Volkswagen AG (VOW3) Earnings Call Transcript & Summary

So good morning. Again, this is Sebastian. Welcome to our media Q&A. Oliver and Arno are sitting next to me, and we can right away start. [Operator Instructions].

And the first one appears is from Hamburg, [ Christian Miskin ].

I hope you can hear me. Hello?

We can hear you.

Yes, perfect. Two questions. First is could you give a little bit more insight on BEV order situation in Europe? I mean you have talked about -- a lot about that the market is not moving as fast as you have expected it to move. So what's your order intake? And what should it be like to utilize your capacities better? Maybe you can give some figures on that. And the second question is connected to that, I mean, in Germany, government incentives to buy electric cars have been reduced. And given the reluctance of customers, maybe what are you asking for? Does Germany need a new program, a new incentive program, what do you expect the politics to do?

Yes. Christian Miskin, thanks for your questions. Oliver Blume is speaking. First of all, we still have a strong order bank of 200,000 EVs. We have a good proof point in this year being able to increase 50% of our BEV from deliveries world worldwide. In Europe, the situation is, because some countries reduced or exit from their support for battery electric vehicles. And on the other side, we have inflation effects and pricing effects because of higher material costs. In terms of Volkswagen Group, besides of the still strong order bank, we have seen during the last weeks, a slightly positive development of our order bank. So we have to watch very deeply during the next weeks how it will develop. And at the end, everything depends of the right product offering we have in the market to drive further on our ramp-up of EVs not only in Europe, but also in China and North America. In terms of support for the ramp-up curve of electromobility in Germany, there are 3 important factors. First of all, product, that's our responsibility, right pricing, right technology profile, attractive design. Then secondly, the charging infrastructure. And that's partly our responsibility as Volkswagen Group, we are planning to increase the charging points worldwide up to 2025 to 45,000 charging points. But on the other side, we need support from energy suppliers, for example, from the mineral industry, but also from the government and the communities to improve the charging -- the local charging infrastructure, especially in the cities. And then thirdly, to increase the source of renewable energies. And there, the German government has got an ambitious target. But it's important to execute step-by-step and improving this and these 3 factors are important that would be the biggest support we can get. But what I think, especially in Germany for the commercial use, there would be helpful a support, especially for the electric vehicles, they are driving around a lot in cities and in towns, and yes, that's about your question on incentives.

Then we go from Christian to Victoria, Reuters. Victoria Waldersee, please.

I have 2 questions. One, just relating to the news yesterday about the Exxon-Volkswagen partnership. Could you just clarify what platforms the 2 new models that you're jointly developing will be on? Because the Chinese release from Exxon said they would be on the G9 platform, but that wasn't mentioned in the Volkswagen release. So just to clarify that. And a second question, just a broader one. I wonder if you could speak in a bit more detail about the value-over-volume strategy as you move into the battery electric space? I feel like we're seeing these 2 strategies emerge of gaining share by cutting prices or holding on to profit margins and financial robustness you say you're more on the values over volume side, but you are still targeting a EUR 25,000 to the EUR 20,000 vehicle. So evidently, you do still want to keep hold of that mass market. Could you just give us some specific examples of strategic decisions, which proves the value-over-volume approach, that would be really helpful?

Okay, Victoria. May I start here with your first question on chopping and the platform approach. First of all, I think before I explained also with the investors our idea behind to do this and the big opportunities we have with sharing modules, components. And we will use the G9 platform. All the technical details, we will detail during the next weeks. And then deciding clearly using the best available technologies chopping will offer and combining it with our platform approach and to say it again very clearly, that is only a part of our platform -- on our product strategy for Volkswagen 4 segments. It's the lower A segment, the main A segment and the lower B segment, we are providing with our own technology. And for the upper B segment, we will go for the G9 platform from chopping and defining during the next weeks, very clearly, which part of modules or components we will use and combining it with Volkswagen technology. What is very clear when we are using these kinds of technology at the end, it has to be, and it will be 100% Volkswagen in terms of driving ability, in terms of design and in terms of touch and feel of the cars. And then may I hand over to Arno for the value-over-volume approach.

Victoria, on the value-over-volume, I said in the Capital Markets Day, we will focus really on the value and margin of our business and that means that we will display pricing discipline, both on the ICE and on the BEV side. And so we rely on strong products. We have fascinating brands. And we have also the technology, which is getting better and better every day. We invest into technology in our platforms in Europe. In China, we mentioned already, we improved the platforms there with Horizon Robotics and driving existing functions in kind of [indiscernible]. So we have all the ingredients from our perspective we need to explicit strong pricing going forward. On the other hand, there is also an additional flexibility we have, although we are absolutely committed to ramp up our battery electric vehicles. We have also strong combustion engine cars, which have great margins and great cash flows. So this gives us an additional flexibility on that topic.

The next question goes to Patricia Nilsson from Financial Times. [Operator Instructions]

I want to start by asking on deliveries. You've revised down your goal for deliveries. At the same time, you're saying supply chain issues are easing. Can you give a little bit more detail as to what's driven this? And then I have 2 more questions, and they are related to China. And one, some observers have made the comment that Volkswagen is partnering with [indiscernible] here is an addition that the company can't make it on its own in China. And then I would love to get your comments on that. And secondly, I'm wondering how is it impacting your long-running relationships with site and SLAs to partner with one of their rivals at the moment?

Patricia, I will take the question on deliveries. Look, we had a slightly mixed picture on deliveries in the first half of the year. On average, they were like plus 13%, with a really strong growth in Europe, 25%, plus 25%; strong growth in North America, plus 40%; and China slightly below previous year. Based on that run rate, I would say, we slightly changed our outlook. It used to be 9.5 million vehicles. Now we moved it to the range of 9 million to 9.5 million vehicles based on the run rate in China. But what you have to take into account is that the cars that we sell in China, we account for them only at the proportionate result basically on equity. So they are not in our sales and not in our margins. So this is the reason why our sales was up 18% and our margin was very strong. Our underlying margin was very strong at 8.9%. And although we took slightly down the deliveries outlook in line with our value-over-volume approach, we fully confirm our outlook for sales and we fully confirm our margin target.

And Patricia, let me come to your China question. And listen, for us, it is very important to fulfill the expectation of the Chinese customers. And therefore, in our China strategy 2030, we agreed finally beside of the Shanghai Motor Show and was worked out in the months before, is to offer more solutions developed in China for China. And we have our old product portfolio with MEB Plus and in the future with SSP for example. And then picking Partner Solutions to hit directly in the Chinese ecosystem and to fulfill on the expectations and the cooperation with chopping is to speed up in technology solutions. And to widen our product portfolio and to tap into our white spots where we haven't got a product offering today. And in terms of cooperation and future strategy with our long joint ventures, FAW and SAIC we built also a clear, clear strategy and agreed it with them during the last month. With FAW, for example, there, we have the Audi approach with a new PPE factory where we will bring starting next year, new Audi products on a high battery level. And with SAIC, for example, we cited the Audi Corporation also with sharing modules and components. And so I think for all of us, it's positive to get approaches from partners, technology from partners to make our solutions better and then having a better office for our customers. It is well sought and fitting well together in between partnerships like FAW and SAIC and the new partnerships we are getting and having a clear strategy behind and everything sought from the customer perspective.

We have 3 more on the list, starting with Monica Raymunt from Bloomberg.

I guess my first question centers on the recent trip that you and the Board took to North America. I was wondering if you could provide some color on that trip, specifically on where the Scout brand is? And where specifically North America fits in the performance programs and in the savings efforts that are currently going on across the Volkswagen brand? Additionally, you mentioned that during this trip in North America that some decisions were taken regarding technological advancements or technological decisions. I was wondering if you could also elaborate on that, please?