strong passenger car business, which benefited from further market recovery and strong product momentum, especially our premium brands performed impressively. We had strong focus on mix and margins. And we showed high fixed cost and investment discipline, especially compared to 2019. Our financial services business also performed very well. Focus on cash flow generation is our key priority, especially in the transformation. Our reported net cash flow for H1 came in at EUR 10.2 billion driven by high underlying operating cash flows, especially premium, lower CapEx even below the disciplined 2020 spending and low inventory levels. We operate currently at about 20% to 30% below ideal stock levels. Clean cash flow before M&A, this amounted to EUR 12.3 billion. And net liquidity rose to an extremely robust EUR 35 billion, an increase of EUR 16.4 billion versus first half year 2020. These results clearly demonstrate our strong operating performance, show our focus on working capital and prove the robustness of our business. Net liquidity profited from a strong underlying net cash flow. In H1, we received EUR 1.5 billion in dividends from China, which is around half of the dividends we expect to receive for the full year 2021. The main M&A investments this year so far were the capital increase in Northvolt AB, minus EUR 0.7 billion, and the capital increase in Argo AI, minus EUR 0.3 billion. Already in Q1, we paid back EUR 1.2 billion hybrid bond. Please be aware, we expect significant cash outflow in H2, among others, for dividends to shareholders and M&A outflows relating to Navistar [ acquisition ]. Nevertheless, EUR 35 billion is a robust starting point for this transaction. And we still strive to keep net liquidity well above EUR 20 billion at the end of the year, including M&A activities. Coming to the performance of our divisions. Within the Automotive Division, passenger cars delivered EUR 8.5 billion operating result and a very solid 9.3% operating margin, well above 2019. Commercial vehicles came in at EUR 0.3 billion. This result was burdened by substantial restructuring costs at MAN of EUR 0.7 billion. Power Engineering came in at breakeven. And the Financial Service division contributed a strong EUR 2.5 billion result, benefiting especially from high used car demand and very good residual values. Now moving to the passenger car EBIT bridge. The strong result of EUR 8.5 billion for the passenger car business was driven by substantial volume, price/mix of EUR 11.2 billion. The block exchange rates and derivatives came in at a positive EUR 0.7 billion versus last year. This was mainly driven by the fair value valuation of commodity derivatives of EUR 0.7 billion, of which the absolute positive contribution in H1 2021 was EUR 1.1 billion. We were so far able to compensate for higher material costs and prices. But we expect larger headwinds in the second half of the year, for example, in relation to steel. The position fixed costs/others had a significant negative effect of EUR 2.8 billion versus 2020. Overhead costs were higher by EUR 0.4 billion versus 2020. On the other hand, we achieved significant positive contributions from our overhead cost program. And please consider that we compare costs with the first half year of 2020, where production was brought to a stop in lockdown for several weeks. There's a significant base effect in there as well. Development costs were higher by EUR 0.6 billion due to our continued BEV ramp-up and significant software investment. The other reason are mainly one-off effects of EUR 1.8 billion in comparison to 2020, which is a major driver being the transfer of AID to Argo in 2020. This transaction had a significant positive effect back then. Coming to our brand group's performance within the passenger car segment within the volume group. Volkswagen came in with an operating margin of 4.4%, mainly driven by the ongoing recovery of the regions. Despite COVID-19, we expect North America and South America to achieve a consolidated breakeven this year. SKODA delivered a very strong operating margin of 9.5%. Within the premium group, Audi delivered an operating margin of 10.7%. Bentley came in double digit at 13.4%. And in the sports and luxury group, Porsche delivered an impressive 17.6% operating margin, standing out in the industry. Looking at the commercial vehicle business in more detail. You get a mixed picture. Scania delivered an impressive 12% operating margin. The underlying business of MAN had a negative result, which was mainly driven by restructuring costs of EUR 0.7 billion. Before restructuring, MAN achieved a margin of 3.4%, which is a significant swing versus prior year. In H1, the proportional operating profit of our major JVs in China came in at EUR 1.3 billion, which is below 2020 figures. In general, chip shortage had a negative effect, whereby Q2 was stronger affected than Q1. The VW group China premium brands have been doing very well in H1, leading to a decent proportion of operating result, our JV, FAW-VW. On the other hand, competition in the volume segment, especially in the lower segments, remains tough and negatively impacting the VW brand. Please note that SVW was also burdened with the initial ramp-up costs for Audi vehicles, which do not have corresponding sales yet but in the future. Overall, for the full year, we expect the proportion of operating result roughly in par with 2020 figures. H1 has been very strong despite a tough environment. We've managed COVID and the semiconductor restrictions quite well so far. The combination of a strong base from H1, expected weaker Q3 but catch-up in Q4, gives us enough confidence to raise our operating margin guidance by a further 0.5% to the range of 6% to 7.5% return on sales. The risks of undersupply of semiconductors have once again shifted now into the second half of the year. So achieving the upper end of this guidance depends on our ability to recover vehicle production, especially in the light of semiconductor situation, lower our order backlog and recover lost sales in H2 as much as possible. Leading to automotive clean cash flow, we expect a level of above EUR 15 billion. Now I'd like to update you on some of the proof points of our strategy. Focusing on BEV ramp-up. Our BEV volume continues to ramp up significantly. We delivered 16,000 BEVs in Q1, 110,000 BEVs in Q2. And we are now striving for our BEV between 5% and 6% in 2021 with a minimal technical spending. To continue with transparency on the performance of CARIAD, currently shown within the other line. Our group P&L since CARIAD is in the initial investment phase and the operating result and net cash flow were both negative and R&D cost doubled in Q2 as planned to EUR 1.0 billion. CARIAD has increased head count by a further 500 employees in Q2 and now has a head count of around 4,500 people in total. Looking at our fixed cost program, which includes general overhead costs in our headquarters, indirect costs in our plants worldwide and the budgets of our national sales companies. For better comparison, we track our overhead cost program versus 2019 figure that were not distorted by the 2020 plant closures and short-time measures. We managed to continue our progress and decreased this cost base by around 8% versus 2019, a further 2% decrease since Q1. And we are absolutely committed to continuing this disciplined approach. The sharpened focus will continue throughout this year as well as until 2023 and beyond. We have very ambitious transformation plans that are required to safeguard our future. For that reason, we have guided for R&D of around 7% for the full year 2021. While this is still above our strategic target of 6%, it's a necessary reflection of the execution of our BEV strategy and of building up our software competence. R&D spending came in at 7.2%, still above our 2021 target of 7%. But in terms of CapEx, we showed industry benchmark discipline. The H1 CapEx ratio came in at 3.5%, what was well below 2020 figure. In absolute terms, we came in well below both 2020 and below 2019 at EUR 1.4 billion. We put full focus on product and future technologies while keeping nonproduct-related and structural CapEx at the minimum. Since we've already achieved a very decent CapEx ratio in Q1 so far, we've seen upside despite the typical seasonal higher CapEx spend that will come in Q2. We will continue our strict disciplined approach, and we will increase our efforts to capture synergies between the brands to compensate for higher R&D costs in the years to come. At Q1, we communicated that we would raise focus and transparency on cash and cash flow even stronger and provide transparency by brand. For the time being, the premium brands are the key contributors to the very strong cash flow generation. Our volume brands still have a way to achieve acceptable cash flows levels. But please take into account that cash flow from the Volkswagen brand was still burdened by diesel outflows of EUR 400 million. And of course, the net cash flow of all our brands benefited from lower inventory levels of finished goods. Ladies and gentlemen, with our strategy, NEW AUTO, we have a clear plan to transform our company into a technology and mobility service group. We will continue to focus on synergies across brands and working hard on cost and efficiency while focusing on technology, ramping up our electric platforms and developing and deploying a leading automotive software. We intend to shape and financially steer our transformation with as much accountability and transparency as possible. Thank you very much. And now I will hand back to Helen. Thank you.

Thank you very much, Arno, and thank you, Herbert. If I could just clarify 2 small points, please. On the passenger cars EBIT bridge, the block exchange rates and derivatives came in at positive EUR 1.7 billion, not EUR 0.7 billion, versus the prior year. So the correct value is shown on the chart. And secondly, of course, we meant that the higher typical seasonal CapEx will come in the second half of the year. Operator, if I could please pass over to you to kick off our Q&A session. Thank you.

[Operator Instructions] Now we can go to our first question. It comes from the line of Tim Rokossa of Deutsche Bank.

The first one is probably for you, Herbert, or for Christian. I understand that you still want to do a explanation on the Europcar acquisition. But I think what was most important to your investors and why a lot of them didn't really like the idea of you acquiring this is that there's a lack of understanding why you need to own a good chunk of this asset rather than just partnering with them. Is that something that you can already allude to, what the rationale behind that element of the acquisition is in this idea? And then secondly, obviously, you have steered the mix in a tremendous way. I mean these margins that we're seeing at Porsche and also Audi are very, very impressive. Should we be prepared for mix dilution once the semi shortage normalizes? Or are you ready to cut out some of the lower end of the portfolio even by that point in time?

So Christian, I think the first question was directed to you on the logic behind buying a chunk of Europcar.

Yes. Tim, thanks for your question. I think 2 fundamentals. One is, obviously, you also -- if you put everything in the new mobility platform, you will also leverage the brand. So obviously, if you only partner with the brand, you actually strengthen a massive brand that you, at the end of the day, don't own if we are successful in the future. Second point you need to -- as Herbert Diess has explained, you need to work out of an integrated fleet. So if, for example, through Europcar, we offer branded subscription service for, let's say, Porsche or Audi, you want to deliver more Audis and Porsche relatively speaking to that partner. And that's a partner you should have a particular intensive relationship, i.e., ideally own at least the majority of it. These are the 2 main reasons apart, of course, from the third effect. It's much easier to align everybody in this group to a partner that we actually have a significant shareholding in and you participate in the value creation that we hope to generate.

Okay. Herbert, if you could take the second question. It's on our steering of mix and if things are -- what will -- say will be positive when things go back to normal on the semiconductor, whether we see a mixed dilution then or whether we can maintain our very strong mix as in the premium brands.

Yes. For sure, there is an effect of mix improvement because of prioritization, but we have a strong focus on keeping the margins high and improving our mix. So -- and we have seen that we have -- we are able to price some of our increased costs, and we will maintain that route. So we're not striving anymore for volume leadership. We are striving for profitability. So our task is and our aim is to keep the margins as high as they are today.

Our next question comes from Arndt Ellinghorst of Bernstein.

First, a question for Herbert Diess, please. On capital allocation, I think we all know and understand that you and the management team are very passionate about the value of Volkswagen and the potential of value unlock from really lifting hidden value from the various businesses you have. Now at the moment, it seems that we're moving in the other direction with Navistar, Europcar, Guoxuan. We're potentially looking at about EUR 14 billion of liquidity outflow in the second half alone. Can you just update us on your thinking regarding core versus noncore businesses and the action behind it that might lead to a more valuable Volkswagen? And then secondly, on China, really. I mean, thanks for the additional slides on the deck, but it's now -- we've seen this for a while now that the equity contribution from the joint ventures is dramatically falling. It's obviously related to Shanghai VW and, as you say in your slides as well, the mass market exposure. Can you just talk about what structurally -- how you will reset the VW brand in China? And how much it will cost you to reposition or even take out SKODA?

Okay. Yes, first of all, I think you -- it's fair to say that we are doing a lot also to streamline our operations. Not many months ago, we put our seeds operation, for instance, into a joint venture with Brose. I think we move now with Bugatti, where we didn't have a clear future answer now, having it under the leadership or under the control of Rimac is a very good move. We streamlined our operations for the premium sector. The combination of, let's say -- adding Bentley to the product portfolio of Audi makes it now very easy to manage the entire product portfolio under one umbrella but allows Audi to address higher segments with Bentley leveraging scale and technology. So we think we are moving the organization of the group into groups, in volume premium. And letting alone Porsche makes a lot of sense for reducing the complexity. And actually, it's working really well. We are now -- we don't deal with the minor investments like Ducati, Lamborghini anymore. It's in good hands with Audi, and they leverage all the synergies and scale. On the other hand, we think that premium brands are valuable. And they -- we have a good chance to increase brand value over time. We -- and our strategy shows clearly that in the -- by the year 2030, also, it will be very much a brand game. Brands has -- will be -- have to be aspirational, also emotional. And we have probably the best brand portfolio in the world. And we have now -- I think we have restructured the brand portfolio decently. It's well organized and it's working well. And the combination now is with the big platforms. Also, I think this, we have organized in the right manner, hardware platform, software platform, which allows for the right scale. And we strongly believe that automotive industry in 2030 will be more of a scale game than it is today. Software is fully scalable. Autonomous driving is fully scalable. Hardware platforms will be one unified hardware platform. You will see that this is going to be a game for very, very big companies. At least you need the economies of scale on the technology side. So we think that's absolutely the right setup. Same applies to batteries and charging. This is why we are very confident that we are making the right move. Is there something where we have to work on our brand portfolio? Yes, in some aspects. SKODA is doing very well. They're getting close to 10% profit margins now. We're streamlining the worldwide business. SKODA has taken control for India, for Russia, East European markets. Volkswagen is coming back strongly in Latin America, in the United States. Brand portfolio, our weakest point probably is Fiat. And they are very well on the move now with their sports brand, CUPRA. CUPRA is already bigger than Alfa Romeo has been over the past years. They are going into higher margins. Their new product launches are received very well. So this might be the way forward, and we are confident that it can be the way forward for Fiat as well. And then we have, by far, the best worldwide brand portfolio in the industry. All brands are being modernized, made future-proof, are electrifying. And this allows us also to play the scale game in the EV sector, also probably on a different level than many of our peers because 70% of the platforms -- EV platforms are on full scale between the brands. This is how we play the game, and we think this is the way we are going to be successful. Whenever it's possible, we streamline, yes. Think about seats. We have other things in mind. We already reorganized our supply plans quite considerably. We phased out plastic components production. And if we see further potential to streamline, we will do so. We will have strong investments because the industry will remain very capital intensive. We have to add the battery plant. And we will do that in a way to maintain our margins high and only invest where we really see the right margin or where we see strategically very relevant investment. This is the case for Europcar. We think mobility platforms can be highly profitable because at the end, it's customer knowledge, it's software, it's a brand. And this is why -- and the best base is to build up one of those brands or probably several of those brands. Delivering services is Europcar, and we see a high potential for also creating value with building a mobility platform. You can see that -- and we think we can be more successful in many of the mobility players you have in mind like Uber or Lyft or so because they are probably in the best position than we are now, but time will tell. Your question regarding China, yes, we are in a difficult situation because of semiconductor supply, but our brands are in good shape. SKODA is suffering because it lacks the size for China. We are just too small, and the efforts to make SKODA really successful are really big. That is why we are really losing market share. I'm not too -- and the premium brands are doing excellently because premium is growing much faster in China than volume. But I'm not too concerned about Volkswagen. Volkswagen has a very strong market position. We are around -- over 10%, 12% market share even now in a crisis situation where we have given up market share because of semiconductor supply, very strong. The next brand to follow us has probably -- a little bit more than half of our size. So the economies of scale, we are owning there. The brand perception is very positive. We have a very loyal customer base. We have good dealership network. We are in good shape in the traditional business. Where we really have to gear up now is NEV. NEV is a new game in China. We have new competitors. It's a new customer we have to address. And probably, Stephan will lose a few words on it. We think that we are in good shape. We -- our product substance is good. We are -- we have the right range, battery product, excitement. We are very competitive. And now we have to really make it work. I would say the first signs are positive. The order intake is growing. ID.6 has -- was very well received by customers and the press. ID.4 sales are picking up. But we have to be aware that NEV is still in development. We have Tesla there, very dominant on the high-end side. And then we have very low-margin, small-scale NEV electric vehicles. There's no other real competitor which has been able to overtake us, talking new or any others which are very much hyped, we are in much better shape than those. And if we do the job, if we find the right way to address a new customer base, which is a much younger customer, if we are fast enough to build up the charging network, we will -- we can be, on the NEV side, as successful as we are currently on the combustion engine side. We have been able to demonstrate this in Europe. We are currently demonstrating this in the United States. And we will demonstrate this in China. Stephan, do you have to add something?

No, perfectly summarized almost. As we said, so we are well on track also with regard to July. You stated that our China-specific model, the ID.6, is surprisingly well perceived. Let's say, mixes on order intakes are higher than we expected. And we are -- I would not say we are doubling now almost every month, but we are now gaining, on a month-by-month basis between 50% and 70%-plus on orders as well as on deliveries. And as we have also stated in the last days, our aim is -- which seems to be quite realistic to deliver between 80,000 to 100,000 cars on the ID family this year in China. And Mr. Ellinghorst, as you probably know, as much as your colleagues, that the NEV market is about still a [ 2 million one ]. Except Tesla, there is actually nobody who delivers, let's say, a 6-digit number on a yearly basis on a comparable model if we exclude the mini BEV in this respect. So with this number in mind, we are very confident that the first big step into getting Volkswagen also into the NEV game will be made this year and then with further growth and normalization of the sales trend to be expected for next year. It is a different game probably also to further elaborate on what Herbert stated on this. You know that in particular, the pure NEV brands, most of them are start-up based ones. If you leave, for instance, BYD, as a more traditional contender out, also have pursued a different sales model, which we are also adapting to our traditional franchise model. So we are selling in China as we do in Europe also our ID models via the agency system. We are currently with both joint ventures ramping up massively exclusive ID stores, relatively small sized ones but in prime location, in shopping malls. We aim for a network across both joint ventures of roughly about 150 of such prime locations in high-frequency areas in China, where also our competitors are now presenting their cars, which would be a similar sized network as also the NEV-only brands have. And of course, on top of it, we have our natural strengths with our established 2,000 unit dealer network, which, of course, is able to deliver a first-class service, which some of our competitors are certainly not able to reach because simply of the maturity in the market. So NEV is one -- is probably the most important strategic initiative to come. Nevertheless, as you have also elaborated on the Volkswagen brand as such, we are still on the way of executing our so-called Move Forward strategy. So also this year, we had just recently launched another SUV car, which was one of the key areas where we had to pick up. There is one more car to go in order to complete and then we will have more or less completed and saturated ICE portfolio. And future model extension will happen purely in the field of electric vehicles. where we are more or less, for the transition phase, are building a second compelling portfolio on NEV. And then in the -- at the end of the decade, certainly, we expect also for China then the tipping point to be reached, where NEVs are taking the majority over the ICE car business. And also worth to mention that similar to Europe but probably even more radical, we also built our own charging infrastructure in China in conjunction with our colleagues from FAW as well as with Star Charge, where we are also completing the offer in terms of charging and not completely relying on public or semi-public charging infrastructure but making sure that our NEV customers have access to first-class VIP services on charging. And I believe still the holistic experience, including the charging and service element, will be one of the decisive factors to turn NEV into the big thing to happen in China.

That's great. Maybe just one quick follow-up really for Herbert. Herbert, given you've got a new contract now which gives you more planning visibility for the group, do you personally believe in a partial IPO of Porsche?

The -- as I said, we're continuously reviewing our setup. First priority is now to finance the battery ramp-up. We try to partly externally finance, and we are working out the models. And all the other, let's say, possibilities to go to market, which might be trucks, where we could dilute a little bit -- coming a new strategy or any other things, we have to consider. The first priority now is to finance the ramp-up in batteries.

We can go to José Asumendi of JPMorgan.

José, JPMorgan. A couple of questions, please. Dr. Diess, can you comment a little bit, please, about the collaboration with Ford, specifically in Europe on this NEV architecture. That's going to give you, I think, very strong economies of scale. How is that progressing? Has there been any development since the last time? And any opportunity to expand on a geographical basis across any other region? Also, can you comment a little bit around Argo? And, again, that collaboration with Ford is definitely not valued or priced into the share price currently. Can you comment a bit around the investments, the commitments you have there? Any latest development on the technology side that you may share? And then second for Arno. Can you help us a little bit in terms of the available -- the short-term momentum into the third quarter? Are you seeing wholesale down versus Q2? And are you seeing raw materials becoming a substantial headwind? Or do you think you have the opportunity again to offset some of the headwinds with pricing and with mix?

Yes. José, wonderful questions. Ford alliance is working out really well. We did that mostly driven by the strategic position of our light commercial vehicles. And we -- I think we are gaining a lot of competitiveness over the next couple of years, using mostly Ford platforms for our commercial vehicles. It's well underway. The projects are making good progress. The designs I've seen are really promising. The cost base we will -- are going to achieve are good. And we already see recovery of our light commercial vehicles. I think there should be even in our planning some upward potential because of the Ford partnership from light commercial vehicles and chances. The Argo venture is making good progress. We have been -- it was tough times because we couldn't communicate well. We couldn't drive the cars. But now Bryan Salesky is coming over. I think he will give a presentation on the Munich Fair, where we are going to show the next steps. The cars, I've been seeing the cars which are being equipped now with all the LiDAR equipment. They started test driving at the Munich Airport. And later this year, I'm invited to a test drive. And then next year, hopefully, we're going to see some fleets in the United States and our cars here in Germany. They are telling us, it's a third party, that their sensor technology is much better than what you see in -- on the rest of the competitors. Compute hardware is very similar. So I think we are at eye level with at least -- at the same level of technology than most of our peers. And test drives next year should show -- and should show them progress. The vehicles look nice, I think. And hopefully, we can next year test drive some of our cars in the [ MOIA ] environment in Hamburg or in Munich. So I'm happy that we made the investments. It took us probably half a year, we examinated all potential partners. We ended up with Argo and we don't regret. We think we have the right partner, and we have the right partner with Ford. Now we all know it's a long way to become profitable in that business. Its technology road map is still a long one, but I don't regret anything. And I think we've made the right choices. And the team is making good progress. Ford is happy, we are happy. And I agree with you that we have to show it more because it's an asset. It's probably more of an asset than you have in your books. Then next question was...

Headwinds.

Headwind, wholesale figures. Yes, probably, Arno, can you...

Yes. José, on the margin side, I mean you asked last time also for Q3 -- or for Q2. Let me start with the full year. Look, we start with a starting point of 8.8% now. And -- but you know we have a certain seasonality in our business, a typical seasonality. Specifically in the third quarter, we have closing shutdowns for the summer period. So that accounts for like -- on a full year basis, for 0.5 point or up to 1 percentage point. So that 8.8% in the first half of year should ideally have led to a guidance of 8.8% for the full year. So why didn't we go for the 8%? Let me first make clear, we are absolutely committed to achieve the best margin possible but we see some uncertainties in Q3. And that -- from today's perspective, it's difficult to predict specifically in terms of visibility. And we do not rule out that we even slightly surpassed the 7.5%. But from today's perspective, you should expect a more normal Q4, but that obviously mathematically leads to a higher burden we expect in Q3. But again, as I said, we do not rule out that we surpassed the current margin guidance if we really manage the supply of semiconductors quite well.

Okay. I think we had a question, a bit more details on raw materials, if possible.

Yes. Raw materials, a little bit counterintuitive, what you saw in our EBIT bridge because we had a significant positive effect on the product cost side. What we see is currently -- the raw materials we use, we have in our inventories. So basically, these raw materials still had lower prices, but we see the steel, the aluminum that we buy so far, the prices increased significantly. So you should expect a higher burden in the second half of the year. Of course, we are hedged. Of course, we have long-term contracts. And of course, we look into pricing. And of course, we look into the possibility to compensate for that on cost and fixed cost side. But yes, in a theoretical EBIT bridge, for the second half of the year, we expect a swing to a negative figure there.

And then maybe, Christian, the last point on the development of pricing into Q3 and the rest of the year.

So I can assure you that my boss reminds me every morning that we should [ additionally ] price our car. I think generally speaking, as you can see for mix and price effect, I think we've done a pretty decent job to leverage pricing. And again, pricing, of course, always has 2 aspects: One is our price increases. We've already done in March. We have done a second price increase -- or we will do a second price increase already announced on the 1st of October. And thirdly, of course, we have reduced technicals massively, which is effectively nothing else than a price increase across the board pretty much across all markets and all segments.

[Operator Instructions] I think we've covered very comprehensively some of the bigger topics. And we're checking the possibility of extending 10 minutes, depending on where all these guys need to get to. But hopefully, we'll get through.

And the next question comes from Kai Mueller of Barclays.

Okay. If I just stick to one, on your Europcar deal, as Tim outlined earlier, there's a lot of questions in terms of the structure of the deal. Can you just clarify a little bit how much will it actually cost you to invest into this and what shareholding you will be having? And what is the idea behind being a shareholder in such an asset versus owning the asset outright?

So Christian will take that question.

Yes. Happy to take the question. I mean first of all, as Herbert Diess has explained, we will buy your car or we intend to buy your car in a consortium. We will buy 67% of the shares at the price of EUR 0.50. That will cost us EUR 1.655 billion. If, as we hope, we will reach the threshold of 90% and then will allow us for a squeezeout, we will pay EUR 1.688 billion. This is for our 67% relative to 100%. Attestor will own 27% of the shares and Pon will invest EUR 176 million, owning 7% of the shares. We believe that instead of owning it outright, I think we'll leverage actually the abilities of 3 great partners. One, starting with the private equity partner, will help us to do some necessary restructuring measures, which sometimes is easier and better to do in a partnership than as a big corporate alone. Second, Pon is much more agile and advanced in terms of mobility. So we will be able, first of all, not only to test new things in the Netherlands, for example, or in other markets. Second, we'll have someone who also holds us accountable. Being a large corporate is sometimes slow, so it's good to have someone to push us and do some things maybe a bit more agile. If I might compare, we're competing with [ Six ] for example, that's a well-run, agile company. So we need someone to have the same speed. That's the reason why we strongly believe that partnership is a good combination of our abilities.

George Galliers of Goldman Sachs.

Look, I wanted to revisit something which has been raised in the past. You are clearly making good traction with your electric vehicle sales. And if I look back this year, your share price on Power Day was at a similar level to today before increasing by more than 20% in the following 30 days, seemingly indicating that investors too are excited by your EV offensive. However, since then, it does feel like some of the excitement has faded. And with that in mind, would you be willing to change your position on the reporting of your battery electric vehicle sales to report them monthly rather than quarterly so that the market can more easily follow your progress? And in addition, can you confirm that internally you are tracking the revenues and contribution profit generated by your battery electric vehicles? And is that something that you might consider disclosing to the investment community?

Okay. So Christian will take the question on reporting of our BEV progress.

George, I think -- and Arno Antlitz has explained that multiple times. Of course, we'll increase our transparency on the BEV reporting massively. We strongly oppose we including the monthly reporting because in an organization like ours, what happens then, people run after monthly delivery targets. And we deliberately want to steer for profitability and not for volume numbers. So we believe the 3-month reporting is sufficient transparency and enables us internally to steer what you want at the end of the day, of course, as our investors, see for profitability and not run after monthly published targets.

And in terms of your second half of your question, we have internally, of course, margin information. And based on that information, combustion engine versus better electric cars, we gave you the indication that within the next 2 to 3 years, the margins will converge. And we explained in our Strategy Day the effect of better margins from battery electric vehicles, better scale, better battery costs and the priority we will see within the next 2 to 3 years. But for the time being, we won't disclose, for competitive reasons, specific margins on specific models. But we are confident that we can stick to that margin currency prediction within the next 2 to 3 years, which is a good -- it should be a good message for also the capital market from our point of view.

We can go to Stephen Reitman of Societe Generale.

Yes. Looking at Slide #26, which is the -- showing the cash flow. Obviously, it's very striking that when you look at the very strong cash flow that you generated, the EUR 10.2 billion, it's predominantly the result of Audi and Porsche. And obviously, those companies are also in quite heavy spending phases as well. So they're still managing generally, obviously, very strong cash flows. But I'm wondering when -- how do you think the development of the sort of more volume-oriented parts of the business can be in terms of cash flow generation going forward? And obviously, I did take note of your higher cash flow guidance for this year. And the second question as well about the United States. You mentioned that you're pretty much sold out already on the ID.4 in the United States. Obviously, those vehicles are being imported from Germany at the moment. So could you update us on how quickly you'll be transitioning to local production in the United States?

Thanks, Stephen. Arno will comment on the cash flow development in relation to brands versus premium.

Stephen, thanks for your question. And as promised, we increased focus and we also increased transparency. And so basically, the results you see on Page 26, yes, there is significant upside potential in -- specifically in the volume brands. But if you look at the -- at SKODA cash flow for 6 months, it's not too bad already. So -- and Volkswagen passenger cars, it's burdened by diesel payouts, but they know they have quite some way to go. But as you're aware, Volkswagen brand currently operates on 4% margin. There is a path to 5% next year and 6% in 2023. And with that operative improvement, the margin should improve as well. There is a small thing you need to consider when you look on that net cash flow exhibit. Due to the cash flow -- due to our operating model within CARIAD, there is a significant negative cash flow, which we also communicated in the deck. And that basically, theoretically, you had to add to the brand, specifically also to the -- partly to the premium brands because if they had to pay for their upfront investment in digitalization and in software, their cash flow would be a little bit more diluted. But still, it's a really strong cash flow from Audi, strong cash flow from Porsche, basically from a very strong product momentum, very strong operating business. And the next small reason is, yes, we operate a little bit under ideal stock, 20% to 30%, and that will normalize over time. But as I said before, we increased focus, we increased transparency and we also increased like our initiatives on working capital. Perhaps in Q3 but at latest in Q4, we will give you more detail on our working capital initiative, which has basically 3 streams: focus on ideal stock calculation, a much more stringent and robust and ambitious focus there and then receivables and payables. And from this initiative, we should also see another positive effect. But again, what you summarized with the improvement of the operating result of brand Volkswagen in 2022 and 2023, we should also much -- see a much more positive cash flow.

Okay. If I could hand over to Herbert just to address when we will localize the ID.4 in the USA.

ID.4 is going to be localized quarter 3 '22, quarter 3 next year. And until then, we are trying to squeeze out a little bit more production here from our German plants to satisfy the U.S. demand.

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

Most of my questions actually have been asked already. So therefore, just a final one. On Financial Services, on the splendid result you reported here in Q2, just want to get a feeling what has driven the result in Q2. And to what extent the tail, is in fact, going to be permanent also in the next 2 quarters? So I want to get a feeling what is the run rate from here in Financial Services.

Yes. Horst, thanks for your question there. There were like extraordinary factors, but there are a lot of factors we should expect also in the coming quarters and years to come. Also, in the Financial Service business, we started a fixed cost and operational improvement program. And they have a very good and positive business. On the other hand, we saw very good residual values and very low basically factors on risk. So it's difficult to predict whether these effects will be permanent. From today's perspective, we try to make them permanent since we -- what we said before, we will promise that we keep the cost discipline, we keep also the inventory discipline and incentive discipline. And that should also lead to a more permanent positive effect on our financial services side. And the credit risk is difficult to predict. For the time being, they didn't materialize. Customers are still solvent. But you know this is something you can't really predict for the future. But for the time being, the business is very solid as well.

Our next question comes from Tom Narayan of RBC Capital Markets.

Tom Narayan, RBC, taking the questions. Questions for Stephan on China. And first, thanks for the details from before. But we've been hearing some press reports indicating some issues maybe Chinese consumers have been having with the software on the ID family. I'd just love for you to maybe respond to this. And what are those issues? And when might they be resolved?

Tom, as you know, we brought the MEV factory alongside the ID.4 also the first time to China. Indeed, as I would say, with all complex software/hardware topics, we had to adjust some. As we did so, I would say we are currently -- since a couple of weeks out with the software, where we see hardly any problems which we are currently also, let's say, offering to our customers of the very first days. Similar to U.S., you probably know that we are also aiming, let's say, for the over-the-air updatability, probably slightly delayed to Europe simply for 2, 3 reasons. Because in China, we have a slightly different hardware, much more performed than we have it in Europe. We have more legal requirements in terms of permanent delivery on data to government back ends to observe and monitor the battery status, which is a legal obligation in China, which, of course, is affecting all software updates to function as well. And we are planning to go in front of our customers with updatability and increased functionality. So it will be a very attractive software package to hit the market, I would say, around changes latest early next year. And the good thing is, hardware is not going to change. This will be a positive also surprise and benefit for all customers that have already decided and deciding these days to buy an ID car in China.

Our next question today comes from Henning Cosman of HSBC.

Maybe while we're on China, another one for Stephan on Slide 19. So thank you for indicating the profitability for the remainder of '21, obviously, implies that you go back to above EUR 1 billion contribution on a per quarter basis. So last year, in H1, you obviously had the COVID dilution. This year, you had the semi dilution. Is the understanding correct that you can sustain the above EUR 1 billion contribution on a per quarter basis going into '22 as well? I'm not really looking for guidance but just order of magnitude so that you're, for the first time, again, now able to break that trend of declining earnings in China.

As I said, the -- what you call the decline of earnings in China is really more on extraordinary effects. We had one-off effects, financial ones, that are positively affecting our 2020 results, which are not to be repeated in 2021. And also, the colleagues have stated earlier on, we are, in particular, hit in China by the semiconductor shortage in quarter 2 and quarter 3. Just for you as a background, if you do not know, we are, let's say, in the same boat as we are on many components globally. But we are specifically for a safety relevant part also related to the Japanese supplier that had a burn-down in the semiconductor factory in March, which are now on the way to fully recover, which was hitting our MQB platform massively on the steering books. In quarter 2, [ 2b ], let's say, continuing to quarter 3. We have an alternative supplier also on top of what we have with our main one, hoping to see a return back to almost normal levels by the end of quarter 3, quarter 4 to commence into 2022. And on top of what Arno Antlitz in general stated, we had also specifically in China also for a joint venture that was raised by Arndt Ellinghorst on SVW, a massive fixed cost optimization program, a place where we are able long-term lasting to also reduce the fixed cost by more than EUR 1 billion. So this will, of course, will positively contribute in the earning qualities in the years to come. So I would say if we are really able to manage, on one hand, the ramp-up cost on Audi as we go for a second partner strategy with this, if our fixed cost programs now unfold fully, we have a price value strategy for the brand Volkswagen to come. We have a richer product model mix on the core brand Volkswagen, as I stated earlier on. So if the lasting effect goes through and the short-term effects mainly around the chip shortage in 2021 will pass away, we will see, let's say, improved financials for China to come and to last.

And Henning, if I understood it correct, you asked for guidance for 2021 or for 2022? I think 2022, right? Henning? So as far as I understood, I think 2021 is clear. We said roughly on par. We said we will give more transparency in the future. And I don't rule out that in the future, we also guide for the proportionate operative profit, but it's too early to guide that for 2022. I would propose that we do that within our normal guidance process for next year. And then we can discuss what we expect for 2022. But as I said before, we will and we promise to increase transparency and that might be part of that higher transparency we give in the future.

But in absence of new extraordinary factors, there's no reason to assume a deceleration in run rate compared to the EUR 2.3 billion in H2, right? That's the message.

Could you repeat your question, please?

For 2021, we said roughly in par on the 2020 figures. Yes.

No, exactly, which implies EUR 2.3 billion for the second half of the year, right? So I'm just asking, in absence of additional extraordinary factors, or like you say, normalization into 2022, there's no reason to expect a deceleration from the H2 run rate?

Exactly.

If I can just add -- sorry, if I can just add, Henning, if you're looking at the 2020 proportional operating result, that was EUR 3.6 billion. So that's the number we're referring to as being roughly on par.

We can go to Charles Coldicott of Redburn.

Just a clarification actually. I think you said earlier in your prepared remarks that you're now expecting fully electric vehicles to be 5% to 6% of your total deliveries this year, which I know is only a small change, but I think previously, you said 6%. And obviously, that's relative to an overall group deliveries figure for the year that you now are saying is lower than you previously thought, about 5% lower. So I just wanted to check the reason why your expectations for BEV sales might be lower than previously thought. Is that just a chip issue in spite of sort of prioritizing supply of chips for the BEV models? Or is it something else?

So Christian will cover the topics related to the target for electric vehicles for the full year.

Yes, that's true. I think in our previous guidance, we always communicated 6% or up to 6%, so it's 5% to 6%. Again, the slight change in the outlook is so minimal relative to the share of BEV that, that doesn't have an impact. Obviously, we're prioritizing BEV due to the semiconductor shortage, but also BEV was slightly affected. So that's why we guide 5% to 6% at this point in time. Maybe important addition, we continue to say that we definitely will hit our CO2 compliance based on these numbers, so just to avoid any confusion here. And also for IDs last point, as for all other models, we're obviously optimizing for profitability. That's why we, for example, cut some year production relative to original budgets. So also there, we optimize for margin and profitability while, of course, satisfying customer demand and hitting CO2 compliance.

If we can take Jürgen, please.

I have one question left on the used car business, which seems to be very strong. Can you quickly describe it maybe? Why is it so strong? And the -- I mean, I guess, this is more or less 100% combustion cars. So what people -- why do people rush for these products? Is it just more or less a demand thing? Because people who just don't want to wait for 12 or 18 months for a new car go to used cars as a bit an exit strategy from their side? And is it a widespread phenomenon across margins -- sorry, across markets and across products? Or is it more a specific thing, let's say, in Germany and some other markets?

Maybe I can take that question. Maybe I'll start with the last point. This is actually widespread across Europe and the U.S. most notably. In the U.S. it's actually particularly big. It's driven by 2 key factors that apply for both markets. One, of course, you have an effect due to the simple fact that 2020, you sold less new cars. So if you sell less new cars, then at least on the shorter-term, used cars, you have less supply. And the second, of course, is, of course, the fact that new cars are, first of all, more pricey due to the increases we all do. And second, they are not as available as -- to customers as they used to. So of course, they consider used cars as an alternative. These are the 2, let's say, individual factors. I think generally speaking, all manufacturers are fully aware meanwhile about the importance of residual values. And I think we're all jointly managing the used car business a bit more cautiously and thoroughly. And I think that's why we believe it's also while not maybe in the order of magnitude, but it is a longer-lasting effect because the RV management becomes so important for our entire industry.

We'd like to wrap up now for today's event. Thank you all for your participation. I would like to make a reminder that tomorrow at 1:00 Central European Time, our Audi colleagues are holding their webcast and conference call. So we -- they're looking forward to your participation. And yes, to wrap up, the most important thing for today for all of us, staying healthy and having happy, relaxing holidays. If there's questions, of course, contact us or the IR team. And yes, have a good day, good afternoon.

This concludes today's call. Thank you for your participation. You may now disconnect.